Publisher Tribune to emerge from bankruptcy on Dec. 31

Sun Dec 30, 2012 11:29pm EST

Dec 31 (Reuters) - U.S. media giant The Tribune Co, owner of the Los Angeles Times and the Chicago Tribune, said late on Sunday it will emerge from bankruptcy on Dec. 31, ending four years of Chapter 11 reorganization.

Chicago-based Tribune said it will emerge from the Chapter 11 process with a portfolio of profitable assets that will include eight major daily newspapers and 23 TV stations. The company will also have a new board of directors.

As part of the Chapter 11 exit, the company will close on a new $1.1 billion senior secured term loan and a new $300 million asset-based revolving credit facility.

The term loan will be used to fund certain payments under the plan of reorganization and the revolving credit facility will be used to fund ongoing operations, the company said.

Upon exiting bankruptcy, Tribune will have issued to former creditors a mix of about 100 million shares of new class A common stock and new class B common stock and new warrants to purchase shares of new class A or class B common stock.

The current chief executive officer, Eddy Hartenstein, will remain in his role until the new board ratifies the company's executive officers.

In November, Tribune received regulatory approval from the Federal Communications Commission (FCC) to transfer its broadcast licenses to the owners who will take over the company when it emerges from bankruptcy.

The company's plan of reorganization was confirmed by the Delaware bankruptcy court in July. Tribune's emergence from bankruptcy was conditional on the FCC approving the transfer of the broadcast licenses to new owners.

The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

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UPDATE 1-Publisher Tribune to emerge from bankruptcy on Dec. 31

Mon Dec 31, 2012 1:16am EST

* Former Fox Ent. chairman Liguori may get CEO job

* New board to include former execs of Yahoo, Disney

* Reorganized company includes 23 TV stations, 8 dailies

Dec 31 (Reuters) - U.S. media giant The Tribune Co, owner of the Los Angeles Times and the Chicago Tribune, said late on Sunday it will emerge from bankruptcy on Dec. 31, ending four years of Chapter 11 reorganization.

Chicago-based Tribune said it will emerge from the Chapter 11 process with a portfolio of profitable assets that will include eight major daily newspapers and 23 TV stations. The company will also have a new board of directors.

"Tribune will emerge as a dynamic multi-media company with a great mix of profitable assets, powerful brands in major markets, sufficient liquidity for operations and investments and significantly less debt," Eddy Hartenstein, Tribune's chief executive officer, said in an email to employees. "In short, Tribune is far stronger than it was when we began the Chapter 11 process."

As part of the Chapter 11 exit, the company will close on a new $1.1 billion senior secured term loan and a new $300 million asset-based revolving credit facility.

The term loan will be used to fund certain payments under the plan of reorganization and the revolving credit facility will be used to fund ongoing operations, the company said.

Upon exiting bankruptcy, Tribune will have issued to former creditors a mix of about 100 million shares of new class A common stock and new class B common stock and new warrants to purchase shares of new class A or class B common stock.

The current chief executive officer, Eddy Hartenstein, will remain in his role until the new board ratifies the company's executive officers.

The company announced a seven-person board that includes Hartenstein, former Fox Entertainment chairman Peter Liguori, former Yahoo interim CEO Ross Levinshohn and Peter Murphy, Walt Disney's former top strategic planning executive.

Liquori is expected to be named Tribune's new chief executive officer.

In November, Tribune received regulatory approval from the Federal Communications Commission (FCC) to transfer its broadcast licenses to the owners who will take over the company when it emerges from bankruptcy.

The company's plan of reorganization was confirmed by the Delaware bankruptcy court in July. Tribune's emergence from bankruptcy was conditional on the FCC approving the transfer of the broadcast licenses to new owners.

The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

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BRIEF-Tricor says co may be placed into liquidation

LONDON | Mon Dec 31, 2012 2:10am EST

LONDON Dec 31 (Reuters) - Tricor PLC : * Facing mounting pressure from its short term creditors * Insufficient cash to settle liabilities whilst the company waits for the

outcome of the vat tribunal * Directors are currently evaluating strategies to ensure the continued

survival of the company * If the directors efforts are unsuccessful, there is a risk that the company

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BRIEF-MWB Business Exchange says marketing period will run until Feb. 14

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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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Bankia investors can look to AIB experience as precedent

Thu Dec 27, 2012 11:53am EST

* Shares effectively worthless after negative valuation

* Irish case sets precedent for preservation of small stake

* Holders in some Europe banks avoided full nationalisation

By Laura Noonan

DUBLIN, Dec 27 (Reuters) - Investors in Spain's embattled Bankia can take some comfort from the prior experience of shareholders at Ireland's largest retail bank, Allied Irish Banks.

Bankia now has a negative equity value of 4.2 billion euros ($5.6 billion), according to Spain's bank rescue vehicle, which means the shares are essentially worthless.

But the previous treatment of AIB's shareholders suggests Spain is likely to be successful in convincing the European Union to allow Bankia's existing shareholders to retain a tiny stake in the recapitalised, and newly valuable bank.

In typical corporate rescues, shareholders suffer a total wipeout before any bondholders are touched.

AIB's shareholders were able to cling to a 0.2 percent interest, however, because its 20.7 billion euro recapitalisation included a 6.1 billion euro "capital contribution" that didn't have any dilutive impact on shareholders.

The measure got through Europe's state aid rules because the shareholders' interest was marginal, and the solution avoided the complexities of full-on nationalization, a source familiar with the situation told Reuters.

By not nationalizing AIB, the deal meant it remained listed on the Irish stock exchange and continues to report financial results in the same way as other listed companies, making the job of eventually finding new investors easier.

Similar reasoning is likely to be employed by the Spanish in convincing the European Commission to allow Bankia's largely retail shareholder base to retain some ownership.

A spokesman for the European Commission's competition directorate declined to comment on the Bankia case on the basis that a decision on the bank's shareholders had not yet been made public.

ITALY, GREECE, BELGIUM CASES

In Italy, shareholders in the country's third-biggest bank, Monte dei Paschi di Siena, have avoided any dilution in the institution's recently approved 3.9 billion euro recapitalisation, because the capital was injected in the form of debt instruments rather than equity.

In Greece, the 18 billion euro recapitalisation shared by its four biggest banks over the summer did not dilute shareholders because it was structured as a bridging measure, which did not grant the state any regular shares.

The EC approved the temporary measures for Alpha Bank , the National Bank of Greece, EFG Eurobank and Piraeus Bank but noted its reservations.

"While such an arrangement could be acceptable as a temporary measure to give some time to find private investors, it would not comply with the remuneration and burden-sharing principles under state aid rules if the bridge recapitalisation were to last over a protracted period," the EC noted in a letter sent to Greece over the summer and published on Nov. 21.

Greece is in the midst of a more permanent banking rescue, which could result in nationalisations in 2013 if the banks cannot convince investors to stump up fresh cash.

Elsewhere in Europe, other shareholders have suffered the obliteration that usually comes with nationalisation.

Shareholders in Ireland's Anglo Irish Bank, whose equity value peaked at 13 billion euros in May 2007, were left with nothing following the bank's 4 billion euro recapitalisation and immediate nationalisation in January 2009.

The wipeout was announced less than a month after a plan that would have recapitalised Anglo to the tune of just 1.5 billion euros, which have left shareholders with some of their equity intact.

The government said the stronger measures were needed, because Anglo's position had "progressively weakened" after revelations of "unacceptable corporate governance practices". The bank had artificially boosted its customer deposits by more than 7 billion euros by putting money on deposit with another Irish bank and having that bank re-deposit the cash with Anglo.

Anglo ultimately needed another 25.3 billion euros of state money, on top of the initial 4 billion euros.

On the Franco-Belgian front, investors in ailing Dexia voted last week to accept the near-nationalisation of their group when it gets its next 5.5 billion euros of rescue money.

The shareholders were faced with choosing between having their collective ownership diluted to just 1.9 percent of the bank (from their current 30.4 percent) or acquiescing to the immediate liquidation of the bank.

Geert Lenssens, a lawyer who represents a number of minority shareholders, described it as "a choice between syphilis and gonorrhoea, between the guillotine and the electric chair, between the plague and cholera".

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UPDATE 2-Mich. gov signs bill giving local govts fiscal options

Thu Dec 27, 2012 5:00pm EST

Dec 27 (Reuters) - Michigan Governor Rick Snyder signed into law on Thursday a bill that gives options to cities and school districts for dealing with severe financial problems, including bankruptcy.

The law, passed by the Republican-controlled legislature earlier this month, allows local elected officials to choose between Chapter 9 municipal bankruptcy, if the move is approved by the governor; an emergency manager; arbitration with a neutral party; or a consent agreement laying out terms for fixing the government's finances.

It replaces a controversial law repealed by Michigan voters on Nov. 6 that made it easier for the state to intervene in fiscally troubled cities and schools and gave state-appointed emergency managers running the governments the power to suspend collective bargaining agreements with workers.

That law, known as Public Act 4, was suspended in August pending the outcome of the vote and the state has been relying on a former, weaker law since then.

Snyder, a Republican, defended the new law against criticism that it is too similar to Public Act 4.

"This legislation demonstrates that we clearly heard, recognized and respected the will of the voters," the governor said in a statement. "It builds in local control and options while also ensuring the tools to protect communities and schools districts' residents, students and taxpayers."

The law also includes appropriations for administrative expenses, making it ineligible for a petition drive that could result in its repeal by voters.

Because the new law will not take effect for 90 days, it will have no immediate impact on eight cities and school districts currently operating with emergency financial managers and three cities, including Detroit, which are operating under consent agreements.

Even after it kicks in, the law keeps in place existing state-appointed managers and any ongoing review process to determine if a manager is needed, which is the case in Detroit.

Snyder on Dec. 18 named a review team for Michigan's largest city, a step in a process that could lead Detroit to file what would be the biggest-ever municipal bankruptcy.

That team, which met twice last week and is on an expedited schedule to report to the governor, is continuing its work despite the receipt on Thursday of a fiscal plan from the city, according to Caleb Buhs, a spokesman for the Michigan Treasury Department.

The Detroit Free Press reported on Thursday that a majority of the nine-member city council believes Detroit's problems can be fixed without a state-appointed manager. A spokeswoman for Council President Charles Pugh said she had no information on the plan and that Pugh was not available for comment.

Detroit was able to avoid an emergency manager by entering into the consent agreement earlier this year that gave the state more oversight of the city.

However, slow progress on reforms led state officials to launch a review process earlier this month that could lead to a manager, who could decide to take the city to federal bankruptcy court unless the state blocks the move.

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BRIEF-MWB Business Exchange says marketing period will run until Feb. 14

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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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Bankia investors can look to AIB experience as precedent

Thu Dec 27, 2012 11:53am EST

* Shares effectively worthless after negative valuation

* Irish case sets precedent for preservation of small stake

* Holders in some Europe banks avoided full nationalisation

By Laura Noonan

DUBLIN, Dec 27 (Reuters) - Investors in Spain's embattled Bankia can take some comfort from the prior experience of shareholders at Ireland's largest retail bank, Allied Irish Banks.

Bankia now has a negative equity value of 4.2 billion euros ($5.6 billion), according to Spain's bank rescue vehicle, which means the shares are essentially worthless.

But the previous treatment of AIB's shareholders suggests Spain is likely to be successful in convincing the European Union to allow Bankia's existing shareholders to retain a tiny stake in the recapitalised, and newly valuable bank.

In typical corporate rescues, shareholders suffer a total wipeout before any bondholders are touched.

AIB's shareholders were able to cling to a 0.2 percent interest, however, because its 20.7 billion euro recapitalisation included a 6.1 billion euro "capital contribution" that didn't have any dilutive impact on shareholders.

The measure got through Europe's state aid rules because the shareholders' interest was marginal, and the solution avoided the complexities of full-on nationalization, a source familiar with the situation told Reuters.

By not nationalizing AIB, the deal meant it remained listed on the Irish stock exchange and continues to report financial results in the same way as other listed companies, making the job of eventually finding new investors easier.

Similar reasoning is likely to be employed by the Spanish in convincing the European Commission to allow Bankia's largely retail shareholder base to retain some ownership.

A spokesman for the European Commission's competition directorate declined to comment on the Bankia case on the basis that a decision on the bank's shareholders had not yet been made public.

ITALY, GREECE, BELGIUM CASES

In Italy, shareholders in the country's third-biggest bank, Monte dei Paschi di Siena, have avoided any dilution in the institution's recently approved 3.9 billion euro recapitalisation, because the capital was injected in the form of debt instruments rather than equity.

In Greece, the 18 billion euro recapitalisation shared by its four biggest banks over the summer did not dilute shareholders because it was structured as a bridging measure, which did not grant the state any regular shares.

The EC approved the temporary measures for Alpha Bank , the National Bank of Greece, EFG Eurobank and Piraeus Bank but noted its reservations.

"While such an arrangement could be acceptable as a temporary measure to give some time to find private investors, it would not comply with the remuneration and burden-sharing principles under state aid rules if the bridge recapitalisation were to last over a protracted period," the EC noted in a letter sent to Greece over the summer and published on Nov. 21.

Greece is in the midst of a more permanent banking rescue, which could result in nationalisations in 2013 if the banks cannot convince investors to stump up fresh cash.

Elsewhere in Europe, other shareholders have suffered the obliteration that usually comes with nationalisation.

Shareholders in Ireland's Anglo Irish Bank, whose equity value peaked at 13 billion euros in May 2007, were left with nothing following the bank's 4 billion euro recapitalisation and immediate nationalisation in January 2009.

The wipeout was announced less than a month after a plan that would have recapitalised Anglo to the tune of just 1.5 billion euros, which have left shareholders with some of their equity intact.

The government said the stronger measures were needed, because Anglo's position had "progressively weakened" after revelations of "unacceptable corporate governance practices". The bank had artificially boosted its customer deposits by more than 7 billion euros by putting money on deposit with another Irish bank and having that bank re-deposit the cash with Anglo.

Anglo ultimately needed another 25.3 billion euros of state money, on top of the initial 4 billion euros.

On the Franco-Belgian front, investors in ailing Dexia voted last week to accept the near-nationalisation of their group when it gets its next 5.5 billion euros of rescue money.

The shareholders were faced with choosing between having their collective ownership diluted to just 1.9 percent of the bank (from their current 30.4 percent) or acquiescing to the immediate liquidation of the bank.

Geert Lenssens, a lawyer who represents a number of minority shareholders, described it as "a choice between syphilis and gonorrhoea, between the guillotine and the electric chair, between the plague and cholera".

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UPDATE 2-Mich. gov signs bill giving local govts fiscal options

Thu Dec 27, 2012 5:00pm EST

Dec 27 (Reuters) - Michigan Governor Rick Snyder signed into law on Thursday a bill that gives options to cities and school districts for dealing with severe financial problems, including bankruptcy.

The law, passed by the Republican-controlled legislature earlier this month, allows local elected officials to choose between Chapter 9 municipal bankruptcy, if the move is approved by the governor; an emergency manager; arbitration with a neutral party; or a consent agreement laying out terms for fixing the government's finances.

It replaces a controversial law repealed by Michigan voters on Nov. 6 that made it easier for the state to intervene in fiscally troubled cities and schools and gave state-appointed emergency managers running the governments the power to suspend collective bargaining agreements with workers.

That law, known as Public Act 4, was suspended in August pending the outcome of the vote and the state has been relying on a former, weaker law since then.

Snyder, a Republican, defended the new law against criticism that it is too similar to Public Act 4.

"This legislation demonstrates that we clearly heard, recognized and respected the will of the voters," the governor said in a statement. "It builds in local control and options while also ensuring the tools to protect communities and schools districts' residents, students and taxpayers."

The law also includes appropriations for administrative expenses, making it ineligible for a petition drive that could result in its repeal by voters.

Because the new law will not take effect for 90 days, it will have no immediate impact on eight cities and school districts currently operating with emergency financial managers and three cities, including Detroit, which are operating under consent agreements.

Even after it kicks in, the law keeps in place existing state-appointed managers and any ongoing review process to determine if a manager is needed, which is the case in Detroit.

Snyder on Dec. 18 named a review team for Michigan's largest city, a step in a process that could lead Detroit to file what would be the biggest-ever municipal bankruptcy.

That team, which met twice last week and is on an expedited schedule to report to the governor, is continuing its work despite the receipt on Thursday of a fiscal plan from the city, according to Caleb Buhs, a spokesman for the Michigan Treasury Department.

The Detroit Free Press reported on Thursday that a majority of the nine-member city council believes Detroit's problems can be fixed without a state-appointed manager. A spokeswoman for Council President Charles Pugh said she had no information on the plan and that Pugh was not available for comment.

Detroit was able to avoid an emergency manager by entering into the consent agreement earlier this year that gave the state more oversight of the city.

However, slow progress on reforms led state officials to launch a review process earlier this month that could lead to a manager, who could decide to take the city to federal bankruptcy court unless the state blocks the move.

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BRIEF-MWB Business Exchange says marketing period will run until Feb. 14

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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Bankia investors can look to AIB experience as precedent

Thu Dec 27, 2012 11:53am EST

* Shares effectively worthless after negative valuation

* Irish case sets precedent for preservation of small stake

* Holders in some Europe banks avoided full nationalisation

By Laura Noonan

DUBLIN, Dec 27 (Reuters) - Investors in Spain's embattled Bankia can take some comfort from the prior experience of shareholders at Ireland's largest retail bank, Allied Irish Banks.

Bankia now has a negative equity value of 4.2 billion euros ($5.6 billion), according to Spain's bank rescue vehicle, which means the shares are essentially worthless.

But the previous treatment of AIB's shareholders suggests Spain is likely to be successful in convincing the European Union to allow Bankia's existing shareholders to retain a tiny stake in the recapitalised, and newly valuable bank.

In typical corporate rescues, shareholders suffer a total wipeout before any bondholders are touched.

AIB's shareholders were able to cling to a 0.2 percent interest, however, because its 20.7 billion euro recapitalisation included a 6.1 billion euro "capital contribution" that didn't have any dilutive impact on shareholders.

The measure got through Europe's state aid rules because the shareholders' interest was marginal, and the solution avoided the complexities of full-on nationalization, a source familiar with the situation told Reuters.

By not nationalizing AIB, the deal meant it remained listed on the Irish stock exchange and continues to report financial results in the same way as other listed companies, making the job of eventually finding new investors easier.

Similar reasoning is likely to be employed by the Spanish in convincing the European Commission to allow Bankia's largely retail shareholder base to retain some ownership.

A spokesman for the European Commission's competition directorate declined to comment on the Bankia case on the basis that a decision on the bank's shareholders had not yet been made public.

ITALY, GREECE, BELGIUM CASES

In Italy, shareholders in the country's third-biggest bank, Monte dei Paschi di Siena, have avoided any dilution in the institution's recently approved 3.9 billion euro recapitalisation, because the capital was injected in the form of debt instruments rather than equity.

In Greece, the 18 billion euro recapitalisation shared by its four biggest banks over the summer did not dilute shareholders because it was structured as a bridging measure, which did not grant the state any regular shares.

The EC approved the temporary measures for Alpha Bank , the National Bank of Greece, EFG Eurobank and Piraeus Bank but noted its reservations.

"While such an arrangement could be acceptable as a temporary measure to give some time to find private investors, it would not comply with the remuneration and burden-sharing principles under state aid rules if the bridge recapitalisation were to last over a protracted period," the EC noted in a letter sent to Greece over the summer and published on Nov. 21.

Greece is in the midst of a more permanent banking rescue, which could result in nationalisations in 2013 if the banks cannot convince investors to stump up fresh cash.

Elsewhere in Europe, other shareholders have suffered the obliteration that usually comes with nationalisation.

Shareholders in Ireland's Anglo Irish Bank, whose equity value peaked at 13 billion euros in May 2007, were left with nothing following the bank's 4 billion euro recapitalisation and immediate nationalisation in January 2009.

The wipeout was announced less than a month after a plan that would have recapitalised Anglo to the tune of just 1.5 billion euros, which have left shareholders with some of their equity intact.

The government said the stronger measures were needed, because Anglo's position had "progressively weakened" after revelations of "unacceptable corporate governance practices". The bank had artificially boosted its customer deposits by more than 7 billion euros by putting money on deposit with another Irish bank and having that bank re-deposit the cash with Anglo.

Anglo ultimately needed another 25.3 billion euros of state money, on top of the initial 4 billion euros.

On the Franco-Belgian front, investors in ailing Dexia voted last week to accept the near-nationalisation of their group when it gets its next 5.5 billion euros of rescue money.

The shareholders were faced with choosing between having their collective ownership diluted to just 1.9 percent of the bank (from their current 30.4 percent) or acquiescing to the immediate liquidation of the bank.

Geert Lenssens, a lawyer who represents a number of minority shareholders, described it as "a choice between syphilis and gonorrhoea, between the guillotine and the electric chair, between the plague and cholera".

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UPDATE 2-Mich. gov signs bill giving local govts fiscal options

Thu Dec 27, 2012 5:00pm EST

Dec 27 (Reuters) - Michigan Governor Rick Snyder signed into law on Thursday a bill that gives options to cities and school districts for dealing with severe financial problems, including bankruptcy.

The law, passed by the Republican-controlled legislature earlier this month, allows local elected officials to choose between Chapter 9 municipal bankruptcy, if the move is approved by the governor; an emergency manager; arbitration with a neutral party; or a consent agreement laying out terms for fixing the government's finances.

It replaces a controversial law repealed by Michigan voters on Nov. 6 that made it easier for the state to intervene in fiscally troubled cities and schools and gave state-appointed emergency managers running the governments the power to suspend collective bargaining agreements with workers.

That law, known as Public Act 4, was suspended in August pending the outcome of the vote and the state has been relying on a former, weaker law since then.

Snyder, a Republican, defended the new law against criticism that it is too similar to Public Act 4.

"This legislation demonstrates that we clearly heard, recognized and respected the will of the voters," the governor said in a statement. "It builds in local control and options while also ensuring the tools to protect communities and schools districts' residents, students and taxpayers."

The law also includes appropriations for administrative expenses, making it ineligible for a petition drive that could result in its repeal by voters.

Because the new law will not take effect for 90 days, it will have no immediate impact on eight cities and school districts currently operating with emergency financial managers and three cities, including Detroit, which are operating under consent agreements.

Even after it kicks in, the law keeps in place existing state-appointed managers and any ongoing review process to determine if a manager is needed, which is the case in Detroit.

Snyder on Dec. 18 named a review team for Michigan's largest city, a step in a process that could lead Detroit to file what would be the biggest-ever municipal bankruptcy.

That team, which met twice last week and is on an expedited schedule to report to the governor, is continuing its work despite the receipt on Thursday of a fiscal plan from the city, according to Caleb Buhs, a spokesman for the Michigan Treasury Department.

The Detroit Free Press reported on Thursday that a majority of the nine-member city council believes Detroit's problems can be fixed without a state-appointed manager. A spokeswoman for Council President Charles Pugh said she had no information on the plan and that Pugh was not available for comment.

Detroit was able to avoid an emergency manager by entering into the consent agreement earlier this year that gave the state more oversight of the city.

However, slow progress on reforms led state officials to launch a review process earlier this month that could lead to a manager, who could decide to take the city to federal bankruptcy court unless the state blocks the move.

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CORRECTED-UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 7:15pm EST

(Corrects 19th paragraph to show Lubic represents Calpbers, not San Bernardino)

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place."

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L Gates representing Calpers, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process. (Reporting by Jonathan Weber and Tim Reid; Editing by Chizu Nomiyama and Tiziana Barghini)

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UPDATE 2-Pharmacy linked to U.S. meningitis outbreak files for bankruptcy

Fri Dec 21, 2012 7:51pm EST

By Tim McLaughlin

Dec 21 (Reuters) - The Massachusetts pharmacy linked to a deadly U.S. meningitis outbreak filed for Chapter 11 bankruptcy on Friday and said it would establish a fund to compensate victims.

According to the Centers for Disease Control and Prevention, 39 people have died and more than 600 have been injured from injections of methylprednisolone acetate, a drug typically used to ease back pain.

New England Compounding Center, the specialty pharmacy, shut down in October after shipping tainted vials of the steroid, and filed for bankruptcy with between $1 million to $10 million in assets, court documents show.

NECC, a private company based in Framingham, Massachusetts, shipped the drug to medical facilities throughout the United States. NECC had less than $2.34 million in debts when it filed, according to the documents in U.S. Bankruptcy Court for the District of Massachusetts.

The pharmacy's equity shareholders are Carla Conigliaro with a 55 percent stake, Barry Cadden with a 17.5 percent stake, Lisa Conigliaro Cadden with a 17.5 percent stake and Gregory Conigliaro with a 10 percent stake, the documents show. In bankruptcy, the equity of a company typically has no value.

Its largest unsecured creditor is McKesson Drug and it owes it $143,169, the documents show.

The company said in a statement that it has filed papers with the court to pursue a greater, quicker payout to its creditors than they could achieve through piecemeal litigation.

NECC said Keith Lowey would be NECC's independent director and chief restructuring officer. He will oversee setting up a compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," Lowey said in a statement.

NECC's bankruptcy counsel is Daniel Cohn of Murtha Cullina LLP.

Before the deadly outbreak, NECC escaped harsh punishment from health regulators several times in the years leading up to the health crisis that has raised questions about oversight of the customized drug mixing industry, Massachusetts records show.

Problems at NECC date as far back as 1999, the year after it began operations, according to hundreds of pages of documents obtained under a Freedom of Information Act request.

And the documents show regulators refraining from the harshest sanctions available to them, even as the list of complaints against NECC continued to grow.

The documents came to light after steroid shots from NECC were given to thousands of patients across the country.

Among the reported problems was a company official handing out blank prescriptions. And an outside evaluation firm found inadequate documentation and inadequate process controls involving sterilization at NECC in 2006, the documents show.

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MF Global trustee announces settlement deals key to cash payouts

Sat Dec 22, 2012 3:07pm EST

Dec 22 (Reuters) - The trustee for the failed MF Global Inc on Saturday announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage.

James Giddens, trustee for the MF Global estate, said in a statement he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd.

As a result of the UK agreement, Giddens estimated between$500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts.

Giddens said claims by MF Global's securities customers could be fully restored. Commodities customers could get "significant additional distributions," he said.

The estate has a hearing scheduled for Jan. 31, 2013 before the United States Bankruptcy Court for the Southern District of New York, the first step toward getting the UK agreement approved.

"The trustee's goal is still to return 100 percent to the commodities customers, and we will be going before the court in an attempt to achieve that," Kent Jarrell, a spokesman for Giddens, said on Saturday.

MF Global improperly used customer money to plug liquidity gaps as the brokerage was in freefall last year, creating a roughly $1.6 billion gap in customer accounts, according to a June report by Giddens. The company filed for bankruptcy in October 2011.

As a result of money changing hands during MF Global's chaotic collapse, various company affiliates have been fighting over who owes money to whom.

Earlier this month, Giddens released a report saying more than 28,000 claims have been filed by the brokerage's commodities and securities customers, all but 200 have been fully resolved.

So far, Giddens has returned approximately $4.7 billion to commodities customers hit by the brokerage's collapse.

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CORRECTED-UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 7:15pm EST

(Corrects 19th paragraph to show Lubic represents Calpbers, not San Bernardino)

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place."

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L Gates representing Calpers, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process. (Reporting by Jonathan Weber and Tim Reid; Editing by Chizu Nomiyama and Tiziana Barghini)

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UPDATE 2-Pharmacy linked to U.S. meningitis outbreak files for bankruptcy

Fri Dec 21, 2012 7:51pm EST

By Tim McLaughlin

Dec 21 (Reuters) - The Massachusetts pharmacy linked to a deadly U.S. meningitis outbreak filed for Chapter 11 bankruptcy on Friday and said it would establish a fund to compensate victims.

According to the Centers for Disease Control and Prevention, 39 people have died and more than 600 have been injured from injections of methylprednisolone acetate, a drug typically used to ease back pain.

New England Compounding Center, the specialty pharmacy, shut down in October after shipping tainted vials of the steroid, and filed for bankruptcy with between $1 million to $10 million in assets, court documents show.

NECC, a private company based in Framingham, Massachusetts, shipped the drug to medical facilities throughout the United States. NECC had less than $2.34 million in debts when it filed, according to the documents in U.S. Bankruptcy Court for the District of Massachusetts.

The pharmacy's equity shareholders are Carla Conigliaro with a 55 percent stake, Barry Cadden with a 17.5 percent stake, Lisa Conigliaro Cadden with a 17.5 percent stake and Gregory Conigliaro with a 10 percent stake, the documents show. In bankruptcy, the equity of a company typically has no value.

Its largest unsecured creditor is McKesson Drug and it owes it $143,169, the documents show.

The company said in a statement that it has filed papers with the court to pursue a greater, quicker payout to its creditors than they could achieve through piecemeal litigation.

NECC said Keith Lowey would be NECC's independent director and chief restructuring officer. He will oversee setting up a compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," Lowey said in a statement.

NECC's bankruptcy counsel is Daniel Cohn of Murtha Cullina LLP.

Before the deadly outbreak, NECC escaped harsh punishment from health regulators several times in the years leading up to the health crisis that has raised questions about oversight of the customized drug mixing industry, Massachusetts records show.

Problems at NECC date as far back as 1999, the year after it began operations, according to hundreds of pages of documents obtained under a Freedom of Information Act request.

And the documents show regulators refraining from the harshest sanctions available to them, even as the list of complaints against NECC continued to grow.

The documents came to light after steroid shots from NECC were given to thousands of patients across the country.

Among the reported problems was a company official handing out blank prescriptions. And an outside evaluation firm found inadequate documentation and inadequate process controls involving sterilization at NECC in 2006, the documents show.

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MF Global trustee announces settlement deals key to cash payouts

Sat Dec 22, 2012 3:07pm EST

Dec 22 (Reuters) - The trustee for the failed MF Global Inc on Saturday announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage.

James Giddens, trustee for the MF Global estate, said in a statement he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd.

As a result of the UK agreement, Giddens estimated between$500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts.

Giddens said claims by MF Global's securities customers could be fully restored. Commodities customers could get "significant additional distributions," he said.

The estate has a hearing scheduled for Jan. 31, 2013 before the United States Bankruptcy Court for the Southern District of New York, the first step toward getting the UK agreement approved.

"The trustee's goal is still to return 100 percent to the commodities customers, and we will be going before the court in an attempt to achieve that," Kent Jarrell, a spokesman for Giddens, said on Saturday.

MF Global improperly used customer money to plug liquidity gaps as the brokerage was in freefall last year, creating a roughly $1.6 billion gap in customer accounts, according to a June report by Giddens. The company filed for bankruptcy in October 2011.

As a result of money changing hands during MF Global's chaotic collapse, various company affiliates have been fighting over who owes money to whom.

Earlier this month, Giddens released a report saying more than 28,000 claims have been filed by the brokerage's commodities and securities customers, all but 200 have been fully resolved.

So far, Giddens has returned approximately $4.7 billion to commodities customers hit by the brokerage's collapse.

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CORRECTED-UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 7:15pm EST

(Corrects 19th paragraph to show Lubic represents Calpbers, not San Bernardino)

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place."

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L Gates representing Calpers, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process. (Reporting by Jonathan Weber and Tim Reid; Editing by Chizu Nomiyama and Tiziana Barghini)

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UPDATE 2-Pharmacy linked to U.S. meningitis outbreak files for bankruptcy

Fri Dec 21, 2012 7:51pm EST

By Tim McLaughlin

Dec 21 (Reuters) - The Massachusetts pharmacy linked to a deadly U.S. meningitis outbreak filed for Chapter 11 bankruptcy on Friday and said it would establish a fund to compensate victims.

According to the Centers for Disease Control and Prevention, 39 people have died and more than 600 have been injured from injections of methylprednisolone acetate, a drug typically used to ease back pain.

New England Compounding Center, the specialty pharmacy, shut down in October after shipping tainted vials of the steroid, and filed for bankruptcy with between $1 million to $10 million in assets, court documents show.

NECC, a private company based in Framingham, Massachusetts, shipped the drug to medical facilities throughout the United States. NECC had less than $2.34 million in debts when it filed, according to the documents in U.S. Bankruptcy Court for the District of Massachusetts.

The pharmacy's equity shareholders are Carla Conigliaro with a 55 percent stake, Barry Cadden with a 17.5 percent stake, Lisa Conigliaro Cadden with a 17.5 percent stake and Gregory Conigliaro with a 10 percent stake, the documents show. In bankruptcy, the equity of a company typically has no value.

Its largest unsecured creditor is McKesson Drug and it owes it $143,169, the documents show.

The company said in a statement that it has filed papers with the court to pursue a greater, quicker payout to its creditors than they could achieve through piecemeal litigation.

NECC said Keith Lowey would be NECC's independent director and chief restructuring officer. He will oversee setting up a compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," Lowey said in a statement.

NECC's bankruptcy counsel is Daniel Cohn of Murtha Cullina LLP.

Before the deadly outbreak, NECC escaped harsh punishment from health regulators several times in the years leading up to the health crisis that has raised questions about oversight of the customized drug mixing industry, Massachusetts records show.

Problems at NECC date as far back as 1999, the year after it began operations, according to hundreds of pages of documents obtained under a Freedom of Information Act request.

And the documents show regulators refraining from the harshest sanctions available to them, even as the list of complaints against NECC continued to grow.

The documents came to light after steroid shots from NECC were given to thousands of patients across the country.

Among the reported problems was a company official handing out blank prescriptions. And an outside evaluation firm found inadequate documentation and inadequate process controls involving sterilization at NECC in 2006, the documents show.

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MF Global trustee announces settlement deals key to cash payouts

Sat Dec 22, 2012 3:07pm EST

Dec 22 (Reuters) - The trustee for the failed MF Global Inc on Saturday announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage.

James Giddens, trustee for the MF Global estate, said in a statement he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd.

As a result of the UK agreement, Giddens estimated between$500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts.

Giddens said claims by MF Global's securities customers could be fully restored. Commodities customers could get "significant additional distributions," he said.

The estate has a hearing scheduled for Jan. 31, 2013 before the United States Bankruptcy Court for the Southern District of New York, the first step toward getting the UK agreement approved.

"The trustee's goal is still to return 100 percent to the commodities customers, and we will be going before the court in an attempt to achieve that," Kent Jarrell, a spokesman for Giddens, said on Saturday.

MF Global improperly used customer money to plug liquidity gaps as the brokerage was in freefall last year, creating a roughly $1.6 billion gap in customer accounts, according to a June report by Giddens. The company filed for bankruptcy in October 2011.

As a result of money changing hands during MF Global's chaotic collapse, various company affiliates have been fighting over who owes money to whom.

Earlier this month, Giddens released a report saying more than 28,000 claims have been filed by the brokerage's commodities and securities customers, all but 200 have been fully resolved.

So far, Giddens has returned approximately $4.7 billion to commodities customers hit by the brokerage's collapse.

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CORRECTED-UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 7:15pm EST

(Corrects 19th paragraph to show Lubic represents Calpbers, not San Bernardino)

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place."

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L Gates representing Calpers, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process. (Reporting by Jonathan Weber and Tim Reid; Editing by Chizu Nomiyama and Tiziana Barghini)

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UPDATE 2-Pharmacy linked to U.S. meningitis outbreak files for bankruptcy

Fri Dec 21, 2012 7:51pm EST

By Tim McLaughlin

Dec 21 (Reuters) - The Massachusetts pharmacy linked to a deadly U.S. meningitis outbreak filed for Chapter 11 bankruptcy on Friday and said it would establish a fund to compensate victims.

According to the Centers for Disease Control and Prevention, 39 people have died and more than 600 have been injured from injections of methylprednisolone acetate, a drug typically used to ease back pain.

New England Compounding Center, the specialty pharmacy, shut down in October after shipping tainted vials of the steroid, and filed for bankruptcy with between $1 million to $10 million in assets, court documents show.

NECC, a private company based in Framingham, Massachusetts, shipped the drug to medical facilities throughout the United States. NECC had less than $2.34 million in debts when it filed, according to the documents in U.S. Bankruptcy Court for the District of Massachusetts.

The pharmacy's equity shareholders are Carla Conigliaro with a 55 percent stake, Barry Cadden with a 17.5 percent stake, Lisa Conigliaro Cadden with a 17.5 percent stake and Gregory Conigliaro with a 10 percent stake, the documents show. In bankruptcy, the equity of a company typically has no value.

Its largest unsecured creditor is McKesson Drug and it owes it $143,169, the documents show.

The company said in a statement that it has filed papers with the court to pursue a greater, quicker payout to its creditors than they could achieve through piecemeal litigation.

NECC said Keith Lowey would be NECC's independent director and chief restructuring officer. He will oversee setting up a compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," Lowey said in a statement.

NECC's bankruptcy counsel is Daniel Cohn of Murtha Cullina LLP.

Before the deadly outbreak, NECC escaped harsh punishment from health regulators several times in the years leading up to the health crisis that has raised questions about oversight of the customized drug mixing industry, Massachusetts records show.

Problems at NECC date as far back as 1999, the year after it began operations, according to hundreds of pages of documents obtained under a Freedom of Information Act request.

And the documents show regulators refraining from the harshest sanctions available to them, even as the list of complaints against NECC continued to grow.

The documents came to light after steroid shots from NECC were given to thousands of patients across the country.

Among the reported problems was a company official handing out blank prescriptions. And an outside evaluation firm found inadequate documentation and inadequate process controls involving sterilization at NECC in 2006, the documents show.

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MF Global trustee announces settlement deals key to cash payouts

Sat Dec 22, 2012 3:07pm EST

Dec 22 (Reuters) - The trustee for the failed MF Global Inc on Saturday announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage.

James Giddens, trustee for the MF Global estate, said in a statement he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd.

As a result of the UK agreement, Giddens estimated between$500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts.

Giddens said claims by MF Global's securities customers could be fully restored. Commodities customers could get "significant additional distributions," he said.

The estate has a hearing scheduled for Jan. 31, 2013 before the United States Bankruptcy Court for the Southern District of New York, the first step toward getting the UK agreement approved.

"The trustee's goal is still to return 100 percent to the commodities customers, and we will be going before the court in an attempt to achieve that," Kent Jarrell, a spokesman for Giddens, said on Saturday.

MF Global improperly used customer money to plug liquidity gaps as the brokerage was in freefall last year, creating a roughly $1.6 billion gap in customer accounts, according to a June report by Giddens. The company filed for bankruptcy in October 2011.

As a result of money changing hands during MF Global's chaotic collapse, various company affiliates have been fighting over who owes money to whom.

Earlier this month, Giddens released a report saying more than 28,000 claims have been filed by the brokerage's commodities and securities customers, all but 200 have been fully resolved.

So far, Giddens has returned approximately $4.7 billion to commodities customers hit by the brokerage's collapse.

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CORRECTED-UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 7:15pm EST

(Corrects 19th paragraph to show Lubic represents Calpbers, not San Bernardino)

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place."

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L Gates representing Calpers, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process. (Reporting by Jonathan Weber and Tim Reid; Editing by Chizu Nomiyama and Tiziana Barghini)

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UPDATE 2-Pharmacy linked to U.S. meningitis outbreak files for bankruptcy

Fri Dec 21, 2012 7:51pm EST

By Tim McLaughlin

Dec 21 (Reuters) - The Massachusetts pharmacy linked to a deadly U.S. meningitis outbreak filed for Chapter 11 bankruptcy on Friday and said it would establish a fund to compensate victims.

According to the Centers for Disease Control and Prevention, 39 people have died and more than 600 have been injured from injections of methylprednisolone acetate, a drug typically used to ease back pain.

New England Compounding Center, the specialty pharmacy, shut down in October after shipping tainted vials of the steroid, and filed for bankruptcy with between $1 million to $10 million in assets, court documents show.

NECC, a private company based in Framingham, Massachusetts, shipped the drug to medical facilities throughout the United States. NECC had less than $2.34 million in debts when it filed, according to the documents in U.S. Bankruptcy Court for the District of Massachusetts.

The pharmacy's equity shareholders are Carla Conigliaro with a 55 percent stake, Barry Cadden with a 17.5 percent stake, Lisa Conigliaro Cadden with a 17.5 percent stake and Gregory Conigliaro with a 10 percent stake, the documents show. In bankruptcy, the equity of a company typically has no value.

Its largest unsecured creditor is McKesson Drug and it owes it $143,169, the documents show.

The company said in a statement that it has filed papers with the court to pursue a greater, quicker payout to its creditors than they could achieve through piecemeal litigation.

NECC said Keith Lowey would be NECC's independent director and chief restructuring officer. He will oversee setting up a compensation fund.

"We want to assemble a substantial fund, and then distribute it fairly and efficiently to those who are entitled to relief," Lowey said in a statement.

NECC's bankruptcy counsel is Daniel Cohn of Murtha Cullina LLP.

Before the deadly outbreak, NECC escaped harsh punishment from health regulators several times in the years leading up to the health crisis that has raised questions about oversight of the customized drug mixing industry, Massachusetts records show.

Problems at NECC date as far back as 1999, the year after it began operations, according to hundreds of pages of documents obtained under a Freedom of Information Act request.

And the documents show regulators refraining from the harshest sanctions available to them, even as the list of complaints against NECC continued to grow.

The documents came to light after steroid shots from NECC were given to thousands of patients across the country.

Among the reported problems was a company official handing out blank prescriptions. And an outside evaluation firm found inadequate documentation and inadequate process controls involving sterilization at NECC in 2006, the documents show.

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MF Global trustee announces settlement deals key to cash payouts

Sat Dec 22, 2012 3:07pm EST

Dec 22 (Reuters) - The trustee for the failed MF Global Inc on Saturday announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage.

James Giddens, trustee for the MF Global estate, said in a statement he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd.

As a result of the UK agreement, Giddens estimated between$500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

Giddens, whose job is to recover as much money as possible for customers, has returned about 80 percent of the money in customer trading accounts.

Giddens said claims by MF Global's securities customers could be fully restored. Commodities customers could get "significant additional distributions," he said.

The estate has a hearing scheduled for Jan. 31, 2013 before the United States Bankruptcy Court for the Southern District of New York, the first step toward getting the UK agreement approved.

"The trustee's goal is still to return 100 percent to the commodities customers, and we will be going before the court in an attempt to achieve that," Kent Jarrell, a spokesman for Giddens, said on Saturday.

MF Global improperly used customer money to plug liquidity gaps as the brokerage was in freefall last year, creating a roughly $1.6 billion gap in customer accounts, according to a June report by Giddens. The company filed for bankruptcy in October 2011.

As a result of money changing hands during MF Global's chaotic collapse, various company affiliates have been fighting over who owes money to whom.

Earlier this month, Giddens released a report saying more than 28,000 claims have been filed by the brokerage's commodities and securities customers, all but 200 have been fully resolved.

So far, Giddens has returned approximately $4.7 billion to commodities customers hit by the brokerage's collapse.

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UPDATE 2-U.S. judge rules against Calpers on San Bernardino

Fri Dec 21, 2012 6:28pm EST

* First step in a complex legal proceeding

* Lifting protection would leave the city without cash flow- judge

* $2 million cashout paid to employees "preferential" - Calpers

By Jonathan Weber and Tim Reid

RIVERSIDE, Calif., Dec 21 (Reuters) - A U.S. bankruptcy judge ruled on Friday against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino.

The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy.

Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

Calpers is concerned that if San Bernardino - a city of 210,000 east of Los Angeles - continues to withhold payments it could encourage other debt-strapped California cities to follow suit.

Calpers has long argued that under California state law the contract between Calpers and debtor cities is inviolate and the pension fund should be paid in full, even in a bankruptcy.

Two other California cities - Vallejo, which emerged from bankruptcy last year, and Stockton, which filed for bankruptcy protection this year - continued to make payments in full to Calpers. San Bernardino is the first city to halt payments to the pension fund and thus the first to potentially challenge Calpers' historic primacy as a creditor.

The motion by Calpers was denied without prejudice, Judge Meredith Jury said. While Jury said the bankruptcy court clearly had jurisdiction, a Calpers attorney said the pension fund may nonetheless ask a state court to intervene in the matter.

San Bernardino has not made its $1.2 million twice monthly payments to Calpers since it filed for bankruptcy in August. It now owes at least $8 million to the pension system in addition to a long term debt that the city pegs at $143 million.

"Unless I have been misled the city has limited funds on a daily and monthly basis, it is using the limited funds to pay salaries," Jury said in her opening remarks. She based her ruling largely on the potentially disastrous impact a state collection action could have on the struggling city.

Lifting the protection would leave the city without the cash flow to run daily operations, she said.

Calpers has also made a broader argument that San Bernardino should not be eligible for bankruptcy and that state law should prevail when it comes to pension payments.

Calpers officials have said that they are willing to argue a wider Constitutional point - the state law defending their right to be paid versus the federal municipal bankruptcy law - all the way to the U.S. Supreme Court.

GOOD FAITH?

The court decision may favor bondholders who sided with the city against Calpers.

Ralph Taylor, an attorney representing the holders of $50 million pension bond holders said they agreed with the judges' comments and "it was in the best interests of the city for the stay to remain in place".

If Calpers were allowed to sue the city and collect its payments, it would likely be "devastating on the city, its workforce...and other creditors because Calpers will take it all" he said.

San Bernardino has issued $50 million of pension obligation bonds to pay down part of its debt with Calpers.

At the Friday hearing, attorneys also argued about whether Calpers and other creditors should be entitled to extensive discovery as part the proceeding to determine whether the city is eligible for bankruptcy.

One reason for denying bankruptcy protection would be a finding that the city had not acted in good faith --and Calpers attorneys said the lack of information from the city and other factors suggested a lack of good faith.

Michael Lubic, an attorney with K&L gates representing San Bernardino, cited a Reuters article about $2 million in cash-outs of sick and vacation time to employees that were paid immediately prior to the bankruptcy filing.

Calling those payments "clearly preferential" and thus improper in a bankruptcy, Lubic argued that they showed the city was not acting in good faith in claiming that it had no money to pay its bills.

City lawyers said the city was required to make the payments, and chided union representatives for objecting to the cash-outs at the hearing even though many employees had demanded the payments. Jury expressed great surprise that the parties would learn about such payments from a news article.

Jury ultimately agreed that in light of the many unanswered questions about the current state of the city's finances, some discovery would be warranted. She had initially said she hoped to avoid a time-consuming and expensive discovery process.

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