A reported by the Government Accountability Office (GAO) found that pension plans may have lower investment gains when they use consultants who have undisclosed conflicts of interest, Dow Jones reported yesterday. The GAO study found that pension plans using consultants considered by federal regulators to have undisclosed conflicts had annual investment returns 1.3 percentage points lower than those whose consultants did not have significant conflicts. The GAO said that its findings were “consistent with the views of the experts we interviewed concerning the adverse effect that complex service-provider-related conflicts of interest can have on pension plans.” It cautioned that its findings, “while suggestive, should not be considered as proof of causality between consultants and lower rates of return.”

As Collins & Aikman Corp. continues to wind down operations, the bankrupt auto supplier has asked a judge to endorse an agreement with some of its big-name customers, as well as JP Morgan Chase, that would allow the company to continue producing crucial parts into July, Bankruptcy Law360 reported yesterday. Collins & Aikman asked U.S. Bankruptcy Judge Steven Rhodes yesterday to sign off on an agreement with Daimler Chrysler, General Motors Corp. and JP Morgan Chase, the agent of the lenders, that was tentatively reached last December. Under chapter 11 protection since 2005, Collins & Aikman had initially planned to reorganize. The company soon realized, however, that its plans weren’t feasible, and opted instead to liquidate. While the supplier is currently trying to sell off its assets, the customer group and Collins & Aikman agreed that they would work out a deal if both sides felt the need for continued parts production after June 30.
See Also:  Bankruptcy Lawyers New York

Bear Stearns Asset Management CEO Richard Marin is taking a stronger role in managing its two troubled hedge funds and tapped mortgage unit head Thomas Marano to save one of the funds, Reuters reported today. Marin appointed Marano last week to help with the funds managed by Ralph R. Cioffi, who retains his current role as portfolio manager for both funds, said one source. Bear Stearns Cos. Inc. said yesterday it does not plan to bail out the High-Grade Structured Credit Strategies Enhanced Leverage Fund, the second of two struggling hedge funds. Instead it will provide $1.6 billion of financing to save its High-Grade Structured Credit Strategies Fund. Days earlier the bank had said it would provide up to $3.2 billion in financing.

See Also:  Chapter 7 Bankruptcy

Verizon Wireless and Amp’d Mobile Inc. have reached a settlement that will allow Amp’d to receive the financial backing that will see it through chapter 11 proceedings, Bankruptcy Law360 reported yesterday. Under the settlement, Verizon Wireless will rescind the network termination letter it sent to Amp’d on June 1, and Amp’d and its lender, Kings Road Investments Ltd., will drop their pending law suits against Verizon Wireless. Amp’s and Kings Road were seeking a court order barring Verizon Wireless from kicking Amp’d off its network. The proposed settlement will allow Amp’d to provide uninterrupted mobile network access to its customers while under bankruptcy protection. Additionally, Amp’d will also be able to gain funding from lenders to help it maintain its business operations during the chapter 11 proceedings.

U.S. Energy Systems Inc. said that its board suspended the chief executive of its British subsidiary, and warned that the energy services provider faces potential defaults that may force it into bankruptcy, the Associated Press reported today. The company said its board plans to retain financial advisers to evaluate a potential refinancing, restructuring and other strategic alternatives. On Sunday, the board suspended UK Energy Systems CEO Grant Emms, with pay, pending an investigation by the audit committee. The subsidiary’s program director, Joseph Reynolds, will serve as interim CEO. The company did not specify why Emms was suspended. U.S. Energy Systems also confirmed it has insufficient funds for the planned expansion of its British gas assets. The company said the capital expenditure requirements are expected to exceed the $36 million budget by more than 100 percent.

Lou Pearlman, the impresario who formed the Backstreet Boys and N’ Sync, has been arrested and has agreed to return to Florida to face federal bankruptcy charges, EZ-Tracks Music News reported today. Pearlman, 53, was arrested in Indonesia last week on one count of bank fraud. He was expelled from the resort island of Bali after the FBI contacted authorities there, then transferred to U.S. custody and flown to Guam. The former music mogul is accused of fraudulently securing nearly $20 million in bank loans with documents from a made-up accounting firm. The criminal complaint against him was filed in March and unsealed last week after authorities found him. Pearlman ignored court actions against him for months as all of his assets were liquidated in two bankruptcy cases against him and his companies. Florida investigators separately accuse Pearlman of bilking more than 1,000 individual investors out of more than $315 million in a long-running Ponzi scheme. Several banks say he collectively owes them more than $120 million, according to bankruptcy court documents.

A Milan judge upheld a plea-bargain request by Italian asset manager Nextra in one of the proceedings over alleged market rigging stemming from Parmalat SpA’s collapse in 2003, helping bondholders to start recouping some of their losses, the Wall Street Journal reported today. The Italian dairy company also announced three out-of-court settlements with banks for €72 million ($96.3 million), closing some of the lawsuits linked to its insolvency under massive debt. Under the plea-bargain agreement, Nextra, which is soon to be part of Intesa Sanpaolo SpA, will reimburse bondholders 1 percent of the nominal value of the bonds issued, before they lost value. The judge also imposed on Nextra an administrative sanction of €500,000 and the seizure of an additional €1 million.
See Also:  Chapter 7 Bankruptcy

A judge on Monday dismissed an appeal of formerly bankrupt media company Granite Broadcasting Corp.’s chapter 11 reorganization plan, after the shareholders who filed it agreed to drop their objections, Bankruptcy Law360 reported yesterday. The shareholders, led by Harbinger Capital Partners Master Fund I Ltd., had filed a rival reorganization plan in which they offered to pay a large portion of Granite’s debts in exchange for control of the company. The court approved Granite’s plan on June 4. The shareholders went on to appeal the plan only days after the company exited chapter 11. The approved agreement put Granite in the control of hedge fund Silver Point Capital, which paid the company’s debts in exchange for nearly all of its equity. In approving the deal, the court noted that the rival shareholders were “not willing to pay a price that would cover the debt in full.”

Bankruptcy Judge Kevin Gross of the U.S. Bankruptcy Court in Wilmington, Del., signed off on the eco-friendly packaging company EarthShell Corp.’s disclosure statement on Monday, allowing EarthShell to send its plan to exit chapter 11 to creditors for a vote, the Associated Press reported yesterday. EarthShell and its unsecured creditors’ committee last month jointly proposed a chapter 11 plan that would give private equity firm Cornell Capital Partners 100 percent of the reorganized company’s equity. Under the proposed chapter 11 plan, Cornell Capital would receive all of the new equity and a $2.5 million note in exchange for its $5.2 million secured claim against the company. The deadline for voting on EarthShell’s plan is July 16. A confirmation hearing is scheduled for July 23.

Calpine Corp.’s CEO Robert May said that he expects the power company to emerge from bankruptcy in the fourth quarter of this year or the first quarter of 2008, Reuters reported yesterday. May said that most of the remaining work needed to emerge from bankruptcy is financial, as most of the restructuring of the company’s operations has been completed. The independent power company, which filed for chapter 11 protection in December 2005, has the option of turning its bankruptcy financing into exit financing, but May downplayed that option. Calpine currently has until June 20 to file its reorganization plan.

See Also:  Chapter 7 Bankruptcy