Elephant & Castle, a Boston-based chain of 21 British-style pubs, has filed for Chapter 11 bankruptcy protection

Elephant & Castle, a Boston-based chain of 21 British-style pubs, has filed for Chapter 11 bankruptcy protection after struggling through the recession and defaulting on its loans.

The restaurant company, which employs 866 people, said it is has been seeking a possible sale since April to keep the chain alive.

“Those efforts resulted in the identification of a number of interested parties,” David Dobbin, the company’s chairman, said in a filing in U.S. Bankruptcy Court. “Due diligence is ongoing with several potential purchasers and expressions of interested parties.”


Elephant & Castle, founded in 1977, has 19 company-owned and two franchised locations in major cities in the U.S. and Canada, including a pub in Boston’s Financial District.

The company said it owes more than $16 million to its lender, GE Canada Equipment Financing.

Dobbin noted that Elephant & Castle was hurt by a downturn in sales during the recession, prompting cost-cutting at the corporate level and at its restaurants.

“These moves helped, but the company continued to have negative cash flow after required debt service,” he said, adding that he poured $5 million from his own holding company to help the chain.

Never have so many jobs been shed by a single bank in British history. It's possible no UK company of any sort has ever reduced job numbers by so much.

Never have so many jobs been shed by a single bank in British history. It's possible no UK company of any sort has ever reduced job numbers by so much.

Because when Lloyds reduces staff numbers by the further 15,000 announced today - scheduled to happen before the end of 2014 - it will have reduced employee numbers by 45,000, compared to where they were at the end of 2008.

Some will see those job losses as the biggest cost of the government's decision at the end of 2008 to allow Lloyds to acquire HBOS, to prevent HBOS collapsing and being fully nationalised.

That said, Lloyds' new chief executive, Antonio Horta-Orsorio, would argue that the latest 15,000 job reductions are not the elimination of duplicated functions but represent streamlining and simplification that any sensible bank would do.

The latest job reductions - some of which will happen through redundancies, though Lloyds hopes to take out as many jobs as possible by natural attrition and redeployment - will mainly affect those employed in middle management and back offices.

There's also worrying news for Lloyds' suppliers, since - as part of the new chief executive's plan to take £1.5bn of annual costs out of the bank - it is reducing the number of businesses that provide goods and services to it from 17,000 to less than 10,000.

The aim, which would be good news for all of us as taxpayers and owners of 41% of Lloyds, is to return Lloyds to profitability on a sustainable basis.

'Big incentive'
And there is a bit of actual good news for taxpayers today in that the amount Lloyds in effect borrows from taxpayers has fallen by £60bn in the last six months.

What this means is that Lloyds has repaid everything it owes to the Bank of England under the Special Liquidity Scheme, which was created by the Bank of England during the great crash of 2007-8 to prevent banks like Lloyds from collapsing after assorted securities markets shut down, depriving banks of vital finance.

Under Mr Horta-Orsorio's new strategy, Lloyds will become a much more UK-focussed bank - whose recovery will to a large extent be dependent on the UK's economic recovery.

Which means that Lloyds will have a big incentive to contribute to that recovery by providing adequate access to credit to small businesses and households that need it.

Lloyds is withdrawing from more than half of the 30 countries overseas where it currently operates. And it will attempt to reinvigorate the Halifax brand, to compete with the Lloyds brand.

In spite of plenty of speculation to the contrary, Mr Horta Orsoria has decided to keep Scottish Widows, Lloyds insurance business.

In fact a central element in his plans to rehabilitate Lloyds is an aim to sell a wider range of products and services to the banks' many millions of customers, with the hope of generating substantial growth in income from retail finance other than just borrowing and lending.

Clothes store Jane Norman closes

Women’s clothing chain Jane Norman closed all of its 90 stores across the country - including a branch in Queensgate Shopping Centre, Peterborough on Saturday (25 June).

Administrators Zolfo Cooper hopes to find a buyer for the stricken retailer, which sold clothes for women aged between 16 and 25.

The retailer, which also has around 100 concessions within department stores including Debenhams, is understood to have asked its landlords last week to defer its rent payments as its quarterly payments deadline loomed.

A spokesman for Queensgate Shopping Centre declined to comment on the future of the unit in the centre but confirmed the branch had not opened over the weekend.

The firm has been hit by the recession as well as the cost of raw materials such as cotton, which has soared in price.

It has also been hit by the rise in VAT from 17.5 per cent to 20 per cent in January.

No-one from Jane Norman or Zolfo Cooper was available for comment about the future of the city’s store

 

Thorntons said it will exit at least 120 outlets over the next three years as their leases expire, while it will also consider the future of an additional 60 shops over the same period.

The plan will leave Thorntons with around 180 to 200 company-owned stores, although in the majority of locations it hopes franchisees will open outlets.

It is the latest blow to the high street after the failure of chains such as Habitat and Oddbins in recent weeks.

Chains such as HMV, Game and JJB Sports, which have long been the mainstay of UK high streets, are also slimming down their store estates. And Mothercare said recently that it would axe 110 shops in order to focus its trading on out-of-town locations.

The Thorntons strategy review, led by new chief executive Jonathan Hart, will see the company increasingly focus on its commercial division, which sells Thorntons-branded chocolate through other retailers, and grow online sales.

The review also aims to make the business less dependent on seasonal events such as Christmas and Easter by increasing the number of gifts it sells.

Mr Hart said the strategy was the right one because he sees the current weakness in high street footfall and consumer sentiment continuing.

The closure of the stores could put between 750 and 1,125 jobs at risk, but Mr Hart said the company would try to find staff alternative roles wherever possible.

The review said its stores needed an overhaul after a recent lack of investment and changes in shopper behaviour, as they visit the high street less regularly in favour of supermarkets and internet shopping.

Although it still thinks its own stores will remain an important part of its future, it said selling through other retailers will become its main sales channel over the next three years.

It will revamp its products with gifts for under £5 for special occasions such as birthdays and anniversaries to help broaden its appeal throughout the year and will develop a new flagship boxed chocolate brand next year. It will start offering free tastings in-stores in the next couple of months.

The group also aims to make efficiency savings at its factories and supply chain in a bid to save £2 million a year. However, closing the company-owned stores will cost it between £4.2 million and £4.8 million.

Department store chain TJ Hughes revealed it is set to enter administration.

Recent weeks have seen a string of high street names announce they are in difficulties thanks to a combination of high rents and sluggish sales.
TJ Hughes, which was bought by private equity firm Endless in March, announced on Monday it was looking to appoint an administrator.
Founded in Liverpool in 1912, the firm has 57 stores across the UK, employing a total of 4,000 staff.
In the year to January 31, the retailer lost more than £10m and was on the brink of collapse when Endless acquired it for a "nominal amount" in March.
Speaking to Sky News, Endless managing partner Gary Wilson said the firm was struggling after a 19% like-for-like drop in sales for the last three months, and supplier nervousness after the firm's credit insurance was withdrawn.

Chocolate maker Thorntons is to close at least 120 of its UK stores
He said the firm's rents and staff wages were paid up until this week, "but the future remains uncetain".
Carpetright has announced that pre-tax profits dropped 70% to £6.6m in the year to April 30, and hinted stores would close.
"With leases on 94 stores in our estate due to expire in the next five years, we have ample opportunity to reshape the portfolio, reduce the size of store footprints and lower our ongoing rent roll," the company said.
Carpetright Share Price 1-Month Chart



The confectioner said it will exit at least 120 outlets over the next three years as their leases expire, while it will also consider the future of an additional 60 shops over the same period.
The plan will leave Thorntons with around 180 to 200 company-owned stores, although in the majority of locations it hopes franchisees will open outlets.
It comes a day after women's fashion retailer Jane Norman announced it was going into administration, closing 90 stores and putting 1,600 jobs at risk.

Thousands of customers of Moben Kitchens and Dolphin Bathrooms are waiting to hear whether they might receive goods or a return of their deposits after parent company Homeform warned that it planned to draft in administrators.

Consumer watchdogs are this weekend warning shoppers to take every precaution when making cash deposits on expensive items after a spate of retail failures, with the possibility of more to follow.


Money down the drain: Shoppers must  take precautions when making cash deposits after spate of retail failures

Thousands of customers of Moben Kitchens and Dolphin Bathrooms are waiting to hear whether they might receive goods or a return of their deposits after parent company Homeform warned that it planned to draft in administrators.

The Consumers' Association said: 'Consumers must take every precaution to make sure they are protected, such as using credit cards for deposits or purchases.'

Retail sources told Financial Mail that companies selling expensive items such as furniture, washing machines and kitchens have been among the hardest hit.

The Consumer Credit Act of 1974 protects shoppers using credit cards for purchases between £100 and £30,000. The Consumers' Association pointed out that shoppers were completely covered, even if they pay as little as £1 of the deposit with a credit card. Debit card payments are not covered.

Homeform, which owns Moben, Dolphin, Kitchens Direct and Sharps bedrooms, said it planned to call in administrators as soon as this week. Its owner is US private equity firm Sun Capital, which has an office at No 2 Park Street in London's West End and claims to have £5 billion of assets.

It advised shoppers to call the Moben head office on 0845 603 3020 for more details on orders or how to claim back deposits. Sun Capital's phone number is 020 7318 1100. And enquiries are being dealt with by Maitland on 020 7379 5151.

Moben customers have already been offered the chance to recoup their money by rival Wren Kitchens, which said it would match the funds for those affected.

Homeform is the latest retailer in the home and DIY sector to fail since Habitat folded two days ago.

In what could be the start of a market consolidation Homebase and Argos owner Home Retail acquired the Habitat name and three stores. The rest of the company was placed into administration.

Can we help? Contact Financial Mail

Are you worried about having paid a deposit to a High Street retailer who has gone bust or who you fear may do so? Financial Mail would like to hear about it.

Private equity firms have too many times used companies such as Homeform for financial gain while customers have been left with the consequences.

Conrad Black, the former newspaper mogul ordered back to prison to spend another year in jail, could face a series of lawsuits which threaten financial ruin.

The peer, who used to own The Daily Telegraph, has protested his innocence against convictions in the US for skimming money from his Chicago-based holding company, Hollinger International, and of obstructing regulators' investigations into his affairs. Defiant to the end and beyond, Black said in court on Friday that you would have to believe him "barking mad" to have done the things he was accused of.

But, as he returned to prison to serve another 13 months for fraud and obstruction of justice, it was suggested that his failed attempts to clear his name in court may just be the start of his battles.

First, he has asked Canada, the country of his birth, to allow him to return to Toronto when he is released after being told he will be barred from living in America. If that request for normal immigration rules for convicted felons to be waived fails, he could be forced to live in the United Kingdom.

After the small matter of his residency is resolved, Black then faces contests in the civil courts, where a string of lawsuits will be reactivated in the coming weeks.

The Securities and Exchange Commission, the regulator that polices corporate America, is suing, claiming Black defrauded shareholders. It has already been granted an interim judgment that Black should pay $3.8m (£2.4m), but the case has been stayed for the duration of Black's appeals against his criminal convictions. His defence team must put in its next motions by 1 August.

The US tax authorities, meanwhile, are pursuing Black for $71m in back taxes, penalties and interest payments, and his old company is also suing him for hundreds of millions of dollars, claiming that his crimes led to its collapse. That case resumes in August.

George Tombs, a Quebec-based biographer of Black, said he heard pathos in the peer's courtroom oration, which ran to 20 minutes. "He talked as if he were Napoleon returning from Elba, but the army he claims is made up of inmates from Coleman prison. What kind of army is that? How does a person who has been roundly defeated continue to pretend that defeat is victory?"

Mr Tombs says that Black intimated in a 2006 conversation that he had protected himself financially well enough to ensure funding for these legal actions, but that with up to $1bn in claims against him, he faces an uncertain future.

The writer said: "He has to lay out huge amounts of money in legal fees, and he is not able to earn anything except the 12 to 18 cents an hour he gets teaching English in prison. He has had to sell his place in Palm Beach, and to remortgage the home in Toronto. He has suffered greatly from the meltdown of Hollinger, and he has already paid serious amounts of money back to the US government. Yet I do believe he has considerable resources still."

Black can claim one recent legal victory, a settlement of a libel action he launched against Hollinger and the authors of an internal report that accused him of operating a "corporate kleptocracy". The trustees of the now-bankrupt company decided not to defend the suit.

Black and his wife, Barbara Amiel, have been living in a New York hotel since he sold their Florida mansion for $25m in April.

The Canadian authorities can issue an immigration visa to a convicted criminal after his "rehabilitation", but this is usually only after five years have elapsed.

In court on Friday, Black's lawyers said he was "devastated" at being barred from the US. Carolyn Gurland said: "His daughter lives here; many of his closest friends are here. He is not just a casual observer of this country but, I am reliably told, he can recite the vice-presidents of the US in order. He is writing a third book on US history, and he lectures on US history from memory." He will be a guest of the US government, now, for a while longer – but not much longer.

On Friday, a Chicago court slashed Black's sentence from 78 months in the light of a Supreme Court ruling that voided two of his three fraud convictions. The new 42-month jail term was still more than the 29 he had served before being freed last year, pending resentencing.

His legal team has yet to decide whether to request his return to the Coleman correctional facility in Florida, where he served the first part of his term, or whether to ask for a placement nearer the Canadian border, to make it easier for his sick wife to visit.

Black will be granted the return of his passport so that he can prepare to leave the US as soon as he is released. "Better get the photos done," Judge Amy St Eve joked to his lawyers on Friday.

It was the furniture chain that revolutionised homes in the Swinging Sixties.

But Habitat, the one-time pinnacle of British design, has itself fallen out of fashion. The retailer, which has 33 stores in the UK, is expected to announce within days that it is being broken up.

Homebase owner Home Retail Group was in talks late last night to buy three key London branches, Tottenham Court Road, King's Road and Finchley Road, as part of a £20million to £30million deal.


Swinging Sixties: Sir Terence Conran's Habitat revolutionised home decor, introducing a generation of young homeowners to modern design

If negotiations are successful, Habitat is expected to place the remaining 30 of its UK stores, which are dotted around the country, into administration.

Around 900 jobs are at risk from the possible closure of the shops.

As part of the deal Home Retail would also buy the rights to the Habitat brand in the UK and use it in its Homebase store chain.

 
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Britain's battered retailers have been hit hard by shoppers reining in spending on all but the most essential of items, and the downturn has seen the collapse of High Street names including Woolworth's and Zavvi.

Hilco, the owner of Habitat – which has expanded into France, Spain, Germany and Italy – is understood to be selling the international business separately. It has been performing strongly and would not be affected by any administration.

If the UK business is plunged into administration, it would mean the Habitat name is virtually wiped off shop fronts on the High Street.


If the deal goes ahead Home Retail would buy the rights to the Habitat brand in the UK and use it in its Homebase store chain

It would be a major blow to the king of Britain's interior design, Sir Terence Conran, who revolutionised the furniture market when he opened his first Habitat store in 1964.

This was decades before rival Ikea set up shop in the UK with its cheap flat-packed designs which have stolen the lion's share of customers.

The grand old man of British design introduced a generation of young home-owners to pastel kitchen chairs and garlic presses.

At its peak the chain operated 38 stores in the UK and expanded internationally with 24 stores in France, six in Spain and five in Germany.

But Sir Terence left the business long ago and Habitat lost its way under the ownership of the Kamprad family, heirs to the Ikea fortune.

Just 18 months ago they passed it over to Hilco, giving the retail specialist a £45million 'dowry' to take the business off their hands.

Hilco, which has been trying to turn the business around, has been talking with rival retailers about various options for the business including a licensing deal.


The Habitat store in Tottenham Court Road in London would be one of only three to survive if the deal goes through

Details of the agreement with Home Retail were still being thrashed out last night.

Habitat would only push the button on the administration if it can reach an agreement to sell the brand and the three stores to Home Retail.

Experts say the Habitat brand would sit well within Homebase, helping to draw in a new set of middle-class customers.

The company is keen to develop the brand but is unlikely to open more stand-alone stores even when financial conditions improve.

Hilco has previously sold the Schreiber and Hygena brands to Home Retail following the collapse of MFI.

This week has been one of the gloomiest weeks for Britain's battered retailers.

On Thursday the firm behind the Moben and Dolphin bathroom brands took the first step towards administration.

Habitat, Home Retail Group and Hilco all declined to comment last night.

SHAPING TASTES OF A GENERATION

The 1964 opening of Habitat in a then unfashionable area of Chelsea revolutionised the world of interior decorating and changed the tastes of a generation.

The concept, by young designer and furniture restorer Terence Conran, was to bring furniture and contemporary design to the masses, at affordable prices.

From the beginning, Habitat sold everything you could want for a home, with display living rooms and kitchens set up in the stores to show how items could be arranged to create a particular look.

The new generation of middle-class baby boomers had been to university and had their pick from an expanding jobs market.

They were setting up home earlier and wanted chic but low-maintenance homeware: cutlery that did not need polishing, tables that looked good without tablecloths, and beds that could be made easily with a duvet.

Conran’s store had a unique combination of modernist minimalism and earthy comforts that appealed to these young, educated professionals by offering pine furniture and colourful storage jars in place of old-fashioned, dark and heavy furnishings.

The chain rapidly expanded but the clever designs were soon mimicked by cheaper rivals and by the late 1980s the company was suffering financial difficulties.

In 1992, Habitat was acquired by the Ikano Group, a conglomerate controlled by the Kamprad family, whose patriarch Ingvar founded Swedish furnishings giant Ikea.

However, Ikea’s success did not rub off on Habitat with losses reaching £13.4million in the year to March 2008.

A UK bank could have lent to a bank that itself had lent to a bank that in turn was exposed to sovereign risk

Mr King added that, while UK banks had "remarkably low" direct exposure to Greece, "experience has shown that contagion can spread through financial markets especially when there is uncertainty about the precise location of exposures".

The Governor said: "A UK bank could have lent to a bank that itself had lent to a bank that in turn was exposed to sovereign risk."

He highlighted the "heavy exposure" of Britain's banks to their equivalents in Germany and France, which have much greater involvement with Greece, and could spread the contagion of a Greek default back here.

According to the report, British banks' combined claims on France and Germany represent about 130 per cent of their core tier-one capital, with close to half accounted for by loans to French and German institutions. But asked if Greece could become "the next Lehman Brothers", Mr King said: "It doesn't have that much in common other than that it's a mess."

The same fears over hidden exposures could be true of other teetering economies at Europe's fringes such as Portugal and Ireland, both bailed out, or risky economies such as Spain. As a result of the concerns, the Financial Services Authority will order British lenders to come clean about their true exposures to financial crises around Europe as part of their regular reporting. This was one of six recommendations made by the Bank's new Financial Policy Committee, all of which were agreed unanimously and accepted. On the issue of bonuses, Baron Turner of Ecchinswell, who sits on the committee as chairman of the FSA, said he would not cap how much banks could pay out, arguing that each company's circumstances would be different.

But both he and Mr King said regulation would play a role in forcing banks to focus on building up reserves when their earnings are strong. They said they wanted to be sure banks which followed regulators' guidelines did not suffer if rivals chose to ignore the rules and began making bumper payouts.

Further recommendations included a call for the FSA to extend its work on loan forbearance, where lenders ease pressure on corporate and individual borrowers who find themselves under stress. The committee wants banks to set aside cash to cover them if these loans ultimately default. But Mr King stressed that he did not want to see banks reining in forbearance – a factor which led to a low level of defaults and repossessions during the recession.

ADMINISTRATORS for the fashion chain which rose from the ashes of Ethel Austin said it will continue to trade – but stores are set to close.

Life & Style, which has 11 shops across Merseyside, was formally placed into administration this week, little more than a year after it emerged from the wreckage of the once-proud Knowsley-based Ethel Austin chain.

RSM Tenon directors Simon Bonney, Peter Hughes-Holland and Tom MacLennan were appointed as joint administrators and have started an immediate review of Life & Style’s business.

They said they will keep the business operating – but a plan was in place before they were called in to close some stores and they will keep to that.

It is not yet known which of the firm’s 90 stores nationwide face the axe over the coming weeks.

The business employs around 1,000 people in total and the blame for going into administration was said to be “poor trading” in the current tight financial climate.

In court papers filed at Manchester crown court, the former head of Ethel Austin and current Life & Style director Elaine McPherson signed her name to the declaration: “I hereby do solemnly declare that: The company is or is likely to become unable to pay its debts.”

Ethel Austin and sister chain store Au Naturale crashed into administration last February with debts standing at more than £59m.

Having already bought it out once before, Mrs McPherson “rescued” Ethels for a second time shortly afterwards, picking out and buying back the profitable parts of the business and leaving behind those with huge debts.

The current procedure marks the retailer’s third administration in as many years.

Junior bond holders in the Bank of Ireland are getting a worse deal than expected, far worse than banks who hold the Irish bank's bonds. Just 20p in the pound

Holders of Bank of Ireland 13.375% perpetual subordinated bonds face a savage haircut on their investments. They are being offered just 20p in the pound – with worse to come if they don’t accept. Bank of Ireland calls it ‘burden sharing’ but holders can, no doubt, think up far more graphic terms for this drastic reduction in their investments – the burden of which is definitely not being shared by all bond holders. Holders of senior Bank of Ireland debt – mostly other banks – have not been called upon to accept any reduction in the value of their bonds.

Bank of Ireland 13.375% Perpetual Sub. Bond (BOI) is an upper tier two security and holders are being offered either 20p in the pound cash, with no payment for accrued interest or 40p in the pound in Bank of Ireland ordinary shares based on a conversion price between € 0.1130 and € 0.1176. This is worse than bondholders had expected. The exact equity conversion price will be announced on 23 June. This offer will include a payment for accrued interest. Bondholders who accept the debt-for-equity offer and sell their ordinary shares should bear in mind that delivery of ordinary shares is not scheduled to take place until 12 August.

The details were laid out in two announcements by Bank of Ireland yesterday: an announcement of further capital raising and a second on 'exchange offers and consent solicitations'.

These are the ‘early bird’ offers available to early accepters. Those accepting later will have terms reduced by 20% to 16p in the pound cash or 32p in the pound in the equity offer. No deadline has yet been announced for acceptance, but the circular and prospectus are due to be sent out on Friday 17 June. As the results of the early bird exchange offer are due to be announced on Thursday 23 June, this suggests there will be a very short window of opportunity in which to accept these offers. Holders should therefore be ready to respond quickly after the documents are sent out.

Should bondholders accept?

Should holders accept these offers? Given where the bonds have been trading – around 69p less than a month ago – they don’t look attractive. But what is likely to happen if the proposals are rejected by bondholders? Bank of Ireland is seeking approval from bondholders to grant the bank a call option (option to buy) at only 1p per £1,000 nominal of relevant securities. The Irish minister of finance has stated that he is prepared to take ‘whatever steps are necessary’ in respect of subordinated liabilities to ensure this ‘burden-sharing’ takes place. A law passed in December allows Ireland's government to force restructurings upon subordinated bank creditors – that is the holders of junior bonds.

The bond offer is part of the government’s plans to recapitalise Bank of Ireland which it effectively nationalised following the credit crisis and the bank is estimated to need €4.2 billion of core tier one capital. The scheme also includes proposals to amend the terms of the relevant subordinated liabilities to grant a call option. This will allow Bank of Ireland to acquire the securities for a cash amount less than the terms already offered to bond holders. Holders of ‘subordinated’ bonds stand at the end of the queue when it comes to pay outs.

This probably means that if holders do not take up these offers, they will most likely be forced out of their investments at an even lower level. Bondholders will have little choice but to accept these offers, and should be ready to act promptly from 17 June.

Other bondholders

Bank of Ireland bondholders are not the only ones suffering. The Irish government is hoping to cut around €5 billion from a €70 billion bill for bailing out its banking sector which collapsed following the credit crunch by imposing losses of up to 90% on junior bonds in AIB, Bank of Ireland, Irish Life & Permanent, and EBS building society.

Finance minister Michael Noonan has faced widespread criticism for not imposing losses on banks' senior bondholders, widely held by other banks throughout Europe, due to opposition from the European Central Bank. The ECB is afraid of the domino effect this would have on other banks. The Bank of Ireland's move has also angered hedge funds. The bank has responded that the Irish government may have to increase its stake to 87% if bond holders do not accept the proposals. 

Just over a week ago Irish Life & Permanent and EBS building society also said they would impose losses equivalent to around 80% to 90% of the face value of some €1.1 billion in junior bonds. ‘These financial institutions are remaining solvent due to the ongoing overwhelming financial support of the state,’ said Noonan. ‘Without this support subordinated bondholders' entire investment would have been irrecoverable.’

 

Lehman Trustee Beats Barclays Over $2.05 Billion in Disputed Account

judge on Monday ruled in favor of the trustee overseeing the liquidation of Lehman Brothers Holdings Inc.'s U.S. brokerage business in the trustee's multibillion-dollar fight with Barclays PLC, calling for all of the money in a disputed account to go to the trustee.

Judge James Peck of U.S. Bankruptcy Court in Manhattan said all $2.054 billion in a so-called margin account must go to the trustee from Barclays, as the trustee argued in court papers following the judge's February ruling as part of the bigger "secret discount" lawsuit, in which Barclays otherwise prevailed.

Barclays, which said it will appeal the ruling, had argued that it should keep about $1.5 billion assets in the account, particularly government-issued securities with maturities of more than three months. The trustee, James W. Giddens, also plans to go after an additional $1.9 billion being held by third parties.

"Today's bench ruling brings finality to this issue by confirming that the $4 billion in Lehman cash and other margin assets belong to the trustee," said Hughes Hubbard & Reed LLP's William Maguire, a lawyer for the trustee.

Judge Peck quoted a statement from the trustee's prior arguments about the fact that Barclays never brought up the government securities during the 34-day trial. "The trial was a fight about margin and it was very clearly a fight about all the margin," placing his emphasis on the word "all." "That was clearly a correct statement."

The judge did rule against the trustee's contention that Barclays should pay about 9% interest on the assets it is recovering, instead calling for a rate of 5%—the rate in September 2008, when Lehman was collapsing.

Lehman last year sued Barclays for billions of dollars, accusing the British bank of negotiating a discount not adequately disclosed to the court when it bought Lehman's broker-dealer unit in 2008. Barclays argued in the months-long trial that both sides negotiated in good faith, and the deal, approved by Judge Peck just days after the investment bank collapsed into bankruptcy, was Lehman's best option.

Lehman pressed its case that in the tumultuous days of September 2008, when Barclays was finalizing its purchase of Lehman's brokerage, Barclays scrambled for more assets and negotiated with some Lehman executives a $5 billion discount. Lehman said its bankruptcy attorney, Weil, Gotshal & Manges partner Harvey Miller, and other Lehman representatives weren't informed of the discount and neither was Peck. Lehman sought to recover what it called more than $11 billion in ill-gotten gains by Barclays.

In his ruling, Judge Peck wrote at several points about the "clarification letter" that became a focal point of the case. Judge Peck agreed at the time of the sale that the letter should be drafted to address several complications and list some assets moving over from Lehman to Barclays. On several occasions throughout Lehman's bankruptcy and the Barclays trial, Judge Peck emphasized he had never approved the actual letter.

But in his ruling, Judge Peck agreed with a key Barclays argument about the letter, saying, "While not expressly approved in so many words, the clarification letter is deemed approved" by the fact that it was known that it would be drafted, and that no party objected to it in court.

While Lehman fought to prove the discount, the trustee disputed the transfer of assets in the margin account and other accounts.

 

British banks’ lenience to struggling customers may be disguising the dangers the institutions face

 

Lender forbearance, where loans are extended or payments reduced, “may, in some cases, have masked the extent of risks, given the high indebtedness of the household and commercial real estate sectors,” said the Fund.
Just last week it emerged that the Financial Services Authority has accused banks of moving mortgage customers on to less strenuous terms to conceal bad debts.
The latest warning came as the IMF delivered a strong endorsement of the Government’s austerity plans on Monday, but laid out a clear Plan B of monetary easing and tax cuts in case of an emergency.
The “unexpected” weakness in growth and rise in inflation raises the question of whether it is time to adjust economic policies, said the global lender, as it performed its annual health-check on the UK economy.
However, despite cutting its growth forecast and raising its inflation expectations to reflect recent disappointments in the data, the Fund concluded:

 

bankrupt former director of Heathcroft Home Improvements has received a suspended jail sentence for defaulting on legally binding creditor agreements.

Peter Stephen Matthews of Suffolk was sentenced to three months imprisonment suspended for 12 months plus 180 community service by Cambridge Crown Court following an investigation and prosecution by The Insolvency Service and the Department for Business, Innovation and Skills.

He was also ordered to pay £5,000 in compensation.

Mr Matthews, who is already subject to a five-year Bankruptcy Restrictions Undertaking, was sentenced after pleading guilty to the removal of property after an order or judgement for money had been obtained, which remained unsatisfied at the date of bankruptcy. He spent money that should have been paid to his creditors, on a new car and on family holidays, among other things.

Mr Matthews was the director of Suffolk-based Heathcroft Home Improvements Ltd, through which he worked as a fitter.

The court heard that, after Heathcroft was wound up in 2009, Mr Matthews became liable for the company's debts as a result of personal guarantees that he had given to trade creditors. However, despite being served with a court judgement relating to these debts, he failed to pay these creditors following the sale of his family home. Instead, he transferred the money to his partner and the funds were never recovered.

The court heard that Matthews spent some of the money on advance rent and general living expenses for his family.

The court was shown bank statements revealing that Mr Matthews bought a car for £5,500 and paid £3,000 for holidays for various family members. The bank accounts also revealed numerous transactions between Matthews' account and a new business, HI Solutions, owned by his partner, through which he continued to provide his services as a window fitter. Funds were not used to satisfy either Matthews' trade or personal creditors.

As a consequence of his actions, Mr Matthews' creditors have lost out to the tune of almost £24,000.

Commenting on the case, Insolvency Service chief executive Stephen Speed said: "People genuinely struggling with debt who want to benefit from the debt relief arrangements offered by the insolvency regime must be prepared to declare all of their assets or face the penalty imposed on them. It is for the Official Receiver to decide which assets should be sold for the benefit of the creditors and which may be retained by the debtor."

Ian West, an investigator with the Department for Business, Innovation and Skills added: "We can and will investigate bankrupts, and where appropriate, take action when we find evidence of them deliberately acting to the detriment of their creditors".

 

Brown Publishing Co., the bankrupt former owner of Dan's Papers in the Hamptons, Wall Street's summer retreat, had its liquidation plan approved in federal court.

U.S. Bankruptcy Judge Dorothy Eisenberg said today in Central Islip, New York, that she will confirm the Chapter 11 plan after noting that creditors with unsecured claims who voted to approve it will recover a small amount of money.

"I'm surprised to find the numerous acceptances filed with this court," Eisenberg said at the conclusion of a more than five-hour hearing. "Apparently the creditors believe this is the best plan possible."

The Cincinnati-based company sold most of its assets last year for about $27 million. Brown Publishing's former top executives, including Chief Executive Officer Roy Brown, had submitted a winning bid at an auction, then dropped it because they "lacked the financial ability to close," according to court papers.

Brown Publishing's secured lenders, led by PNC Bank, made a bid based on the amount they were owed and won the assets. Dan's Papers, based in Bridgehampton, New York, was sold separately to Isis Venture Partners LLC.

Economic Recession

Brown Publishing filed for Chapter 11 creditor protection in April 2010, citing a decline in advertising revenue resulting from the economic recession. It then operated 15 daily and 32 weekly newspapers, as well as business publications and free shopping guides. The company listed $94 million of assets and $104.6 million of liabilities.

The liquidation plan included a settlement agreement between the committee of creditors with unsecured claims, the secured lenders and the debtor.

The committee had filed a complaint claiming that a $75 million secured loan to Brown Publishing in 2007 was a "fraudulent conveyance." In the settlement, the first-lien lenders will pay $1.32 million to a liquidating trust for the payment of unsecured claims and administrative expenses. The recovery on $38 million of general unsecured claims is estimated at 0.7 percent.

The principal objection at today's hearing was from Keith Evans, who had worked for Brown Publishing after it acquired his company. He sued the publisher in Texas state court and was in turn sued by the company in New York over claims for compensation. His lawyer, Patrick Collins, argued against an injunction in the plan that would prevent him from proceeding with his claims against Brown.

Eisenberg granted Evans's request to remove the injunction.

Greek entrepreneur behind Flyglobespan collapse declared bankrupt

ELIAS Elia, owner of the credit card company blamed for the collapse of Scottish airline Flyglobespan, has been declared bankrupt, Scotland on Sunday has learned.
The Greek Cypriot businessman ran E-Clear, a credit card processing firm based in Mayfair, London, which was accused of withholding £35 million from Flyglobespan and its parent company Globespan, which went to the wall in December 2009.

The collapse of the Edinburgh-headquartered airline left 4,500 passengers stranded at airports around Europe and North Africa, just as they hoped to get home for Christmas.

Around 80 per cent of customers were able to recover their funds through the Consumer Credit Act, ATOL and Visa scheme rules, but 550 staff, predominantly in Scotland, lost their jobs following the airline's demise.

E-Clear was pursued by administrators for Flyglobespan at PricewaterhouseCoopers for £35m worth of fares, which they claimed were not handed over to the travel giant.

The credit card processing firm met its own end in January 2010 after PwC filed a petition to force it into administration. E-Clear's administrators at BDO later unearthed debts of as much as £127m.

Elia was the subject of an investigation by the Serious Fraud Office last year, but was cleared amid "insufficient evidence to support a prosecution".

However, it has now emerged that he has been declared bankrupt and Ian Defty, a partner at Kingston Smith & Partners, has been appointed his trustee in bankruptcy. Defty was unavailable for comment last night, but another member of his team at the accountancy firm was able to confirm his appointment.

It is understood that credit card companies have repaid around £15m of the £35m pursued by PwC, but Flyglobespan administrators are still hunting for the remaining £20m. E-Clear acted as an intermediary between the airline and credit card companies.

Bruce Cartwright, head of business recovery at PwC in Scotland and joint administrator for Flyglobespan, said: "We are continuing to investigate a number of matters in relation to the administration of Globespan and we are in regular dialogue with the administrators of E-Clear. We note that the individual who owned and managed E-Clear has now been made bankrupt and we will be considering the implications of this in relation to Globespan."

Earlier this year it was reported that Elia was facing a High Court action by BDO. A spokeswoman for BDO said the action was still ongoing.

 

Former magistrate cleared of rape but facing bankruptcy

For seven years he had served as a magistrate, a pillar of the community handing down sentences in Southampton magistrates court.
So when Tony Hunt had a brief fling with a married colleague he knew that, although it might have been wrong, it was not against the law.
Little did he know that seven years later he would be accused of rape by that same woman – and his life would be turned upside down.
The "attack" was reported to police not by the alleged victim but by one of her friends, another colleague, who at the time was being investigated over disciplinary matters by Mr Hunt, then a senior traffic warden.
Hampshire police persuaded the "victim", a special constable with the force, to give evidence. Hunt was arrested, charged and found guilty of rape at Winchester crown court in 2003 for the "offence" in 1995. He was sentenced to four years in prison.

 

Luxury hotel chain puts sites on market for £200m

Some of the West's most stunning hotels have been put up for sale, six weeks after their parent company went into administration.

Thornbury Castle, The Royal Crescent Hotel in Bath and the Mount Somerset near Taunton are among the 26 hotels put up for sale by administrations of the Von Essen group.

They are being marketed for around £200 million by Christie & Co, who say the venues fall into the categories of classic, luxury family and country hotels.

A spokesman for the firm said: "Within the UK group are some of the most historic hotels in the world. The opportunity to own and operate such unique properties will not be repeated for generations and interest from UK and overseas buyers will be intense."

The company's managing director Chris Day said there have already been enquiries from potential operators.

"This collection of fine country house hotels offers a unique opportunity as a whole group or in parts to be added to similar hotel estates," he added.

"Given the history and international reputation of these hotels we anticipate considerable interest from potential buyers who have already been in contact to try and secure some or all of this famous collection of hotels."

Von Essen went into administration at the end of April and last month, six people working at the firm's headquarters in Peasedown St John lost their jobs.

One of its hotels, Hunstrete House, near Keynsham, has since gone out of business with 12 full-time members of staff losing their jobs.

The remaining hotels are still open for business.

They include Buckland Manor, Lower Slaughter Manor and Washbourne Court in the Cotswolds and the Greenway Spa Hotel in Cheltenham.

There is also Bishopstrow House in Warminster, and Moonfleet Manor, which overlooks Chesil Beach in Dorset.