Arizona Bankruptcy Attorney Blog

So I get that businesses are fighting for every cent.

I do.

They have absurd overhead, gluttonous taxes and stiff competition in every industry just to stay afloat in these hard times, but the amount of trouble Safeway just bought nationwide is probably more expensive than the $10 they fought for on principle.

It's not like we condone shoplifting, but these folks paid for $50 worth of groceries and were arrested while their child was taken from them before they ever got so much as a reminder about the sandwiches the pregnant mother ate in the store. Criminal Defense isn't exactly my forte, but why did no one bring this up at the register when they were paying for things? You know, with money?

Safeway appears to have bitten off more than they can chew as being tough on shoplifters carries a very different image than a grossly overblown misunderstanding that results in parents having their child torn from their arms. This event is bad advertising that lasts and also stands as a cautionary tale that customers have to consider before entering the stores.

Management might misunderstand something a customer does, but customers won't know until they release the hounds.

Will Safeway go under as a result of this? Not likely, but that doesn't rule out Bankruptcy in Safeway's future now that Target has jumped into the whole "grocer" thing with both feet. Competition for your grocery dollars is tough, but it became much tougher for Safeway as a chain.

If Safeway isn't as "safe" as they pretend to be, why shop there?

Harrisburg's City Council is pushing hard to advocate the Municipal Chapter 9 Bankruptcy, a move which will likely inspire other cities and states to follow suit should they succeed. Much like other attempts before them, elements within their own city are desperately seeking to stymie the efforts of the City Council, the loudest voice in attendance being the Mayor.

Joseph actually brought up Harrisburg before, he asserted that they were dithering unnecessarily. That instead of utilizing the one tool that could save them from being gobbled up by the state and set upon by their looming creditors, they kind of sat around waiting for it to happen. Or for something worse to happen than natural disasters and insolvency.

Something worse than defaulting Bonds, missed payrolls and a state takeover?

Now that they've taken Joseph's advice, or at least the City Council has made an honest effort to push forward, they're running into roadblocks. Kind of like how California tried to plug up the attempts of insolvent municipalities with Anti-Bankruptcy legislation.

Some critics are calling the movie irresponsible because the situation that will leave creditors swinging in the wind. However, this logic begs the questions of where they expect a trouble-riddled city to find the dough to pay for already overwhelming debt after a natural disaster, displaced citizenry and a massive investment that tanked its economy.

Rep. Glen Grell, Pennsylvania State Representative 87th Legislative District, is railing against it insisting that the greatest harm comes to Municipal Bond holders and joins Harrisburg's mayor, Linda D. Thompson, in labeling it an illegal action.

I realize these folks don't like how a bankruptcy would look on the City's record, but to date no one has a plan to revive the withering Economy in the fair city of Harrisburg. No way to bring jobs, industry or relief to the people of the city.

The most loathsome part of this is that the internal strife brought on by the mayor seeking to keep the city swamped with debt is creating more debt and keeping already existing debt alive. In fact, considering that the costs of her efforts to halt the attempt by the City Council to relieve the city of its debt are also coming out of the city itself this creates more problems than solutions.

Harrisburg can't pay payroll, but the mayor can hire legal counsel to keep the city up to its eyes in debt that it can't afford to pay.

I wonder what her next election platform is going to be?

Something about how heroically she fought to keep the city down in the muck? She selflessly shielded the city from debt relief? She spared no expense from Taxpayers to make sure the state wouldn't be able to pay it's debts and ensured there was no escape?

I admit that this is a scary precedent to set either way, but the option of seeking relief is vastly more hopeful than seeking solutions that simply aren't present as the city falls apart around them.

We'll probably find out more later today.

The poor folks in Harrisburg, PA have had it pretty rough.

Massive flood damage that led to an exodus of over 10,000 people, huge unemployment and a big investment that never panned out.

They are taking the matter into their own hands in dealing with over 300 Million Dollars in debt.

There appears to be some dissent in the ranks, including the Mayor who insists that the city council went over her head and that the Bankruptcy is going nowhere.

More as it develops!

Remember the "it's better to be lucky than smart bankruptcy avoidance rule"?

Yeah, me neither.

But I've written before about places that were unlucky enough to have a business in a shopping center where the street was being repaired.

For two years.

Not quite as common is the situation that arises when a manufacturing facility is raided based on an interpretation of a law in India.

And the implicit advice that Gibson Guitars was given was simple: use Indian Workers rather than U.S. Workers.

That makes me sad. Seems to me that if there was any question at all on any matter, all government agencies should ask themselves, "will this action take away jobs from U.S. Citizens?"

Now, Gibson Guitar has discussed its position on the raid, and understandably, Gibson is a little cranky about being put out of business, even if it's only temporary.

And the U.S. Workers who had been getting paychecks from Gibson? They're a little cranky, too.

Most Americans would prefer jobs to unemployment.

But here's the Gibson Guitar take on the issue; enjoy reading!

Bailouts are interesting things.

I'm not sure I like them very much.

A Bank (UBS) received a bailout of 50 billion from the Swiss Government, and very recently, one of the traders at that bank (UBS trader Kweku Adoboli) has been arrested in connection with a two billion Euro loss.

Was it fraud? Or just bad luck? Inquiring minds want to know!

In either case, my guess is that the Swiss, always careful with their money, will be downright cranky about all this.

And I loved the tone of the video: nothing to see here, keep moving, nothing interesting to see.

Germany is a very serious country.

The people there work hard, and they have good engineers.

After the Weimar Republic, which overprinted money so much that you needed a wheelbarrow to do your grocery shopping (to take your paper money to the store, not to take your food home), Germany generated a war machine that required the combined efforts of the Allies to defeat.

But it was much easier to defeat German resolve to bail-out Greece.

Germany produces industrial products. A lot of 'em. So when it sells them, Germany makes a lotta Euros. A lotta, I tell you.

Greece makes sheep and wine and some cheese and tomatoes. They're all good, but they don't sell for as many Euros as a Mercedes.

Germany has begun the retreat from Greece, having bailed out the insolvent country one too many times to make German taxpayers happy.

In the retreat, Germany is opening up a discussion that has moved from theoretical to extremely practical: how does a country go bankrupt?

When a country goes bankrupt, how to the creditors file Proofs of Claim?

Where is the First Meeting of Creditors for Greece going to be held?

Inquiring minds want to know!

It's interesting to see what happens when countries make mistakes.

The mistakes you make as a nation don't have exactly the same results that they have when you're an individual, but they're similar.

For instance, right now Germany is preparing for the bankruptcy of Greece.

That will be interesting, because onlookers will be able to tell what happens to a country that borrows too much and is then unable to pay.

Some of that is obvious now; government services and payouts have dwindled to a trickle in Greece, and the Greek Citizens have one primary indoor sport, called "how do I get my money out of this country so the Government can't take it all a way from me with confiscatory taxes?"

Germany, on the other hand, is going to play the part of the irritable lender in the play.

The Greek Politicians, currently, are beating the Greeks, and taking every possible opportunity to squeeze them for taxes, to show the world what good citizens the Greek Politicians are.

My guess is that whoever is currently in office in Greece will be out of office in Greece in about twenty minutes.

Giveaways to buy votes apparently last until the giveaways stop; when voters have to pay the price of the government's generous distributions, they appear to dislike that.

Germany is looking at two different scenarios; one involves Greece returning to the Drachma.

If I were Greece, I'd do exactly that, because then I might have some control over my future.

Apparently, when somebody else controls your money supply, you have less control over your future.

The Evening Standard recently published a piece suggesting that the Global Economy, something I think of as The Worst Idea Ever, is heading toward a rough landing.

And when I say "landing", I'm really talking about a place seven or eight feet underground.

Why?

When countries are intertwined economically, and some countries (Greece is the current poster child, but many others are among the usual suspects) keep borrowing and spending on early retirement and big pensions for some of their citizens, and the countries don't make the money to support such lavish government spending, bad things happen.

In specific, the wheels come off the wagon.

Of the world economy.

Because when countries keep borrowing beyond their ability to pay back debts, they eventually hit a point where there is no more money to borrow.

And then things get bad. See Greece, for instance, which is currently the poster child for "bad".

I'm only a simple backcountry bankruptcy attorney, but it's clear to me that when the Chinese Economic Miracle sours, and the phonebanks of India fall silent, and all of Europe is dragged into the economic black hole by Greece, Italy, Spain and Ireland, bad things will happen in the United States.

And the article in the Evening Standard also points out that the United States has been bailing out banks for some time now, and the Bank of America may need a new round of bailouts.

And is the Bank of America too big to fail?

Or only too big to bail?

There are those who are cheerleaders for Communist China, and the "Chinese Economic Miracle".

Me? Not so much.

I'm not wild about the acid rain they're sending out of their country, and the massive pollution that China spews into the air and water (lung cancer is the primary cause of death in China these days, I hear).

Mostly I don't like it that so many U.S. jobs have been exported to Red China, and that the United States feels comfortable borrowing from a country that has frequently made policy statements about the destruction of the United States.

And I suppose the easy-going, humorous attitude about trademarks and patents shown by Chinese manufacturers also makes me a little uneasy.

But China has its own problems.

As trade slows down, unemployment is skyrocketing in China. You don't hear about it much because the statistical measures of unemployment in China don't count employees who voluntarily quit; and employees are pressured to quit, rather than be fired.

So the numbers coming out of China are cooked to a remarkable level.

Then there are the loans to businesses made by the Chinese banks.

The bubble associated with those loans will make the bubble in the United States look like...a bubble!

And inflation in China is now running at breakneck speeds, particularly in key areas like food.

But one of the upcoming comeuppances for China is going to be the sort of early-warning signal that we've seen in the United States: a credit downgrade for China is in the works!

Now, I don't wish the Chinese any harm. As long as they send back the jobs they swiped from the U.S., and clean up their country so that the rivers don't run black with sewage and their cities are no longer invisible under a cloud of coal smoke, all is forgiven.

Actually, I guess that I have a Challenge for China.

Go Green, Guys!

We'll be happy to send you our EPA to help you out!

And, actually, that might be the fastest way to build jobs here in the United States.

p.s. the Chinese Economic Miracle is coming to an end, some experts believe. I tend to agree, even without a Doctorate in Economics. There's one simple reason: governments can't run businesses, and when they try, they fail. Every single time. See the country formerly known as the USSR. And the U.S. Post Office.

The Dodgers have been a team of legend in the United States since 1928.

The Dodgers won the World Series, when led by Jackie Robinson, the first black major-league baseball player.

The Dodgers rivaled the Yankees during a golden age of baseball in the United States.

And now it looks as though the Dodgers may have a new owner: the Government of China.

A 1.8 billion dollar cash offer has reportedly been made to Frank McCourt by a group backed by Chinese Government-backed investment banks.

Investors fail, and banks fail.

Will we see the day when the Dodgers are owned by the Chinese Government?

Makes you wonder about that whole Globalism Thing, you know?

I've noticed that not many folks are talking about a double-dip recession these days.

I chalk it up to an inability to keep a straight face when saying goofy things.

For the United States to go into a double-dip recession, it would have had to have come out of a recession, right?

And the jobs report for August was abysmal.

Shaila Dewan at The New York Times has discussed the worst job showing in eleven months.

She pointed out that the unemployment rate is 9.1%, and admirably, also she also referenced the sky-high U-6 measure of inflation.

Now, is this a depression?

Well, global manufacturing is down, down, down. Emily Knapp, at Wall Street Cheat Sheet, gives us the numbers, and they awful.

So here's my answer to the question, is this a double-dip recession, or a depression?

It doesn't matter.

I just want it to stop.

Because as long as unemployment is sky-high, people will need to file bankruptcy cases.

Which are down slightly last month.

Go figure!

Here's a short clip discussing ShegdaTech prior to the delisting.

The numbers involved are significant.

ShengdaTech has filed a Chapter 11 Bankruptcy, and it's not your Grandfather's Chapter 11.

A remarkably aggressive initial order right out of the chute is designed to protect the Chief Restructuring Officer and the Special Committee, and "ShengdaTech filed for and was granted a temporary restraining order from the US Bankruptcy Court blocking its shareholders and or member of its board of directors from taking any action that interferes with Kang's activities or those of the company's so-called Special Committee. The restraining order also prevents the appointment of any new person, and one Mr. Gongbo Wang in particular, to ShengdaTech's board of directors."

I don't know much about ShengdaTech. In fact, I only learned about the filing of the Chapter 11 and the unusual preliminary injunction this morning.

But if the SEC is investigating, and KPMG has resigned as the auditor, saying some disturbing things about the financials, one has to wonder if this if a perfect company.

This Chinese company was traded on our stock exchange because of a reverse merger into a publicly traded company.

Here's what I wonder: is this the tip of the iceberg? Are there other Chinese Companies that trade on a different board that also have creative books?

I'll watch that space and let you know if I find out.

Although I suppose that finding out might involve learning Mandarin.

Never mind.

I'll let somebody else find out, and tell you what they have to say!

Solon, a manufacturer of solar panels, is closing its Tucson facility.

Sixty more jobs will be lost in Arizona as a result of that closure.

Solon heard that Evergreen Solar, a Mass.-based company, had filed a Chapter 11 Bankruptcy and was planning to sell its assets, after posting a loss of almost five hundred million. And after hearing that, Solon decided that it was time to get out of Dodge.

Or, less metaphorically, Tucson.

Evergreen Solar had received tens of millions of dollars in subsidies and tax breaks, which is itself irritating. And it had earlier this year announced a move to manufacturing in China, which cost 800 U.S. jobs. It plans to continue operations in China, depending on Chinese Investors.

After the Evergreen move to China was announced, I stopped being a member of the cheerleading section, so the Chapter 11 did not cause my tears to flow.

And the fact that Evergreen had possession of technology developed at MIT, and hundreds of millions from U.S. investors and lenders and subsidies and tax breaks, and now China will reap the benefits; yeah, I could get cranky about that if I thought about it.

So I won't think about it!

Student loans have overtaken credit card debt.

'Atsa one spicy meatball of debt!

And a big one.

The trillion dollar student loan bubble has experienced increasing default rates in the years available to review. If you look at 2005, the default rate on student loans was 4.6; if you look at latest year available for review, 2008, you see a default rate of 7%.

Does anybody want to bet that 2009 and 2010 will show horrifically higher default rates?

The Government has taken steps to limit the profits being made by private schools that have a high default rate; it will be interesting to see if it applies the same standards to public schools, which are working the same side of the street.

Now, I have a theory, and it goes like this: you can fool some of the people all of the time, and all of the people some of the time. But you can't fool all of the people all of the time.

Until recently, it looked like going back to school had little opportunity cost associated with it, because there were no jobs to take in any case.

But now, that proposition doesn't look quite so sweet.

Kids coming out of school are increasingly angry that they were sold a bill of goods, and rightly so; I note that law students are suing law schools for providing them with inaccurate data on hiring statistics and income statistics of graduates.

Once kids have a realistic understanding of the way the story ends (being garnished forever from your minimum wage job, and the standard for discharging student loans in bankruptcy out of reach), they may be less interested in the siren song of the expensive four-year university and the useless degree in Interdisciplinary Studies.

And while some commentators believe that a catastrophic (for universities) fall-off in student applications will happen in thirty years, I think information circulates a lot faster today than it did in the good old days (formerly known as "these trying times").

And I expect that we'll see universities closing right, left and sideways, because this is a depression, and kids aren't stupid.

It's entirely possible that SAAB will be the subject of an involuntary bankruptcy.

And if that happens, do you think creditors will get paid more, faster, or less, slower?

My intuition is that creditors who use a threat of involuntary bankruptcy play a dangerous game.

Here in the United States, it's a threat that is seldom-used, because it's...dumb. If a debtor is forced into such an involuntary bankruptcy, the least that happens is that the mind-set of the debtor changes.

Take SAAB, for instance.

Right now SAAB wants to pay its creditors.

That's not easy when it doesn't have all the parts it needs to build cars, of course.

But once it becomes the subject of a reorganization, it may change its plans, because now it has the tools to work with, and the worst that could happen did happen!

And if SAAB believes that it will be the subject of an involuntary bankruptcy in a venue it doesn't like, do you think it'll look around for a debtor-friendly venue and a DIP financing package?

And do you think that irritating creditor will get paid last and least, if SAAB can manage it?

Just a thought.