Bloomberg News

Harrisburg, Innkeepers, Madoff, Nebraska Book: Bankruptcy

October 13, 2011

(This report contains items about companies both in bankruptcy and not in bankruptcy. Updates Harrisburg item; adds Innkeepers, Madoff, MSR Resorts, Philadelphia Orchestra and Dodgers in Updates; Jefferson County in Watch List; and Advance Sheets section.)

Oct. 13 (Bloomberg) -- Harrisburg, the capital of Pennsylvania, filed for municipal debt adjustment at 10:30 p.m. on Oct. 11 after the city council by a 4-3 vote authorized filing the petition, which was sent by fax to the U.S. Bankruptcy Court.

Although Harrisburg is officially in bankruptcy, whether it stays there is an open question.

The city attorney advised against the filing, saying proper procedures weren’t used in authorizing bankruptcy. There are other reasons based on state law giving grounds for asking the bankruptcy court to dismiss the petition.

The city claims to need bankruptcy in view of $65 million in default on $242 million owing on bonds sold to finance an incinerator that converts trash to energy. The bonds are insured by Assured Guaranty Municipal Corp.

Preceding the bankruptcy filing, the city council again rejected a state-sponsored workout that would have required new taxes and asset sales to avoid a bankruptcy filing.

Unlike companies whose Chapter 11 filings are rarely dismissed, a municipality can find itself tossed out of bankruptcy court.

Federal law gives states the right to place restrictions on bankruptcy filings by municipalities. As a result, the U.S. Bankruptcy Code calls for the bankruptcy judge to hold a hearing to entertain objections to a filing.

If an objector shows that the filing wasn’t authorized under state law, the bankruptcy court dismisses the petition.

Harrisburg’s own bankruptcy papers shows several grounds on which someone could challenge the filing and seek dismissal.

As a condition to filing, the city cited Pennsylvania’s Act 47 as requiring “imminent jeopardy” that a creditor will take action and “substantially interrupt” services to the citizens. Although six lawsuits are pending, an argument could be made that there’s no “imminent jeopardy.”

The city acknowledges that financial problems must be solvable “only” by use of Chapter 9. Given that there was a deal with creditors that the city turned down, meeting this condition likewise could be challenged.

In addition, the city admits it must show that it’s “not generally paying” its debts as they come due. In a case this year involving U.S. subsidiaries of Mexico’s Vitro SAB, an involuntary petition was dismissed even though the U.S. companies were two years in default on $1 billion in bonds. Because the companies were paying all creditors other than bondholders, the judge concluded that it was “generally” paying its debts and thus couldn’t be thrown into Chapter 11 involuntarily.

Bridgeport, Connecticut, is an example of a city that filed in Chapter 9, to have the petition later dismissed as not authorized under state law.

In municipal bankruptcies, a bankruptcy judge isn’t selected at random among the local judges. Instead, the chief judge of the U.S. Court of Appeals in Philadelphia selected Mary D. France to preside over the case. France is chief bankruptcy judge for the Middle District of Pennsylvania. Her courtroom is in Harrisburg.

Sometimes outside judges are selected. In the bankruptcy of Central Falls, Rhode Island, the Court of Appeals in Boston selected a Massachusetts bankruptcy judge to preside over the case.

Cravath Swaine & Moore LLP, a large New York law firm, agreed last year to provide advice to Harrisburg about bankruptcy and alternatives. Two lawyers from the firm told Bloomberg News that Cravath wasn’t involved in the filing.

The powers of the court and the rights of creditors are limited in municipal bankruptcies compared with corporate reorganizations in Chapter 11. A trustee can never be appointed to take over a municipality, and neither the judge nor creditors can force a sale of property. Similarly, creditors can never file a reorganization plan.

If the Chapter 9 case languishes, the bankruptcy judge has little alternative from dismissing the case, thus compelling the city and creditors to fight out their disputes in state court.

For a Bloomberg survey of the problems facing Harrisburg, including opinions of some residents, click here.

The petition says assets and debt are both less than $500 million although debt is more than $100 million.

For Bloomberg coverage of the filing, click here.

The case is In re City of Harrisburg, Pennsylvania, 11-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).


Innkeepers, Cerberus May Announce Settlement on Lawsuit Today

Innkeepers USA Trust and Cerberus Capital Management LP may announce a settlement of their $1.12 billion lawsuit as early as today, according to a person familiar with the discussions who declined to be identified because the negotiations are private.

Trial originally was to begin Oct. 10 on the suit in which Innkeepers was aiming to force Cerberus and Chatham Lodging Trust to carry out a contract to buy 64 hotels for $1.12 billion. Completing the sale would allow Innkeepers to carry out the Chapter 11 reorganization plan the bankruptcy court in New York approved in June.

Cerberus reached a tentative settlement over the weekend with Innkeepers, according to two people with knowledge of the discussions. Under that agreement, Cerberus and Chatham will cut the amount they pay for Innkeepers, said the people, who didn’t disclose the new price and asked not to be named because the talks aren’t public.

Given pending settlement talks, the bankruptcy court yesterday rescheduled the trial to begin Oct. 20. If the settlements calls for a lower price and the parties seek approval of a modified plan on Oct. 20, affected parties would need to consent because a new version of the plan would have a lower recovery at least for the primary secured creditors.

The primary secured creditors are Midland Loan Services Inc., the servicer for $825 million of fixed-rate mortgages on 45 hotels, and Lehman Ali Inc., a non-bankrupt subsidiary of Lehman Brothers Holdings Inc. with $238 million in floating-rate mortgages on 20 of the Innkeepers properties

Cerberus and Chatham claim they were entitled to terminate the contract given a material adverse change in the lodging industry. For some of the issues to be decided by the judge, click here for the Oct. 4 Bloomberg bankruptcy report.

Apollo Investment Corp. acquired Palm Beach, Florida-based Innkeepers in July 2007 in a $1.35 billion transaction. It had 72 extended-stay and limited-service properties with 10,000 rooms in 20 states. The Chapter 11 petition filed in July 2010 listed assets of $1.5 billion against debt totaling $1.52 billion.

The lawsuit against Cerberus is Innkeepers USA Trust v. Cerberus Four Holdings LLC (In re Innkeepers USA Trust), 11-02557, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The Chapter 11 case is In re Innkeepers USA Trust, 10-13800, in the same court.

Madoff Trustee Accuses Defendants of Forum Shopping

When the U.S. Supreme Court ruled on a case in June called Stern v. Marshall, the court said the opinion was narrow and wouldn’t have a major effect on bankruptcy court. The Stern ruling may be having more effect than the high court predicated, if the liquidation of Bernard L. Madoff Investment Securities LLC is a gauge.

Taken narrowly, the Stern case ruled that bankruptcy courts don’t have power under the U.S. Constitution to make final judgments on counterclaims against creditors based on state law.

The Madoff trustee filed papers in U.S. District Court yesterday citing how 247 of his lawsuits for recovery of false profits have been or may be taken out of the bankruptcy court, in part based on the Stern decision. Lawyers for Irving Picard, the Madoff trustee, argue that defendants are misreading Stern while “blatantly engaging in forum shopping.”

The trustee points to how the bankruptcy judge has already upheld similar complaints at an early stage of the lawsuit. In at least one case, the defendant who lost in bankruptcy court was rebuffed when attempting to take an appeal. In that case, U.S. District Judge Kimba M. Wood concluded that the ruling by the bankruptcy court seemed on firm footing.

Defendants seeking to remove lawsuits from bankruptcy court are contending that their cases should go to U.S. District Judge Jed Rakoff, who was the first to rule that non-bankruptcy law issues compelled removal of the suits from bankruptcy court. In a case involving the owners of the New York Mets, Rakoff took the next step, didn’t refer to Wood’s decision, and concluded that the trustee can’t seek to recover false profits taken out more than two year before bankruptcy. The trustee was aiming for recoveries going back six years. Rakoff also said the trustee is barred from taking back preferences.

During a court hearing, Rakoff defended his decisions to take so-called withdrawal-of-the-reference motions into his court. Rakoff said that local procedural rules provide that all withdrawal motions from a bankruptcy case should go to the same district judge. By contrast, Rakoff said, appeals are assigned randomly and thus multiple appeals could go to several different judges.

A motion to withdraw the reference is where one party, typically a defendant, contends that a lawsuit brought in bankruptcy court involves subject matter that by law must or can be heard in a U.S. District Court. The Madoff trustee’s filing yesterday was made in opposition to one such withdrawal-of-the- reference motion.

The Madoff firm began liquidating in December 2008 with the appointment of the trustee under the Securities Investor Protection Act. Bernard Madoff individually went into an involuntary Chapter 7 liquidation in April 2009. His bankruptcy case was consolidated with the firm’s liquidation. Madoff is serving a 150-year prison sentence following a guilty plea.

The lawsuit in district court is Picard v. M&B Weiss Family Limited Partnership (In re Bernard L. Madoff Investment Securities LLC), 11-06244, U.S. District Court, Southern District of New York (Manhattan). In bankruptcy court the lawsuit has the same title and is 10-04241, U.S. Bankruptcy Court, Southern District of New York. The Madoff liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Madoff, 09-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).

Nebraska Book Lienholders Begin Pressing for New Plan

Second-lien lenders to Nebraska Book Co., a bookseller to college students, say the time has come for unsecured bondholders to step aside if they can’t fund the pending reorganization plan.

Calling the case neither “unusually large” nor “complex,” the second-lien lenders are objecting to a four- month extension of the exclusive right to propose a plan. The papers explain how Nebraska Book has been unable to secure a $250 million loan required for confirming and implementing the Chapter 11 plan largely worked out before the Chapter 11 filing in late June.

The plan called for new financing to pay off first- and second-lien debt in full, while giving most of the new equity to subordinated noteholders of the operating company and holders of notes issued by the holding company.

The secured lenders argue that four more months of so- called exclusivity improperly give unsecured lenders an “option to hope the capital markets come to their rescue.” In the meantime, secured lenders shouldn’t “be forced to bear the risk that the financing markets don’t improve.”

Secured lenders believe that a 60-day extension of exclusivity is sufficient. The hearing on the exclusivity motion is set for Oct. 18.

Currently, the confirmation hearing for approval of the plan is set for Oct. 24. The company previously said there is a “substantial possibility” of further delay. For details on the plan after a settlement with shareholders, click here for the Sept. 9 Bloomberg bankruptcy report. For details on the original plan, click here for the July 19 Bloomberg bankruptcy report.

Based in Lincoln, Nebraska, the company sells used textbooks and operates more than 290 college bookstores. The company said $598 million in sales during fiscal 2011 resulted in a net loss of $98 million, including an $89 million writedown of intangible assets.

The case is In re Nebraska Book Co. Inc., 11-12005, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Meritage Homes Aiming to Oppose South Edge Plan

Although Meritage Homes Corp. is scheduled to oppose approval of the Chapter 11 plan for South Edge LLC, it may need to find new lawyers to argue its case at the Oct. 17 confirmation hearing.

The reorganization of South Edge, the owner of the 2,000- acre Inspirada residential development in Henderson, Nevada, is based on a settlement negotiated in May by South Edge’s Chapter 11 trustee with secured lenders, KB Home and other homebuilders representing 92 percent of the ownership interests in the project. For details on the settlement to be carried out through the Chapter 11 plan, click here for the June 17 Bloomberg bankruptcy report.

Meritage, based in Scottsdale, Arizona, is a builder-owner that didn’t settle with the trustee and JPMorgan Chase & Co., as agent for secured lenders. Meritage contends among other things that the plan is unfairly discriminatory.

In recent weeks Meritage was represented in the South Edge bankruptcy by the Phoenix office of Squire Sanders & Dempsey LLP, a law firm based in Cleveland.

JPMorgan discovered this month that Squire Sanders is representing the New York-based bank in unrelated matters, thus raising a conflict of interest. When the bank asked Squire Sanders to withdraw from the South Edge case, the firm agreed, the bank said in a court filing.

According to Squire Sanders, Meritage refused to allow the firm to quit. Consequently, the firm filed papers in bankruptcy court this week to settle the dispute over whether it can go ahead and represent one client, Meritage, against another client, JPMorgan.

Meritage said it doesn’t want to join the settlement because it “does not trust the settling builders and has no desire to become a minority member” of the new owner of the project.

KB has 49 percent of the project. Other owners joining in the settlement include Coleman Toll LP (10.5 percent), Pardee Homes Nevada Inc. (4.9 percent), and Beazer Homes USA Inc. (2.6 percent), a KB regulatory filing said.

Bankruptcy began with an involuntary petition filed by secured lenders. The U.S. District Court in April upheld a decision from February by the bankrupt judge to put South Edge in bankruptcy involuntarily and simultaneously appoint a trustee.

The project ultimately was to cost $1.25 billion and would have 8,500 homes. The lenders were to provide $595 million in financing. Other financing includes $102 million in public bonds for improvements.

The Chapter 11 case is In re South Edge LLC, 10-32968, U.S. Bankruptcy Court, District of Nevada (Las Vegas).

Revere Copper Calls Hussey Copper Auction Unfair

Revere Copper Products Inc., a possible competing bidder, is objecting to proposed procedures governing the auction for the business of Hussey Copper Corp. When Hussey filed for Chapter 11 protection on Sept. 27, it already had a deal in the bag for an affiliate of Kataman Metals LLC to purchase the enterprise under a contract with an $84.7 million sticker price.

Revere points to escape clauses in the contract leading to the proffered conclusion that the Kataman contract is “illusory.” As a competing bidder, Revere says the proposed timeline doesn’t afford “sufficient time for parties other than Kataman to conduct due diligence.”

According to Revere, there are inconsistencies and ambiguities in the Kataman contract where the purchase price could be overstated as much as $10 million.

Revere argues that Kataman’s proposed breakup fee is about 7 percent of the cash price, or more than twice what courts in Delaware usually allow. Given how St. Louis-based Kataman isn’t firmly bound to buy the business, Revere opposes a breakup fee.

The hearing to approve sale procedures is set for Oct. 18. According to the sale contract, the buyer is also related to Cobalt Ventures from Louisville, Kentucky.

In business since 1848, family-owned Hussey makes a variety of copper products from plants in Leetsdale, Pennsylvania, and Eminence, Kentucky. Revenue of $454 million in 2008 fell to $382 million in 2010. Last year, the net loss was $3 million, according to court papers.

Debt includes $38.2 million owing on a matured revolving credit. There is also a $2.4 million subordinated loan. In addition, the company owes $29 million to trade suppliers, the papers say.

The Leetsdale plant is near Pittsburgh.

The case is In re Hussey Copper Corp., 11-13010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Donald Trump on Tap to Buy Doral from Paulson, Winthrop

Donald Trump is the purchaser lined up to pay $170 million for the Doral Golf Resort and Spa in Miami, according to Michael Ashner, chief executive of Winthrop Realty Trust. Winthrop along with Paulson & Co. foreclosed the Doral and four other resorts in January that had been owned by Morgan Stanley’s CNL Hotels & Resorts Inc.

Although there will be an auction presenting the opportunity for a higher price, there are no other bidders at this time, Ashner told Bloomberg News in an interview. For Bloomberg coverage, click here.

Yesterday the bankruptcy judge took care of housekeeping matters opening the door to an Oct. 31 hearing where Paulson and Winthrop will have until September 2012 for completion of the reorganization.

The Oct. 31 hearing is when the judge will consider approving interim settlements with Government of Singapore Investment Corp. and MetLife Inc., two mezzanine lenders who had been pushing for a quicker resolution of the reorganization. For summaries of the settlements, click here and here for the Oct. 11 and Sept. 22 Bloomberg bankruptcy reports.

Paulson and Winthrop believe the Trump offer implies a value for all the resorts “significantly” exceeding the $1.5 billion in debt. Paulson and Winthrop foreclosed mezzanine loans on five resorts in January and put them into Chapter 11 in February. The filing forestalled maturity of $1 billion in mortgages and $525 million in mezzanine debt.

After the Doral sale, the remaining resorts would be the Grand Wailea Resort Hotel and Spa in Hawaii; the La Quinta Resort and Club and the PGA West golf course in La Quinta, California; the Arizona Biltmore Resort and Spa in Phoenix; and the Claremont Resort & Spa in Berkeley, California. Including Doral, the resorts have 14 golf courses.

The properties listed assets of $2.2 billion and liabilities of $1.9 billion. New York-based Morgan Stanley purchased the five resorts in 2007 for $4 billion. Revenue in 2010 was $465 million.

The case is In re MSR Resort Golf Course LLC, 11-10372, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Philadelphia Orchestra Pension Fund Promises to Litigate

The union pension fund for musicians from the Philadelphia Orchestra said in a statement yesterday that the orchestra “distorted aspects of its financial” condition. Although the statement didn’t say so directly, a conclusion to draw from the press release is that the pension fund believes the orchestra misstated how much of the $120 million endowment fund represents restricted gifts that can’t be used to pay claims in the bankruptcy that began in April.

The pension plan was reacting to news that the newly negotiated collective bargaining agreement with the musicians’ union allows termination of participation in the existing multiemployer pension plan. The musicians’ pension plan’s claims for withdrawal liability will be as much as $35 million, the statement said.

The pension plan is conducting an investigation into the endowment fund and whether it can be used to pay creditors’ claims. The pension plan said it already received information from one donor indicating that the orchestra “mischaracterized” a $2 million gift.

The pension plan previously said it will end up being the creditor with the largest unsecured claim were the orchestra’s participation in the pension plan terminated. At this stage, the pension fund said there is “no alternative to litigation.” For other Bloomberg coverage, click here.

The orchestra’s Chapter 11 petition in April said assets and debt were both less than $50 million. From the outset, the orchestra said it intends to use Chapter 11 to gain relief from pension obligations, secure a new lease with the Kimmel Center where it performs, and structure new union contract with musicians.

The case is In re The Philadelphia Orchestra Association, 11-13098, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

Dodgers Lose Preliminary Round with Baseball Commissioner

The Los Angeles Dodgers baseball club was directed by the bankruptcy judge at a hearing yesterday to turn over documents left behind when the team removed the monitor put in place by the Commissioner of Major League Baseball before the Chapter 11 filing in June.

After bankruptcy, the team removed the monitor, who left behind documents locked in a cabinet. The judge yesterday granted the judge’s request and told the team to turn over the monitor’s documents. For Bloomberg coverage and a taste of the animosity between the team’s owner and the commissioner, click here.

From the pivotal trial beginning Oct. 31, the bankruptcy judge in Delaware will decide whether the team can sell television broadcasting rights beginning with the 2014 season. The commissioner contends the sale violates league rules because it’s not in the best interests of baseball. The team in return alleges the commissioner isn’t making decisions in good faith.

The team says a media-rights sale will allow confirmation of a full-payment Chapter 11 plan. The league proposes a sale of the entire team and says that a media sale alone will mortgage the club’s future.

If the commissioner succeeds in blocking the media-rights sale, he wants permission from the judge to file a Chapter 11 plan selling the club.

For a discussion of the issues to be decide at the trial to run through Nov. 4, click here for the Oct. 3 Bloomberg bankruptcy report. The issues include whether the bankruptcy court has power to override provisions in the existing telecasting agreement with Fox Entertainment Group Inc.

The Dodgers filed under Chapter 11 in late June when faced with missing payroll because the commissioner refused to approve an agreement to sell Fox an extension on the existing broadcasting license.

The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Southwest Georgia Ethanol Plan Goes Out for Vote

Creditors of Southwest Georgia Ethanol LLC are voting on the bankruptcy reorganization plan covering the 100 million- gallon-a-year plant in Mitchell County, Georgia. The bankruptcy court approved the disclosure statement on Oct. 11 that explains the plan. The confirmation hearing for approval of the plan will take place Dec. 7.

The plan calls for lenders owed $107.6 million to receive $105 million in preferred stock plus 25 percent of the common stock. The disclosure statement estimates the lenders’ recovery at 97.5 percent.

Unsecured creditors with $2.1 million in claims and bondholders owed $8.7 million are to receive proceeds from a litigation trust and are expected to see a recovery of 3 percent. If lower classes accept the plan, the lenders will waive their deficiency claims.

The bankruptcy judge also extended the company’s exclusive right to solicit acceptances of a plan until Nov. 30.

The plant began production in 2008 and sought Chapter 11 protection in February. The petition listed assets of $164.7 million and debt totaling $134.1 million. In addition to bank debt, liabilities initially included $12.6 million owing on two subordinated notes.

Revenue was $168.9 million for the fiscal year ended in September 2010, resulting in a $2.2 million net loss. The company is owned by First United Ethanol LLC, which didn’t file bankruptcy.

The case is In re Southwest Georgia Ethanol LLC, 11-10145, U.S. Bankruptcy Court, Middle District of Georgia (Albany).

Broadstripe Officially Has Oct. 26 Disclosure Hearing

Broadstripe LLC, a broadband cable operator now based in Dallas, filed for bankruptcy reorganization in January 2009 and filed a proposed plan within two weeks. The plan lay fallow until it was modified in September.

The bankruptcy court set a hearing on Oct. 26 for approval of the disclosure statement explaining the plan. As contemplated in the plan, there will be an auction on Oct. 20 to determine if a $95 million bid from a group of buyers is the best price to finance the liquidating plan.

Broadstripe filed an operating report showing a $1.5 million net loss in August on revenue of $7.6 million. Expenses contributing to the loss included depreciation of $1.3 million and $1.9 million in interest expense to senior lenders.

The sale will be completed as part of the process of implementing a confirmed plan.

One of the buyers is WaveDivision Holdings LLC. The first- lien secured lenders have consented to the sale even though it pays less than half their debt and financing for the Chapter 11 case, a court filing says.

The bankruptcy court in December approved a settlement with first- and second-lien lenders. The settlement is to be implemented in the plan. For details on the settlement and what it means for unsecured creditors, click here for the Dec. 30 Bloomberg bankruptcy report.

The first-lien debt is $181 million while second-lien debt now owed to Highland Capital Management LP is $91.9 million. There is another $10.3 million of second-lien debt owed to other creditors. Highland is to receive nothing on its portion of the second-lien debt. General unsecured claims amount to about $54.4 million.

Should Highland chose, the settlement allows it to bid its secured debt at auction.

At the beginning of the reorganization in January 2009, Broadstripe had 93,000 customers in Maryland, Michigan, Washington State, and Oregon. It was created through four acquisitions in 1998 and 1999 and filed for Chapter 11 reorganization in January 2009.

The case is In re Broadstripe LLC, 09-10006, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Watch List

Jefferson County Workout Still Facing Local Opposition

The ability of the Alabama state legislature to approve a bill implementing a workout of $3.1 billion in Jefferson County sewer debt remains in doubt given continuing opposition from some members of the legislative delegation from the county. For Bloomberg coverage, click here.

County commissioners voted 4-1 on Sept. 16 to approve a debt restructuring with $1.1 billion in concessions from holders of the defaulted sewer bonds. The agreement requires creation of a sewer authority to take ownership of the sewer system and raise rates, along with the state’s moral obligation to stand behind the restructured debt.

Advance Sheets

‘No Harm, No Foul’ Acceptable in Basketball, not Bankruptcy

On an arcane question of fraudulent transfer law that divides federal appeals courts, the Bankruptcy Appellate Panel for the 8th Circuit came down on the side of circuit courts in Richmond and San Francisco and parted company with the appeals court in Cincinnati.

The case involved what’s known as the “no harm, no foul” theory that some courts accept while others don’t. It arises when an individual makes a fraudulent transfer of property that would be exempt if it hadn’t been transferred before bankruptcy.

The Appellate Panel in St. Louis conceded that an exempt homestead can’t be fraudulently transferred under Minnesota law. The panel’s opinion by U.S. Bankruptcy Judge Arthur B. Federman from Kansas City said that the same rule doesn’t apply under the federal fraudulent transfer law in Section 548 of the U.S. Bankruptcy Code.

Taking sides with the majority of the Courts of Appeal to rule on the question, Federman relied in part on Section 522(g) of the code, which says that an individual bankrupt can’t claim an exemption in recovered property that was fraudulently transferred if the transfer was voluntary.

Since the bankrupt had voluntarily transferred the home, he sent the case back to the bankruptcy court to determine if all required elements of a fraudulent transfer had been met. On remand, the bankruptcy judge was directed to decide if the bankrupt had received equivalent value for the transfer and was insolvent at the time.

The case is Sullivan v. Welsh (In re Lumbar), 11-6018, U.S. Bankruptcy Appellate Panel for the 8th Circuit (St. Louis).

--With assistance from Nadja Brandt in Los Angeles; Margaret Newkirk in Atlanta; Steven Church, Dawn McCarty and Michael Bathon in Wilmington, Delaware. Editors: Glenn Holdcraft, Mary Romano

To contact the reporter on this story: Bill Rochelle in New York at

To contact the editor responsible for this story: John Pickering at

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