Post-bankruptcy, GTAT's losses pile up

Category: Bankruptcy Law
Published: Friday, 20 February 2015
Written by Admin

GT Advanced Technologies Inc. lost another $221 million in December, bringing its total reported loss to more than $300 million since the Merrimack company filed for bankruptcy at the beginning of October, 2014.

The latest loss came despite of, and partially because of, the Merrimack-based companys settlement with Apple Inc. to sell off GTATs sapphire furnaces in Arizona to pay off a $439 million debt owed to the corporate giant.

GTAT had planned to use the furnaces forge sapphire to use for screens for Apple mobile devices, but the deal fell through, resulting in the second-largest bankruptcy in the states history.

Much of the losses have yet to be realized. Roughly $100 million of Decembers loss was on paper only, reflecting the massive Apple-related write-off.

The value of the equipment, for instance, now has to be considered at its liquidation value. And there are the actual administrative costs of bankruptcy, including about $2.9 million in professional fees, much of which is to be paid later. The companys cash seems to be holding up, however, with some $87.7 million on hand, compared to $94.9 million at the end of November.

But there were apparently operational losses as well.

The company recorded only $2.5 million in revenue, with $151.5 million was recorded as cost of revenue. That cost did not include $2.7 million spent on Ramp;D, $1.8 million on marketing and $4.5 million on administration, including $258,000 to top executives. CEO Tom Gutierrez, for instance, earned $67,250 in December.

GTAT had argued that its executives were not being compensated enough for them to stick around, so the company asked the court for approval of $3.7 million in incentive bonuses tied to future performance, but federal Bankruptcy Judge Henry Boroff nixed that idea for good on Feb. 11, though he seemed to have left the way open for an alternate plan.

Boroff did grant a motion to keep the recipients and the amounts of the bonus secret.

Meanwhile, T. Richard Faloh, a Florida investor, asked the court for Gutierrez to be dismissed for gross mismanagement and replaced by a bankruptcy trustee.

He cited the CEOs actions before bankruptcy, primarily his reassurances to investors about the companys deal with Apple when it was falling apart. But Boroff struck down that motion.

Thirteen shareholders suits have been filed in US District Court since GTATs bankruptcy, and on Feb. 4 the court consolidated them all into Levy v. Gutierrez, naming Mark L. Mallory of Concord as the lead attorney.

Protected by bankruptcy law, GTAT is not named in the suit. Instead, Gutierrez, other executives and board members and some companies that could be held liable, including Morgan Stanley amp; Co., who are the defendants.

Romania's personal bankruptcy law to bring 25000 court cases

Category: Bankruptcy Law
Published: Friday, 20 February 2015
Written by Admin

The personal bankruptcy law could trigger up to 25,000 court cases.

It would not result in million of cases, as previously rumored, say insolvency and foreclosure experts, reports local Mediafax.

They base their estimations on the relatively small number of foreclosures of real estate guarantees owned by individuals.These amount to about 50,000 cases, half of which have already entered payment procedures in stages.

The total number of foreclosures amounts to 850,000 files.

Nobody wants this law, except for the individuals and the National Authority for Consumer Protection, but its time has come, said Arin Stanescu, president of the Romanian National Association of Insolvency Practitioners.

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Judge in Stockton bankruptcy upholds retiree benefit cuts

Category: Bankruptcy Law
Published: Thursday, 19 February 2015
Written by Admin
Judge in Stockton bankruptcy upholds retiree benefit cuts By Adam Mclean
12 February 2015

On February 4th, Judge Christopher Klein of the United States Bankruptcy Court signed a confirmation order allowing the city of Stockton, California to move forward with its bankruptcy plan of adjustment.

The order will most likely enable the city of Stockton to exit bankruptcy after an automatic two-week stay. According to officials, the city is expected to exit from bankruptcy later this month.

Judge Klein's 54-page opinion in the ruling claims that pension obligations under state law can be unilaterally overwritten during the course of bankruptcy proceedings.

Using language that does not even attempt to conceal his enthusiasm for slashing the retirement benefits of elderly workers, Klein declares, "CalPERS [the state's public employee pension system] has bullied its way about this case with an iron fist." The fund, Klein wrote, "turns out to have a glass jaw."

The move to slash the pension benefits of Stockton public employees is part of a nationwide assault on public employee pensions and benefits. The precedent for these moves was set by the Detroit bankruptcy, in which workers' pensions were cut by 4.5 percent, and cost of living adjustments were eliminated.

CalPERS had made a claim of $1.6 billion against the city for unmet pension obligations. The fund had hoped to recoup the $1.6 billion through a lien against city assets.

Klein instead ruled that while employee pensions are nominally honored under state law, the lien itself could be set aside under federal bankruptcy law, effectively negating the very mechanism which would ensure the disbursement to retirees of their constitutionally guaranteed pension payments. Furthermore, according to the judge, state municipalities should be allowed to exit the pension system entirely.

As part of the city's bankruptcy plan, all retiree medical benefits-part of a program costing $544 million-have been eliminated. To make up for this devastating blow to retirees, a paltry, one-time payout of $5.1 million has been made to those affected. Most of these retirees are not eligible for social security benefits and live on near poverty level incomes from CalPERS.

Under the plan of adjustment, remaining pension benefits for new city employees will be lowered while individual employee contributions will rise. In addition to cutting pension benefits for all new hires to the bone, the plan will inevitably be used to pit "greedy" older workers against younger new hires.

The ruling should be taken as a grave warning to the working class. The initiation of municipal bankruptcy is now a tool that the financial elite can utilize to eliminate pensions and healthcare for retirees entirely.

Klein also wrote in his opinion, "As a matter of law, the City's pension administration contract with CalPERS, as well as the City-sponsored pensions themselves, may be adjusted as part of a chapter 9 plan." He continued, "It is doubtful that CalPERS even has standing to defend the City pensions from modification. This decision determines that the obstacles interposed by CalPERS are not effective in bankruptcy."

Furthermore, the legal reasoning behind Klein's ruling is that in bankruptcy proceedings states effectively act as "gatekeepers." That is, states initiate bankruptcy proceedings by determining whether or not bankruptcy is necessary, but once they have, federal Bankruptcy Code directs proceedings. Since pensions often derive their hardiness from their enshrinement in state constitutions, by making bankruptcy a federal issue, state constitutions are effectively bypassed. This opinion may well be used as a starting point for future attacks on pensions across the country.

Bankruptcy courts are increasingly becoming the method of choice by the ruling class to circumvent democracy and impose new and greater attacks on the working class. In Detroit this took the form of an unelected emergency manager, deep cuts in pensions, the sell-off and privatization of public services and invaluable art, and even the cutting off of access by a large section of the population to water.

Franklin Templeton, an investment firm that is calling for even sharper cuts to workers' pensions, is being represented by Jones Day, the same firm that oversaw the dubious and semi-legal proceedings in the Detroit bankruptcy.

Puerto Rico bankruptcy bill to get House hearing: sources

Category: Bankruptcy Law
Published: Thursday, 19 February 2015
Written by Admin