BofA to Test New Account Structure, Fees

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January 6, 2011

Chapter 11 Sale Offers a New Way of Dealing with Bank Failures

The recent sale of a Washington state bank out of chapter 11 created a new tool that potentially could rescue hundreds of similarly troubled institutions and save the Federal Deposit Insurance Corp. billions of dollars, the Wall Street Journal reported today. An investment vehicle backed by a Goldman Sachs Group Inc. fund and Oaktree Capital Management LP late last month purchased AmericanWest Bank, of Spokane, Wash., out of bankruptcy from its holding company, without the need for regulators to seize the bank and shore up its deposits. The deal could open up options to save other banks teetering on the edge of failure, particularly those whose holding companies are saddled with so-called trust-preferred securities, and make it easier for hungry investors to acquire undercapitalized banks. Read more. (Subscription required.)



Fulton Homes Fights for Confirmation



Bankrupt Fulton Homes Corp. is still battling its secured lender over confirmation of its plan, the Deal Pipeline reported yesterday. Bank of America NA has asked the court to vacate a previous order approving the debtor's disclosure statement, saying that modifications to the plan have made it unconfirmable. Bankruptcy Judge George B. Nielsen Jr. first heard the bank's motion on Nov. 8, but continued it until Nov. 17. At the second hearing, Nielsen scheduled evidentiary hearings on the bank's motion and the debtor's fourth amended plan for yesterday, and Jan. 19. Debtor counsel Craig D. Hansen of Squire, Sanders & Dempsey LLP said the matter was unresolved after yesterday's hearing. Read more.(Subscription required.)



U.S. Trustee Criticizes Trico Marine Proposal



U.S. Trustee Roberta A. DeAngelis joined a chorus of protest over a Trico Marine Services Inc. proposal to hand over valuable operating units to a leading group of lenders in a pact that the company says is vital to its restructuring, Dow Jones Daily Bankruptcy Review reported today. Trico's proposed deal with holders of $400 million worth of high-yield notes has already drawn fire from the unsecured creditors' committee in its chapter 11 case, as well as from second-lien noteholders and bondholder Arrowgrass Capital Partners LLP. Couched as a settlement of intercompany claims, the proposal is in fact the equivalent of a chapter 11 restructuring plan. However, it is designed to avoid the protections of the bankruptcy process, including the need to court creditors for their votes, DeAngelis, said in a court filing.



Loehmann's to Put Bankruptcy Plan to Creditor Vote



Retailer Loehmann's received bankruptcy court approval to put its restructuring plan to a vote of creditors, a key step to ending the department store chain's chapter 11, Reuters reported yesterday. Creditors of the company will have until Feb. 2 to vote on the plan, the company said yesterday. As part of the plan, the company's current owner, Dubai World unit Istithmar, and Whippoorwill Associates Inc will backstop a rights offering that will invest $25 million in the company when it exits chapter 11. A bankruptcy court hearing is scheduled for Feb. 7 to confirm the plan. Read more.



Delta, Bankrupt Mesa Air settle Claims



Delta Air Lines Inc. has agreed to waive most of its claims against Mesa Air Group Inc. to resolve litigation with the regional carrier, which is reorganizing in bankruptcy court, Reuters reported yesterday. In a Tuesday court filing, Mesa said that Delta will retain about $7.3 million of general unsecured claims and waive other claims. The waiver includes claims that Delta said that it had prior to Mesa's chapter 11 filing one year ago, the filing said. Delta had filed claims for at least $67.8 million against Mesa and its Freedom Airlines unit. Read more.



IRS Watchdog Calls for Tax Code Overhaul



The various calls to revamp the nation's highly complex tax code were joined by a significant new voice yesterday - the IRS's own taxpayer advocate, who urged that the system be rewritten for the first time in a generation, the New York Times reported today. Nina E. Olson, the national tax advocate who acts as an ombudsman for the IRS, issued a sweeping criticism of federal tax policy in her annual report to Congress. Olson found that the volume of the tax code had nearly tripled in size during the last decade - to 3.8 million words in February 2010 from 1.4 million in 2001. She estimated that Americans spent 6.1 billion hours preparing their returns each year - the equivalent of 3 million employees working full time. By comparison, the federal payroll has 2.1 million full-time workers. Read more.



Blockbuster Landlords Take Issue with Store Closing Procedures



Several Blockbuster Inc. landlords are objecting to what they call the video retailer's attempt to get a bankruptcy court to approve "unilateral and virtually unrestricted" power to close its stores, regardless of lease terms, Dow Jones Daily Bankruptcy Review reported today. Blockbuster, which said in a Dec. 17 court filing that it planned on closing and rejecting the leases of 72 stores by the end of 2010 plus an additional 110 during the first quarter of 2011, is getting resistance from the owners of the buildings for several reasons. Publix Super Markets Inc., which owns five shopping centers where Blockbuster leases space, said that it does not wholly object to Blockbuster closing its stores, only certain aspects of the procedures Blockbuster is asking a court to approve. "The order allows the debtors to conduct store closing sales at any location and any time," lawyers for Publix say in a filing. "This blanket authority is highly disruptive and burdensome for all landlords who will not know if and when the debtors may decide to conduct a store closing sale at their location." Publix wants Blockbuster to give more advanced notice, and also to limit the advertising Blockbuster can conduct about its store closing sales.



BofA to Test New Account Structure, Fees



Bank of America Corp. told employees yesterday how it intends to restructure the way it charges customers as the bank will soon begin testing fees of roughly $6 a month on its most basic account, the Wall Street Journal reported today. Customers will have no options to waive that monthly fee. Accounts with more features can have monthly fees ranging from $8.95 to $25. They can be waived if customers maintain certain balances, use credit cards, do their banking online, or have a mortgage with the bank. The nation's largest bank by assets said it will divide customers into four categories structured by account activity and number of products, according to an internal memo. The four accounts are "Premium," "Enhanced," "eBanking" and "Essentials."

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