American Bankruptcy Institute Update

December 1 , 2005

In This Issue



Asbestos Bill Will Have Its Day, But Chances of Passing Are Slim

After more than two years of wrangling, the Senate is set to vote next month on a major $140 billion bill to resolve the asbestos litigation crisis. But insiders say the bill's chances are iffy at best, Investors Business Daily reported yesterday.

Senate Majority Leader Bill Frist (R-Tenn.) has pledged that a vote on the Fairness in Asbestos Injury Resolution Act will be one of the first items of business when the Senate reconvenes in January. "Of all of the items which could provide an economic stimulus to the U.S. economy, I think asbestos reform would be the most important," Sen. Arlen Specter (R-Pa..), co-author of the bill, said last month. But he conceded, "It is going to be a battle." Read more.


Two Congressmen Call for Inquiry on U.S. Pension Management

Two members of the House of Representatives have asked the research arm of Congress to investigate whether the government agencies that enforce pension law have failed to police a crucial part of the pension business: the consultants and money managers who help decide how money is invested, the New York Times reported today. The request by Representatives George Miller (D-Calif.) and Edward Markey (D-Mass.) yesterday underscores a flaw in the pension law.
The law divides the authority for pension plans among three federal agencies, which look at such issues as whether companies are putting enough money into pension funds and whether they are keeping employees informed about the plans. But the money managers are regulated by a fourth agency, the Securities and Exchange Commission, which has no authority over pension law. Read more.

Pension Funds Play Catch-Up with High Rise of Real Estate

After several years of robust performance and enviable returns, public and private pension funds are hitching their bandwagon to the bull-run real estate market, Employee Benefit News said in its November issue. Time will tell if their rearview-mirror investment strategies are too late.

"The pension fund universe was underfunded in recent years," says Gary Koster, leader of investment funds services at Ernst & Young and a real estate market watcher. "According to classic portfolio theory, real estate should be part of any investor's asset allocation strategy. Real estate should be about 6 percent to 7 percent of a portfolio. For pension funds as a whole, it's at about 3.5." Read the full analysis.

U.S. Pension Funds Need Bigger Contributions-Study

With stock market returns expected to dwindle in the years ahead, U.S. companies will have to step up contributions to their pension plans to fully fund them, the asset management arm of JPMorgan Chase & Co. said on Tuesday. The New York-based asset manager said that it expects energy prices to fuel inflation and sees slimmer profit margins as real earnings growth should average about 3 percent over the next decade or so, the Associated Press reported.

Because the average pension plan is about 84 percent funded, it will need annual returns of about 11 percent to become fully funded over the next seven years, JPMorgan said in a Web presentation. Read more.


Calpine Corp. may be close to bankruptcy or debt restructuring, but it may not be as bad as it seems for some of the company's bondholders, the Associated Press reported yesterday. Although Calpine is saddled with a massive debt load, rapidly depleting cash, pending legal problems, and high costs to run its power plants, the San Jose, Calif.-based company does have hard assets—power plants. Still, almost a third of bondholders could lose everything.

After Calpine's board of directors removed CEO and founder Peter Cartwright and CFO Robert Kelly on Tuesday, market participants have focused on the likelihood that the troubled company will seek chapter 11 bankruptcy protection. "After yesterday's action, we think the possibility of a filing has moved to a probability," said Dot Matthews, analyst at independent credit research firm CreditSights.

No matter what bondholders' recoveries, any restructuring is likely to be a boon to lawyers everywhere, quipped analysts. With so many parties and interest groups latched on to Calpine's debt, ad-hoc groups and committees are already forming to fight for their best possible returns, said market participants. Read the full analysis.


ABI World is now home to a blog on the latest case law interpreting the bankruptcy amendments. Created by David L. Rosendorf, ABI member and a shareholder at Miami’s Kozyak Tropin & Throckmorton, P.A., the ABI BAPCPA Blog provides regular commentary, analysis and an opportunity for you to post comments. Recent posts have covered the various homestead opinions, credit counseling, revised automatic stay provisions and the interim rules. Check out the blog here, and feel free to weigh in.


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The print edition of the 2005-06 ABI Annual Membership Directory is now available. This 1,000-page edition lists more than 11,000 insolvency professionals. An online version of the Directory is available at the ABI World Web site, which is continually updated. All members received a complimentary CD-ROM version of the Directory with their November ABI Journal.

The $55 cost of the printed version includes shipping and handling. Visit the ABI bookstore to order.

In Time for the New Law: The Consumer Bankruptcy Manual (Second Edition)

Written by ABI Consumer Bankruptcy Committee Co-chair Thomas Yerbich, the Consumer Bankruptcy: Fundamentals of Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code (Second Edition) provides both new and experienced practitioners with the fundamentals of consumer bankruptcy proceedings under chapter 7 or 13 of the Code. The second edition covers changes made by the new law. Topics covered include how the two statutory schemes work, their differences, the duties of the debtor in the bankruptcy process, the rights and procedures applicable to creditors, dischargeability/discharge, the automatic stay, commonly asked questions and much more. Softbound, 170 pages.

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