A magistrate judge has ordered all documents obtained during National Century Financial Enterprises Inc.’s bankruptcy proceedings limited to “attorney’s eyes only” in multidistrict litigation involving a scandal dubbed the Enron of health care, Bankruptcy Law360 reported yesterday. The interim order, issued Wednesday by U.S. Magistrate Judge Mark R. Abel, follows motions filed this week by JPMorgan Chase & Co., Bank One NA and former NCFE executives Lance Poulson and Donald Ayers, seeking to keep the financial information from becoming public. Abel gave counsel until July 9 to send a proposed final protective order, for which a telephone conference will be held a day later. The order would clarify what can be designated as confidential. The litigation includes several suits naming NCFE’s former trustees JPMorgan and Bank One, as well its affiliates, for their fiduciary roles with the company, which collapsed after investors discovered it had hidden cash and collateral shortfalls.

Three hedge funds that previously reneged on a $250 million rights offering for bankrupt auto parts maker Tower Automotive Inc. have demanded $2 million in unreimbursed fees and expenses, Bankruptcy Law360 reported yesterday. Strategic Value Partners LLC, Wayzata Investment Partners LLC and Stark Investments LP asked the U.S. Bankruptcy Court in Manhattan on Monday to require Tower to pay the costs they incurred conducting due diligence for the underwriting. According to the motion, Tower Chief Financial Officer James Mallek and other executives repeatedly assured the hedge funds that they would be reimbursed for all expenses they incurred during the due diligence process. A hearing on the matter has been scheduled for July 11.

See Also:  Bankruptcy Lawyers New York

A rival of model-train maker Lionel LLC wants a judge to put the brakes on Lionel’s control of its bankruptcy case so the competitor can file its own reorganization plan, the Associated Press reported yesterday. Mike’s Train House says Lionel is using its chapter 11 control as a “bludgeon” to force Mike’s into settling a long-running dispute over stolen trade secrets, according to court documents filed Monday. Mike’s, of Columbia, Md., is asking a bankruptcy judge for permission to file an alternative plan for Lionel to resolve the dispute and pull out of bankruptcy. Lionel already filed its reorganization plan in May, but it hasn’t sought approval of the plan from creditors because of missing financial information. The plan allows for claims filed by Mike’s to be paid in full, as long as exit financing is found. The claims stem from the damages ensued during the trade-secrets dispute.
See Also:  Chapter 7 Bankruptcy

Enron Corp.’s creditors have prevailed in a discovery battle with Goldman Sachs & Co. after the judge granted them a motion to compel Goldman Sachs to turn over documents related to over $1 billion worth of transfers that Enron made under the name “Project Truman,” Bankruptcy Law360 reported yesterday. Project Truman was a financial advisory project undertaken by Enron and Goldman Sachs between August and December 2001. The Truman Project materials were being sought to determine if and how the advisory dealings between Goldman Sachs and Enron might have had an impact on the commercial paper transactions at issue in the suit. Between Oct. 26 and November 6, 2001, Enron transferred over $1 billion to Goldman Sachs and other defendants, according to court documents. The suit names a slew of defendants, including Goldman Sachs, J.P. Morgan Securities Inc., Merrill Lynch Investment Managers L.P. and Citibank NA.

Seven years after winning a women’s record five Olympic track and field medals and snagging multimillion-dollar endorsement deals, Marion Jones is facing bankruptcy, the Associated Press reported yesterday. Last year a bank foreclosed on her $2.5-million mansion nearChapel Hill, N.C., and she was also forced to sell two other properties, including her mother’s house, to raise money.  Legal bills have plagued Jones since 2003, when suspicions of drug use emerged and she was linked to the Bay Area Laboratory Co-Operative (BALCO) after a federal raid. Jones retained lawyers for her BALCO grand jury testimony, for negotiations with the U.S. Anti-Doping Agency in her fight to avoid being banned from competition, for a defamation lawsuit she filed against BALCO founder Victor Conte, who accused her of taking performance-enhancing drugs, and for taking on Pfaff in her breach-of-contract suit.

Several lenders, including JP Morgan Chase, Goldman Sachs and Bank of America, reached deals yesterday with Bear Stearns that forestalled a need to sell the mortgage securities in the open market, the New York Times reported today. It appeared that some lenders pulled back over concerns about the effect that a large liquidation would have on bond prices and investor confidence. While the securities involved represent a fraction of the market, a liquidation could have forced a bigger sell-off while setting a lower price. One lender, Merrill Lynch & Company, moved ahead with plans to auction $850 million in collateral it had seized from the Bear funds and Deutsche Bank was said to be shopping $600 million in assets. In the last week, escalating problems at the Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund and a related fund have jarred investors into confronting systemic risks in the once booming market for bonds that are backed by subprime mortgages. Last year, more than $483 billion of such bonds were issued, up 5 percent from 2005.

An effort to save a troubled hedge fund at Bear Stearns hit a major hurdle yesterday when Merrill Lynch signaled that it would move forward with plans to auction $850 million in subprime securities that had been held as collateral, the New York Times reported yesterday. While negotiations are continuing and the auction could be averted, the move signaled that some lenders in the High Grade Structured Credit Strategies Enhanced Leverage fund are not happy with some terms of the Bear Stearns bailout plan. Executives at the bank have been scrambling to shore up the fund since three lenders — Merrill, Citigroup and JPMorgan Chase — asked the bank to put up more capital. The executives had offered to inject $1.5 billion in new loans into the fund, and a consortium of other banks, including Citigroup and Barclays, would infuse $500 million in new capital. In return, the Wall Street banks and brokerage firms that had provided nearly $6 billion to the hedge fund would have had their own exposure reduced but would have had to agree not to demand more cash or collateral from the fund for a year. Started just last year, the Bear Stearns hedge fund was hit by a combination of bad bets on bonds backed by subprime mortgages as well as high levels of leverage. Investors originally put $600 million into the fund and another $6 billion was borrowed from the Wall Street banks.

See Also: Chapter 7 Bankruptcy

Taiwanese legislators said that they passed the country’s first bankruptcy law for individuals, Reuters reported today. The legislature finished the final reading on the Consumer Debt Clearance Act, which would require banks to forgive bad consumer debts by individuals, lawmakers said. Many lenders in Taiwan, Asia’s fourth largest market, posted big losses in 2006 after writing off a combined T$150 billion ($4.5 billion) non-performing loans, most of which were for credit cards and cash cards, industry sources said. Taiwan was hit by a credit card crisis last year as hundreds of thousands of Taiwan’s credit card holders racked up debt, undermining consumer sentiment and stunting economic growth.

Amtrol Inc. announced that it has emerged from its chapter 11 reorganization thanks to the closing of $128 million in exit financing, the Providence (R.I.) Journal reported yesterday.  The closing follows the May 24 confirmation by Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware, of the plan proposed by the company and its unsecured creditors. The plan received approval from 100 percent of creditors who held Amtrol senior subordinated notes. More than 98 percent of those creditors, led by Newport Global Advisors, have converted their notes to equity in the company.  The exit financing – arranged by Merrill Lynch and Credit Suisse – was used to repay the debtor-in-possession financing that had allowed Amtrol to operate normally since it filed for chapter 11 protection in December, to pay off the less than 2 percent of noteholders who elected to receive cash instead of equity, and cover the costs of the bankruptcy filing.

General Motors Corp. CEO Rick Wagoner touted progress in the auto maker’s turnaround effort at the company’s annual meeting, but he continued to face criticism from shareholder activists over the performance of management and directors, the Wall Street Journal reported. A group of shareholders spoke out on issues facing the company, including the ability of the board to oversee the creation of a sustainable business model after two years of deep losses and the company’s effectiveness in addressing accounting weaknesses. Wagoner said that GM is looking for ways to continue cutting costs while boosting revenue. He said the company will hit its $9 billion cost-cut target this year, but will continue to seek additional cuts in the future as it looks to reduce the ratio of structural costs as a percentage of global revenue to 25 percent in 2010 from about 30 percent.