Detroit's civilian retiree group agrees to pension cuts

Fri May 2, 2014 5:51pm EDT

May 2 (Reuters) - The group representing the largest block of Detroit's retired workers on Friday agreed to accept the city's proposed cuts to their pension benefits, the latest in a string of deals the city has struck in an effort to resolve its historic bankruptcy.

The board of directors for the Detroit Retired City Employees Association, which represents 8,000 retired civilian workers, voted to support the city's plan of adjustment, according to the mediators appointed by the federal bankruptcy judge overseeing the case.

Under the deal, contingent on full funding of the so-called Grand Bargain to aid retired city workers, nonuniformed city retirees would accept a 4.5 percent reduction in benefits and the elimination of cost-of-living-adjustment increases to their benefits. They would also have a voice in the voluntary employee beneficiary association, or VEBA, that is planned for managing retiree health care.

Previously, the group representing retired police and firefighters agreed to back the city's adjustment plan, as had the boards for the two independent pension systems for both groups. Under their deal, public safety retirees will not have their pensions reduced, though COLAs would be cut to 1 percent.

All the deals hinge on $816 million the city would tap to aid its retired workers. Michigan Governor Rick Snyder has asked the state legislature to approve $350 million of that amount, while the rest would come from philanthropic foundations and the Detroit Institute of Arts, which pledged the money to avoid a fire sale of art works due to the bankruptcy.

The agreement added to several deals Detroit reached with other major creditors in the past month.

It also increases the ranks of creditors that Detroit Emergency Manager Kevyn Orr has lined up so far to support his plan to adjust the city's $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history which was filed in July 2013.

Holdouts include bond insurance company Syncora Guarantee, which has been fighting the city over the swaps settlement.

Separately, the city on Friday was granted a delay until Monday for filing its final disclosure statement containing details of its plan of adjustment. The plan had been due to the court by the end of the day on Friday, but the court granted an extension.

(Writing by Dan Burns; editing by Matthew Lewis)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

U.S. bankruptcy judge urges settlement on GM ignition defects

Fri May 2, 2014 1:15pm EDT

* Judge says would prefer settlement to litigation; parties hesitant

* GM is seeking ruling it cannot be sued over alleged loss of car value stemming from recall

* Plaintiffs say GM concealed ignition switch defect that led to recall

By Nick Brown

NEW YORK, May 2 (Reuters) - A U.S. bankruptcy judge on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch.

Judge Robert Gerber, of the U.S. Bankruptcy Court in Manhattan, said he would welcome the prospect of a resolution that avoided a "monstrous battle."

"Frankly, it would be great if whatever money is available for injured people could go to them, and not to litigation costs and attorneys' fees," Gerber said at a court conference with GM and the plaintiffs.

Gerber is the same judge who in 2009 oversaw GM's whirlwind Chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Gerber to enforce the so-called bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall.

Under the plan approved by Gerber, GM channeled its burdensome liabilities into a shell known as "Old GM," while selling its profitable assets to "New GM," a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

Accident victims are not involved in the dispute before Gerber, which involves only claims for loss of car value.

The new entity agreed to take on certain of Old GM's legal liabilities, including those for accidents that occurred after the bankruptcy but which involved cars made before the bankruptcy.

But New GM says it did not agree to take on liability for so-called economic loss claims like the ones it now faces, in which plaintiffs allege that their cars lost value due to the recall. The company wants Gerber to endorse that position and declare that such lawsuits can only be brought against the Old GM shell.

Plaintiffs allege that they could not have known about the defect because GM purposely concealed it from the bankruptcy court. That allegation could lead down several legal paths. Intentional concealment could constitute fraud on the bankruptcy court, and GM wants Gerber to rule no fraud was committed.

A CONSTITUTIONAL ISSUE?

The plaintiffs would rather frame the issue as a constitutional one: they believe any concealment constitutes a violation of due process rights, because the liability shield, they argue, would bind people who could not have known they had claims against GM at the time the shield was imposed. They say they should therefore be able to circumvent the shield and sue New GM.

Arthur Steinberg, a lawyer for GM, said he agreed that settlement talks could be productive eventually, but wanted to wait for recommendations from attorney Kenneth Feinberg, hired by GM to explore legal options for compensating victims of accidents stemming from the switch defect.

"We'd like to see what Mr. Feinberg will or won't do," Steinberg said. "Let's see where the legal issues lie."

Feinberg, the architect of high-profile compensation funds like the Sept. 11 Victim Compensation Fund, is considering among other things whether GM should fund a trust for accident victims, but he could also address - and reach conclusions - on other legal matters.

GM has come under heavy criticism for not catching sooner the defective ignition switch, which had been studied by engineers in the company as early as 2001 but was not recalled until the initial action in February this year. The defective switch has been linked to 13 deaths.

Assuming the case does not settle quickly, Gerber indicated on Friday that he may be inclined to address questions of due process violations before those relating to potential fraud on the bankruptcy court, which would require plaintiffs to probe GM's records.

"I want to accomplish as much as we can before we get bogged down in discovery," Gerber said.

Ed Weisfelner, representing some of the plaintiffs, was hesitant to embrace settlement talks right away, citing disruption to Feinberg's study as well as the ongoing investigations into the switch defect by regulators and federal officials. "While we would rather mediate than litigate, I'm not sure the environment is such today that we're being presented with that choice," Weisfelner said. (Editing by Howard Goller and Matthew Lewis)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

UPDATE 1-U.S. bankruptcy judge urges settlement on GM ignition defects

Fri May 2, 2014 2:26pm EDT

* Judge favors settlement over litigation; parties hesitant

* GM seeks to bar lawsuits over alleged loss of car value

* Plaintiffs say GM concealed defect that led to recall

* Accident victims not involved in this legal dispute (Updates with end of hearing and call for timetable)

By Nick Brown

NEW YORK, May 2 (Reuters) - A U.S. bankruptcy judge on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, though neither side seemed ready to negotiate quite yet.

Judge Robert Gerber, of the U.S. Bankruptcy Court in Manhattan, said he would welcome the prospect of a resolution that avoided a "monstrous battle."

"Frankly, it would be great if whatever money is available for injured people could go to them, and not to litigation costs and attorneys' fees," Gerber said at a court conference with GM and the plaintiffs.

Gerber ended up deferring the idea after both sides said they would rather let the dispute play out a bit before they arrive at the bargaining table.

Gerber is the same judge who in 2009 oversaw GM's whirlwind Chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Gerber to enforce the so-called bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall.

Under the plan approved by Gerber, GM channeled its burdensome liabilities into a shell known as "Old GM," while selling its profitable assets to "New GM," a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

Accident victims are not involved in the dispute before Gerber, which concerns only claims for loss of car value.

The new entity agreed to take on certain of Old GM's legal liabilities, including those for accidents that occurred after the bankruptcy but which involved cars made before the bankruptcy.

But New GM says it did not agree to take on liability for so-called economic loss claims like the ones it now faces, in which plaintiffs allege that their cars lost value due to the recall. The company wants Gerber to endorse that position and declare that such lawsuits can only be brought against the Old GM shell.

Gerber said he wanted the case to move quickly, and called on the parties to agree on deadlines for filing briefs. "You can take the weekend off," he told lawyers, but added that he expected a timetable early next week.

GM has come under heavy criticism for not catching sooner the defective ignition switch, which had been studied by engineers in the company as early as 2001 but was not recalled until the initial action in February this year. The defective switch has been linked to 13 deaths.

A CONSTITUTIONAL ISSUE?

Plaintiffs allege that they could not have known about the defect because GM purposely concealed it from the bankruptcy court. That allegation could lead down several legal paths. Intentional concealment could constitute fraud on the bankruptcy court, and GM wants Gerber to rule no fraud was committed.

The plaintiffs would rather frame the issue as a constitutional one: they believe any concealment constitutes a violation of due process rights, because the liability shield, they argue, would bind people who could not have known they had claims against GM at the time the shield was imposed. They say they should therefore be able to circumvent the shield and sue New GM.

Gerber said he would prefer to hear constitutional and other issues first because they require less discovery, but agreed to hear the fraud issue provided parties can present it without a long and burdensome discovery process. If not, he said, the issue may be deferred until later in the case.

Arthur Steinberg, a lawyer for GM, said he agreed that settlement talks could be productive eventually, but wanted to wait for recommendations from attorney Kenneth Feinberg, hired by GM to explore legal options for compensating victims of accidents stemming from the switch defect.

"We'd like to see what Mr. Feinberg will or won't do," Steinberg said. "Let's see where the legal issues lie."

Feinberg, the architect of high-profile compensation funds like the Sept. 11 Victim Compensation Fund, is considering among other things whether GM should fund a trust for accident victims, but he could also address - and reach conclusions - on other legal matters.

Ed Weisfelner, representing some of the plaintiffs, was also hesitant to embrace settlement talks right away, citing disruption to Feinberg's study as well as the ongoing investigations into the switch defect by regulators and federal officials. (Editing by Howard Goller and Matthew Lewis)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

Texas' Energy Future, creditors square off in bankruptcy hearing

By Tom Hals

WILMINGTON, Del Thu May 1, 2014 3:35pm EDT

WILMINGTON, Del May 1 (Reuters) - Hearings kicked off one of the biggest-ever U.S. bankruptcies on Thursday with creditors of Energy Future Holdings Corp, the largest power company in Texas, airing grievances over timing, value and how to administer the case.

Energy Future, created in the 2007 buyout of TXU Corp, filed for Chapter 11 bankruptcy on Tuesday after struggling more than a year to work out a deal with its creditors. The company's lawyer, Edward Sassower of Kirkland & Ellis, told the court its proposal was "wildly complicated," and many creditors began to explore lines of attack.

The hearing in the U.S. Bankruptcy Court in Wilmington, Delaware, drew scores of top bankruptcy lawyers from around the country on behalf of sophisticated investment funds that are owed nearly $50 billion.

The hearing spilled into two overflow courtrooms and seemed unlikely to finish before Friday.

The company proposed splitting from the parent its power plant and retail electricity business, and turning the holding company that owns those assets over to lenders. In a separate deal, a group of unsecured creditors would end up controlling Texas's largest network of power lines.

The proposed deal would leave lower-ranking creditors of Texas Competitive Electric Holdings Co, or TCEH, the holding company for Luminant and TXU Retail, with less than 3 percent of what they are owed. They raised the first objections.

"They don't use the term wipe-out, but wipe-out is what they intend," said Ed Weisfelner, a Brown Rudnick attorney who represents a group of lower-ranking secured creditors that is owed $1.6 billion.

Creditors lodged a highly unusual objection to consolidating the cases, which forced the company's chief financial officer, Paul Keglevic, to the stand before Judge Christopher Sontchi overruled the objection.

Weisfelner said Energy Future is trying to undervalue the TXU Retail and Luminant businesses to steer those assets into the hands of investment firms that hold the $24.4 billion in loans. He told Sontchi he feared he would not get his day in court to prove his clients deserved to be paid.

An attorney who represented the largest group of creditors which would end up owning the those businesses tried to assure the judge his group would work with Weisfelner's, and talks would continue.

"This is not the end of the story. You have to start somewhere," said Alan Kornberg of Paul, Weiss, Rifkind, Wharton & Garrison. He said he expected support for the deal among the class of creditors he represents to grow from the current 41 percent.

The second part of the agreements would swap ownership of the Oncor business, which operates the largest network of Texas power lines, to two groups of unsecured creditors. The company has proposed borrowing $7.3 billion to pay off higher-ranking creditors of the Oncor business.

Some of those higher-ranking creditors oppose the deal because it does not provide them with an added payment for retiring their debt prior to maturity. The company said it will litigate with creditors that hold out for that added money, known as a "make-whole payment."

Those higher-ranking creditors are also challenging the company's attempts to obtain this financing, arguing that the added payment needs to be "adequately protected" before the financing can be in place.

Judge Sontchi issued an interim order allowing the company to enter a commitment letter for that financing and giving it the authority to pay lenders just under $100 million in fees.

The judge set a final hearing on the loan for June 5.

Energy Future and its affiliates owe $49.7 billion, mainly to hedge funds and investment firms. Its $36.4 billion in assets make one of the biggest non-financial Chapter 11 filings ever.

The company was the target of a record $45 billion buyout in 2007, when it was known as TXU Corp, in a deal led by KKR & Co LP, TPG Capital Management LP and the private equity unit of Goldman Sachs Group Inc.

The buyout was a leveraged bet on the price of natural gas, which in turn essentially sets the price of electricity.

But natural gas prices have plummeted since the buyout.

The case is In re: Energy Future Holdings Corp, U.S. Bankruptcy Court, District of Delaware, No:14-10979. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Alden Bentley)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

BRIEF-Bankruptcy judge says to approve Energy Future Holdings interim $2.7 bln DIP loan

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

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

16.47 | 0 komentar | Read More

UPDATE 1-Texas' Energy Future, creditors square off in bankruptcy hearing

Thu May 1, 2014 7:05pm EDT

(Updates with end of hearing, interim loan approval)

By Tom Hals

WILMINGTON, Del May 1 (Reuters) - The largest power company in Texas, Energy Future Holdings Corp, began its bankruptcy turnaround by securing approval for an interim loan after seven hours of contentious arguments in a Delaware bankruptcy court.

Judge Christopher Sontchi approved the loan that was originally proposed at $2.7 billion, but he authorized that only $20 million could be spent. The company and its creditors will return to the Wilmington court on Friday to continue battling over the remainder of the money.

Thursday marked the first hearing in Energy Future Holdings' bankruptcy, with creditors airing grievances over scheduling, value and how to administer the case.

Energy Future, created in the 2007 buyout of TXU Corp, filed one of the largest non-financial Chapter 11 bankruptcies in U.S. history on Tuesday after struggling more than a year to work out a deal with its creditors.

The company's lawyer, Edward Sassower of Kirkland & Ellis, told the court its proposal was "wildly complicated," and many creditors began to explore lines of attack on Thursday.

The company proposed splitting from the parent its Luminant power plant and TXU Retail electricity business, and turning the holding company that owns those assets over to lenders. In a separate deal, a group of unsecured creditors would end up controlling Texas's largest network of power lines, a company known as Oncor that is not bankrupt.

The proposed deal would leave lower-ranking creditors of Texas Competitive Electric Holdings Co, or TCEH, the holding company for the power plants and retail units, with less than 3 percent of what they are owed. They raised the first objections.

"They don't use the term wipe-out, but wipe-out is what they intend," said Ed Weisfelner, a Brown Rudnick attorney who represents a group of lower-ranking secured creditors that is owed $1.6 billion.

Weisfelner said Energy Future is trying to undervalue the TXU Retail and Luminant businesses to steer those assets into the hands of investment firms that hold the $24.4 billion in loans.

Weisfelner grilled Paul Keglevic, Energy Future's chief financial officer about the need for the $2.7 billion loan and the company's use of cash.

Weisfelner mocked Keglevic's arguments that he was constrained in his ability to negotiate by the creditors who will take over the TCEH business, who are known as the first-lien lenders.

"The first-lien lenders have a gun to their own head and you have to stop them before they kill their own company," he told Sontchi.

An attorney for the lowest-priority unsecured creditors of the TXU Retail and Luminant business ticked off a string of what he called conflicts and said a reorganization of the corporate family in recent years could amount to a fraudulent transfer.

"We've got problems here," said Tom Lauria, another White & Case attorney for unsecured creditors of TCEH.

An attorney who represented the creditors who would end up owning the TXU Retail and Luminant businesses tried to assure the judge his group would work with Weisfelner's, and talks would continue.

"This is not the end of the story. You have to start somewhere," said Alan Kornberg of Paul, Weiss, Rifkind, Wharton & Garrison. He said he expected support for the deal among the class of creditors he represents to grow from the current 41 percent.

The second part of the agreements would swap ownership of the Oncor business, which operates the largest network of Texas power lines, to two groups of unsecured creditors. The company has proposed borrowing $7.3 billion to pay off higher-ranking creditors of the Oncor business.

Some of those higher-ranking creditors oppose the deal because it does not provide them with an added payment for retiring their debt prior to maturity. The company said it will litigate with creditors that hold out for that added money, known as a "make-whole payment."

Energy Future and its affiliates owe $49.7 billion, mainly to hedge funds and investment firms. Its $36.4 billion in assets make one of the biggest non-financial Chapter 11 filings ever.

The case is In re: Energy Future Holdings Corp, U.S. Bankruptcy Court, District of Delaware, No:14-10979. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Alden Bentley and Andrew Hay)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

Saudi govt acquires minority investors' shares in ailing telco

DUBAI, April 30 Wed Apr 30, 2014 6:36am EDT

DUBAI, April 30 (Reuters) - Shareholders in Saudi Integrated Telecom Co (SITC), which is due to be wound up, could be compensated earlier than expected after Saudi Arabia's finance ministry acquired minority investors' shares.

Last week, a royal decree declared that investors in SITC - excluding founding shareholders - would receive 30 riyals ($8) per share for their stakes in the company, a 23 percent premium on the stock's last traded price of 24.35 riyals.

A lawyer for SITC's minority shareholders had told Reuters he expected it would take a few months for his clients to receive their money, but a Riyadh bourse statement on Wednesday said the Ministry of Finance has now taken ownership of these shares.

This did not say whether minority investors had yet been paid, but may indicate they will be compensated sooner than previously thought.

SITC shares were suspended in February 2013. A royal decree last May ordered the liquidation of the firm, which never launched services despite making a winning 1 billion riyals ($266.64 million) bid for a fixed telecom licence in 2007.

SITC's founding shareholders, which include chairman Prince Saud bin Khaled bin Abdullah al-Saud, own the majority of the company. (Reporting by Matt Smith; Editing by Elaine Hardcastle)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

UPDATE 1-Saudi Arabia starts payout to minority investors' in ailing telco

Wed Apr 30, 2014 8:23am EDT

(Recasts with govt statement that it has begun paying minority investors)

By Matt Smith

DUBAI, April 30 (Reuters) - Saudi Arabia began to compensate shareholders in Saudi Integrated Telecom Co (SITC) for their stakes in the ailing firm on Wednesday, a statement on the Ministry of Finance website said.

Last week, a royal decree declared that investors in SITC - excluding founding shareholders - would receive 30 riyals ($8) per share for their stakes in the company, a 23 percent premium on the stock's last traded price of 24.35 riyals.

A lawyer for SITC's minority shareholders had told Reuters he expected it would take a few months for his clients to receive their money.

However, a Finance Ministry statement now says state-run National Commercial Bank will start paying investors from Wednesday, although it does not state how long this process will take.

The ministry has taken ownership of the stakes owned by non-founding shareholders, according to a separate bourse statement, and will participate in the liquidation of SITC.

The company's shares were suspended in February 2013. A royal decree last May ordered the liquidation of the firm, which never launched services despite making a winning 1 billion riyals bid for a fixed telecom licence in 2007.

SITC's founding shareholders, which include chairman Prince Saud bin Khaled bin Abdullah al-Saud, own the majority of the company. ($1 = 3.7505 Saudi Riyals) (Reporting by Matt Smith; Editing by Elaine Hardcastle and William Hardy)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

Israeli panel proposes new rules for managing debt-troubled firms

Wed Apr 30, 2014 12:13pm EDT

* Proposes three-step process for settling with creditors

* Aimed at encouraging growth of debt capital markets

By Steven Scheer

JERUSALEM, April 30 (Reuters) - A panel of Israeli regulators has proposed new, more transparent rules for managing companies after they get into financial difficulties that would provide more protection and predictability for creditors.

The panel, led by Finance Ministry Director-General Yael Andorn, made the recommendations to encourage the growth of Israel's debt capital market following a number of high-profile debt settlements that angered the public and harmed investor confidence.

"We think that having specific rules and specific directives of what happens when a company gets to a debt (restructuring) brings much more certainty and makes this debt market a better one and a more efficient one," Andorn told reporters.

She noted that the recommendations are based on regulations in the United States and Britain.

"Regulation of debt arrangements ... is critical to strengthening the confidence of savers and depositors in the credit system," she said, adding that such a process would create more rational pricing of debt.

Half of all business credit currently comes from the bond market and other sources than banks, up from 23 percent in 2003.

Andorn's panel, which included securities, banking and capital markets regulators, recommended in an interim report a three-stage approach to debt restructuring.

In the optional first phase, companies that start having debt problems appoint a debt representative, who draws up an initial debt settlement proposal aiming to strengthen the firm.

In the second phase when the company is already in financial distress, the creditors appoint an observer to the board of directors to make sure the interests of the lenders are taken into account. The company is required to cut costs and stop dividend payments, ensuring it acts in the interests of its debtholders.

In the third phase, after a company fails to pay its debt for 45 days, the controlling shareholder loses the ability to manage it, and a special manager is appointed by a receiver. The company also has the option to go to court.

"The purpose of this stage is, first and foremost, to create complete certainty for the company and its debtholders," the report said.

"The certainty should increase the chances for dialogue between the company and its creditors that will lead to an optimal arrangement for the parties," it added.

Since 2008, 140 Israeli companies have entered into debt settlement arrangements for a value of 39 billion shekels ($11.3 billion), 10 of them in 2013.

Most recently, conglomerate Israel Corp lost control of shipping company Zim under an agreement with Zim's creditors.

Nochi Dankner, once one of Israel's most powerful businessmen, lost his debt-ridden conglomerate IDB Holding earlier this year.

($1 = 3.4674 shekels) (editing by Jane Baird)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More

Delaware messes with Texas, sparks fight over mega-bankruptcy

By Tom Hals and Nick Brown

WILMINGTON, Del, April 29 Tue Apr 29, 2014 6:49pm EDT

WILMINGTON, Del, April 29 (Reuters) - Energy Future Holdings is all Texas: It's the state's biggest power company with the state's largest network of power lines, and it is run by a Houston native.

But when Energy Future's owners filed for bankruptcy early Tuesday, they went to a court more than 1,000 miles away, in Wilmington, Delaware. That immediately sparked an unusual, long-shot bid by a group of creditors to move one of the biggest bankruptcies in U.S. history to Dallas, an indication that creditors believe they could get a fairer shake outside of Delaware.

"I think it was naked forum-shopping" to file in Wilmington, Ed Weisfelner, a lawyer for the group, told Reuters. "You scratch your head as to what this case is doing there."

The dispute over where to hear the case risks bogging the restructuring down for weeks, particularly if Texas politicians and regulators support the move, and it could eventually lead to a mini-trial.

Energy Future's bankruptcy filing came on the heels of more than a year of complex negotiations with a diverse group of creditors who were owed more than $40 billion. The company says it has reached the framework of a restructuring with its biggest creditors and that it wants to exit bankruptcy in less than a year.

Weisfelner's group, which mostly consists of sophisticated funds accustomed to investing in distressed companies, could get nothing as things currently stand.

In arguing for a change of venue, Weisfelner cited the added expense of sending the company's executives, regulators and local creditors to Delaware. He also noted that Texas has been the venue for the bulk of more than 200 lawsuits involving Energy Future since 2012.

Energy Future has not filed a response in court to Weisfelner's motion. A company spokesman said Delaware is the proper venue for the bankruptcy, since several of its corporate entities are incorporated there.

"The major issues in our restructuring involve our financial structure, rather than our high-performing operations or other constituents based in Texas such as our employees, customers or others," spokesman Allan Koenig told Reuters.

Wilmington and New York City are the preferred jurisdictions to file corporate bankruptcy cases. Many bankruptcy professionals say the two courts are more efficient and experienced in handling large, complex turnarounds with billions of dollars at stake.

Weisfelner, a bankruptcy guru known for representing creditors, is challenging the company's position that his clients, which are owed about $1.5 billion in low-priorty bonds, are out of money.

Weisfelner said he wants a trial to determine the company's value. He's concerned, he said, that the Delaware court might allow Energy Future to forgo such a hearing, while a Texas court might be more willing to hold one.

In addition to seeking a change of venue, his group is demanding the right to subpoena witnesses and information from Energy Future, in order to try to prove that the company has the ability to repay them.

To be sure, it may be in Weisfelner's interest to raise as many obstacles as he can to a quick reorganization. Barring some action by the court or concessions from other creditors, his group does not figure to see any recovery.

Energy Future was formed in 2007 in a record $45 billion buyout of TXU Corp by KKR & Co, TPG and Goldman Sachs' private equity arm. The deal loaded the company with debt just before new drilling technology depressed natural gas prices and in turn prices for the company's electricity.

FRIENDLY VENUE?

Critics have long complained that the Wilmington and Manhattan bankruptcy courts bend over backwards to please lawyers that represent bankrupt companies, often to the detriment of creditors and employees.

Lynn LoPucki, a law professor at the University of California Los Angeles, describes a form of quid pro quo in his book "Courting Failure": The court tends to defer to the wishes of debtors while approving big legal fees, so lawyers bring almost every sizeable case to one of those courts. LoPucki declined to comment on Tuesday.

Companies have a lot of leeway as to where they file. The federal bankruptcy code allows them to file where their headquarters are located, where they have significant assets, or where they are incorporated -- which for most U.S. companies means Delaware.

There often is not an obvious connection between the bankrupt company and Wilmington.

In recent years, for example, the bankruptcies of the Los Angeles Dodgers baseball team, savings and loan company Washington Mutual, and the owner of the Chicago Tribune and Los Angeles Times newspapers all took place in the Wilmington bankruptcy court.

Bankrupt companies have often taken clever routes to get to a preferred court, including using an obscure subsidiary to establish the "venue hook."

General Motors, for example, established jurisdiction in Manhattan in 2009 by first filing a bankruptcy petition for a unit that consisted of a single dealership in Manhattan's Harlem neighborhood. The rest of the corporate family followed immediately after.

Still, fights over venue in bankruptcy are rare, and only 26 large cases have been transferred since 1989, according to LoPucki's extensive bankruptcy database.

Texas Senator John Cornyn led one failed bid when he was attorney general of his state to remove Enron Corp's bankruptcy from Manhattan back to its home base of Houston.

In 2012, Patriot Coal Corp became one of the biggest cases transferred -- to St. Louis from Manhattan. Just weeks before filing for bankruptcy, the company incorporated a New York subsidiary, with a Capital One Bank checking account with $97,985 as its principal asset, as its venue hook.

Judge Shelley Chapman decided that was going a step too far. "Nothing in our jurisprudence requires the court to condone every strategy devised by clever lawyers to outsmart statutory purpose and language," she wrote when transferring the case.

Weisfelner has requested that Judge Christopher Sontchi consider his motion to transfer the venue to Dallas as soon as possible, but the court has not scheduled its initial hearing in the case. (Reporting by Tom Hals in Wilmington, Delaware and Nick Brown in New York; editing by Andrew Hay)

• Link this
• Share this
• Digg this
• Email
• Print
• Reprints

16.47 | 0 komentar | Read More