Below is our first installment of notable blog and news posts on topical bankruptcy issues of interest to the bankruptcy litigator and practitioner for the week ending 11/18/05. Enjoy!

Lots of blogging on GM’s demise, and possible bankruptcy, at:
* Mises Economics Blog has a report by Karen De Coster entitled “The Street Beats Up GM.”
* Svenrox writes a post entitled “GM Goes the Way of the 80’s Chrysler?
* Houston’s Clear Thinkers follows up on it’s prior post (reported here) entitled “GM’s Enronesque experience continues.”
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Appellate Law & Practice links to an article entitled “The Citation of Unpublished Opinions in the Federal Courts of Appeals” by Professor Patrick J. Schiltz’s and published in the October 2005 issue of the Fordham Law Review. Professor Schiltz serves as Reporter for the Advisory Committee on the Federal Rules of Appellate Procedure.
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The Legal Theory Blog reports on a new article by Anita I. Anand of Yale Law School on Dutch Auction IPO’s, which states in part:

The Google IPO raised the question of whether Dutch auctions are preferable to the traditional bookbuilding method of financing. Some argue that Dutch auctions make public offerings more efficient in terms of price discovery by leaving less money on the table. They further argue that Dutch auctions are more fair, since underwriters do not allocate securities to preferred clients, thereby allowing for a more equitable allocation among institutional and retail investors. I suggest that the Dutch auction is not necessarily more fair and may in fact lead to less efficient capital markets. I argue that reform of the current system is unnecessary because of capital market composition and, in particular, the means by which a majority of retail shareholders invest in securities.

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The Volokh Conspiracy reports on a story in about “secret docketing” in Florida federal courts.
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Hedge Fund Street reports that hedge funds “experienced severe October blues this year,” prompted in part by the “meltdown of commodities brokerage Refco.”
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The Bankruptcy and Restructuring Blog reports on an 8/12/05 decision of the Delaware Bankruptcy Court in the Bridgeport Holdings case stating:

[C]lear and unambiguous provisions in a disclosure statement and reorganization plan, which specify the category of causes of actions to be preserved and the effect of any recovery, are sufficient to preserve those causes of action for post-confirmation adjudication. Bankruptcy Code Section 1123(b)(3) does not require “specific and unequivocal” identification of all preference claimants.

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Appellate Law & Practice reports on a new decision by the 5th Circuit, In re Vito Lomagno and Marie Midolo, No. 05-9003, where the Court held, “The bankruptcy court determined that Salomon Brothers Realty Corp. (“Salomon”) did not violate an automatic stay by foreclosing on the Debtors’ house while the Debtors’ Chapter 13 petition dismissal was on appeal.”
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The Future of the Union, a rank and file union publication, publishes an interview with Mark Reutter, author of the book Making Steel: Sparrows Point, and the Rise and Ruin of American Industrial Might, on “The Delphi Case And The Misuse Of Bankruptcy Law.”
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Working Life writes a post entitled “At Delphi, Greed is Good,” which reports on a column by Gretchen Morgenson in the Sunday Business section of The New York Time$, where she writes:

It’s not every day that investors can view the contortions performed by compensation consultants trying to justify the monster executive pay packages that they recommend to corporate clients. And when these exercises in absurdity are done for executives asking for great sacrifices from workers, retirees, creditors and former shareholders because they manage a company in Chapter 11 bankruptcy protection, the entertainment is unmatched.

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The W$J reports here on the Refco auction of more than 15,000 customer accounts from a business that allows individuals to trade foreign currencies in an article by Peter McKay entitled “Refco Auction Became ‘Absolute Theater’: Intense 21-Hour Bidding Process Provided a Showcase for Strategy.” He reports:

The sale of Refco’s main futures brokerage unit, however, took place behind closed doors at the slick Times Square offices of the law firm Skadden, Arps, Slate, Meagher & Flom LLP, which represents Refco. People present described the auction as a mostly cordial but especially intense contest unlike any they had experienced on Wall Street, where the carcasses of troubled firms are often divvied up.
“It was absolute theater,” says Earl Nemser, vice chairman of Interactive Brokers Group LLC, another bidder.
Mr. Nemser and other participants declined to be quoted in detail about the auction, citing confidentiality agreements with Refco….
Skadden attorney J. Gregory Milmoe said the auction started around 10 a.m. Wednesday. There were five suitors: Man, Cerberus, Interactive Brokers, the private-equity firm J.C. Flowers & Co. and a consortium of investors from the oil rich state of Dubai and Marathon Asset Management LLC, a New York money manager.
But the neutral territory wasn’t traversed until around 5 p.m. Bankers from Refco adviser Greenhill & Co. and Mr. Milmoe, who acted as an auctioneer, decided to open the in-person bidding with a bid from Man valued at over $40 million.
With a minimal incremental increase of $2 million required for each subsequent bid — a relatively small change — there was a lot of room for one-upping, and indeed some 75 offers and counteroffers were made over the course of the evening.
Around midnight, J.C. Flowers & Co., represented by its head, former Goldman Sachs banker Christopher Flowers, dropped out.
Soon after, Mr. Nemser and other Interactive Brokers representatives left without ever raising the initial bid they submitted in writing. “We came to the conclusion that the differences in culture and business models were too great,” according to a statement from company Chairman Thomas Peterffy.
By 2 a.m. Thursday, Mr. Feinberg had arrived to oversee Cerberus’s efforts himself, in a contest that was down to his firm, Man, and the Dubai/Marathon group, which had the largest contingent present, about 25 representatives.
Around 4 a.m., there were 80 people hashing out the three remaining bids in the shared conference room. “Seeing that many people working on this deal at that hour was surreal,” one participant says.
The Dubai/Marathon group dropped out around 4:30, with the Refco units’ valuation hovering around $250 million. That left just Man and Cerberus. Since the early 1990s, Cerberus has been building a reputation for handling bailouts.
A Refco acquisition might have burnished that record, but was not to be. Around 7:15, Mr. Steinberg, who as a student at Princeton listed chess among his hobbies, acknowledged checkmate.

Steven Jakubowski
© Steve Jakubowski 2005