Charitable and campaign donations given through the Rothstein Family Foundation, including $800,000 to Joe DiMaggio Children’s Hospital, $1 million to Holy Cross Hospital, and $90,000 to the Republican Party of Florida, which was already turned over to the U.S. government.

These recipients of Rothstein’s largess, mostly in Fort Lauderdale and Broward County may be exposed to and subject to The Bankruptcy Trustee’s power to recover and recapture payments made that can be traced as proceeds from the ill gotten funds. Various theories of law may be applied to achieve this result similar to those being considered in the Madoff case. Please related article in The South Florida Business Journal.

This is a classic example of how planning ahead and in particular how you are going to finance the restructuring of your capital structure is an imperative to a successful reorganization. CIT has been working on this specific issue for months.

CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in debt outstanding, said people familiar with the matter. The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured firm. The new debt would mature later than current debt, the impending maturity of which has posed a problem for CIT.

The plan sets up a potential showdown between bondholders with debt coming due soon and those whose debt does not come due for years. If the company doesn’t receive enough bondholder support, it plans to execute the restructuring in bankruptcy court, the people familiar with the situation said.

In a move smoothing its restructuring, the company recently said that it had persuaded billionaire investor Carl Icahn to support its prepackaged bankruptcy plan. Mr. Icahn, who wanted to push CIT into liquidation, failed to persuade other bondholders to derail CIT’s restructuring plan. Please see the link provided to the WSJ article.

One loser from a bankruptcy would be the U.S. Treasury. Late last year it injected $2.3 billion of funds from the Troubled Asset Relief Program to help stabilize the lender, which was weighed down by billions of dollars of bad student loans and subprime mortgages. The government investment is likely to be wiped out, said people familiar with the matter. Common shares would likely drop to zero, too, these people said. To learn more, read the article by  the Wall Street Journal or read the article posted on the New York Times website.

Chapter 11 bankruptcy reorganizations have emerged as the hottest venue for quickly buying, trading and breaking up companies.

Bankruptcy is built around the idea of reorganization where cash-strapped firms enter court and often spend, years paying off creditors and attracting new financing. Now, with that financing in short supply, companies are rushing to hash out deals in weeks and months. That is reshaping traditional deal making and restructuring. The number of prearranged bankruptcy plans – which receive significant creditor blessing before entering court should increase significantly in 2009. Meanwhile, the numbers of asset sales directly out of bankruptcy court are well ahead of last year’s pace.

For example Masonite International Inc., a debt-laden door maker once controlled by Kohlberg Kravis Roberts & Co., entered bankruptcy court in mid-March. Three months later it has new owners and virtually no debt.

‘The traditional stand-alone reorganization is on the endangered species list due to the lack of financing, so the acquisition in bankruptcy is much more prevalent now. General Motors Corp.’s fast-paced strategy to sell its desirable assets to a “New GM” while its more-onerous assets wind down in bankruptcy court.

So many situations are dire, like with retailers, that there need to be quick solutions; stakeholders have to have a reorganization plan in place even prior to the company’s Chapter 11 filing. Masonite chief executive has been quoted as saying the company is poised to use its clean balance sheet to make acquisitions. Whenever you can de-lever the way we have through Chapter 11, it clearly puts you in a position to be on the offensive.

In other cases, investors are acquiring company assets in so-called 363 bankruptcy sales, which are named after a section of the Bankruptcy Code. In such sales, companies quickly auction assets and leave many liabilities behind. That makes the assets attractive to new owners. These auctions can raise legal challenges, with sellers accused of using the sale as a substitute for a reorganization plan requiring creditors’ endorsement. But bankruptcy lawyers have generally cited such sales as “bulletproof,” because they are difficult to undo once approved by a judge.

Debt is the new equity. There are tremendous opportunities for investors to really take control of, or purchase, companies at a very good price.

This is not a good sign. The Sun Sentinel did not indicate whether the NexStore had filed for protection from creditors, bankruptcy, however this fact pattern is the classic pattern where bankruptcy, should be and is, a very valuable tool to assist the cash strapped business to get some relief.

To learn more about how to protect yourself from creditors and/or bankruptcy, contact me at 561-208-6383 or emailing me at info@sidneyturnerllc.com.

The debtors filed motions seeking approval to, among other things, continue using their prepetition cash management system, use the secured lenders’ cash collateral and obtain debtor-in-possession (“DIP”) financing. Prior to the filings, the SPEs and other GGP subsidiaries practice was to upstream their income to a commingled account (the “Main Operating Account”) from which the expenses of all subsidiaries were paid and intercompany loans were made. The debtors indicated that they kept track and record all upstreamed cash and intercompany loans.

Initially, the debtors proposed that a DIP loan would be made to GGP and GGP LP and guaranteed by the SPEs. Many of the SPE debtors’ secured lenders objected to the debtors’ motions. The secured lenders argued, among other things, that the debtors’ use of their cash collateral, the continuation of the cash management system and the court’s approval of the DIP loan would constitute a de facto substantive consolidation of the debtors’ estates and violate the terms of the SPE debtors’ organizational documents and/or loan documents.

The court rejected objections stating that approval of the DIP loan and the cash collateral motion did not result in a substantive consolidation of the debtors’ estates. In addition to approving the DIP loan, the court also approved the debtors’ cash collateral and cash management motions. While there are still important unresolved issues, the angst generated by the bankruptcy filings of the SPEs has abated, at least temporarily, because the court’s orders have respected the separateness of the SPEs.

A few secured lenders have moved to dismiss the cases of some of the SPEs for cause on the ground that they were filed in bad faith. The lenders argue that the loans made to these SPEs are not in default, that each property is generating cash flow that is more than sufficient to cover the debt service, property taxes and operating expenses, and that the loans will not mature for at least a year.

According to these lenders, its respective SPE debtor’s bankruptcy case was not filed for a legitimate reorganizational purpose. The motions to dismiss raise many of the same issues about the debtors’ bankruptcy-remote status. Additionally, one lender has argued that its SPE debtor’s case should be dismissed because the corporate resolutions that authorized its bankruptcy filing were ineffective under state law and the filing violated the SPE’s organizational documents. That lender is pursuing the facts relating to the formal requirements of the bankruptcy filing, including the identity of any independent directors who consented to the filing and whether they met the requirements to serve as independent directors