Michael Vick, the former Atlanta Falcons quarterback, is serving a 23-month prison sentence after pleading guilty to federal dogfighting charges last year. “He was subsequently suspended indefinitely without pay and lost all his major sponsors, including Nike.” Vick filed for Chapter 11 bankruptcy Monday in the Eastern District of Virginia. The debt includes part of a signing bonus that the Falcons are seeking to recover.

According to the bankruptcy filing, “Vick cites debts of $10 million to $50 million and a comparable amount of assets.” The Falcons tried to recover about $20 million in bonuses Vick earned from 2004 to 2007. But a federal judge held that “Vick is entitled to keep $16 million and must return $3.75 million of the money paid to him for playing football through the 2014 season.”

Other creditors with claims against Vick include Wachovia Bank and the Royal Bank of Canada. “A federal district court in Atlanta ruled that Vick must repay $1.1 million to Wachovia for defaulting on a loan to open a liquor store and restaurant.” “That decision came less than a week after a judge ruled that Vick must repay the Royal Bank of Canada $2.4 million for defaulting on yet another loan.”

Here is a link to the article:
http://biz.yahoo.com/law/080710/548d6774bfa2b01a74252644467a189a.html?.v=1

Another link on the subject:
http://www.usatoday.com/sports/football/nfl/2008-07-08-vick-bankruptcy_N.htm?csp=34

Yameena

Barack Obama proposes changing bankruptcy laws to help military families, seniors, and people recovering from natural disasters.
According to the Associated Press, “Obama said he also would help service members and military families struggling financially after multiple moves, lengthy deployments and, in some cases, predatory lenders.”

Also, Obama wants to allow a faster bankruptcy process for all service members regardless of what state they live in. This is a departure from current law that says people can use federal bankruptcy exemption laws if their state of residence allows. According to a campaign-issued fact sheet, almost 35 states bar families from federal exemptions.

As for seniors, Obama said “people in that age bracket would get a minimum federal homestead exemption equal to the median cost of a home in their state, giving them a better chance to keep their homes and helping them maintain both their independence and their financial security."

Obama said he would help families recovering from a natural disaster by “streamlining the bankruptcy process for those in certified natural disaster areas by eliminating unnecessary paperwork and waiving unneeded credit counseling requirements.”

Here is a link to the article:
http://ap.google.com/article/ALeqM5hiBZp5QJXYZRlj_zYa0ebd-0RsfwD91POFAG0

Here is an additional link to an article on the same subject:
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/08/AR2008070800861.html

Yameena

According to analysts, Lehman Brothers may need to seek more capital to alleviate concerns as the company prepares to report its first-quarterly loss since going public in 1994.

Analysts at Oppenheimer & Co. and Bank of America predict that Lehman Brothers, the fourth largest U.S. securities firm, will probably post a loss of 50 to 75 cents a share in the second-quarter. “New York-based Lehman holds very large, illiquid assets and we can't rule out equity issuance to replenish the balance sheet,” said Merrill Lynch & Co. One report stated that Lehman is seeking an equity infusion from a foreign government as so many other financial firms have done.

“Lehman may seek as much as $4 billion by selling common stock,” the Wall Street Journal reported. According to Bloomberg “the company has raised $8 billion since February amid asset writedowns and losses from the collapse of the U.S. subprime mortgage market.”

“S&P downgraded the credit ratings of Lehman and bigger New York-based competitors Morgan Stanley and Merrill yesterday, saying they may disclose more writedowns for devalued assets. Lehman's credit rating was cut to A from A+, as was Merrill's.” Some argue that the credit rating agencies are not being honest on their appraisal of companies because to do so would trigger an economic meltdown.
The value of Lehman’s stock dropped 48 percent in New York trading this year.

Here is a link to this article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTuOsweHP_pE&refer=home

Yameena

Vallejo, California filed for bankruptcy protection under Chapter 9 (available only to municipalities and a form of reorganization, not liquidation) last Friday in the Eastern District of California. The city has been struggling with personnel costs and low taxes from the housing market. The voluntary petition estimates between one to five thousand creditors, $500 million and $1 billion in assets, and $100 to $500 million in debt. The largest claim for $219,300,816 (which accounts for over half of the total) is for the city retirees.

As you might know, we have been following the potential bankruptcy filing for the city for several months now. The city has been negotiating with the unions for the past year concerning wage cuts to keep the city out of bankruptcy. The financial audits conducted for the city have shown that it would run out of money in its operating account by the end of June.

Vallejo is the largest city ever to file for bankruptcy protection in California; with over 120,000 residents. The most famous Chapter 9 filing was by Orange County, California filed on December 6, 1994. The county treasurer lost $1.7 billion of the investment pool on Wall Street securities. The county didn't emerge from the reorganization for 18 months.

Other California cities that have filed for bankruptcy under Chapter 9 are:

Coalinga in 2003 with a population of approximately 12,000;
Desert Hot Springs in 2001 with a population of approximately 17,000;
Dinuba in 2001 with a population of approximately 17,000; and
Calexico in 1995 with a population of approximately 19,000.

Vallejo is the birth city of several famous individuals, actor Raymond Burr and musicians Roy Rogers and E-40, just to name a few.

You can read an article discussing the filing at:
http://amlawdaily.typepad.com/amlawdaily/2008/05/vallejo-turns-t.html

Chandra

Now that foreign governments (through their funds usually called sovereign wealth funds) have come to the financial rescue of the big banks and brokerage firms, like Citigroup, Merrill Lynch and Morgan Stanley, it has become necessary to also recapitalize the smaller US banks as the credit crisis widens. Today, a privet equity form is investing 7 billion in the 10th largest US bank, National City Corp..

Quote:
"Like many regional lenders, National City, which is based in Cleveland, Ohio, has been hard hit by mortgage losses. The bank lost $333m in the fourth quarter.

The National City deal comes weeks after TPG led a $7bn recapitalisation for  Washington Mutual, the largest US savings and loan association, and only days after Wachovia announced plans to raise $7bn from shareholders.

Bankers and investors described the National City transaction as emblematic of the second wave of rescue finance deals that have followed the collapse of the US subprime mortgage market and the ensuing turmoil in global finance."

Here is a link to the entire article:
http://www.ft.com/cms/s/0/f0f7ba6e-0f28-11dd-9646-0000779fd2ac.html?nclick_check=1

Michael