UniCredit Tier 2 buoys bank capital revival

Fri Apr 26, 2013 8:37am EDT

* UniCredit Reg S Tier 2 hailed as watershed moment

* Regulatory clarity to drive banks into sub market

* BBVA goes a step further with first Additional Tier 1

By Aimee Donnellan

LONDON, April 26 (IFR) - UniCredit's well-received subordinated bond has delivered a vital shot of confidence to the market, and could be the push that peripheral banks need to finally pull the trigger on capital deals that have been waiting in the wings for months.

The Italian borrower's USD750m 10-year non-call five-year, which priced on Wednesday with a 6.375% yield, had been in the works since February. It coincided with a strong peripheral rally over the past week that helped secure an order book in excess of USD3bn.

"Every bank in Europe is looking at raising capital this year, and the success of a deal from UniCredit, with a callable structure, will certainly inspire others," said Antoine Loudenot, head of capital structuring at Societe Generale.

The new Tier 2 bond, led by BNP Paribas, Citi and UniCredit, is trading marginally tighter in the secondary market on Friday, quoted at 549bp over mid-swaps from its plus 551bp equivalent pricing level.

On the back of the deal's success, BBVA went a step further on Friday with the announcement of an even more ground-breaking structure. It is planning to sell an Additional Tier 1 security which complies with the region's new Capital Requirements Regulation (CRR) - the first deal of its kind to be marketed.

The perpetual Reg S bond will have a 7% Common Equity Tier 1 conversion trigger and will be marketed next week in Asia, the UK and Switzerland by joint bookrunners BBVA, Bank of America Merrill Lynch, Goldman Sachs and UBS.

UniCredit said AT1 is also on its radar.

"Everyone is looking at Additional Tier 1 because they know they have to fill the 1.5% bucket, so we certainly won't be the first out in this space," said Waleed El-Amir, senior vice-president of UniCredit's strategic funding and investments business.

CAPITAL RACE COMMENCES

The majority of European banks have so far abstained from issuing Tier 2 capital this year, with only Standard Chartered and Nationwide braving the market to sell a combined EUR2.75bn-equivalent in January and March.

But that all looks set to change with the European Parliament's adoption of CRD IV last week, offering clarity to banks that were unsure about how Tier 2 instruments would be treated in a recovery situation.

BBVA, Santander and Intesa have capital levels of between 12% and 13%. Although this meets regulatory requirements, they are trailing behind Nordic and Swiss peers that have increased total capital to at least 18%.

According to Waleed El-Amir, this clarity, as well as a supportive market backdrop, encouraged UniCredit into the market.

"We felt that the implications of CRR had already been laid out with situations like Anglo Irish, SNS and Cyprus that offer a very clear idea of how the resolution regime will be implemented," he said.

"Point of non viability and loss given default look relatively straight forward, so I think it makes sense to issue Tier 2 now."

PERFECT TIMING

The strong market backdrop is setting the perfect tone for capital deals.

Italian 10-year yields fell to 3.93% at one point on Tuesday - the first time they have broken below 4% since September 2010 - after President Giorgio Napolitano gained a second term, reducing the threat of another election.

The upbeat conditions were a key factor in investors' willingness to buy a callable bond, particularly after Intesa Sanpaolo changed the call policy on some of its subordinated bonds last year.

"The callable structure is definitely a harder sell to investors but we thought it was important to show that Italian banks are able to place these kinds of structures with investors," said El-Amir.

"We think it has given a massive boost to the bank capital sector."

Although UniCredit is known to have met the 9% Core Tier 1 ratio as stated in the EBA's December 2011 recommendations, market observers were still pleasantly surprised by its success.

"This was an excellent deal with the right price that has clearly proved attractive to a lot of investors that are desperate for yield," said a syndicate banker.

"The issuer clearly made the most of a supportive market and regulatory backdrop." (Reporting by Aimee Donnellan; Editing by Natalie Harrison, Philip Wright, Julian Baker)

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Spanish regulator proposes Deloitte as Pescanova administrator

MADRID, April 26 | Fri Apr 26, 2013 1:56pm EDT

MADRID, April 26 (Reuters) - Spanish stock market regulator CNMV said on Friday it had proposed Deloitte as the administrator of Spanish fishing firm Pescanova, which has filed for insolvency.

A Spanish court accepted Pescanova's insolvency filing on Thursday and put the CNMV in charge of appointing independent administrators.

Pescanova has filed for insolvency on 1.5 billion euros of debt but financial sources who have had dealings with the company say total debt is probably more than double that amount, potentially making it the country's third-largest bankruptcy.

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Primacy of pensions in city bankruptcy may be issue for U.S. court in July

By Jim Christie

SAN FRANCISCO, April 26 | Fri Apr 26, 2013 8:56pm EDT

SAN FRANCISCO, April 26 (Reuters) - A U.S. judge in July could take up the issue of whether a bankrupt city can shield workers' pensions while inflicting heavy losses on bond holders and other creditors, a lawyer for California's pension fund for public employees said on Friday.

Since filing for bankruptcy last year, the California city of Stockton has made a point of maintaining payments to the California Public Employees' Retirement System, or Calpers, while targeting creditors for steep losses.

Whether Stockton may press on with that approach could be taken up in coming weeks by U.S. Bankruptcy Judge Christopher Klein, who did not take up the matter during a three-day trial last month on Stockton's eligibility for bankruptcy.

Instead, he ruled the city of about 300,000 established it is eligible to proceed with its bankruptcy case and craft a so-called plan of adjustment for its debts.

But Klein at the same time signaled the closely watched role of Calpers in Stockton's bankruptcy case could come into focus when the plan of adjustment emerges.

Stockton aims to file the plan in the third quarter with an eye toward exiting bankruptcy by the end of the year. That means the plan could be put to Klein as early as July, said Michael Gearin, an attorney for Calpers in the Stockton case.

Stockton is the biggest U.S. city to pursue Chapter 9 bankruptcy, a move the city made in the face of a $26 million shortfall that years of steep spending cuts failed to prevent.

CHALLENGING CITY'S PRIORITY

To prop up its budget while pressing its bankruptcy case, Stockton pressed bondholders to swallow major losses, prompting them and the city's bond insurers to challenge the city in court.

Stockton's decision to keep paying into the state pension fund known as Calpers has been hotly disputed by the creditors, who argued in the recent eligibility trial that the city would not be able to repair its finances without tackling its pension expenses.

The creditors include bond insurers Assured Guaranty Corp, Assured Guaranty Municipal Corp and National Public Finance Guarantee Corp. They were joined by Wells Fargo Bank, the Franklin California High Yield Municipal Fund and the Franklin High Yield Tax-Free Income Fund.

Stockton officials say they need to maintain payments to Calpers to retain and recruit city employees and that state law bars the city from impairing payments to the fund.

The officials also say retired Stockton employees will suffer enough under the city's financial restructuring by losing their city-provided medical coverage.

Calpers was sidelined during the eligibility trial but is prepared to defend Stockton's pension payments before Klein.

Marc Levinson, a lawyer for Stockton, said a best case scenario is for the city and its creditors to reach settlements so they are included in an amicable plan of adjustment.

The two sides will be negotiating in confidential talks even as Stockton works on its plan of adjustment, Levinson said, noting he is optimistic about the talks.

"People are going to do their best," he said. "Klein has made it clear at every opportunity that he would like to see negotiations."

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UniCredit Tier 2 buoys bank capital revival

Fri Apr 26, 2013 8:37am EDT

* UniCredit Reg S Tier 2 hailed as watershed moment

* Regulatory clarity to drive banks into sub market

* BBVA goes a step further with first Additional Tier 1

By Aimee Donnellan

LONDON, April 26 (IFR) - UniCredit's well-received subordinated bond has delivered a vital shot of confidence to the market, and could be the push that peripheral banks need to finally pull the trigger on capital deals that have been waiting in the wings for months.

The Italian borrower's USD750m 10-year non-call five-year, which priced on Wednesday with a 6.375% yield, had been in the works since February. It coincided with a strong peripheral rally over the past week that helped secure an order book in excess of USD3bn.

"Every bank in Europe is looking at raising capital this year, and the success of a deal from UniCredit, with a callable structure, will certainly inspire others," said Antoine Loudenot, head of capital structuring at Societe Generale.

The new Tier 2 bond, led by BNP Paribas, Citi and UniCredit, is trading marginally tighter in the secondary market on Friday, quoted at 549bp over mid-swaps from its plus 551bp equivalent pricing level.

On the back of the deal's success, BBVA went a step further on Friday with the announcement of an even more ground-breaking structure. It is planning to sell an Additional Tier 1 security which complies with the region's new Capital Requirements Regulation (CRR) - the first deal of its kind to be marketed.

The perpetual Reg S bond will have a 7% Common Equity Tier 1 conversion trigger and will be marketed next week in Asia, the UK and Switzerland by joint bookrunners BBVA, Bank of America Merrill Lynch, Goldman Sachs and UBS.

UniCredit said AT1 is also on its radar.

"Everyone is looking at Additional Tier 1 because they know they have to fill the 1.5% bucket, so we certainly won't be the first out in this space," said Waleed El-Amir, senior vice-president of UniCredit's strategic funding and investments business.

CAPITAL RACE COMMENCES

The majority of European banks have so far abstained from issuing Tier 2 capital this year, with only Standard Chartered and Nationwide braving the market to sell a combined EUR2.75bn-equivalent in January and March.

But that all looks set to change with the European Parliament's adoption of CRD IV last week, offering clarity to banks that were unsure about how Tier 2 instruments would be treated in a recovery situation.

BBVA, Santander and Intesa have capital levels of between 12% and 13%. Although this meets regulatory requirements, they are trailing behind Nordic and Swiss peers that have increased total capital to at least 18%.

According to Waleed El-Amir, this clarity, as well as a supportive market backdrop, encouraged UniCredit into the market.

"We felt that the implications of CRR had already been laid out with situations like Anglo Irish, SNS and Cyprus that offer a very clear idea of how the resolution regime will be implemented," he said.

"Point of non viability and loss given default look relatively straight forward, so I think it makes sense to issue Tier 2 now."

PERFECT TIMING

The strong market backdrop is setting the perfect tone for capital deals.

Italian 10-year yields fell to 3.93% at one point on Tuesday - the first time they have broken below 4% since September 2010 - after President Giorgio Napolitano gained a second term, reducing the threat of another election.

The upbeat conditions were a key factor in investors' willingness to buy a callable bond, particularly after Intesa Sanpaolo changed the call policy on some of its subordinated bonds last year.

"The callable structure is definitely a harder sell to investors but we thought it was important to show that Italian banks are able to place these kinds of structures with investors," said El-Amir.

"We think it has given a massive boost to the bank capital sector."

Although UniCredit is known to have met the 9% Core Tier 1 ratio as stated in the EBA's December 2011 recommendations, market observers were still pleasantly surprised by its success.

"This was an excellent deal with the right price that has clearly proved attractive to a lot of investors that are desperate for yield," said a syndicate banker.

"The issuer clearly made the most of a supportive market and regulatory backdrop." (Reporting by Aimee Donnellan; Editing by Natalie Harrison, Philip Wright, Julian Baker)

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Spanish regulator proposes Deloitte as Pescanova administrator

MADRID, April 26 | Fri Apr 26, 2013 1:56pm EDT

MADRID, April 26 (Reuters) - Spanish stock market regulator CNMV said on Friday it had proposed Deloitte as the administrator of Spanish fishing firm Pescanova, which has filed for insolvency.

A Spanish court accepted Pescanova's insolvency filing on Thursday and put the CNMV in charge of appointing independent administrators.

Pescanova has filed for insolvency on 1.5 billion euros of debt but financial sources who have had dealings with the company say total debt is probably more than double that amount, potentially making it the country's third-largest bankruptcy.

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Primacy of pensions in city bankruptcy may be issue for U.S. court in July

By Jim Christie

SAN FRANCISCO, April 26 | Fri Apr 26, 2013 8:56pm EDT

SAN FRANCISCO, April 26 (Reuters) - A U.S. judge in July could take up the issue of whether a bankrupt city can shield workers' pensions while inflicting heavy losses on bond holders and other creditors, a lawyer for California's pension fund for public employees said on Friday.

Since filing for bankruptcy last year, the California city of Stockton has made a point of maintaining payments to the California Public Employees' Retirement System, or Calpers, while targeting creditors for steep losses.

Whether Stockton may press on with that approach could be taken up in coming weeks by U.S. Bankruptcy Judge Christopher Klein, who did not take up the matter during a three-day trial last month on Stockton's eligibility for bankruptcy.

Instead, he ruled the city of about 300,000 established it is eligible to proceed with its bankruptcy case and craft a so-called plan of adjustment for its debts.

But Klein at the same time signaled the closely watched role of Calpers in Stockton's bankruptcy case could come into focus when the plan of adjustment emerges.

Stockton aims to file the plan in the third quarter with an eye toward exiting bankruptcy by the end of the year. That means the plan could be put to Klein as early as July, said Michael Gearin, an attorney for Calpers in the Stockton case.

Stockton is the biggest U.S. city to pursue Chapter 9 bankruptcy, a move the city made in the face of a $26 million shortfall that years of steep spending cuts failed to prevent.

CHALLENGING CITY'S PRIORITY

To prop up its budget while pressing its bankruptcy case, Stockton pressed bondholders to swallow major losses, prompting them and the city's bond insurers to challenge the city in court.

Stockton's decision to keep paying into the state pension fund known as Calpers has been hotly disputed by the creditors, who argued in the recent eligibility trial that the city would not be able to repair its finances without tackling its pension expenses.

The creditors include bond insurers Assured Guaranty Corp, Assured Guaranty Municipal Corp and National Public Finance Guarantee Corp. They were joined by Wells Fargo Bank, the Franklin California High Yield Municipal Fund and the Franklin High Yield Tax-Free Income Fund.

Stockton officials say they need to maintain payments to Calpers to retain and recruit city employees and that state law bars the city from impairing payments to the fund.

The officials also say retired Stockton employees will suffer enough under the city's financial restructuring by losing their city-provided medical coverage.

Calpers was sidelined during the eligibility trial but is prepared to defend Stockton's pension payments before Klein.

Marc Levinson, a lawyer for Stockton, said a best case scenario is for the city and its creditors to reach settlements so they are included in an amicable plan of adjustment.

The two sides will be negotiating in confidential talks even as Stockton works on its plan of adjustment, Levinson said, noting he is optimistic about the talks.

"People are going to do their best," he said. "Klein has made it clear at every opportunity that he would like to see negotiations."

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UPDATE 1-Carlyle's Synagro seeks bankruptcy sale to Swedish firm

Wed Apr 24, 2013 3:18pm EDT

By Tom Hals and Soyoung Kim

April 24 (Reuters) - Carlyle Group LP's Synagro Technologies Inc filed for Chapter 11 bankruptcy protection on Wednesday with a plan to sell the business to a Swedish private equity firm for $455 million.

Synagro, the largest recycler of organic waste in the United States, has agreed to a sale to an investment fund associated with EQT.

Carlyle's infrastructure fund had borrowed heavily to take Synagro private in 2007 in a $772 million deal.

Carlyle declined to comment.

The company contacted more than 100 potential buyers over the past four months as it sought a buyer, its chief executive, Eric Zimmer, told Reuters. "We cast the net pretty wide."

The sale is subject to higher bids and must be approved by the U.S. Bankruptcy Court in Wilmington, Delaware, where Synagro filed for Chapter 11 protection from creditors.

Synagro, based in Houston, said in a statement it anticipates the sale will be completed in 60 to 90 days.

The company also agreed to a $30 million debtor-in-possession, or DIP, loan with its current lenders to fund operations during its bankruptcy.

The 2007 deal that took Synagro private left it vulnerable when municipalities cut spending on wastewater treatment and other environmental projects in the aftermath of the 2008 financial crisis.

The company manages byproducts of wastewater treatment, converting the residual matter into fertilizer and alternative fuels. The company is the largest in the $2 billion U.S. market.

The company also lost two major contracts in New York City and Detroit. Synagro's Detroit contract was mired in a bribery scandal that weighed on the public image of the company.

Zimmer said Synagro has adjusted to the loss of the New York contract in 2010 and said the Detroit agreement never got underway.

Carlyle brought in Evercore Partners earlier this year to find buyers for Synagro, sources familiar with the matter told Reuters in January.

Synagro said in court documents it had assets of between $10 million and $50 million and liabilities of between $100 million and $500 million.

Moody's said the company defaulted on its debt earlier this month. It said Synagro had a $290 million first-lien term loan due in April 2014 and a $150 million second-lien term loan due in October 2014.

Synagro was founded in 1986 and employs 800 in 34 states, according to its website.

The bankruptcy case is Synagro Technologies Inc, U.S. Bankruptcy Court, District of Delaware, No. 13-11041

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Bankrupt Alabama county hires new top attorney

By Verna Gates

April 24, Birmingham, Ala. | Wed Apr 24, 2013 5:49pm EDT

April 24, Birmingham, Ala. (Reuters) - Alabama's Jefferson County, readying a plan to emerge from the largest U.S. municipal bankruptcy, on Wednesday hired a judge to replace the county's top in-house lawyer, who was fired nearly two weeks ago.

Alabama Supreme Court Justice Mike Bolin will step down from that post to succeed Jeff Sewell, who took involuntary retirement on April 12, officials said. Bolin will earn $224,000 per year, or a bit more than half the nearly $400,000 salary of his predecessor.

Bolin was probate judge for Jefferson County for 16 years and has a deep familiarity with the legal history of the county's sewer system, which is at the heart of the $4.27 billion Chapter 9 bankruptcy filed by Jefferson County in November 2011, according to officials.

"He is an expert in state and federal law, so he brings a wealth of knowledge and instant credibility," said County Commissioner Jimmie Stephens.

Sewell had been in Jefferson County's legal department for 25 years and was dismissed due to directions he gave the county's outside bankruptcy attorneys "that were not in the best interests of Jefferson County."

The federal judge overseeing the bankruptcy has scheduled a hearing on May 9 to discuss the schedule for filing a plan of adjustment for the county's debts, but no hard deadline has yet been set.

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PRESS DIGEST - Wall Street Journal - April 25

April 25 | Thu Apr 25, 2013 3:04am EDT

April 25 (Reuters) - The following are the top stories in the Wall Street Journal. Reuters has not verified these stories and does not vouch for their accuracy.

* Complaints about air-travel delays in recent days have prompted Democrats in Congress to reconsider their strategy for dealing with across-the-board spending cuts. ()

* U.S. authorities put alleged Boston bomber Tamerlan Tsarnaev on two separate watch lists in 2011 after Russian security agencies twice reached out to their American counterparts. ()

* GE Capital is quietly cutting off lending to gun shops, as the company rethinks its relationship to firearms amid the fallout from the school shooting in Newtown, Connecticut. ()

* With top executives' pay a hot-button topic, some companies in Chapter 11 are simply keeping the information out of the view of creditors and anxious employees. ()

* Honda Motor expects its U.S. car sales in April to be up from a year ago, driven by strong demand from individual customers.()

* Corporate board members are increasingly using a type of opaque trading plan that was originally intended primarily for executives, drawing attention from a federal prosecutor. ()

* Metropoulos & Co, one of the companies that bought the Twinkie, HoHo and Ding Dong brands out of bankruptcy, said it won't use union labor when it reopens the plants. ()

* Sprint and T-Mobile, two big U.S. wireless carriers, said they would delay the release of Samsung's flagship Galaxy S 4 smartphone, citing inventory shortages. ()

* IBM Chief Executive Virginia Rometty delivered a rare companywide reprimand in the wake of a poor earnings report last week, saying the sprawling technology company needed to move faster and respond more quickly to customers. ()

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UPDATE 4-Corzine sued by MF Global trustee over firm's collapse

Tue Apr 23, 2013 2:41pm EDT

* Former CEO accused of breach of duties, lack of good faith

* Ex-COO, ex-CFO also sued over October 2011 bankruptcy

* Trustee seeks damages to repay creditors

* Allegations "seriously flawed" -Corzine's spokesman

By Jonathan Stempel

April 23 (Reuters) - Jon Corzine was sued by the bankruptcy trustee liquidating MF Global Holdings Ltd, who accused the former chief executive of negligently pursuing a high-risk business strategy that culminated in the commodities brokerage's destruction.

The trustee, Louis Freeh, said in the lawsuit that Corzine and two top deputies overhauled MF Global's business without addressing "systemic weaknesses" in oversight and monitoring.

Freeh said the officials breached their fiduciary duties to shareholders and failed to act in good faith, wiping out more than $1 billion in value by the time of MF Global's Oct. 31, 2011, bankruptcy.

"The company's procedures and controls for monitoring risk were lacking and in disrepair," Freeh said in the lawsuit, filed on Monday night in U.S. Bankruptcy Court in Manhattan. "Corzine engaged in risky trading strategies that strained the company's liquidity and could not be properly monitored."

The lawsuit seeks unspecified damages that could be used to pay creditors of MF Global, whose bankruptcy remains the eighth-largest in U.S. history, according to BankruptcyData.com.

Freeh's case adds to legal troubles for Corzine, who faces lawsuits in U.S. District Court in Manhattan by former shareholders of MF Global and by former commodity customers of its brokerage unit. The latter case has drawn support from James Giddens, the trustee recovering money for commodities customers.

Corzine, 66, is a former Goldman Sachs chairman and former Democratic governor and senator from New Jersey.

The other defendants in Freeh's lawsuit are Bradley Abelow, who was MF Global's chief operating officer, and Henri Steenkamp, its former chief financial officer.

FREEH REPORT

Corzine spokesman Steven Goldberg called Freeh's lawsuit a case of "Monday morning quarterbacking" filled with "seriously flawed allegations," and said there was no basis to claim that Corzine breached his fiduciary duties or was negligent.

Abelow's lawyer, Gary Naftalis, said the allegations lack any factual or legal basis, and that his client "did not cause any losses or contribute in any way to the collapse of the company."

Lee Richards, a lawyer for Steenkamp, did not immediately respond to requests for comment.

Federal regulators including the Commodity Futures Trading Commission are still examining MF Global's collapse, but have not accused Corzine of wrongdoing.

A CFTC spokesman declined on Tuesday to comment.

The extent to which insurance might cover any damage awards or settlements in the litigation was not immediately clear.

Last April, U.S. Bankruptcy Judge Martin Glenn in Manhattan said Corzine and other officials may tap insurance money to defend against lawsuits.

Frederick Grede, the trustee for suburban Chicago futures brokerage Sentinel Management Group, which failed in 2007, said some laws could shield assets of Corzine and others, such as retirement accounts and primary residences, from litigation.

"I don't think Corzine will wind up penniless," he said.

Freeh's lawsuit echoed criticisms he raised in an April 4 report on MF Global's collapse. At the time, he delayed filing the lawsuit, citing mediation with Corzine.

Corzine's spokesman said the mediation is continuing.

A lawyer for Freeh did not respond to a request for comment.

FAILED TRANSFORMATION

Corzine had sought to transform MF Global into a global investment bank, with a strategy that included a $6.3 billion bet on sovereign debt of countries such as Belgium, Ireland, Italy, Portugal and Spain.

But as Europe's economy weakened, MF Global was forced to meet margin calls, and regulators learned that money in customer trading accounts had been used to cover liquidity shortfalls.

The end came after the European sovereign debt wager and high leverage ratio spooked markets and credit rating agencies.

But Freeh said MF Global even then missed opportunities to curb its losses.

MF Global also came under intense scrutiny, including in Washington, after about $1.6 billion went missing from commodities customers' accounts.

But much of that has been recovered, and Giddens has said he expects to recover 93 percent of commodities customers' funds.

On April 5, the Manhattan bankruptcy court approved MF Global's liquidation plan, with unsecured creditors recovering as much as 34 cents on the dollar.

In the wake of MF Global's collapse, the CFTC proposed rules to better protect client funds and improve oversight by the commodities industry's self-regulatory bodies, CME Group Inc and the National Futures Association.

"Anyone who violates the law, and particularly anyone at MF Global who used a billion bucks of customer cash that should have been protected, should be punished appropriately," CFTC Commissioner Bart Chilton said in a statement discussing Freeh's lawsuit.

The case is Freeh et al v. Corzine et al, U.S. Bankruptcy Court, Southern District of New York, No. 13-ap-01333. The main bankruptcy case is In re: MF Global Holdings Ltd in the same court, No. 11-15059. Other cases are included at In re: MF Global Holdings Ltd Securities Litigation, U.S. District Court, Southern District of New York, No. 11-07866.

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CORRECTED-Dewey ex-chairman agrees to proposed settlement to resolve claims

Tue Apr 23, 2013 5:49pm EDT

(Corrects that XL Specialty Insurance Co issued Dewey's management liability insurance policy, not that XL is the policyholder; in second paragraph)

By Casey Sullivan

April 23 (Reuters) - The former chairman of Dewey & LeBoeuf has agreed to pay more than half a million dollars in a proposed settlement with Dewey's trustee and insurer to resolve claims that bad management led to the law firm's demise, according to papers filed in federal bankruptcy court.

Former Dewey Chairman Steve Davis has agreed to pay $511,145 to settle claims that he mismanaged Dewey & LeBoeuf, which last May became the largest law firm in U.S. history to file for Chapter 11 bankruptcy. XL Specialty Insurance Co, which issued Dewey's management liability insurance policy, has agreed to pay $19 million in the proposed settlement, according to court documents.

"The Settlement Agreement is a substantially more favorable result than litigation," said Edward Weisfelner, speaking on behalf of the liquidation trustee Alan Jacobs, in court papers.

Without a settlement, Weisfelner said, Dewey's estate would face large litigation expenses to go after Davis and the insurance company in court, as well as the risk of not collecting a full recovery from the parties.

"Litigation of the Management Claims would require extensive discovery, including millions of pages of documents to review and over 100 depositions," he said.

The settlement agreement still needs a judge's approval. A hearing on the proposed deal is scheduled for May 13.

Reached Tuesday, Kevin Van Wart, a lawyer for Davis, said: "Mr. Davis is pleased with the settlement, which is a practical resolution for all concerned."

A spokeswoman for XL Specialty Insurance Co did not immediately return a request for comment.

The case is: In re: Dewey & LeBoeuf LLP, Debtor, United States Bankruptcy Court for the Southern District of New York, Case No. 12-12321 (MG) (Reporting by Casey Sullivan; Editing by Alden Bentley and Phil Berlowitz)

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UPDATE 1-Dewey ex-chairman agrees to proposed settlement to resolve claims

Tue Apr 23, 2013 6:47pm EDT

By Casey Sullivan

April 23 (Reuters) - The former chairman of Dewey & LeBoeuf has agreed to pay more than half a million dollars in a proposed settlement with Dewey's trustee and insurer to resolve claims that bad management led to the law firm's demise, according to papers filed in federal bankruptcy court.

Former Dewey Chairman Steve Davis has agreed to pay $511,145 to settle claims that he mismanaged Dewey & LeBoeuf, which last May became the largest law firm in U.S. history to file for Chapter 11 bankruptcy. XL Specialty Insurance Co, which issued Dewey's management liability insurance policy, has agreed to pay $19 million in the proposed settlement, according to court documents.

If the settlement is approved, Davis would pay less than other former Dewey partners to be released from claims related to the firm's demise.

"He got off easy," said John Altorelli, a former Dewey partner who is now co-chair of DLA Piper's U.S. Finance practice.

Under a liquidation plan for the firm approved by U.S. Bankruptcy Judge Martin Glenn in February, former Dewey partners agreed to pay $71.5 million to the firm's estate in exchange for a release from litigation. The deal required partners to contribute between $5,000 and $3.5 million each. More than 450 former Dewey partners opted into the settlement, though a handful, including Altorelli, declined to participate.

Berge Setrakian, a corporate lawyer now at DLA Piper, pledged $3.5 million and Ralph Ferrara, the firm's former vice chairman now at Proskauer Rose, agreed to pay $3.36 million, court documents showed. Those lawyers did not immediately respond to requests for comment about the Davis settlement.

"Mr. Davis is pleased with the settlement, which is a practical resolution for all concerned," said Davis's lawyer Kevin Van Wart in a statement.

The Manhattan district attorney's office is investigating alleged financial improprieties at the firm, according to sources. The sources declined to comment publicly because they were not authorized to do so.

Davis's half a million dollar settlement with the estate was negotiated during mediation between creditors, XL Insurance and Davis that was conducted by Jed Melnick of JAMS earlier this year, according to court papers. Melnick declined comment.

"The Settlement Agreement is a substantially more favorable result than litigation," said Edward Weisfelner, speaking on behalf of the liquidation trustee Alan Jacobs, in court papers.

Without a settlement, Weisfelner said, Dewey's estate would face large litigation expenses to go after Davis and the insurance company in court, as well as the risk of not collecting a full recovery from the parties.

"Litigation of the Management Claims would require extensive discovery, including millions of pages of documents to review and over 100 depositions," he said.

The settlement agreement still needs a judge's approval. A hearing on the proposed deal is scheduled for May 13.

Two other former Dewey leaders, Chief Financial Officer Joel Sanders and Executive Director Stephen DiCarmine, were not included in the proposed settlement. The trustee reserved the right to pursue non-covered claims against the two men, according to court papers.

Any mismanagement claims against Sanders and DiCarmine would be released by the XL Insurance settlement, said their lawyer, Ned Bassen.

Requests for comment from Weisfelner were not returned. A phone message placed with Jacobs, the trustee, was not immediately returned.

A spokeswoman for XL Specialty Insurance Co declined comment because the proposed settlement hadn't received approval.

The case is: In re: Dewey & LeBoeuf LLP, Debtor, United States Bankruptcy Court for the Southern District of New York, Case No. 12-12321 (MG)

For Dewey's liquidation trust: Edward Weisfelner

For Davis: Kevin Van Wart of Kirkland & Ellis

For XL: NA

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Detroit emergency manager eyes end to union bargaining

By Steve Neavling

DETROIT, April 19 | Fri Apr 19, 2013 6:34pm EDT

DETROIT, April 19 (Reuters) - Detroit's emergency manager indicated for the first time that he may end collective bargaining with city employees as part of his effort to shore up the city's sagging finances.

Kevyn Orr, a former bankruptcy lawyer, alerted state labor officials on Thursday that he has no legal requirement to bargain or participate in compulsory arbitration with Detroit's public safety unions.

The statement by Orr, sent in letters to state employment relations officials, is his first public indication that he actively is considering exercising some of the most sweeping powers granted to him under the 2012 state law that created the position of emergency manager.

Detroit has agreements with some 48 unions, and outside analysts say the city needs concessions from organized labor if it is to restore public finances devastated by a shrinking population and high unemployment.

Staking out his position in the letters, Orr stated that Detroit is in receivership, and he has no duty to bargain under procedures set forward in the state Public Employment Relations Act. The city and its lawyers "are authorized to advance this position and seek...any and all relief available by law," he said.

Orr's move incensed unions for firefighters, police officers and paramedics, whose current pacts with the city end on June 30.

"It's obvious what they're trying to do: They don't plan to negotiate with us," Dan McNamara, president of the firefighters' unions, told Reuters.

Orr's spokesman, Bill Nowling, said the emergency manager won't decide what to do with labor contracts until he meets with the city's 48 unions. He described Orr's actions as a legal formality.

"There's no declaration that we are walking away from the negotiating table," Nowling told Reuters. "It doesn't mean we won't meet in good faith with the unions."

Orr's letter represents a departure from his previous public posture. When the city through Mayor Dave Bing's office sent a similar notice in early April, Orr seemed to distance himself. His office stated that Orr had no prior knowledge of the letter.

This time, Orr and the city are working in parallel. On the same date that Orr sent his letters, the city of Detroit also filed a motion with the Michigan Employment Relations Commission asking it to rule that state arbitration panels no longer have authority to hold hearings or rule on cases brought by the unions representing Detroit police and emergency medical technicians.

The city also contends in its motion that a 2012 Michigan law governing state-appointed emergency managers automatically suspended Detroit's duty to bargain with its unions.

Detroit's unionized police, fire, and paramedics are working under contracts imposed on them last summer by Bing, who cut their pay by 10 percent. Employees also were required to pay 20 percent of their medical costs.

Detroit is running a $100 million annual budget deficit and a state report said it has some $14 billion in long-term debt.

Orr, who formerly worked on the restructuring of auto company Chrysler, was appointed last month by Michigan's Republican Governor Rick Snyder despite objections from elected city officials.

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HSH Nordbank cuts bad ship loans through deal with Navios

FRANKFURT, April 22 | Mon Apr 22, 2013 1:28pm EDT

FRANKFURT, April 22 (Reuters) - Troubled German regional lender HSH said it had cut its exposure to bad shipping loans by persuading struggling debtors to transfer ownership of some vessels to U.S.-listed shipping company Navios.

The deal, unveiled on Monday, may provide a blueprint for the financing of ships that are insolvent and a way for the Hamburg-based lender to cut its 9 billion euro ($11.7 billion)portfolio of bad ship loans, which has already forced it to seek state aid.

"We are already in talks with other ship owners, which showed interest in this transaction", said Wolfgang Topp, who heads up HSH Nordbank's restructuring unit.

Struggling debtors that owe HSH 300 million euros ($390 million) worth of loans have agreed to transfer ownership of 10 tankers and container ships to Navios, HSH said.

In exchange, Navios will give HSH around 130 million euros in cash. The remainder of the debt is converted into a participating loan that gives HSH the opportunity to recover the original amount if the markets improve.

Navios has pledged to contribute fresh capital and operate the ships for at least six years.

Under the deal, ship owners are released from their debt obligations.

HSH plans similar deals this year to restructure shipping loans with a total asset volume worth more than a billion euros.

Previous efforts to restructure the loans had proven unsuccessful, the bank said.

In total, HSH has financed 2,800 ships and has 26 billion euros worth of shipping loans on its books. Of these loans, 9 billion euros, equivalent to 1,100 ships, have already been transferred to its restructuring unit.

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Bankrupt San Bernardino votes to pay Calpers, not bondholders

Tue Apr 23, 2013 2:05am EDT

* City council passes budget to pay Calpers, not bondholders

* Little debate, mayor worries about other creditors

By Tim Reid

SAN BERNARDINO, CA, April 22 (Reuters) - Bankrupt California city San Bernardino passed a new budget on Monday night that will allow it to resume paying into the state pension fund on July 1 as it continues to renege on other debts including payments to bondholders.

The city council vote comes nearly a year after it halted contributions to the California Public Employees' Retirement System (Calpers), the United States' biggest pension fund.

Patrick Morris, San Bernardino's mayor, has said the city's other debts "must be taken care of and must be attended to" - but there was no debate about those dues by the council.

There was no discussion either about the city's arrears to the pension fund, which tops $12 million.

The decision to resume the $1.2 million, biweekly employer contributions to Calpers while continuing to defer pension bond debt will intensify the battle between the pension fund and Wall Street bondholders.

The case has been bogged down in disputes about the scope of documents the city must provide to its creditors. Unlike Stockton, another California city which a judge approved for bankruptcy on April 1, a decision on San Bernardino's eligibility for Chapter 9 protection still appears some way off.

Both San Bernardino and Stockton are considered test cases in the titanic battle over whether municipal bondholders or current and retired employees will absorb most of the pain when a state or local government goes broke.

Calpers, which manages $256 billion in assets, is San Bernardino's biggest creditor. Holders of its $50 million in pension bonds count as the city's second-biggest collective creditor, according to the city's bankruptcy filing.

Calpers is opposing San Bernardino's quest for a formal declaration of bankruptcy and it is the only city to have ever halted payments to the fund. Stockton kept current on its payments to Calpers and the pension fund did not oppose that city's bid for Chapter 9 protection.

Calpers said earlier in April that San Bernardino's decision to start repaying the pension fund was a "smart business decision."

Other creditors, including the holders and underwriters of San Bernardino's pension bonds, have not commented about the city's budget after calls and emails by Reuters.

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US court denies Beechcraft challenge on Afghan plane deal

WASHINGTON, April 19 | Fri Apr 19, 2013 5:29pm EDT

WASHINGTON, April 19 (Reuters) - The U.S. Air Force on Friday said U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack planes for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, had sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

A spokeswoman for the Kansas plane maker said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in an ongoing battle over the Afghan plane orders - a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new planes to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz)

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UPDATE 1-US court denies Beechcraft challenge on Afghan plane deal

Fri Apr 19, 2013 6:23pm EDT

(Adds comment from Sierra Nevada and Embraer)

WASHINGTON, April 19 (Reuters) - The U.S. Air Force said on Friday that U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack aircraft for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the Light Air Support (LAS) contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

"Today's decision ensures that work will continue uninterrupted on the LAS contract and that we will be able to deliver these aircraft in mid-2014," Sierra Nevada and Embraer said in a joint statement.

Last month, the companies opened a plant in Jacksonville, Florida, to assemble at least 20 of Embraer's twin-turboprop Super Tucano.

A spokeswoman for Kansas aircraft maker Beechcraft said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in a battle over the Afghan orders, a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new aircraft to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz and Andre Grenon)

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Detroit emergency manager eyes end to union bargaining

By Steve Neavling

DETROIT, April 19 | Fri Apr 19, 2013 6:34pm EDT

DETROIT, April 19 (Reuters) - Detroit's emergency manager indicated for the first time that he may end collective bargaining with city employees as part of his effort to shore up the city's sagging finances.

Kevyn Orr, a former bankruptcy lawyer, alerted state labor officials on Thursday that he has no legal requirement to bargain or participate in compulsory arbitration with Detroit's public safety unions.

The statement by Orr, sent in letters to state employment relations officials, is his first public indication that he actively is considering exercising some of the most sweeping powers granted to him under the 2012 state law that created the position of emergency manager.

Detroit has agreements with some 48 unions, and outside analysts say the city needs concessions from organized labor if it is to restore public finances devastated by a shrinking population and high unemployment.

Staking out his position in the letters, Orr stated that Detroit is in receivership, and he has no duty to bargain under procedures set forward in the state Public Employment Relations Act. The city and its lawyers "are authorized to advance this position and seek...any and all relief available by law," he said.

Orr's move incensed unions for firefighters, police officers and paramedics, whose current pacts with the city end on June 30.

"It's obvious what they're trying to do: They don't plan to negotiate with us," Dan McNamara, president of the firefighters' unions, told Reuters.

Orr's spokesman, Bill Nowling, said the emergency manager won't decide what to do with labor contracts until he meets with the city's 48 unions. He described Orr's actions as a legal formality.

"There's no declaration that we are walking away from the negotiating table," Nowling told Reuters. "It doesn't mean we won't meet in good faith with the unions."

Orr's letter represents a departure from his previous public posture. When the city through Mayor Dave Bing's office sent a similar notice in early April, Orr seemed to distance himself. His office stated that Orr had no prior knowledge of the letter.

This time, Orr and the city are working in parallel. On the same date that Orr sent his letters, the city of Detroit also filed a motion with the Michigan Employment Relations Commission asking it to rule that state arbitration panels no longer have authority to hold hearings or rule on cases brought by the unions representing Detroit police and emergency medical technicians.

The city also contends in its motion that a 2012 Michigan law governing state-appointed emergency managers automatically suspended Detroit's duty to bargain with its unions.

Detroit's unionized police, fire, and paramedics are working under contracts imposed on them last summer by Bing, who cut their pay by 10 percent. Employees also were required to pay 20 percent of their medical costs.

Detroit is running a $100 million annual budget deficit and a state report said it has some $14 billion in long-term debt.

Orr, who formerly worked on the restructuring of auto company Chrysler, was appointed last month by Michigan's Republican Governor Rick Snyder despite objections from elected city officials.

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US court denies Beechcraft challenge on Afghan plane deal

WASHINGTON, April 19 | Fri Apr 19, 2013 5:29pm EDT

WASHINGTON, April 19 (Reuters) - The U.S. Air Force on Friday said U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack planes for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, had sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

A spokeswoman for the Kansas plane maker said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in an ongoing battle over the Afghan plane orders - a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new planes to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz)

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UPDATE 1-US court denies Beechcraft challenge on Afghan plane deal

Fri Apr 19, 2013 6:23pm EDT

(Adds comment from Sierra Nevada and Embraer)

WASHINGTON, April 19 (Reuters) - The U.S. Air Force said on Friday that U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack aircraft for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the Light Air Support (LAS) contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

"Today's decision ensures that work will continue uninterrupted on the LAS contract and that we will be able to deliver these aircraft in mid-2014," Sierra Nevada and Embraer said in a joint statement.

Last month, the companies opened a plant in Jacksonville, Florida, to assemble at least 20 of Embraer's twin-turboprop Super Tucano.

A spokeswoman for Kansas aircraft maker Beechcraft said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in a battle over the Afghan orders, a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new aircraft to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz and Andre Grenon)

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Detroit emergency manager eyes end to union bargaining

By Steve Neavling

DETROIT, April 19 | Fri Apr 19, 2013 6:34pm EDT

DETROIT, April 19 (Reuters) - Detroit's emergency manager indicated for the first time that he may end collective bargaining with city employees as part of his effort to shore up the city's sagging finances.

Kevyn Orr, a former bankruptcy lawyer, alerted state labor officials on Thursday that he has no legal requirement to bargain or participate in compulsory arbitration with Detroit's public safety unions.

The statement by Orr, sent in letters to state employment relations officials, is his first public indication that he actively is considering exercising some of the most sweeping powers granted to him under the 2012 state law that created the position of emergency manager.

Detroit has agreements with some 48 unions, and outside analysts say the city needs concessions from organized labor if it is to restore public finances devastated by a shrinking population and high unemployment.

Staking out his position in the letters, Orr stated that Detroit is in receivership, and he has no duty to bargain under procedures set forward in the state Public Employment Relations Act. The city and its lawyers "are authorized to advance this position and seek...any and all relief available by law," he said.

Orr's move incensed unions for firefighters, police officers and paramedics, whose current pacts with the city end on June 30.

"It's obvious what they're trying to do: They don't plan to negotiate with us," Dan McNamara, president of the firefighters' unions, told Reuters.

Orr's spokesman, Bill Nowling, said the emergency manager won't decide what to do with labor contracts until he meets with the city's 48 unions. He described Orr's actions as a legal formality.

"There's no declaration that we are walking away from the negotiating table," Nowling told Reuters. "It doesn't mean we won't meet in good faith with the unions."

Orr's letter represents a departure from his previous public posture. When the city through Mayor Dave Bing's office sent a similar notice in early April, Orr seemed to distance himself. His office stated that Orr had no prior knowledge of the letter.

This time, Orr and the city are working in parallel. On the same date that Orr sent his letters, the city of Detroit also filed a motion with the Michigan Employment Relations Commission asking it to rule that state arbitration panels no longer have authority to hold hearings or rule on cases brought by the unions representing Detroit police and emergency medical technicians.

The city also contends in its motion that a 2012 Michigan law governing state-appointed emergency managers automatically suspended Detroit's duty to bargain with its unions.

Detroit's unionized police, fire, and paramedics are working under contracts imposed on them last summer by Bing, who cut their pay by 10 percent. Employees also were required to pay 20 percent of their medical costs.

Detroit is running a $100 million annual budget deficit and a state report said it has some $14 billion in long-term debt.

Orr, who formerly worked on the restructuring of auto company Chrysler, was appointed last month by Michigan's Republican Governor Rick Snyder despite objections from elected city officials.

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US court denies Beechcraft challenge on Afghan plane deal

WASHINGTON, April 19 | Fri Apr 19, 2013 5:29pm EDT

WASHINGTON, April 19 (Reuters) - The U.S. Air Force on Friday said U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack planes for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, had sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

A spokeswoman for the Kansas plane maker said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in an ongoing battle over the Afghan plane orders - a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new planes to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz)

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UPDATE 1-US court denies Beechcraft challenge on Afghan plane deal

Fri Apr 19, 2013 6:23pm EDT

(Adds comment from Sierra Nevada and Embraer)

WASHINGTON, April 19 (Reuters) - The U.S. Air Force said on Friday that U.S.-based Sierra Nevada Corp and Brazil's Embraer would continue work on a $428 million contract to build new attack aircraft for Afghanistan after a federal court rejected a challenge by rival Beechcraft.

U.S. Air Force spokesman Ed Gulick said the Court of Federal Claims denied Beechcraft's challenge, but the congressional Government Accountability Office (GAO) was still reviewing a separate protest that Beechcraft filed against the deal.

Continued work on the Light Air Support (LAS) contract "honors the U.S. Air Force's critical and time-sensitive commitment to provide air support capability to the Afghan Air Force (AAF)," Gulick said.

Beechcraft, which emerged from Chapter 11 bankruptcy protection earlier this year, sued the Air Force to halt work on the planes while federal auditors reviewed the company's protest. The Air Force had authorized Sierra Nevada and Embraer to keep working on the order, despite Beechcraft's protest.

"Today's decision ensures that work will continue uninterrupted on the LAS contract and that we will be able to deliver these aircraft in mid-2014," Sierra Nevada and Embraer said in a joint statement.

Last month, the companies opened a plant in Jacksonville, Florida, to assemble at least 20 of Embraer's twin-turboprop Super Tucano.

A spokeswoman for Kansas aircraft maker Beechcraft said the Witchita-based company was disappointed by the decision and planned to continue to contest the award through the GAO.

The court's decision was another twist in a battle over the Afghan orders, a dispute that has drawn the ire of the Brazilian government and which could complicate U.S. plans to withdraw from Afghanistan in 2014.

The Air Force is racing to get new aircraft to Afghanistan and train pilots to fly them as U.S. forces prepare to withdraw from the country after over a decade of war. (Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz and Andre Grenon)

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Detroit emergency manager eyes end to union bargaining

By Steve Neavling

DETROIT, April 19 | Fri Apr 19, 2013 6:34pm EDT

DETROIT, April 19 (Reuters) - Detroit's emergency manager indicated for the first time that he may end collective bargaining with city employees as part of his effort to shore up the city's sagging finances.

Kevyn Orr, a former bankruptcy lawyer, alerted state labor officials on Thursday that he has no legal requirement to bargain or participate in compulsory arbitration with Detroit's public safety unions.

The statement by Orr, sent in letters to state employment relations officials, is his first public indication that he actively is considering exercising some of the most sweeping powers granted to him under the 2012 state law that created the position of emergency manager.

Detroit has agreements with some 48 unions, and outside analysts say the city needs concessions from organized labor if it is to restore public finances devastated by a shrinking population and high unemployment.

Staking out his position in the letters, Orr stated that Detroit is in receivership, and he has no duty to bargain under procedures set forward in the state Public Employment Relations Act. The city and its lawyers "are authorized to advance this position and seek...any and all relief available by law," he said.

Orr's move incensed unions for firefighters, police officers and paramedics, whose current pacts with the city end on June 30.

"It's obvious what they're trying to do: They don't plan to negotiate with us," Dan McNamara, president of the firefighters' unions, told Reuters.

Orr's spokesman, Bill Nowling, said the emergency manager won't decide what to do with labor contracts until he meets with the city's 48 unions. He described Orr's actions as a legal formality.

"There's no declaration that we are walking away from the negotiating table," Nowling told Reuters. "It doesn't mean we won't meet in good faith with the unions."

Orr's letter represents a departure from his previous public posture. When the city through Mayor Dave Bing's office sent a similar notice in early April, Orr seemed to distance himself. His office stated that Orr had no prior knowledge of the letter.

This time, Orr and the city are working in parallel. On the same date that Orr sent his letters, the city of Detroit also filed a motion with the Michigan Employment Relations Commission asking it to rule that state arbitration panels no longer have authority to hold hearings or rule on cases brought by the unions representing Detroit police and emergency medical technicians.

The city also contends in its motion that a 2012 Michigan law governing state-appointed emergency managers automatically suspended Detroit's duty to bargain with its unions.

Detroit's unionized police, fire, and paramedics are working under contracts imposed on them last summer by Bing, who cut their pay by 10 percent. Employees also were required to pay 20 percent of their medical costs.

Detroit is running a $100 million annual budget deficit and a state report said it has some $14 billion in long-term debt.

Orr, who formerly worked on the restructuring of auto company Chrysler, was appointed last month by Michigan's Republican Governor Rick Snyder despite objections from elected city officials.

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UPDATE 1-Alitalia picks Ducati head as new CEO

Thu Apr 18, 2013 1:59pm EDT

(Adds appointment of new CEO at Ducati)

MILAN, April 18 (Reuters) - Italian motorcycle maker Ducati's chief executive, Gabriele del Torchio, has been recruited to lead struggling Italian airline Alitalia back to profitability.

Alitalia said on Thursday Del Torchio, seen as a turnaround specialist, has been assigned all operational responsibilities.

He will replace Andrea Ragnetti, who quit after only a year in the job in February after the struggling airline company posted a 2012 net loss of 280 million euros ($365 million) which had deepened from 69 million euros in 2011.

Ducati has replaced Del Torchio with Claudio Domenicali, who has spent 21 years at the motorcycle maker, most recently as its director general.

Ducati was bought by Volkswagen's division Audi last year. Revenues rose 16 percent to 606 million euros in 2012.

Alitalia, which is 25 percent owned by Air France-KLM , was rescued from bankruptcy in 2008, when it was bought by a consortium of Italian companies including Intesa Sanpaolo, road operator Atlantia and IMMSI , which also controls scooter maker Piaggio. ($1 = 0.7668 euros) (Reporting by Francesca Landini; Editing by Elaine Hardcastle and William Hardy)

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UPDATE 4-American Air parent results top estimates

Thu Apr 18, 2013 3:17pm EDT

* Adjusted earnings 2 cents a share vs. estimate of loss 9 cents

* CEO confident network outage won't recur

April 18 (Reuters) - American Airlines parent AMR Corp , which plans to merge with US Airways Group Inc to form the world's biggest carrier, reported higher-than-expected adjusted quarterly earnings on Thursday, aided by cost-cutting from its bankruptcy restructuring.

The carrier's net loss narrowed from a year earlier in the first three months of the year. Excluding reorganization and special items, American recorded an $8 million profit, the first time it has had earnings on that basis for the seasonally weak first quarter since 2007.

"If you can be profitable in the worst quarter, you certainly can generate a lot of earnings and cash in the next couple of quarters," said Michael Derchin, an airline analyst with CRT Capital Group.

American, the third-largest U.S. carrier by traffic, has renegotiated plane leases, cut management and support staff and frozen pension plans to lower costs since filing for Chapter 11 protection in November 2011.

For years, American's higher cost base had put it at a disadvantage with peers such as Delta Air Lines and United Continental Holdings that earlier restructured in bankruptcy.

This week, American filed formal plans to exit bankruptcy, a necessary step to completing its proposed $11 billion merger with US Air. Pending approvals, the deal is expected to close in the third quarter.

"It will be one of the more profitable network carriers," Derchin said of the new American.

American said its operations have returned to normal following a computer outage on Tuesday that forced it to ground nearly 1,000 flights. A software issue that affected primary and backup network systems caused the problem, the company said.

Chief Executive Thomas Horton said American understands the cause of the outage, has ruled out external threats and continues to investigate the issue.

The outage "was unrelated to the merger" planned with US Air, Horton said in an interview. "It was a unique event and we do not expect that to recur."

AMR's first-quarter net loss was $341 million, or $1.02 a share, compared with a loss of $1.7 billion, or $4.95 a share, a year earlier.

Adjusted for items, American had a profit of 2 cents a share, compared with a loss of 9 cents a share expected by analysts, according to Thomson Reuters I/B/E/S.

The company recorded costs of $276 million tied to its reorganization, and charges and merger-related expenses of $28 million. It also took a charge of $45 million tied to a rise in workers' compensation claims in recent months.

Operating revenue rose 1 percent to $6.1 billion, aided by record average fares paid per mile. Passenger revenue per available seat mile, an important measure known as unit revenue, rose 2.6 percent for American and its regional affiliate American Eagle.

Operating expenses fell 1.3 percent, as costs tied to wages and salaries fell about 17 percent.

Shares of most airlines traded lower on Thursday as oil prices rose. AMR was down 3 percent at $3.85.

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Hong Kong March bankruptcy petitions up 41 pct from Feb

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California city tells Calpers it will quit pension fund

Wed Apr 17, 2013 6:36pm EDT

* Termination letter sent to biggest U.S. pension fund

* Other cities look for ways to rein in pension debt

By Tim Reid

LOS ANGELES, April 17 (Reuters) - The tiny California city of Canyon Lake has served notice on the state's pension fund that it wants to quit the plan, at a time when cities across the state and the United States are looking at ways to rein in soaring retirement costs.

Canyon Lake in southern California is a city of 11,000 people. But its decision to quit the powerful Calpers - America's largest public pension fund with $256 billion of assets under management - could presage much larger problems for the system as it battles with Wall Street bondholders in the bankruptcy cases of California's San Bernardino and Stockton.

Canyon Lake, which says it is ready to pay a termination fee, sent a letter on April 4 to the California Public Employees' Retirement System (Calpers) stating that it wants to end its relationship with the pension fund.

A major factor in its decision was a likely move by Calpers to raise its employer contribution rate by 50 percent in coming years - a decision the fund's board approved on Wednesday .

Calpers confirmed that it had received Canyon Lake's "required signed resolution of intention to terminate" adding other cities and counties have ended their contracts with the fund in the past. No other city or county in California is known to be taking the step to currently quit the plan.

"The problem here is the uncertainty for Calpers, and that is how many cities might opt out," said Michael Sweet, a bankruptcy attorney with Fox Rothschild in San Francisco.

"That is the unknown. The issue here for Calpers is if Canyon Lake becomes a trend."

Pacific Grove, a California coastal city of 15,000, informed Calpers earlier this year that it wants to explore ways to renegotiate its obligations to the fund. Other California cities are taking legal and financial advice about their obligations to Calpers.

Canyon Lake said it has looked at Calpers's website, which states that its unfunded liability to the fund is $661,000.

Richard Rowe, Canyon Lake's interim city manager, said the city decided it would be cheaper to borrow money to pay off Calpers rather than continue to pay the fund.

The city only has two full-time employees. Payments to Calpers for the pair will cost the city about $35,000 in the next fiscal year beginning July 1, Rowe said. If the city quit Calpers and turned those jobs into part-time positions with much lower benefit structures, the city would save about $88,000 annually in pension and health costs, Rowe said.

Servicing a 10-year loan to quit Calpers will cost the city about $77,000 annually, Rowe said - but it would be one line item in the city's budget that should not change.

Out of a total city budget of $3.6 million, $2.6 million is spent on police and fire costs. That is contracted out to Riverside County and the city has no control over those Calpers costs.

The city wanted to quit Calpers because it looked like payments to the fund would continue to increase, and Rowe said it was frustrating that the city had no control over that.

In the last 10 years, the amount paid to Calpers by California and the cities rose nearly four times to $7.8 million in fiscal 2012.

According to the city, its employer rates to Calpers have risen from 12.8 percent to 17.9 percent in the last three years. Rowe said they have also asked Calpers for an exact termination fee, amid concerns about a rising unfunded liability figure calculated by the fund.

"Budgeting is extremely difficult," Rowe said. "We have no ability to make long-term forecasts because we don't know how Calpers's long term liabilities are going to be resolved."

Brad Pacheco, a spokesman for Calpers, said the fund had not performed any termination calculations for Canyon Lake.

Pacheco suggested the city's assumption that its termination fee was $661,000 might be premature.

"We suspect that they used the hypothetical number from the recent valuation report in the action with their City Council," he said.

The assets of a city that terminates from Calpers are "are put into a more conservative risk pool."

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CORRECTED-California city tells Calpers it will quit pension fund

Wed Apr 17, 2013 8:22pm EDT

(In paragraph 7 from bottom corrects to $7.8 billion instead of $7.8 million and clarifies next paragraph on wages)

* Termination letter sent to biggest U.S. pension fund

* Other cities look for ways to rein in pension debt

By Tim Reid

LOS ANGELES, April 17 (Reuters) - The tiny California city of Canyon Lake has served notice on the state's pension fund that it wants to quit the plan, at a time when cities across the state and the United States are looking at ways to rein in soaring retirement costs.

Canyon Lake in southern California is a city of 11,000 people. But its decision to quit the powerful Calpers - America's largest public pension fund with $256 billion of assets under management - could presage much larger problems for the system as it battles with Wall Street bondholders in the bankruptcy cases of California's San Bernardino and Stockton.

Canyon Lake, which says it is ready to pay a termination fee, sent a letter on April 4 to the California Public Employees' Retirement System (Calpers) stating that it wants to end its relationship with the pension fund.

A major factor in its decision was a likely move by Calpers to raise its employer contribution rate by 50 percent in coming years - a decision the fund's board approved on Wednesday .

Calpers confirmed that it had received Canyon Lake's "required signed resolution of intention to terminate" adding other cities and counties have ended their contracts with the fund in the past. No other city or county in California is known to be taking the step to currently quit the plan.

"The problem here is the uncertainty for Calpers, and that is how many cities might opt out," said Michael Sweet, a bankruptcy attorney with Fox Rothschild in San Francisco.

"That is the unknown. The issue here for Calpers is if Canyon Lake becomes a trend."

Pacific Grove, a California coastal city of 15,000, informed Calpers earlier this year that it wants to explore ways to renegotiate its obligations to the fund. Other California cities are taking legal and financial advice about their obligations to Calpers.

Canyon Lake said it has looked at Calpers's website, which states that its unfunded liability to the fund is $661,000.

Richard Rowe, Canyon Lake's interim city manager, said the city decided it would be cheaper to borrow money to pay off Calpers rather than continue to pay the fund.

The city only has two full-time employees. Payments to Calpers for the pair will cost the city about $35,000 in the next fiscal year beginning July 1, Rowe said. If the city quit Calpers and turned those jobs into part-time positions with much lower benefit structures, the city would save about $88,000 annually in pension and health costs, Rowe said.

Servicing a 10-year loan to quit Calpers will cost the city about $77,000 annually, Rowe said - but it would be one line item in the city's budget that should not change.

Out of a total city budget of $3.6 million, $2.6 million is spent on police and fire costs. That is contracted out to Riverside County and the city has no control over those Calpers costs.

The city wanted to quit Calpers because it looked like payments to the fund would continue to increase, and Rowe said it was frustrating that the city had no control over that.

In the last 10 years, the amount paid to Calpers by California and the cities rose nearly four times to $7.8 billion in fiscal 2012.

According to the city, it paid Calpers 17.9 percent of its employees wages, up from 12.8 percent three years ago. Rowe said they have also asked Calpers for an exact termination fee, amid concerns about a rising unfunded liability figure calculated by the fund.

"Budgeting is extremely difficult," Rowe said. "We have no ability to make long-term forecasts because we don't know how Calpers's long term liabilities are going to be resolved."

Brad Pacheco, a spokesman for Calpers, said the fund had not performed any termination calculations for Canyon Lake.

Pacheco suggested the city's assumption that its termination fee was $661,000 might be premature.

"We suspect that they used the hypothetical number from the recent valuation report in the action with their City Council," he said.

The assets of a city that terminates from Calpers are "are put into a more conservative risk pool." (Reporting by Tim Reid; Editing by Tiziana Barghini and Leslie Gevirtz)

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STOCKS NEWS INDONESIA-Exchange halts trading of Surabaya Agung on bankruptcy filing

Thu Apr 18, 2013 12:05am EDT

The Indonesian Stock Exchange suspended trading in PT Surabaya Agung Industri Pulp dan Kertas Tbk as requested by the paper producer's curator team due to its bankruptcy process, the exchange said in a statement on Thursday.

Surabaya Agung was sued by Singapore-based Asiabase Resources Pte Ltd for payable worth up to $415,036, company had said in an exchange filing dated March 5.

The pulp maker's shares hit their lowest since May 2011 at 160 rupiah per share on Monday, before closing at 200 rupiah. They have lost almost half of their value since last year.

The broader Jakarta's Composite Index is trading down 0.19 percent.

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U.S. court OKs Lehman settlements to free up $15 billion for customers

Tue Apr 16, 2013 2:21pm EDT

* Resolves Lehman brokerage's disputes with parent, European arm

* Frees up funds to repay institutional customers of brokerage

By Nick Brown

NEW YORK, April 16 (Reuters) - A U.S. judge on Tuesday approved a set of settlements among Lehman Brothers entities that will allow the company's defunct brokerage to pay back about $15 billion in customer claims.

The intercompany claims had been the final obstacles keeping James Giddens, the trustee recovering money for the broker's customers, from making full payouts to brokerage customers.

While individual retail customers were made whole shortly after Lehman's collapse in 2008, hundreds of affiliate, institutional and hedge fund customers of the brokerage have been waiting for their money.

The settlements, reached last year, were greenlighted by Judge James Peck at a hearing in U.S. Bankruptcy Court in Manhattan. This was a "milestone" moment in a "complex" bankruptcy, Giddens said in a statement.

The deals resolve a pair of disputes, one between Lehman's brokerage and its parent entity, the other between the brokerage and the company's European arm. The parent will receive a $2.3 billion customer claim, down from the $19.9 billion it had originally sought, and a $14 billion lower-priority unsecured claims against the brokerage.

The European unit will receive a $9 billion customer claim, down from the $24 billion it initially asserted, and a $4 billion unsecured claim.

The deals free up about $15 billion for Giddens to pay back to customers. He said he expected payouts to begin as soon as the court's orders are final. The settlement with Lehman's European arm still needs approval from a British court, where a hearing is slated for May 1.

Holders of unsecured claims will be partially repaid from whatever is left after customer claims are paid out.

Lehman filed the largest-ever U.S. bankruptcy on Sept. 15, 2008, with $639 billion in assets. It is in the midst of repaying about $65 billion to creditors under a liquidation plan approved in late 2011.

Its brokerage was liquidated separately under the Securities Investor Protection Act, or SIPA, which governs the wind-down of failed securities brokers. Most of its assets were sold to Barclays PLC.

"In the face of enormous complexity and unique legal challenges, the SIPA framework to protect customer's property worked as designed," Giddens said in the statement.

Spokeswomen for the Lehman parent and the European unit had no immediate comment on the ruling.

In a statement released earlier this week, Lehman's European unit credited the settlement as a main reason it is forecasting substantial or full repayment for its unsecured creditors.

"To be able to advise ordinary unsecured creditors that we now have a reasonable chance of eventually repaying their claims in full, marks a significant milestone," Tony Lomas, one of the administrators liquidating the European arm, said in the statement.

The brokerage liquidation is In re Lehman Brothers Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-1420.

The Lehman bankruptcy is In re Lehman Brothers Holdings Inc, in the same court, No. 08-13555.

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Detroit takes step to restructure debt despite protests

DETROIT, April 16 | Tue Apr 16, 2013 3:42pm EDT

DETROIT, April 16 (Reuters) - The Detroit City Council on Tuesday approved a controversial contract to restructure the city's debt, despite a protest that temporarily shut down the meeting.

About 2 dozen protesters opposed to Michigan Governor Rick Snyder's appointment last month of an emergency manager to run Detroit linked arms and sang protest songs, forcing Council President Charles Pugh to call for a recess that lasted 90 minutes.

The council reconvened after about a dozen police officers moved into the chamber and threatened to arrest anyone who became unruly.

In a 5 to 2 vote, the council approved a six-month, $3.4 million contract to hire the Jones Day law firm, the former employer of Emergency Manager Kevyn Orr, to help negotiate agreements with creditors.

Under Michigan law, Orr has the final say on contracts for the cash-strapped city.

Jones Day's selection as the city's restructuring counsel was announced by Mayor Dave Bing on March 11, just days before the governor tapped Orr to run Detroit.

Both Orr and Snyder have said talks with creditors were needed to help solve Detroit's fiscal mess, which mushroomed as the city's population dropped along with its revenue.

Bill Nowling, Orr's spokesman, said no meetings with the city's bondholders have been scheduled.

"We will have more to say about concessions sought when we enter into negotiations," Nowling said. "Right now, it would be premature to comment."

Detroit has about $2.4 billion of outstanding general obligation debt, $6 billion of water and sewer revenue bonds and unfunded liabilities of $6 billion for retiree healthcare and $650 million for pensions, according to a March report from the mayor's office.

The city also faces paying as much as $440 million, or about 22 percent of its annual operating budget, after a credit rating downgrade last year and more recently the appointment of an emergency manager triggered the termination of interest rate swap agreements.

Nowling said Michigan-based law firm Miller Canfield will continue to negotiate with swap providers.

In the wake of the council meeting, protesters pledged to heighten the intensity of the demonstrations. Since the emergency manager was named, protest threats have mostly not borne out and there has been no violence.

"This is just the beginning. They haven't see the worst of it," said Rev. Charles Williams II, the head of the Michigan chapter of the New York-based Rev. Al Sharpton's National Action Network of community activist. "We are serious about this."

Among the concerns raised about the contract was perceived conflicts of interest. Protesters said Jones Day's clients include big banks that are Detroit creditors and stand to lose a lot of money under bankruptcy or a settlement.

Tensions flared late on Tuesday morning when Morris Mays, a 51-year-old Detroiter clad in a black leather jacket, black leather gloves, a black shirt, black sunglasses and gold chains threatened the council.

"I resent you. I hate you for what you did," Mays told the council for agreeing to work with the emergency manager. "I watch you attack us and attack us and attacks us. And I urge the people of Detroit to attack you!"

Police escorted Mays from the room. Others were forcibly removed after refusing to stay quiet.

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