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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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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Bondholders turn down DEPFA offer

By Helene Durand

Thu Dec 20, 2012 8:47am EST

LONDON, Dec 20 (IFR) - An offer by DEPFA Bank to buy back some of its hybrid debt at a deep discount to par, while giving investors a sweetener to amend the terms and conditions, was turned down by bondholders, which will stop the issuer from redeeming the securities.

The bailed-out German lender was seeking to amend the terms and conditions on three hybrid Tier 1 securities totalling EUR1.2bn so that it could retire them at a deep discount, instead of calling them at par at the next call dates.

The bank had structured its exercise differently from how the Irish banks did in 2010/2011 when they included exit consent measures designed to coerce non-consenting bondholders into taking part in their distressed buy-backs.

It was offering a 1% sweetener for bondholders who agreed to a change in the terms and conditions by December 18 ahead of a December 20 formal meeting deadline, and would have paid them 30% of face value.

Under the terms of the liability management exercise, if DEPFA got at least a third of bondholders to approve, by a simple majority in each of the bonds, it would have been able to redeem the rest at 29% of par.

However, in an announcement today, the issuer said that while the resolutions were duly passed in respect of one bond, DEPFA Funding III LP, they were not for the other two deals in question (DEPFA Funding II LP and DEPFA Funding IV LP).

"Thus under the terms of the Consent Solicitation the terms and conditions of all three series of Securities will not be amended and the Securities will not be redeemed," the issuer said in a statement.

"The Consent Solicitation was intended to allow for the opportunity to redeem the Securities whilst ensuring proper burden-sharing as required by the European Commission. DEPFA Bank followed a voluntary and market-based approach reflecting the distressed nature of the Securities.

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