AMR pilots cite 'potential' for imminent labor deal

Tue Oct 30, 2012 4:38pm EDT

* Pilots seeking industry standard on pay rates, outsourcing

* Union acknowledges progress being made

* Union still supports merger with US Airways

By Nick Brown

NEW YORK, Oct 30 (Reuters) - The pilots union at American Airlines said on Tuesday that a labor deal could be close if the bankrupt airline is willing to make certain key concessions.

The union, locked in years of tense contract negotiations with the AMR Corp unit, said in a statement that it wants a contract on par with other major carriers, namely Delta Air Lines, on issues such as pay.

"There is potential for an agreement with AMR in the days ahead, but it all comes down to a number of moves management will need to make on key deal points to bring us into the realm of industry standard," the union said.

A spokesman for AMR had no immediate comment on ongoing talks.

AMR declared bankruptcy last November, in part to reduce labor costs. While it has reached new contracts with its flight attendants' and ground workers' unions, it remains at odds with the Allied Pilots' Association.

The pilots' union announced on Oct. 21 that AMR had agreed to certain concessions, including improvements to disability plans and a one-year moratorium on closing pilot bases.

But major items remain unresolved, most notably pay rates and outsourcing work to pilots not represented by the union, Dennis Tajer, the pilots' spokesman, told Reuters on Tuesday.

In its statement, the pilots' union said getting a deal would guarantee it a 13.5 percent equity stake in a reorganized AMR. It also said labor peace would give the union more influence in talks between AMR and its creditors over how the airline would emerge from bankruptcy.

AMR has said it wants to emerge as a standalone entity, but smaller competitor US Airways Group Inc is making an aggressive push to acquire the company in bankruptcy. The pilots' union, along with the rest of AMR's unionized labor force, supports a merger.

But while Tuesday's statement acknowledged the benefits of a deal, the union is not eager to sign a new contract at any cost.

"While there is progress being made, it will only continue if it results in an industry-standard contract," Tajer told Reuters.

The union must balance its demands against economic realities. It stressed in the statement that a deal must be economically feasible for AMR because it will require support from AMR's creditors and approval by its bankruptcy court.

The sides have been in talks on a labor deal since 2006. The union voted down a tentative agreement in August, but its board went back to the negotiating table earlier this month after September flight cancellations and delays that American blamed on a slowdown campaign by pilots.

Incidents in which seats came unbolted from the floor on American flights also raised concerns about safety at the airline and made it the butt of late-night talk show jokes.

AMR is in merger talks with US Airways, although it has said it would prefer to consider a tie-up only after leaving bankruptcy. Some bondholders have expressed interest in funding a plan that would bring AMR out of bankruptcy on its own.

Power struggles can arise between creditor constituencies with differing ideas on how a company should exit bankruptcy.

One of the most powerful constituencies in AMR's case is its unsecured creditors committee, which advocates for all of the airline's unsecured creditors. The unions, which have lost faith in AMR management, including Chief Executive Officer Tom Horton, have seats on that committee and would prefer a US Airways takeover sooner rather than later. But labor discord with pilots could add uncertainty to the prospect of a smooth merger.

Tajer said on Tuesday that the union will continue to support a merger even if it signs a new contract.

A deal would save the union from having to endure unilateral work terms designed to cut costs, which AMR earlier won court approval to impose.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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UPDATE 1-AMR pilots cite 'potential' for imminent labor deal

Tue Oct 30, 2012 5:18pm EDT

* Pilots seeking industry standard on pay rates, outsourcing

* Union acknowledges progress being made

* Union still supports merger with US Airways

By Nick Brown

NEW YORK, Oct 30 (Reuters) - The pilots union at American Airlines said on Tuesday that a labor deal could be close if the bankrupt airline is willing to make certain key concessions.

The Allied Pilots Association union, locked in years of tense contract negotiations with the AMR Corp unit, said in a statement that it wants a contract on par with other major carriers, namely Delta Air Lines, on issues such as pay.

"There is potential for an agreement with AMR in the days ahead, but it all comes down to a number of moves management will need to make on key deal points to bring us into the realm of industry standard," the union said.

American reiterated its desire to reach a consensual agreement.

Denise Lynn, American's senior vice president for people, "last week said that good progress has been made and we are approaching a deal that we hope the APA board of directors will soon agree to put out for a ratification vote," said Bruce Hicks, American Airlines spokesman.

AMR declared bankruptcy last November, in part to reduce labor costs. While it has reached new contracts with its flight attendants' and ground workers' unions, it remains at odds with the pilot group.

The pilots' union announced on Oct. 21 that AMR had agreed to certain concessions, including improvements to disability plans and a one-year moratorium on closing pilot bases.

But major items remain unresolved, most notably pay rates and outsourcing work to pilots not represented by the union, Dennis Tajer, the pilots' spokesman, told Reuters on Tuesday.

In its statement, the pilots' union said getting a deal would guarantee it a 13.5 percent equity stake in a reorganized AMR. It also said labor peace would give the union more influence in talks between AMR and its creditors over how the airline would emerge from bankruptcy.

AMR has said it wants to emerge as a standalone entity, but smaller competitor US Airways Group Inc is making an aggressive push to acquire the company in bankruptcy. The pilots' union, along with the rest of AMR's unionized labor force, supports a merger.

But while Tuesday's statement acknowledged the benefits of a deal, the union is not eager to sign a new contract at any cost.

"While there is progress being made, it will only continue if it results in an industry-standard contract," Tajer told Reuters.

The union must balance its demands against economic realities. It stressed in the statement that a deal must be economically feasible for AMR because it will require support from AMR's creditors and approval by its bankruptcy court.

The sides have been in talks on a labor deal since 2006. The union voted down a tentative agreement in August, but its board went back to the negotiating table earlier this month after September flight cancellations and delays that American blamed on a slowdown campaign by pilots.

Incidents in which seats came unbolted from the floor on American flights also raised concerns about safety at the airline and made it the butt of late-night talk show jokes. The pilots union has denied calling any work slowdown.

AMR is in merger talks with US Airways, although it has said it would prefer to consider a tie-up only after leaving bankruptcy. Some bondholders have expressed interest in funding a plan that would bring AMR out of bankruptcy on its own.

Power struggles can arise between creditor constituencies with differing ideas on how a company should exit bankruptcy.

One of the most powerful constituencies in AMR's case is its unsecured creditors committee, which advocates for all of the airline's unsecured creditors. The unions, which have lost faith in AMR management, including Chief Executive Officer Tom Horton, have seats on that committee and would prefer a US Airways takeover sooner rather than later. But labor discord with pilots could add uncertainty to the prospect of a smooth merger.

Tajer said on Tuesday that the union will continue to support a merger even if it signs a new contract.

A deal would save the union from having to endure unilateral work terms designed to cut costs, which AMR earlier won court approval to impose.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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Kodak posts larger loss amid bankruptcy costs

Tue Oct 30, 2012 5:59pm EDT

* Q3 loss increases 41 pct as net sales drop

* Kodak hopes to emerge from bankruptcy in 2013

Oct 30 (Reuters) - Eastman Kodak Co on Tuesday said its third-quarter loss grew 41 percent from a year earlier, reflecting restructuring and other costs as the bankrupt camera pioneer shifts its business focus toward printing from photography.

The net loss widened to $312 million, or $1.15 per share, from $222 million, or 83 cents, a year earlier, Kodak said in a regulatory filing.

Revenue fell 19 percent to $1.02 billion, hurt by a weakened economy, currency fluctuations, and the decision to exit some businesses, Kodak said.

Excluding restructuring and reorganization costs, Kodak said it lost $139 million in the quarter, compared with roughly $205 million a year earlier, and ended September with $1.13 billion of cash.

The Rochester, New York-based company has been in talks with creditors on a possible reorganization plan that Chief Executive Antonio Perez hopes will enable it to emerge from Chapter 11 protection next year.

Kodak has shuttered its digital camera business and plans to stop selling inkjet printers. It is still exploring options to sell more than 1,100 digital patents after failing to win acceptable bids in an auction held in August.

The company filed for bankruptcy protection on Jan. 19 after failing to keep up as consumers and rivals shifted to digital photography from film photography. High pension costs have also weighed on Kodak.

The case is In re: Eastman Kodak Co, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.

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Head of Polish PBG resigns over unit troubles

Mon Oct 29, 2012 7:30am EDT

* Chief exec quits over Rafako

* Shares fall 17 pct

WARSAW Oct 29 (Reuters) - The chief executive of bankrupt Polish builder PBG quit on Monday after a dispute over control of its key unit Rafako, putting in question PBG's return to financial stability.

Mariusz Rozacki headed Rafako before replacing co-founder Jerzy Wisniewski at PBG's helm in June after it was granted bankruptcy protection.

The group ran into trouble when it was stuck with loss-making contracts from Poland's road building bonanza and had trouble financing the purchase of Rafako when one of its main lenders backed out.

By 1106 GMT, PBG shares fell 17 percent to 4.55 zlotys. The battered stock shed 93 percent this year.

"The market still had hope that a reasonable chief executive will lead the company through bankruptcy so that something would remain," said Arkadiusz Chojnacki, analyst at Ipopema Securities.

"Now this hope is much smaller," he said,

In his resignation letter addressed to Wisniewski, who heads PBG's supervisory board, Rozacki said that after a series of unauthorised transactions the company lost control over Rafako. (Reporting by Chris Borowski; Editing by Louise Heavens)

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BRIEF-Hibu says lending group CoCom supports waivers

LONDON | Mon Oct 29, 2012 11:58am EDT

LONDON Oct 29 (Reuters) - Hibu PLC : * Lending group cocom has unanimously agreed to support the waivers, subject to

credit committee approval. * No payments are expected to be made to any term loan lender under facilities

agreements dated November 30 2009 * Received correspondence from some members of 2006 lenders that they may seek

to launch litigious actions * This May include a petition for the winding-up of the relevant borrowing

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Aircraft maker Hawker Beechcraft outlines new bankruptcy plan

Mon Oct 29, 2012 7:47pm EDT

* Proposes to give control of company to secured creditors

* Previous plan to sell to Chinese firm fell through

By Nick Brown

NEW YORK, Oct 29 (Reuters) - Aerospace manufacturer Hawker Beechcraft Inc on Monday unveiled a bankruptcy exit plan that would give control of the company to secured creditors after a proposed sale to a Chinese firm fell through.

The Wichita, Kansas-based firm filed a disclosure statement in Manhattan bankruptcy court revealing plans to hand 81.1 percent of its new equity to senior lenders, which include Angelo Gordon & Co, Centerbridge Partners, Sankaty Advisors and Capital Research & Management. The rest of the equity would go to senior and junior noteholders, according to the filing.

The move comes 11 days after Hawker's announcement that its plan to sell itself to China's Superior Aviation Beijing Co for $1.79 billion had fallen through. Hawker said at the time that it would pursue a backup plan under which creditors would receive equity and general unsecured claims would be canceled.

Hawker CEO Steve Miller said at an Oct. 18 conference that China-bashing by U.S. presidential candidates may have contributed to the failure of the sale talks.

"Global politics may have interfered," said Miller, who had been in Beijing the previous week trying to sell the firm. Miller cited competing calls from Democrats and Republicans for toughness on China's currency policies.

The new plan should allow for Hawker to emerge as a standalone company in early 2013. The plan requires creditor and court approval, though Hawker said it already has the support of major creditors.

The company has said it would rename itself Beechcraft Corp and would likely get out of the corporate jet business, focusing on turboprop, piston, special mission and trainer/attack aircraft.

Owned by Goldman Sachs's private equity unit and Canada's Onex, Hawker went into a tailspin after the 2008 financial crisis and subsequent economic downturn. It filed bankruptcy in May with about $2.5 billion in debt, including roughly $1.8 billion under a senior credit facility.

The plan provides for a $530 million exit loan under which Hawker will be able to pay off its previous bankruptcy loan, according to the filing.

In presidential debates, Republican Mitt Romney has slammed President Barack Obama for allowing China to keep its currency at low levels to the detriment of U.S. competitiveness and trade deficits. Obama has countered that he is tougher on trade policies with China than Romney would be.

The bankruptcy is In Re Hawker Beechcraft Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-11873.

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Court hearing over West Penn Allegheny investor talks extended

PITTSBURGH | Fri Oct 26, 2012 7:37pm EDT

PITTSBURGH Oct 26 (Reuters) - A Pennsylvania judge on Friday extended a key court hearing in a dispute between troubled West Penn Allegheny Health System and insurer Highmark Inc. over a soured $475 million merger agreement.

Allegheny County Judge Christine Ward presided over two days of testimony on Thursday and Friday but still needed more time next week to hear witnesses and evidence in Highmark's bid to block West Penn from talking to other potential investors.

Ward will continue the hearing next Thursday.

West Penn says Highmark, under a new CEO, began insisting that it file for bankruptcy to reduce its debt load before Highmark would consummate the deal.

Highmark has already provided $225 million to help keep struggling West Penn afloat. West Penn issued $737 million of municipal bonds in 2007.

Each has now accused the other of breaching their agreement.

State insurance regulators suggested in a letter to Highmark that they were more likely to sign off on the merger if West Penn first filed for bankruptcy to reduce its debt, according to evidence Highmark presented at the hearing.

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UPDATE 1-A123 to seek OK for loan from Chinese auto parts maker

Fri Oct 26, 2012 9:04pm EDT

By Tom Hals and Garima Goel

Oct 26 (Reuters) - Bankrupt battery maker A123 Systems Inc plans to ask for court approval for a loan from auto parts maker Wanxiang Group Corp, while Johnson Controls Inc said it would withdraw its prior loan commitment to A123.

A123, which filed for bankruptcy earlier this month, had an interim bankruptcy loan with auto parts supplier Johnson Controls. But the company revealed in a court filing on Friday that it reached agreement for a replacement loan from Wanxiang.

In a statement released late on Friday, Johnson Controls said it is withdrawing the debtor-in-possession (DIP) loan to avoid delays to the bankruptcy process.

Wanxiang's attorney had said last week that the Chinese company plans to fight Johnson Controls for the role of initial bidder.

"Johnson Controls has chosen not to be the debtor-in-possession lender during A123's bankruptcy process to avoid potential delays," Johnson Controls said in a statement.

However, Johnson Controls said that it will maintain its $125 million bid for A123's automotive assets as well as the stalking horse position.

Johnson Controls also said it plans to include A123's government business, including military contracts, to its bid.

A debtor-in-possession or DIP loan often gives the lender significant leverage over the bankrupt company, allowing the lender to demand asset sales and set timelines for conducting the bankruptcy.

In a separate disclosure earlier in the day, A123 had sought court approval for a loan from Wanxiang. The disclosure was part of an agenda for a hearing scheduled for Tuesday in the Delaware Bankruptcy Court in Wilmington.

"The debtors intend to file an emergency motion in advance of the hearing seeking approval of a replacement DIP facility with Wanxiang America Corp," A123 said in a court filing on Friday.

This could give the Chinese company an advantage over U.S. rival Johnson Controls in a takeover battle for A123.

Wanxiang has been pursuing A123 for months. The bankruptcy came after a $465 million rescue deal by the Chinese company unraveled after the U.S. battery maker was unable to meet some conditions of the agreement.

Michael Freitag, a spokesman for A123, and Bojan Guzina, a lawyer for Wanxiang, declined to comment on the disclosure.

A123, a maker of lithium-ion batteries used in hybrid and electric vehicles, had received a $249 million U.S. government grant in 2009 designed to boost the renewable energy industry.

However, the company declared bankruptcy amid a disappointing market for electric vehicles and after it had to recall battery packs made for Fisker Automotive, which made up 26 percent of A123's revenue in 2011.

Fisker on Friday objected to A123's plans to selling the company at an auction with an initial "stalking horse" bid from Johnson Controls, or JCI, for $125 million.

"The best interests of the estates, however, are not well served through a hasty and unfair sale process designed to ensure that JCI is the ultimate purchaser," Fisker said in its court filing.

It asked the court to extend bidding deadlines for 30 days.

Wanxiang would need approval from the Committee on Foreign Investment in the United States and the government of China to acquire A123.

Wanxiang's lawyer told the court earlier this month the Chinese company intended to present its own stalking horse proposal to the court next Tuesday, but that matter was postponed to Nov. 5, according to the agenda.

The case is A123 Systems Inc, Delaware Bankruptcy Court, No. 12-12859.

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American plans pilot 401(k) contributions as labor talks go on

Fri Oct 26, 2012 9:20pm EDT

* Carrier hopes for tentative contract soon

* Pilot retirement plans to freeze Nov. 1

Oct 26 (Reuters) - American Airlines, citing "good progress" in contract talks with its pilots union and hope for an agreement soon, said on Friday it would make contributions to a 401(k) plan for pilots as their retirement plans are set to be frozen.

The AMR Corp unit, which filed for Chapter 11 protection last year and is evaluating a potential merger with US Airways Group, is planning to freeze a defined-benefit plan and terminate a separate defined-contribution plan for pilots on Nov. 1.

In negotiations with the Allied Pilots Association union, the carrier has proposed replacing both plans by contributing 14 percent of pay into a new 401(k) plan.

American's Denise Lynn, senior vice president for people, said in a letter to pilots on Friday that while negotiations continue, the carrier would provide an amount equal to 11 percent of pay to a 401(k). That is the amount the pilots receive under their defined-contribution plan which is set to terminate next week.

Lynn said the move was being made in an attempt to ease pilots' uncertainty about retirement contributions when the current plans are frozen.

"These discretionary contributions will be applied against contributions to be made under the replacement retirement plan anticipated as a part of a new collective bargaining agreement," Lynn's letter said.

In the letter, Lynn also said American hopes the board of the Allied Pilots Association union would approve a tentative agreement by Nov. 1.

Such an agreement would be subject to approval by rank and file pilots and would also have to be approved by the U.S. bankruptcy court, she added.

Pilots union spokesman Dennis Tajer declined to comment on the details of American's letter. "APA continues to focus on securing an industry-standard contract that reflects the value our pilots provide to American Airlines," he said.

American and the pilots union went back to the bargaining table earlier this month after flight cancellations and delays that American blamed on a slowdown campaign by pilots. Pilots had rejected a tentative agreement that offered concessions in August, and their union has denied calling any work slowdown.

The carrier and the union, which has said it wants a contract on par with those of rivals such as Delta Air Lines, have been negotiating on a labor contract since 2006.

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Court hearing over West Penn Allegheny investor talks extended

PITTSBURGH | Fri Oct 26, 2012 7:37pm EDT

PITTSBURGH Oct 26 (Reuters) - A Pennsylvania judge on Friday extended a key court hearing in a dispute between troubled West Penn Allegheny Health System and insurer Highmark Inc. over a soured $475 million merger agreement.

Allegheny County Judge Christine Ward presided over two days of testimony on Thursday and Friday but still needed more time next week to hear witnesses and evidence in Highmark's bid to block West Penn from talking to other potential investors.

Ward will continue the hearing next Thursday.

West Penn says Highmark, under a new CEO, began insisting that it file for bankruptcy to reduce its debt load before Highmark would consummate the deal.

Highmark has already provided $225 million to help keep struggling West Penn afloat. West Penn issued $737 million of municipal bonds in 2007.

Each has now accused the other of breaching their agreement.

State insurance regulators suggested in a letter to Highmark that they were more likely to sign off on the merger if West Penn first filed for bankruptcy to reduce its debt, according to evidence Highmark presented at the hearing.

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UPDATE 1-A123 to seek OK for loan from Chinese auto parts maker

Fri Oct 26, 2012 9:04pm EDT

By Tom Hals and Garima Goel

Oct 26 (Reuters) - Bankrupt battery maker A123 Systems Inc plans to ask for court approval for a loan from auto parts maker Wanxiang Group Corp, while Johnson Controls Inc said it would withdraw its prior loan commitment to A123.

A123, which filed for bankruptcy earlier this month, had an interim bankruptcy loan with auto parts supplier Johnson Controls. But the company revealed in a court filing on Friday that it reached agreement for a replacement loan from Wanxiang.

In a statement released late on Friday, Johnson Controls said it is withdrawing the debtor-in-possession (DIP) loan to avoid delays to the bankruptcy process.

Wanxiang's attorney had said last week that the Chinese company plans to fight Johnson Controls for the role of initial bidder.

"Johnson Controls has chosen not to be the debtor-in-possession lender during A123's bankruptcy process to avoid potential delays," Johnson Controls said in a statement.

However, Johnson Controls said that it will maintain its $125 million bid for A123's automotive assets as well as the stalking horse position.

Johnson Controls also said it plans to include A123's government business, including military contracts, to its bid.

A debtor-in-possession or DIP loan often gives the lender significant leverage over the bankrupt company, allowing the lender to demand asset sales and set timelines for conducting the bankruptcy.

In a separate disclosure earlier in the day, A123 had sought court approval for a loan from Wanxiang. The disclosure was part of an agenda for a hearing scheduled for Tuesday in the Delaware Bankruptcy Court in Wilmington.

"The debtors intend to file an emergency motion in advance of the hearing seeking approval of a replacement DIP facility with Wanxiang America Corp," A123 said in a court filing on Friday.

This could give the Chinese company an advantage over U.S. rival Johnson Controls in a takeover battle for A123.

Wanxiang has been pursuing A123 for months. The bankruptcy came after a $465 million rescue deal by the Chinese company unraveled after the U.S. battery maker was unable to meet some conditions of the agreement.

Michael Freitag, a spokesman for A123, and Bojan Guzina, a lawyer for Wanxiang, declined to comment on the disclosure.

A123, a maker of lithium-ion batteries used in hybrid and electric vehicles, had received a $249 million U.S. government grant in 2009 designed to boost the renewable energy industry.

However, the company declared bankruptcy amid a disappointing market for electric vehicles and after it had to recall battery packs made for Fisker Automotive, which made up 26 percent of A123's revenue in 2011.

Fisker on Friday objected to A123's plans to selling the company at an auction with an initial "stalking horse" bid from Johnson Controls, or JCI, for $125 million.

"The best interests of the estates, however, are not well served through a hasty and unfair sale process designed to ensure that JCI is the ultimate purchaser," Fisker said in its court filing.

It asked the court to extend bidding deadlines for 30 days.

Wanxiang would need approval from the Committee on Foreign Investment in the United States and the government of China to acquire A123.

Wanxiang's lawyer told the court earlier this month the Chinese company intended to present its own stalking horse proposal to the court next Tuesday, but that matter was postponed to Nov. 5, according to the agenda.

The case is A123 Systems Inc, Delaware Bankruptcy Court, No. 12-12859.

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American plans pilot 401(k) contributions as labor talks go on

Fri Oct 26, 2012 9:20pm EDT

* Carrier hopes for tentative contract soon

* Pilot retirement plans to freeze Nov. 1

Oct 26 (Reuters) - American Airlines, citing "good progress" in contract talks with its pilots union and hope for an agreement soon, said on Friday it would make contributions to a 401(k) plan for pilots as their retirement plans are set to be frozen.

The AMR Corp unit, which filed for Chapter 11 protection last year and is evaluating a potential merger with US Airways Group, is planning to freeze a defined-benefit plan and terminate a separate defined-contribution plan for pilots on Nov. 1.

In negotiations with the Allied Pilots Association union, the carrier has proposed replacing both plans by contributing 14 percent of pay into a new 401(k) plan.

American's Denise Lynn, senior vice president for people, said in a letter to pilots on Friday that while negotiations continue, the carrier would provide an amount equal to 11 percent of pay to a 401(k). That is the amount the pilots receive under their defined-contribution plan which is set to terminate next week.

Lynn said the move was being made in an attempt to ease pilots' uncertainty about retirement contributions when the current plans are frozen.

"These discretionary contributions will be applied against contributions to be made under the replacement retirement plan anticipated as a part of a new collective bargaining agreement," Lynn's letter said.

In the letter, Lynn also said American hopes the board of the Allied Pilots Association union would approve a tentative agreement by Nov. 1.

Such an agreement would be subject to approval by rank and file pilots and would also have to be approved by the U.S. bankruptcy court, she added.

Pilots union spokesman Dennis Tajer declined to comment on the details of American's letter. "APA continues to focus on securing an industry-standard contract that reflects the value our pilots provide to American Airlines," he said.

American and the pilots union went back to the bargaining table earlier this month after flight cancellations and delays that American blamed on a slowdown campaign by pilots. Pilots had rejected a tentative agreement that offered concessions in August, and their union has denied calling any work slowdown.

The carrier and the union, which has said it wants a contract on par with those of rivals such as Delta Air Lines, have been negotiating on a labor contract since 2006.

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Court hearing over West Penn Allegheny investor talks extended

PITTSBURGH | Fri Oct 26, 2012 7:37pm EDT

PITTSBURGH Oct 26 (Reuters) - A Pennsylvania judge on Friday extended a key court hearing in a dispute between troubled West Penn Allegheny Health System and insurer Highmark Inc. over a soured $475 million merger agreement.

Allegheny County Judge Christine Ward presided over two days of testimony on Thursday and Friday but still needed more time next week to hear witnesses and evidence in Highmark's bid to block West Penn from talking to other potential investors.

Ward will continue the hearing next Thursday.

West Penn says Highmark, under a new CEO, began insisting that it file for bankruptcy to reduce its debt load before Highmark would consummate the deal.

Highmark has already provided $225 million to help keep struggling West Penn afloat. West Penn issued $737 million of municipal bonds in 2007.

Each has now accused the other of breaching their agreement.

State insurance regulators suggested in a letter to Highmark that they were more likely to sign off on the merger if West Penn first filed for bankruptcy to reduce its debt, according to evidence Highmark presented at the hearing.

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UPDATE 1-A123 to seek OK for loan from Chinese auto parts maker

Fri Oct 26, 2012 9:04pm EDT

By Tom Hals and Garima Goel

Oct 26 (Reuters) - Bankrupt battery maker A123 Systems Inc plans to ask for court approval for a loan from auto parts maker Wanxiang Group Corp, while Johnson Controls Inc said it would withdraw its prior loan commitment to A123.

A123, which filed for bankruptcy earlier this month, had an interim bankruptcy loan with auto parts supplier Johnson Controls. But the company revealed in a court filing on Friday that it reached agreement for a replacement loan from Wanxiang.

In a statement released late on Friday, Johnson Controls said it is withdrawing the debtor-in-possession (DIP) loan to avoid delays to the bankruptcy process.

Wanxiang's attorney had said last week that the Chinese company plans to fight Johnson Controls for the role of initial bidder.

"Johnson Controls has chosen not to be the debtor-in-possession lender during A123's bankruptcy process to avoid potential delays," Johnson Controls said in a statement.

However, Johnson Controls said that it will maintain its $125 million bid for A123's automotive assets as well as the stalking horse position.

Johnson Controls also said it plans to include A123's government business, including military contracts, to its bid.

A debtor-in-possession or DIP loan often gives the lender significant leverage over the bankrupt company, allowing the lender to demand asset sales and set timelines for conducting the bankruptcy.

In a separate disclosure earlier in the day, A123 had sought court approval for a loan from Wanxiang. The disclosure was part of an agenda for a hearing scheduled for Tuesday in the Delaware Bankruptcy Court in Wilmington.

"The debtors intend to file an emergency motion in advance of the hearing seeking approval of a replacement DIP facility with Wanxiang America Corp," A123 said in a court filing on Friday.

This could give the Chinese company an advantage over U.S. rival Johnson Controls in a takeover battle for A123.

Wanxiang has been pursuing A123 for months. The bankruptcy came after a $465 million rescue deal by the Chinese company unraveled after the U.S. battery maker was unable to meet some conditions of the agreement.

Michael Freitag, a spokesman for A123, and Bojan Guzina, a lawyer for Wanxiang, declined to comment on the disclosure.

A123, a maker of lithium-ion batteries used in hybrid and electric vehicles, had received a $249 million U.S. government grant in 2009 designed to boost the renewable energy industry.

However, the company declared bankruptcy amid a disappointing market for electric vehicles and after it had to recall battery packs made for Fisker Automotive, which made up 26 percent of A123's revenue in 2011.

Fisker on Friday objected to A123's plans to selling the company at an auction with an initial "stalking horse" bid from Johnson Controls, or JCI, for $125 million.

"The best interests of the estates, however, are not well served through a hasty and unfair sale process designed to ensure that JCI is the ultimate purchaser," Fisker said in its court filing.

It asked the court to extend bidding deadlines for 30 days.

Wanxiang would need approval from the Committee on Foreign Investment in the United States and the government of China to acquire A123.

Wanxiang's lawyer told the court earlier this month the Chinese company intended to present its own stalking horse proposal to the court next Tuesday, but that matter was postponed to Nov. 5, according to the agenda.

The case is A123 Systems Inc, Delaware Bankruptcy Court, No. 12-12859.

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American plans pilot 401(k) contributions as labor talks go on

Fri Oct 26, 2012 9:20pm EDT

* Carrier hopes for tentative contract soon

* Pilot retirement plans to freeze Nov. 1

Oct 26 (Reuters) - American Airlines, citing "good progress" in contract talks with its pilots union and hope for an agreement soon, said on Friday it would make contributions to a 401(k) plan for pilots as their retirement plans are set to be frozen.

The AMR Corp unit, which filed for Chapter 11 protection last year and is evaluating a potential merger with US Airways Group, is planning to freeze a defined-benefit plan and terminate a separate defined-contribution plan for pilots on Nov. 1.

In negotiations with the Allied Pilots Association union, the carrier has proposed replacing both plans by contributing 14 percent of pay into a new 401(k) plan.

American's Denise Lynn, senior vice president for people, said in a letter to pilots on Friday that while negotiations continue, the carrier would provide an amount equal to 11 percent of pay to a 401(k). That is the amount the pilots receive under their defined-contribution plan which is set to terminate next week.

Lynn said the move was being made in an attempt to ease pilots' uncertainty about retirement contributions when the current plans are frozen.

"These discretionary contributions will be applied against contributions to be made under the replacement retirement plan anticipated as a part of a new collective bargaining agreement," Lynn's letter said.

In the letter, Lynn also said American hopes the board of the Allied Pilots Association union would approve a tentative agreement by Nov. 1.

Such an agreement would be subject to approval by rank and file pilots and would also have to be approved by the U.S. bankruptcy court, she added.

Pilots union spokesman Dennis Tajer declined to comment on the details of American's letter. "APA continues to focus on securing an industry-standard contract that reflects the value our pilots provide to American Airlines," he said.

American and the pilots union went back to the bargaining table earlier this month after flight cancellations and delays that American blamed on a slowdown campaign by pilots. Pilots had rejected a tentative agreement that offered concessions in August, and their union has denied calling any work slowdown.

The carrier and the union, which has said it wants a contract on par with those of rivals such as Delta Air Lines, have been negotiating on a labor contract since 2006.

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UPDATE 1-Berkshire wins ResCap loan portfolio with $1.5 bln bid

Thu Oct 25, 2012 4:48pm EDT

Oct 25 (Reuters) - Warren Buffett's Berkshire Hathaway Inc won a bankruptcy auction for a Residential Capital LLC loan portfolio with a $1.5 billion bid, ResCap said on Thursday.

Berkshire had been the opening bidder for the portfolio of 47,000 whole loans at $1.44 billion. A second bidder participated in the auction, a source familiar with the situation said, but details weren't available.

A Berkshire Hathaway representative was not immediately available. A sale approval hearing is scheduled for Nov. 19 before the bankruptcy court.

ResCap, the mortgage lending unit of Ally Financial Inc, filed for bankruptcy in May. It will use proceeds of the auction to repay creditors, including its parent.

On Wednesday, Ocwen Financial Corp and Walter Investment Management Corp prevailed in the auction for ResCap's mortgage business with a $3 billion bid that topped rival Nationstar Mortgage Holdings Inc. [ID: nL1E8LO71V]

Ally, majority owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap's mortgages. It is also selling international businesses to help pay back taxpayers.

Centerview Partners LLC and FTI Consulting are acting as ResCap's financial advisers, while Morrison & Foerster LLP is acting as legal adviser. Morrison Cohen LLP is advising ResCap`s independent directors.

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Operator of NY-area loan modification scam convicted of fraud

NEW YORK | Thu Oct 25, 2012 5:21pm EDT

NEW YORK Oct 25 (Reuters) - A New Jersey man running a foreclosure mediation business was found guilty of fraud on Thursday for pocketing money from clients who thought they were getting help with home loan modifications.

A jury in federal court in White Plains, New York, convicted Andrew Bartok, 66, who ran the company, Revelations, of conspiracy to commit mail, wire and bankruptcy fraud, obstruction of justice and witness tampering.

Bartok faces a total maximum sentence of 95 years in prison.

"Andrew Bartok dangled false promises of relief to desperate homeowners who were trying to keep their homes, but instead, he victimized them by stealing their money and forcing many of them into involuntary bankruptcy," said U.S. Attorney for the Southern District of New York Preet Bharara in a news release.

According to the news release, Bartok collected millions of dollars from struggling homeowners and used the money to pay for vacations to Aruba and Hawaii, gambling outings in Atlantic City and a $130,000 Mercedes-Benz.

Bartok's lawyer did not immediately respond to a request for comment.

Fraud schemes preying on homeowners trying to modify their mortgages or avoid foreclosure have grown more common since the beginning of the foreclosure crisis in which home values collapsed and some borrowers' interest rates skyrocketed.

Bartok's sentencing hearing is scheduled for Feb. 6.

The case is USA v. Andrew Bartok, U.S. District Court for the Southern District of New York, White Plains, No. 7:10-cr-00510-CS"

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BRIEF-Treveria says German Silo E companies have filed for insolvency

Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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UPDATE 4-Ocwen, Walter win bankruptcy auction for ResCap unit

Wed Oct 24, 2012 7:15pm EDT

* $3 billion bid tops offer from Nationstar Mortgage Holdings

* Non-banks are expanding in mortgage servicing

* ResCap will use money to pay back creditors, including parent

By Rick Rothacker

Oct 24 (Reuters) - Ocwen Financial Corp and Walter Investment Management Corp on Wednesday prevailed in a bankruptcy auction for Residential Capital LLC's mortgage business with a $3 billion bid that topped rival Nationstar Mortgage Holdings Inc.

The deal, which needs bankruptcy court approval, is the latest example of non-bank financial companies expanding in the mortgage business in the wake of the financial crisis. The sale will raise money for bankrupt ResCap, which is looking to repay creditors including its parent, auto lender Ally Financial Inc.

Ocwen and Walter teamed up to buy a mortgage servicing operation that handles payments for 2.4 million home loans with a balance of about $374 billion. ResCap, once a major subprime lender, also has a mortgage lending operation.

Under the bidding arrangement, the smaller Walter, based in Tampa, Florida, will get the right to administer $50 billion in loans owned by government-controlled mortgage finance company Fannie Mae. It also acquires ResCap's lending and capital markets businesses.

Atlanta-based Ocwen has been serially acquiring companies that collect payments on subprime mortgages, known as servicers, as banks and private equity firms look to shed them because of new regulations and capital requirements. The businesses can bring legal headaches, but can also bring profits as the housing market recovers.

Earlier this month, Ocwen agreed to buy mortgage lender Homeward Residential Holdings from Wilbur Ross' private equity firm for $750 million in cash and stock. At the end of June, Ocwen said it had a $127 billion servicing portfolio.

"They are capitalizing on the current weakness in the servicing market and the fact that banks are shunning it," said Guy Cecala, publisher of industry publication Inside Mortgage Finance. "They can get good prices and there's not much competition."

The auction had been Nationstar's to lose. The Lewisville, Texas-based mortgage servicer agreed to buy ResCap's mortgage business when it filed for bankruptcy in May, pending the outcome of the auction. It had set the opening bid at $2.45 billion.

"Obviously we are disappointed in the outcome of the auction, but in the end our judgment was that the price of the assets would not represent a compelling investment opportunity for us," Nationstar Chief Executive Jay Bray said in a statement.

Nationstar said it was now entitled to a breakup fee. A hearing on the auction will begin on Nov. 19.

BUFFETT BIG WINNER

One of the biggest winners in the auction is Berkshire Hathaway, which bid for the mortgage assets at one point even though most observers were certain Warren Buffett's conglomerate did not actually want them. It failed to unseat Nationstar as the opening bidder and did not participate in the auction that began Tuesday.

Berkshire held nearly $1 billion in ResCap junior secured debt as of this summer, and Nationstar's initial $2.4 billion bid was thought to be worth 93 cents on the dollar to bondholders like Berkshire.

A purchase price of $3 billion increases the likelihood that Buffett will make close to a full recovery on the debt - which perhaps was the whole point of his bid, some investors speculated.

Berkshire is the opening bidder for a loan package that ResCap is also selling. Its $1.44 billion topped ResCap's parent Ally, which had said it would buy the loans if no one else did. That auction begins on Thursday.

Stock prices for Ocwen and Nationstar have soared this year, as investors eye future growth. Ocwen shares are up 161 percent this year after climbing 4.3 percent on Wednesday. Nationstar's shares fell 9.6 percent on Wednesday, but are up about 122 percent since the company went public in March.

ResCap filed for bankruptcy in May in an effort to shed liabilities tied to soured loans sold to investors during the housing boom. Its parent Ally, which is majority owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap's mortgages. It is also selling international businesses to help pay back taxpayers.

Barclays Capital advised Ocwen on the ResCap transaction. Mayer Brown served as primary deal counsel to Ocwen.

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UPDATE 1-Patriot miners sue Peabody, Arch over retiree benefits

Wed Oct 24, 2012 7:19pm EDT

* Patriot Coal bankruptcy puts health care, pensions at risk

* Miners say Peabody and Arch should pay

By Nick Brown

Oct 24 (Reuters) - Peabody Energy Corp and Arch Coal Inc are being sued by mine workers who content that the companies have an obligation to pay pension and health care benefits that were transferred to Patriot Coal in a 2007 spinoff.

Eight mine workers and their union, the United Mine Workers of America, are seeking class action status in a lawsuit filed on Wednesday in federal court in West Virginia.

The roughly 10,000 union members whose benefits were transferred in the spinoff are worried that Patriot, in Chapter 11 bankruptcy, will try to take advantage of laws allowing bankrupt companies to cut retiree health care and pensions. Some of the workers whose benefits were transferred retired before the spinoff and never actually worked for Patriot.

In court papers related to its bankruptcy filing, Patriot said its current retiree obligations are untenable.

The union is determined to salvage benefits by going after Peabody and Arch, which it accuses of dumping costly obligations onto Patriot.

In an interview last week, Arthur Traynor, a lawyer for the union, said the goal "is not to get money out of Patriot."

"We're going to go back and talk to the people who are responsible, who made these gentlemen the promise of health care, and that's Peabody and Arch.

"(But) Peabody and Arch, apparently, don't want to pay that," he said.

A spokesman for Peabody said on Wednesday that Patriot was a "completely viable" company when it was spun off and that its downfall resulted from other forces.

"Patriot's decisions to make significant changes in its capital structure (and) decreased demand for U.S. coal due to sharp declines in natural gas prices" contributed to Patriot's decline, spokesman Vic Svec said.

Last week, Svec said that a Peabody subsidiary still pays about $600 million in Patriot retiree health care obligations that it retained at the time of the spinoff.

A spokeswoman for Arch declined to comment on Wednesday.

The lawsuit was filed in West Virginia, home to most of Patriot's operations. The union has said it wants Patriot's bankruptcy to play out in West Virginia where its members would have more of a voice.

Patriot filed for Chapter 11 bankruptcy protection in New York despite not having operations there. The union has said that constitutes unfair forum-shopping and has asked that the case be moved to West Virginia. Its request is still pending in bankruptcy court in Manhattan.

The bankruptcy is In re Patriot Coal Corp, U.S. Bankruptcy Court, Southern District of New York, No. 12-12900.

The lawsuit is Howe et al v. Peabody Holding Co LLC et al, U.S. District Court, Southern District of West Virginia, case number unavailable.

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California pension fund objects in court to San Bernardino bankruptcy

Wed Oct 24, 2012 10:15pm EDT

* Pension fund says San Bernardino has no plan

* Bondholders appear to hold fire - to take fight to Calpers

By Tim Reid

Oct 24 (Reuters) - America's biggest public pension system filed a formal objection on Wednesday to a quest by San Bernardino to seek bankruptcy protection, citing the "disarray" in the Californian city's finances.

San Bernardino, a city of 210,000 people 60 miles (97 km) east of Los Angeles, declared bankruptcy on Aug. 1. Since then it has halted pension payments to the powerful California Public Employee Retirement System (Calpers), its biggest creditor.

The case could set precedent in how local governments deal with soaring pension costs. In particular, it is setting the stage for a showdown between Calpers and Wall Street bondholders and bond insurers over how they are treated as creditors in a municipal bankruptcy.

Last week Calpers made clear in public statements it would not tolerate San Bernardino, or any other Californian city, missing payments into its fund. Since it declared bankruptcy, San Bernardino has missed six biweekly payments totaling over $6 million.

On the deadline day for creditors to file objections to San Bernardino's bankruptcy claim, Calpers filed a 20-page objection and 116 pages of exhibits.

In its filing on Wednesday Calpers, which has long argued that contributions to its fund can never be suspended, even in a bankruptcy, said any arguments about whether San Bernardino can seek bankruptcy protection should be deferred until the city presented a detailed financial plan.

"The city's financial records are in disarray," Calpers said in its filing.

It added: "In filing this preliminary objection, the goal of Calpers is not to start a costly battle over eligibility (for bankruptcy) but rather to defer any dispute about eligibility until the City has produced credible projections which could form the basis of a feasible plan."

By 5 p.m. on Wednesday, the deadline for filing objections, no bondholder creditors appeared on the court docket as objecting to San Bernardino's eligibility for bankruptcy protection.

Karol Denniston, a Californian attorney and expert in Chapter 9 bankruptcy, the section of the federal code that deals with municipal bankruptcies, said not objecting could well have been a deliberate strategy by those Wall Street creditors.

If they objected to the city's eligibility and prevailed, Denniston said, the case would be dismissed - robbing bondholders of taking the fight to Calpers over the pension fund's status as a creditor.

"The absence of objections suggests a strategy of allowing the bankruptcy to proceed so they can focus on the issue of what type of creditor Calpers is," Denniston said.

San Bernardino is the first Californian authority to hold back payments from Calpers or indicate it might treat the pension fund like other creditors.

Two other Californian cities - Vallejo, which emerged from bankruptcy in 2011, and Stockton, which is seeking bankruptcy protection - decided to keep current on all payments to Calpers.

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BRIEF-Moody's:Defaults down again in Q3 2012 as low-rated firms access credit markets

Tue Oct 23, 2012 9:26am EDT

Oct 23 (Reuters) - HD Supply Inc, Ply Gem Industries Inc, Bon-Ton Stores Inc,Broadview Networks Holdings Inc, ATP Oil & Gas Corporation and Patriot Coal Corporation.

* Moody's : Defaults Down Again in Q3 2012 as Low-Rated Firms Access Credit Markets

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US quizzes Canada at WTO over aid for paper mill

Tue Oct 23, 2012 2:21pm EDT

* U.S. wants Canada to withdraw payments to paper mill

* Canada says working with province to answer U.S. questions

By Tom Miles

GENEVA, Oct 23 (Reuters) - Canada found itself lumped together with China and India on Tuesday as a country that the United States suspects of paying illegal subsidies that distort trade, with C$162 million ($163 million) of aid to a Nova Scotia paper mill under scrutiny.

The United States, which is determined to bring China to justice at the World Trade Organization over what it claims are illegal subsidies, said Canada should withdraw payments to the Port Hawkesbury paper mill, which competes with U.S. producers.

The mill has received tax breaks, grants, energy cost reductions and timber subsidies that could be challenged under WTO rules, a U.S. official told the WTO subsidies committee.

A European Union official said the EU also was concerned about the subsidies and asked for more information.

A Canadian official told the meeting that Canada was already working with the provincial authorities to answer U.S. questions and had started a dialogue with the United States which the EU was welcome to join.

Canada is defending itself at the WTO against a legal challenge to another provincial policy - Ontario's green energy scheme which Japan and the EU say illegally discriminates against foreign companies. A leaked early draft of the decision in that case shows Canada is likely to lose.

The Port Hawkesbury mill reopened last month after it had idled for more than a year, following a deal between the provincial power company and the mill's owner Pacific West Commercial Corp (PWCC).

PWCC, itself owned by Stern Partners of Vancouver, bought the mill from NewPage Corp of Ohio, which had filed for Chapter 11 bankruptcy and began restructuring in September 2011.

Nova Scotia Premier Darrel Dexter has said reopening the mill would bring more than 1,400 jobs to the province.

The U.S. official also reiterated the U.S. demand for China to provide full information about state and sub-central subsidies. The U.S. Trade Representative's office says it has found 191 subsidy programmes that were not notified to the WTO.

The United States also says India has 50 unreported subsidy programmes run by the central government. Its criticisms of both Asian countries were backed by the EU, Canada, Japan and Turkey.

The U.S. and Turkish officials also said India should phase out export subsidies for textiles and clothing, a sector which the WTO has considered export competitive since 2007. ($1 = 0.9926 Canadian dollars) (Reporting by Tom Miles; Editing by Stephanie Nebehay and Michael Roddy)

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UPDATE 2-Embraer profit misses on restructured airline financing

Tue Oct 23, 2012 10:48pm EDT

* Planemaker's Q3 net income $65 mln vs forecast $103 mln

* Restructuring for Chautauqua, American Airlines weighs

* Sees private jet deliveries rebounding, inventories high

* Updates on SEC, DOJ investigation; makes no provisions

By Brad Haynes

SAO PAULO, Oct 23 (Reuters) - Brazil's Embraer, the world's third-largest commercial planemaker, missed estimates for its quarterly profit on Tuesday as it helped to restructure aircraft financing for a U.S. regional airline.

Embraer reported third-quarter net income of $65.2 million in a securities filing, missing the average estimate of $103 million in a Reuters survey of nine analysts.

The company said last month it was working with U.S. carrier Chautauqua Airlines, a subsidiary of Republic Airways Holdings , to ease leasing costs for a fleet of regional jets on which Embraer had offered financial guarantees. The cost of that restructuring reduced earnings by $41.9 million.

Still, the planemaker remained confident in its full-year projections, despite canceled orders and slow deliveries.

"The company believes it is in line to meet its 2012 revenue guidance," Embraer said in the filing, adding that the expected mix of fourth-quarter deliveries meant it was well-positioned to deliver on its profit margin targets.

Embraer is grappling with a fragile global economy that is sapping demand for its executive aircraft and hurting the commercial airlines that fly its regional jets.

The company's net cash position shrank in the quarter as it paid $49.5 million due to the Chapter 11 bankruptcy of American Airlines' parent company AMR Corp, which is renegotiating the leases on its fleet of Embraer regional jets.

Embraer booked a $361 million provision for such expenses at the end of 2011, leading to a $92 million fourth-quarter loss.

DELIVERY REBOUND

In corporate jets, where canceled orders have threatened the full-year delivery target, Embraer said it expected rebounding deliveries at the end of the year to reduce stocks.

Still, the manufacturer said inventories may end 2012 at a higher level than where they began the year. Embraer forecast between 195 and 215 deliveries of commercial and executive jets this year, but delivered just 129 in the first nine months.

Slower deliveries and the restructured aircraft financing dragged on earnings before interest, taxes, depreciation and amortization (EBITDA), a gauge of operating profit, which slipped 12 percent from a year earlier to $166 million.

One bright spot for Embraer is its defense unit, which the company noted was outperforming its targets and contributing more than 18 percent of revenue, up from 14 percent a year earlier.

The division's top executive told Reuters recently that the unit would likely generate revenue near $1 billion in 2012, beating an annual target of $900 million to $950 million.

Embraer's net income from July to September rose 19 percent from the prior quarter. Revised earnings from a year earlier showed a narrow $1.9 million net profit in the third quarter of 2011, when a currency tumble wiped out most earnings.

The company also said it saw no need to make provisions at this time for possible fines or sanctions in connection with a bribery investigation by the U.S. Securities and Exchange Commission and Department of Justice, adding that it was not now possible to estimate the duration, scope or results of the probe.

In an update to investors on the investigation, which Embraer disclosed last November, the planemaker said its outside counsel continued to investigate the case and provide information to U.S. authorities.

Embraer recognized that if it was found guilty of violations, it could face steep fines or other sanctions, but added: "Our management, based upon the opinion of our outside counsel, continues to believe that there is no basis for estimating reserves or quantifying any possible contingency."

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UPDATE 1-Solyndra bankruptcy plan approved over U.S. objections

Mon Oct 22, 2012 2:20pm EDT

* Venture capital investors to take control

* Solar panel company got $528 million U.S. loan

By Tom Hals

WILMINGTON, Del., Oct 22 (Reuters) - Solyndra, the solar panel maker that failed despite a $528 million federal loan, on Monday won court approval for its plan to repay creditors and end its politically charged bankruptcy, after a judge overruled objections by the U.S. government.

U.S. Bankruptcy Judge Mary Walrath in Delaware rejected the government argument that the plan was improper because its main purpose was to provide tax breaks.

Venture capital firms Argonaut Private Equity and Madrone Capital Partners will control Solyndra's tax breaks, known as net operating losses or NOLs, that are potentially worth $341 million after the bankruptcy.

"It is clear in this case the bankruptcy and the reorganization dealt with many other things than the value of the NOLs or the preservation of the NOLs," said Walrath on Monday at a hearing in Wilmington.

Anne Oliver, an Internal Revenue Service lawyer, told the judge that the government may appeal. Walrath granted her request to delay the repayment plan by 10 days.

The plan calls for Argonaut and Madrone to take control of Solyndra's parent company, which will have no employees or operations but hold about $1 billion of net operating losses.

Argonaut and Madrone plan to use the company as a vehicle to make investments or buy businesses, and apply those losses against potential future profits to reduce tax liabilities.

Ordinary creditors may not fare as well. Despite selling nearly all its assets, Solyndra expects most creditors to recover 3 percent or less of what they are owed, far less than in a typical corporate bankruptcy.

Solyndra's bankruptcy case continued to generate political heat on Monday, just 15 days before U.S. elections.

Rep. Darrell Issa, a California Republican and chairman of the House Oversight and Government Reform Committee, invoked Solyndra in a letter on Monday to Energy Secretary Steven Chu seeking documents relating to Fisker Automotive, maker of the Karma plug-in hybrid car.

Like Solyndra, Fisker received a government loan through a clean energy program. Issa demanded reassurances that the Department of Energy took steps to protect those taxpayer funds.

Solyndra filed for Chapter 11 protection from creditors on Sept. 6, 2011, as it and other solar panel companies were hurt by a flood of cheap imports from China that drove down prices.

The company had received the $528 million loan as part of a government program to promote clean energy.

Its collapse sparked an 18-month investigation by Republicans who faulted President Barack Obama's administration for failing to cut the government's losses.

Republicans accused the administration of making the loan in part as a favor to George Kaiser, the billionaire founder of Argonaut and a fundraiser for Obama's 2008 presidential campaign.

The White House has called the decision to make the loan "merit-based."

The case is In re: Solyndra LLC et al, U.S. Bankruptcy Court, District of Delaware, No. 11-12799.

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US regulator intervenes in Conoco battle with MF Global trustee

By Ann Saphir

CHICAGO | Mon Oct 22, 2012 7:59pm EDT

CHICAGO Oct 22 (Reuters) - The U.S. Commodity Futures Trading Commission on Monday won court approval to intervene in a $205 million dispute between oil major ConocoPhillips and the bankruptcy trustee for MF Global Inc.

At issue is the treatment of letters of credit that the oil company -- a longstanding MF Global customer -- had lodged with the now bankrupt brokerage to back its energy trades.

The CFTC told a federal court in a filing last week it should be allowed to intervene because of the public policy interest in "the correct interpretation" of law and rules governing the futures industry. A judge approved its application to intervene on Monday.

The regulator, which favors the trustee's interpretation of the letters of credit issue, will be able to present its views in court and try to influence a decision that could cost Conoco tens of millions of dollars should it go against the company.

The dispute focuses on the value of the letters of credit and how much Conoco is owed in compensation by MF Global.

The brokerage's bankruptcy trustee has returned some money to former customers, with as much as 80 percent for some kinds of account holders, and less for others. None have received all back and bankruptcy law requires customers to share equally in any losses.

In the case of Conoco, MF Global bankruptcy trustee James Giddens returned the undrawn letters of credit to the company and counted the full face value of the letters towards Conoco's compensation claim.

If that accounting is allowed to stand, Conoco could be required to return tens of millions of dollars to the estate, under the argument that the letters of credit are worth more than the percentage of its accounts to which Conoco is entitled. For a FACTBOX on the Conoco-MF Global trustee dispute, please see [ID: nL2E8HRFJ2]

Conoco argues the letters of credit should not be counted against its claims, and that it is owed money from the MF Global estate. The trustee, James Giddens, says letters of credit are treated like cash for the purposes of repayment because they were put up as collateral in place of cash.

The CFTC sides with Gidden's position.

The oil company earlier this year asked the New York federal court to remove the dispute over the letters of credit from bankruptcy court. Giddens fought the venue change, but Conoco won earlier this month.

A unit of Koch Industries is waging a similar fight with the MF Global trustee over his treatment of the company's $20 million of credit.

All told, nine MF Global customers used letters of credit to back their trades, with an unknown total face value.

MF Global filed for bankruptcy on Oct. 31, 2011, after revelations of heavy bets on European sovereign debt prompted credit downgrades and demands for payments from banks and other business partners. Regulators say the firm dipped into customer funds to cope with its liquidity crisis, leaving an estimated $1.6 billion shortfall in customer funds.

At least one former MF Global customer with a letter of credit has agreed to Giddens' treatment of such letters: CME Group, whose GFX unit had a $15 million letter of credit with MF Global when the brokerage collapsed.

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Brazil police arrest ex-chief of bankrupt Cruzeiro do Sul bank

Mon Oct 22, 2012 8:38pm EDT

* Ex-bank chief faces money laundering, other charges

* Liquidation one of biggest Brazil bank collapses in years

BRASILIA Oct 22 (Reuters) - Police in Sao Paulo said on Monday they had arrested the former head of bankrupt Brazilian lender Banco Cruzeiro do Sul on charges of money laundering and crimes against the country's financial system and capital markets.

Last month Brazil's central bank ordered the liquidation of the bank and its subsidiary, Banco Prosper, after seizing the lender on June 4 due to fraud-related losses and after administrators failed to find firm takeover bids.

The liquidation of the bank represents one of the biggest collapses in the country's banking system in years.

Sao Paulo's Federal Police said in a statement that the executive was arrested at an apartment building in Cotia, a town on the outskirts of Sao Paulo city, following an investigation by its financial crimes unit which began in June.

The police said it would not release the name of the detained executive. Up until the time of the bank's seizure, it was headed by chief executive Luis Octavio Indio da Costa.

Analysts said last month when the decision to liquidate Cruzeiro do Sul was announced, that it was not a threat to the banking system but might dent confidence in mid-sized lenders and tarnish the central bank's credibility as sector watchdog.

For background on the Cruzeiro do Sul's collapse, see: (Reporting by Bruno Marfinati and Peter Murphy; Writing by Peter Murphy; Editing by Michael Perry)

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Atwater, California may avoid bankruptcy with union deals

Fri Oct 19, 2012 4:23pm EDT

* Monday city council to hear about concessions

* Atwater's non-safety payroll expenses to be cut by $610,000

* More saving from police officers

By Jim Christie

SAN FRANCISCO, Oct 19 (Reuters) - Pay cuts and other concessions by employees of Atwater, California may help the city balance its budget and avoid bankruptcy, i ts mayor said on Friday.

"We hope to be able to balance our budget," Mayor Joan Faul told Reuters by telephone. "We can't thank our unions enough."

Atwater, a city of about 28,000 residents in California's Central Valley, faces a budget gap of more than $3 million and is a candidate to become the fourth city in California this year to seek protection from creditors under Chapter 9 after it declared a fiscal emergency this month.

Three other cities in the most populous U.S. state this year have filed for Chapter 9 protection from their creditors, prompting some concern in the $3.7 trillion U.S. municipal bond market of more filings. They can be used to try to break contracts, including those with bondholders.

On Monday, Atwater's staff will brief Faul and other city council members on concessions agreed to by its work force.

They are expected to considerably bolster the city's finances, said Nancy Vinson, a business agent for the American Federation of State, County and Municipal Employees (AFSCME). The union represents Atwater's non-safety workers.

"I'm very hopeful," Vinson said. "They're doing what they can to fix it and if they follow through with the things they've identified to me, it looks good."

Vinson said the city will cut 8 positions from its 35-employee non-safety payroll and that its remaining members will accept a 5 percent wage cut and pay more toward their pension accounts and health care.

Also, furloughs imposed last year will remain in effect so that Atwater's AFSCME members will see their overall compensation cut by between $500 and $650 a month, which will cut their combined payroll expense by 24 percent from last year Vinson said.

The concessions should cut Atwater's non-safety payroll expenses by $610,000 this fiscal year, Vinson said, adding that the city's police officers, which she does not represent, have agreed to steep compensation cuts in line with those affecting her union's members.

Faul said police officers will see a 22 percent cut in overall compensation, adding that details on Atwater's labor agreements would be unveiled on Monday.

Other financial measures Atwater is pressing include negotiating a new contract for garbage services and moving forward with plans for raising 10-year-old rates for garbage services and 20-year-old rates for water services. The rate plans would need to be put to voters, Faul said.

Faul declined to comment on how the city council may follow up on its fiscal emergency declaration. By declaring such emergencies, California cities can fast-track plans for Chapter 9 filings.

The city council of San Bernardino in July authorized a bankruptcy filing after declaring a fiscal emergency. The city of 210,000 residents 65 miles (104 km) east of Los Angeles filed for bankruptcy on Aug. 1.

By contrast, Stockton, a city of 300,000 about 62 miles (100 km) northwest of Atwater, filed for Chapter 9 protection in June after 90 days of inconclusive mediation with its creditors.

Mammoth Lakes, a resort town of about 8,000 in California's Sierra Nevada Mountains, filed for Chapter 9 protection on the heels of Stockton's filing because it could not afford to pay a $43 million legal judgment against it. That dispute has since been settled and Mammoth Lakes is moving to have its bankruptcy case dismissed.

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UPDATE 2-Nationstar, Ocwen and Walter fight over ResCap-sources

Fri Oct 19, 2012 7:49pm EDT

* Auction next week for mortgage business, loans

* Nationstar is opening bidder for mortgage business

* Berkshire bidding for loan portfolio

By Jessica Toonkel and Rick Rothacker

Oct 19 (Reuters) - Ocwen Financial Corp and Walter Investment Management Corp have teamed up to top Nationstar Mortgage Holdings Inc's starting bid for Residential Capital LLC's mortgage business, ensuring a bankruptcy auction goes ahead next week, two sources familiar with the matter said on Friday.

The consortium offered to buy the mortgage business for $40 million more than Nationstar's $2.45 billion opening bid, one source said. Nationstar was expected to make an updated bid, another source said.

Several other potential buyers that had shown interest in the business, including private equity firm Blackstone Group and technology company IBM Corp, were not expected to submit offers, one of the sources said, potentially leaving Nationstar and the Ocwen-Walter group as the main contenders.

ResCap, the mortgage unit of auto lender Ally Financial Inc, filed for bankruptcy in May in an effort to wipe out legal liabilities from mortgage-backed securities it sold during the housing boom.

Ally, which is 74 percent owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap's mortgages. It is also selling international businesses to help pay back taxpayers.

Residential Capital and Ocwen declined to comment. Spokespeople for Nationstar, Walter, Blackstone and IBM could not be immediately reached.

Bids were due by the end of business on Friday for ResCap's mortgage platform, as well as a portfolio of loans. The private auction begins on Tuesday at a New York hotel.

Warren Buffett's Berkshire Hathaway Inc has set the low bid for the loan package at $1.44 billion, topping Ally, which had said it would buy the loans if no one else did.

Berkshire also argued in bankruptcy court for the right to be the opening bidder for the mortgage business, but failed to unseat Nationstar. It did get Nationstar, majority owned by Fortress Investment Group LLC, to increase the opening bid by $125 million.

It was not clear whether Berkshire planned to submit another bid. Two other sources familiar with the auction, but not close to Buffett said they did not expect Berkshire to enter the fray for the mortgage business.

Berkshire "does not normally discuss our activities other than when we're legally required to do so," said Buffett's assistant, Debbie Bosanek.

The ResCap sale is expected to raise at least $4 billion, which will then become part of a pool of money used to pay back Ally and other investors, including those who bought mortgage-backed securities tied to ResCap home loans that went bad.

Nationstar, Ocwen and Walter have been building up their mortgage servicing businesses by buying assets shed by larger banks such as Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp. Ocwen also agreed this month to buy Homeward Residential Holdings from private-equity firm WL Ross & Co LLC for $750 million in cash and stock.

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Hong Kong Sept bankruptcy petitions down 17.5 pct from August

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Owner of Hickey Freeman, Hart Schaffner Marx files for bankruptcy

Fri Oct 19, 2012 2:14pm EDT

Oct 19 (Reuters) - HMX Acquisition Corp, the firm behind clothing brands Hickey Freeman and Coppley, filed for Chapter 11 bankruptcy protection on Friday in a Manhattan court.

The company, best known for tailoring suits under the Hart Schaffner Marx brand for U.S. Presidents, also sought court approval for a 'stalking horse bid' from Authentic Brands Group LLC.

A stalking horse bid gives the bidder first preference over a bankrupt company's assets and sets a minimum threshold for further bids.

HMX listed assets of less than $50,000 and liabilities of between $50 million to $100 million in the filing. It listed Pacificways Ltd, Conde Nast and others among its largest unsecured creditors.

The company's brands, which include Christopher Blue and Sansabelt, are sold at well-known retailers like Dillard's Inc and Nordstrom Inc.

HMX said its existing lender, Salus Capital, would provide it with a $65 million debtor-in-possession facility to continue operating its business during the bankruptcy.

The Canadian affiliates of the company have not sought bankruptcy protection, HMX said.

The case is In re: HMX Acquisition Corp, U.S. Bankruptcy Court, Southern District of New York, No:12-14300.

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Atwater, California may avoid bankruptcy with union deals

Fri Oct 19, 2012 4:23pm EDT

* Monday city council to hear about concessions

* Atwater's non-safety payroll expenses to be cut by $610,000

* More saving from police officers

By Jim Christie

SAN FRANCISCO, Oct 19 (Reuters) - Pay cuts and other concessions by employees of Atwater, California may help the city balance its budget and avoid bankruptcy, i ts mayor said on Friday.

"We hope to be able to balance our budget," Mayor Joan Faul told Reuters by telephone. "We can't thank our unions enough."

Atwater, a city of about 28,000 residents in California's Central Valley, faces a budget gap of more than $3 million and is a candidate to become the fourth city in California this year to seek protection from creditors under Chapter 9 after it declared a fiscal emergency this month.

Three other cities in the most populous U.S. state this year have filed for Chapter 9 protection from their creditors, prompting some concern in the $3.7 trillion U.S. municipal bond market of more filings. They can be used to try to break contracts, including those with bondholders.

On Monday, Atwater's staff will brief Faul and other city council members on concessions agreed to by its work force.

They are expected to considerably bolster the city's finances, said Nancy Vinson, a business agent for the American Federation of State, County and Municipal Employees (AFSCME). The union represents Atwater's non-safety workers.

"I'm very hopeful," Vinson said. "They're doing what they can to fix it and if they follow through with the things they've identified to me, it looks good."

Vinson said the city will cut 8 positions from its 35-employee non-safety payroll and that its remaining members will accept a 5 percent wage cut and pay more toward their pension accounts and health care.

Also, furloughs imposed last year will remain in effect so that Atwater's AFSCME members will see their overall compensation cut by between $500 and $650 a month, which will cut their combined payroll expense by 24 percent from last year Vinson said.

The concessions should cut Atwater's non-safety payroll expenses by $610,000 this fiscal year, Vinson said, adding that the city's police officers, which she does not represent, have agreed to steep compensation cuts in line with those affecting her union's members.

Faul said police officers will see a 22 percent cut in overall compensation, adding that details on Atwater's labor agreements would be unveiled on Monday.

Other financial measures Atwater is pressing include negotiating a new contract for garbage services and moving forward with plans for raising 10-year-old rates for garbage services and 20-year-old rates for water services. The rate plans would need to be put to voters, Faul said.

Faul declined to comment on how the city council may follow up on its fiscal emergency declaration. By declaring such emergencies, California cities can fast-track plans for Chapter 9 filings.

The city council of San Bernardino in July authorized a bankruptcy filing after declaring a fiscal emergency. The city of 210,000 residents 65 miles (104 km) east of Los Angeles filed for bankruptcy on Aug. 1.

By contrast, Stockton, a city of 300,000 about 62 miles (100 km) northwest of Atwater, filed for Chapter 9 protection in June after 90 days of inconclusive mediation with its creditors.

Mammoth Lakes, a resort town of about 8,000 in California's Sierra Nevada Mountains, filed for Chapter 9 protection on the heels of Stockton's filing because it could not afford to pay a $43 million legal judgment against it. That dispute has since been settled and Mammoth Lakes is moving to have its bankruptcy case dismissed.

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UPDATE 2-Nationstar, Ocwen and Walter fight over ResCap-sources

Fri Oct 19, 2012 7:49pm EDT

* Auction next week for mortgage business, loans

* Nationstar is opening bidder for mortgage business

* Berkshire bidding for loan portfolio

By Jessica Toonkel and Rick Rothacker

Oct 19 (Reuters) - Ocwen Financial Corp and Walter Investment Management Corp have teamed up to top Nationstar Mortgage Holdings Inc's starting bid for Residential Capital LLC's mortgage business, ensuring a bankruptcy auction goes ahead next week, two sources familiar with the matter said on Friday.

The consortium offered to buy the mortgage business for $40 million more than Nationstar's $2.45 billion opening bid, one source said. Nationstar was expected to make an updated bid, another source said.

Several other potential buyers that had shown interest in the business, including private equity firm Blackstone Group and technology company IBM Corp, were not expected to submit offers, one of the sources said, potentially leaving Nationstar and the Ocwen-Walter group as the main contenders.

ResCap, the mortgage unit of auto lender Ally Financial Inc, filed for bankruptcy in May in an effort to wipe out legal liabilities from mortgage-backed securities it sold during the housing boom.

Ally, which is 74 percent owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap's mortgages. It is also selling international businesses to help pay back taxpayers.

Residential Capital and Ocwen declined to comment. Spokespeople for Nationstar, Walter, Blackstone and IBM could not be immediately reached.

Bids were due by the end of business on Friday for ResCap's mortgage platform, as well as a portfolio of loans. The private auction begins on Tuesday at a New York hotel.

Warren Buffett's Berkshire Hathaway Inc has set the low bid for the loan package at $1.44 billion, topping Ally, which had said it would buy the loans if no one else did.

Berkshire also argued in bankruptcy court for the right to be the opening bidder for the mortgage business, but failed to unseat Nationstar. It did get Nationstar, majority owned by Fortress Investment Group LLC, to increase the opening bid by $125 million.

It was not clear whether Berkshire planned to submit another bid. Two other sources familiar with the auction, but not close to Buffett said they did not expect Berkshire to enter the fray for the mortgage business.

Berkshire "does not normally discuss our activities other than when we're legally required to do so," said Buffett's assistant, Debbie Bosanek.

The ResCap sale is expected to raise at least $4 billion, which will then become part of a pool of money used to pay back Ally and other investors, including those who bought mortgage-backed securities tied to ResCap home loans that went bad.

Nationstar, Ocwen and Walter have been building up their mortgage servicing businesses by buying assets shed by larger banks such as Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp. Ocwen also agreed this month to buy Homeward Residential Holdings from private-equity firm WL Ross & Co LLC for $750 million in cash and stock.

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Owner of Hickey Freeman, Hart Schaffner Marx files for bankruptcy

Fri Oct 19, 2012 2:14pm EDT

Oct 19 (Reuters) - HMX Acquisition Corp, the firm behind clothing brands Hickey Freeman and Coppley, filed for Chapter 11 bankruptcy protection on Friday in a Manhattan court.

The company, best known for tailoring suits under the Hart Schaffner Marx brand for U.S. Presidents, also sought court approval for a 'stalking horse bid' from Authentic Brands Group LLC.

A stalking horse bid gives the bidder first preference over a bankrupt company's assets and sets a minimum threshold for further bids.

HMX listed assets of less than $50,000 and liabilities of between $50 million to $100 million in the filing. It listed Pacificways Ltd, Conde Nast and others among its largest unsecured creditors.

The company's brands, which include Christopher Blue and Sansabelt, are sold at well-known retailers like Dillard's Inc and Nordstrom Inc.

HMX said its existing lender, Salus Capital, would provide it with a $65 million debtor-in-possession facility to continue operating its business during the bankruptcy.

The Canadian affiliates of the company have not sought bankruptcy protection, HMX said.

The case is In re: HMX Acquisition Corp, U.S. Bankruptcy Court, Southern District of New York, No:12-14300.

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