Thursday, July 14, 2016

GM Ignition Switch Plaintiffs Litigation: Not So Free and Clear

In an opinion issued yesterday, the Second Circuit provides a scintillating account of the astonishing events leading up to GM’s flop into bankruptcy in 2009 and its “surgical” sec. 363 sale of assets to New GM  “free and clear” of liabilities of Old GM.   The 2d Cir. decides whether plaintiffs who learned of failed GM ignition switches in 2014 could sue New GM under a successor liability theory, or were stuck with just Old GM as a defendant because of the 2009 section 363 sale.  I won't give away the exciting conclusion.  The opinion is here

Erin Andrews's Stalker Gets No Forgiveness in Bankruptcy

Erin Andrews’s claim against the stalker guy who videotaped her through a hotel door peephole got a $55 million judgment jointly against the stalker (Barrett) and the hotel.  Barrett filed for bankruptcy to discharge his debt to her (51% of the $55 million, the hotel was liable for the balance). Erin objected to discharge of her claim on grounds that under section 523(a)(6) it was for “willful and malicious injury.”  (Section 526(a) is  my personal favorite exception to discharge, however  sec. 523(a)(4) “fraud or defalcation while acting in a fiduciary capacity” is a close second).  Anyhoo—the bankruptcy court agreed with Ms. Andrews.  Creeper Barrett gets no forgiveness in bankruptcy.

How Are Americans Really Doing Financially?

FINRA Investor Education Foundation released the results of a study on the financial status of people living in the United States. View the report titled "Financial Capability in the United States 2016" to see findings nationally and by state.  The percentage of survey responders who report no difficulty covering their monthly bills increased from 36% in 2009 to 48% in 2015.  Those who report having emergency funds on hand increased from 35% in 2009 to 46%.  The percentage of responders who fall into the "high" financial literacy category (could answer 4 of 5 basic financial questions correctly) dropped from 42% in 2009 to 37% in 2015.   (Test your financial literacy skills by trying to answer these three questions correctly (no peeking at the answers).

Education makes a difference in financial resilience.  Almost half  of the responders with a high school education or less say they could not raise $2,000 in 30 days in case of an emergency.  Among responders with a college degree, the percentage was 18%.

Tuesday, July 12, 2016

Harrisburg's Parking Bonds Drop to Junk

In more bad news for Harrisburg, the  bonds issued by the Pennsylvania Economic Development Financing Authority (PEDFA) to fund parking operations in Harrisburg dropped to the top rank  of speculative grade,  BB+ , per S&P.  The parking system failed to make the revenue the bonds required for the past two years and is likely to fall short this year.  The parking bonds were part of a fiscal recovery plan for Harrisburg following a near insolvency crisis from its failed incinerator project.  Under a court approved plan, PEDFA took over Harrisburg's parking system under a long term lease.  In 2013, it issued about $285 million in bonds backed by parking revenue and used the cash to help pay off creditors.

Tuesday, July 5, 2016

Twinkies and Ho Ho's Find a New Owner

The current owner of Hostess Brands will announce later today an agreement to sell control of the company to an affiliate of the Gores Group for about $725 million.  Four years ago Hostess's former parent filed for bankruptcy, but Twinkies and Ho Ho's survived. The snack cake business got snapped up by corporate turnaround firms, who did just that by arranging a sale to Gores Group.

These iconic treats have an unlimited shelf life, both in the market and in kids' lunch bags.

Amazon is Crushing Mall Stores

Retail stores are closing at the highest rate since the 2010, and industry observers think the worst is yet to come.  Department store retailers and national chains that sell clothing got hit the worst.  Amazon, with its easy online interface and next day delivery, is growing.  It's easy to comparison shop online so department stores can't raise prices to cover overhead as sales volume drops. So  stores close.

In 2015, the states that were hid hardest by retail store closings were Arizona, California, Florida, Pennsylvania and Ohio.  

Friday, July 1, 2016

2d Circuit Rejects Class Action Settlement in Case against Visa and Mastercard

Here is the 2d Circuit opinion dismissing the $5 billion plus settlement of class action litigation by retailers against Visa and Mastercard over swipe fee policies.  The problem with the settlement was that some retailers in the class of plaintiffs were not adequately represented.  Judge Leval wrote:  “This is not a settlement, it is a confiscation.”

Sweet Opportunity to Grab Hershey

The Hershey Co. (NYSE-HSY) appears to be too sweet to resist for Mondolez (NASDAQ-MDLZ), owner of Oreo, Nabisco and Cadbury brands.  On Thursday, Mondolez sent a tasty offer to Hershey that valued the company at a 10% premium over its market price.  Hershey's board turned the offer down with a thump, noting in the press release that it "provided no basis for further discussion."  But Hershey's stock price spiked above the per share offer price, which may indicate that investors think sweeter bids are on the way, either from Mondolez, or another snack food suitor.