This blog publishes articles and updates focused on bankruptcy law, restructuring matters, creditor and debtor considerations, court decisions, and procedural developments that affect businesses and individuals navigating financial distress.

Content includes practical analysis of case outcomes, regulatory changes, and emerging trends, as well as perspectives from legal practitioners on how bankruptcy and insolvency issues are addressed in real-world scenarios.

October 2007

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Recent Developments

Merrill Lynch Comments On The Current U.S. Economy’s Striking Similarities To The Late 1980s

Merrill Lynch economists David Rosenberg and Neil Dutta have prepared a fascinating analysis comparing a number of current economic indicators with those from the late 1980s. (Hat tip to Brad Feld and Seth Levine.) You can view the report, entitled 1980s Redux?, by clicking on its title in this sentence.

Here are a few of their observations, which when combined with their startling side-by-side charts comparing the two cycles, make their point:

  • Inverted Yield Curve. "At the peak of the tightening cycle in the late 1980s, the Fed inverted the yield curve. It did the very same thing this time around. The yield curve leads by 5-6 quarters and was flashing economic stress signals a year-ago just as it did in the late 1980s."

  • Increase In Unemployment. "This expansion and the one in the late 1980s witness a dramatic tightening in labor markets and chronic shortages of skilled labor. [O]nce the unemployment rate hooks up from its low, a recession was not far behind."

  • Housing Market Deflation. "This cycle is also hauntingly similar to the 1980s because of what happened to the housing market. Years of massive credit extension, overbuilding and "new paradigm" thinking of housing as an asset class ultimately morphed into a massive excess inventory overhang, eroding credit quality and house price deflation. We are reliving that today, except the deflation is much broader and the credit issues far more complex and global in nature."

They also point out further similarities between the two periods, including that both had an LBO-financed M&A boom, a falling dollar, and a strong Asian stock market (then Japan, now China). These observations take on even more force when looking at their charts.

For companies, credit managers, and bankruptcy professionals trying to determine where the economy is headed, a look back to the economy of the late 1980s — which was followed by the recession of the early 1990s and a spike in Chapter 11 filings — might be a good starting point.

Business Bankruptcy Issues Recent Developments

A Fly In The Ointment: Sale Of Property May Cut Off Landlord’s Section 502(b)(6) Lease Rejection Claim For Future Rent

Here’s a scenario frequently seen in Chapter 11 cases. A tenant files bankruptcy and rejects a commercial real estate lease. The landlord files an unsecured lease rejection claim seeking to recover the lost future rent under the rejected lease. The claim amount is capped by Bankruptcy Code Section 502(b)(6) but may still be one of the larger unsecured claims in the case. Now let’s add a small, but relatively common, twist. Sometime later, but before distributions are made on the claim, the landlord sells the real estate that the debtor had occupied under the rejected lease.

The FLYi Chapter 11 Case. That, complete with the twist, was the situation in the In re FLYi, Inc. Chapter 11 case pending in the Delaware Bankruptcy Court. After the landlord sold the property, the liquidation trust established under the debtor’s Chapter 11 plan of reorganization objected to the landlord’s claim, arguing that after the sale of the property the debtor had no further obligations under the lease. Virginia law applied because the property was located in Dulles, Virginia. As described by the Bankruptcy Court, the landlord had three options under Virginia law:

[D]o nothing and sue for the rent remaining under the Lease; reenter the Premises for the sole purpose of re-letting it without terminating the Lease; or re-enter the Premises and exercise full dominion over the premises thereby terminating the Lease and eliminating FLYi’s obligation to pay any future rent.

The landlord argued that this interpretation of the law was wrong but asserted that provisions in the lease protected the landlord’s claim anyway. The Bankruptcy Court rejected those arguments and held that the landlord’s sale of the property terminated both the lease and the landlord’s right to future rent after the date of the sale. A copy of the Bankruptcy Court’s decision is available here.

Be sure to read the Delaware Business Bankruptcy Report’s interesting discussion for more details on the decision, including the arguments advanced and the Bankruptcy Court’s treatment of them.

What Does This Mean For Landlords? A landlord contemplating a sale of the real property will have to consider what impact that sale might have on its lease rejection claim.

  • In states like Virginia where, according to the Bankruptcy Court in the FLYi case, termination of a lease cuts off a landlord’s claim for future rent, landlords will have to be prepared to lose all or a portion of a lease rejection claim if they sell the real property. 
  • The outcome may be different in other states. Section 1951.2 of the California Civil Code, for example, expressly permits a landlord, upon termination of a lease, to recover the present value of the difference between the unpaid future rent under the lease and the amount of rent that could reasonably be avoided through mitigation efforts. This may permit a landlord to sell the property and still retain a lease rejection claim.
  • When state law allows it, landlords may seek to include provisions in a lease to preserve contractually the right to a post-sale lease damages claim.

What Does This Mean For Bankruptcy Estates? Debtors, liquidation trusts, and other estate representatives may have an incentive to determine whether the landlord still owns the property. In states where a post-rejection sale of the property operates to cut off the landlord’s future rent claim, this fact could provide a new ground for an objection to the landlord’s Section 502(b)(6) claim.

Conclusion. Time will tell how frequently this scenario will play out in future cases, but landlords should expect to see the "did you sell the property" question asked more often going forward.

Business Bankruptcy Issues Recent Developments

New Article Tackles Whether Unsecured Creditors Should Be Able To Recover Post-Petition Attorney’s Fees, The Question Left Open By The Travelers Decision

When the U.S. Supreme Court overruled the Ninth Circuit’s so-called Fobian rule in the Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co. decision (available here) in March 2007, it left for another day the question of whether unsecured creditors could recover, as part of their unsecured claims, post-petition attorney’s fees incurred during the course of the bankruptcy case.

Early Decisions Take Different Views. Since the Travelers decision, two bankruptcy courts have issued decisions but have come to different conclusions on that question. 

  • In May 2007, in the In re Qmect, Inc. decision (available here), the U.S. Bankruptcy Court for the Northern District of California held that unsecured creditors could recover post-petition attorney’s fees. For more on that decision, see this earlier post on the case and its analysis. 
  • In July 2007, in the In re Electric Machinery Enterprises, Inc. case (available here), the U.S. Bankruptcy Court for the Middle District of Florida came to the opposite conclusion, following a majority of courts that had addressed this issue unrestrained by the Ninth Circuit’s Fobian decision. See this previous post for more on the Florida decision.

New Article Sides With Majority View. A new article to be published in the Winter 2007 issue of the American Bankruptcy Institute Law Review, gives context for these differing views and argues that the majority position is the correct one. The article, entitled "Interpreting Bankruptcy Code Sections 502 and 506: Post-Petition Attorneys’ Fees in a Post-Travelers World," was written by Professor Mark S. Scarberry, Professor of Law at the Pepperdine University School of Law. Professor Scarberry is the current Robert M. Zinman Scholar in Residence at the American Bankruptcy Institute. A copy of the article is available for download from the Social Science Research Network website by following this link.

A Textual Argument. The centerpiece of the article is Professor Scarberry’s interesting analysis of the interplay between Sections 502(b) and 506 of the Bankruptcy Code and the textual argument he advances to support the majority view.

  • A key building block of this argument is his conclusion that the language in Section 502(b), which provides that a claim is to be allowed in an amount "as of the date of the filing of the petition," precludes inclusion of post-petition amounts as part of the Section 502(b) claim allowance. 
  • He then argues that Section 506(b)’s function is to add post-petition interest and "reasonable fees, costs, and charges" to this Section 502(b) allowed amount but only for secured claims (determined under Section 506(a)) and only when the value of a secured creditor’s collateral exceeds the allowed amount of the claim, determined under Section 506(a).
  • He contends that Section 506(b)’s use of the phrase "there shall be allowed" demonstrates that its purpose is to allow amounts not otherwise allowable under Section 502(b).

The Debate Continues. Professor Scarberry’s article is an excellent resource for those seeking to understand the history and background of this issue. It also provides debtors, creditors committees, and their attorneys with arguments to oppose an unsecured creditor’s attempt to recover post-petition attorney’s fees. The issue, however, remains far from settled in the courts. 

  • The majority view, now bolstered by the arguments in Professor Scarberry’s article, will probably prevail in many cases.
  • Still, the In re Qmect decision shows that at least some courts may allow these fees.

Until this issue is resolved by the Supreme Court, or at least by more Courts of Appeals, unsecured creditors with a contractual or nonbankruptcy statutory right to attorney’s fees may try their luck and seek allowance of post-petition attorney’s fees in bankruptcy cases as part of their unsecured claims.

Business Bankruptcy Issues

The Terrible Twos? A Look At BAPCPA’s Impact On Business Bankruptcy Cases At Its Second Anniversary

Tomorrow, October 17, 2007, marks the second anniversary of the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, known as BAPCPA.  BAPCPA was enacted primarily to make sweeping changes to the consumer provisions of the Bankruptcy Code. However, BAPCPA also made significant revisions in the business bankruptcy arena.  When it was passed, bankruptcy lawyers, creditors, and potential debtors had many questions about how these changes would play out as new cases made their way through the system. Two years out, we now have answers to some of those questions.

In this post I’ll look at a few of BAPCPA’s more substantial revisions and how courts have addressed them so far. These include new rules governing real estate leases, reclamation, the "20 day goods" administrative claim, key employee retention plans, cross-border bankruptcy cases, and an important preference defense. As we walk down memory lane, I’ll also point you to earlier posts where you can find more details on these issues.

Commercial Real Estate Leases. Under BAPCPA, if the debtor is the tenant under an unexpired commercial lease, it must either assume or reject the lease within 120 days of the filing of bankruptcy. The court can extend this time period without the landlord’s consent for 90 additional days, making a total of 210 days, but any further extensions require the landlord’s prior written consent. If the lease is not assumed (or assumed and assigned) within this period, the lease automatically will be deemed rejected and the debtor will have to move out. 

  • Before BAPCPA, debtors initially had only 60 days to assume or reject leases but there was no statutory limit on extensions of that period. Cumulative extensions of a year or more, over a landlord’s objection, were not uncommon under the pre-BAPCPA version of the Bankruptcy Code. That is no longer possible under BAPCPA.
  • Below market leases can represent a significant asset, particularly for retailers with many store leases, and BAPCPA has forced these debtors to move very quickly to assume and assign leases or to sell designation rights to make the most of the 210 day maximum period. In a number of cases, this 210 day limit has depressed the value of the debtor’s leases and the recovery for its creditors.
  • For more on real estate leases, you may want to read "Commercial Real Estate Leases: How Are They Treated In Bankruptcy?" previously posted on this blog.

Reclamation. When a debtor becomes insolvent or files bankruptcy, some vendors may be able to take advantage of a special, although limited, right to get back or "reclaim" certain of the goods. This reclamation right is part of both the Uniform Commercial Code and the Bankruptcy Code. BAPCPA made some changes in the reclamation area and post-BAPCPA cases have put some meat on the bones of those changes. A new, 45-day bankruptcy reclamation right was added to Section 546(c) of the Bankruptcy Code, expanding the Uniform Commercial Code’s 10-day rule. Under BAPCPA, the goods must have been sold in the "ordinary course" of the vendor’s business and the debtor must have received the goods while insolvent. The reclamation demand must be in writing and made within 45 days of the receipt of the goods by the customer (now the debtor in bankruptcy).  If the 45-day period expires after the bankruptcy case is filed, the vendor must make the reclamation demand within 20 days after the bankruptcy filing.

Two decisions from earlier this year have helped clarify the impact, and highlight the limitations, of BAPCPA’s reclamation changes.

  • In January 2007, Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware refused to issue a temporary restraining order in favor of a reclamation claimant in the Advanced Marketing Services case who sought to prevent the sale of goods it was trying to reclaim. The Court cited the superior rights of the secured creditor, which had a lien on the goods. A discussion of the case and a copy of the Court’s decision is available at this earlier post.
  • Then, in April 2007, Judge Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York applied the "prior lien defense" in favor of a secured creditor by valuing all reclamation claims in the Dana Corporation case at zero. You can find a discussion of that case and a copy of the decision at this previous post.

The "20 Day Goods" Administrative Claim. Although the post-BAPCPA decisions have not been favorable to vendors in the reclamation area, recent developments have underscored the value of the new Section 503(b)(9) administrative claim. That new provision, added by BAPCPA, gives vendors an administrative priority claim for "the value of any goods received by the debtor within 20 days before" the date a bankruptcy petition was filed "in which the goods have been sold to the debtor in the ordinary course of such debtor’s business."  For an overview of the new provision, you may find the post entitled "20 Day Goods: New Administrative Claim For Goods Sold Just Before Bankruptcy," of interest.

Key Employee Retention Plans. One of BAPCPA’s most notable changes was the significant restrictions imposed on key employee retention plans, known as KERPs. Prior to BAPCPA, KERPs were a very popular way of making sure that a company could retain its most important officers and employees to guide it through bankruptcy. Citing perceived abuses, however, Congress added language in BAPCPA that requires debtors to satisfy nearly impossible standards before courts would be permitted to approve payment of retention bonuses (or severance payments) as administrative claims to officers and other insiders of a bankrupt company. In short, a debtor would have to show that the individual was essential the the survival of the business and that he or she had a bona fide job offer from another business at the same or greater rate of compensation.

Debtors looking to compensate key officers have moved away from retention plans entirely and instead have turned to incentive plans. 

  • Several courts have approved incentive plans covering insiders but have applied certain factors to judge the reasonableness of the plan, including an assessment of the relationship between the plan and the results to be obtained, the cost of the plan, and whether the plan’s overall scope is fair and reasonable.
  • In May 2007, the Delaware Bankruptcy Court even approved a downward adjustment to an incentive plan’s targets, permitting a bonus to be paid to insiders, when the original plan’s targets turned out to be unrealistic. 
  • For more on this topic, including copies of three significant decisions in the Dana Corporation, Global Home Products, and Nellson Nutraceuticals cases, follow the link to this earlier post on key employee incentive plans.

Chapter 15 On Cross-Border Bankruptcies. BAPCPA added a new chapter to the Bankruptcy Code to adopt an internationally drafted Model Law on Cross-Border Insolvency.  Chapter 15 is used principally by representatives of, or creditors in, foreign insolvency proceedings to obtain assistance in the United States, by a debtor or others seeking to obtain assistance in a foreign country regarding a bankruptcy case in the United States, or when both a foreign proceeding and a bankruptcy case in the United States are pending with respect to the same debtor. Follow the link in this sentence for a detailed overview of Chapter 15.

  • In a recent case involving two Bear Stearns hedge funds, the Bankruptcy Court in the Southern District of New York refused to recognize proceedings pending in the Cayman Islands as either a foreign main or foreign nonmain proceeding, denying those entities Chapter 15 protection in the United States.
  • You can find the details on this case (and a copy of the original and amended decisions) here and here.

Preferences. Before it took effect, one of BAPCPA’s most talked about changes was a revision to the "ordinary course of business" defense to preference claims. BAPCPA dropped the requirement that a preference defendant establish that a transfer was both (i) made in the ordinary course of business or financial affairs between the debtor and the defendant and (ii) made according to ordinary business terms.

  • BAPCPA’s main change was to replace the "and" with an "or", meaning that a preference defendant now has to establish only one of the two prongs (instead of both) to prevail on the defense. When it was enacted, many bankruptcy lawyers believed this change would favor preference defendants. 
  • In something of a surprise, however, the first case interpreting the revised statute applied a brand new standard to the "ordinary business terms" provision. Unlike the prior analysis of that prong, the new standard examined the question from the perspective of both the creditor (as had been done pre-BAPCPA) and the debtor (the new BAPCPA twist). As a result, in that decision the preference defendant lost. For more on the decision, in the In re National Gas Distributors, LLC case, check out this post on David Rosendorf’s BAPCPA Blog.
  • There have been surprisingly few cases interpreting this section, so it remains to be seen whether other courts will follow the National Gas Distributors interpretation.

Another Great BAPCPA Resource. In addition to the BAPCPA Blog, which has posts on many decisions from BAPCPA’s first year, don’t miss Steve Jakubowski’s Bankruptcy Litigation Blog, in particular his BAPCPA and BAPCPA Outline topics. Steve has posted on a range of BAPCPA issues, including major consumer decisions and many business bankruptcy decisions.

Acting Like A Two Year Old? As we begin the third year under BAPCPA, the law is beginning to take early steps toward greater clarity in some areas but much remains to be decided. In particular, few appellate decisions have been issued on BAPCPA’s key changes, giving us little guidance on how the Courts of Appeals will interpret the new law.  As always, stay tuned for more developments and feel free to subscribe to the blog by email or by RSS to your feedreader.

Business Bankruptcy Issues Recent Developments The Financially Troubled Company

The Bull Rips A Hole In The Matador’s Cape: New Ninth Circuit Decision Limits Reach Of Section 502(b)(6)’s Landlord Cap

A commercial real estate lease often represents the largest single liability of many debtors. For retailers, which typically have scores or even hundreds of store leases, the liability involved is orders of magnitude larger. It’s fair to say that the management of lease obligations can be of enormous consequence to debtors, landlords, and other creditors in Chapter 11 bankruptcy cases.

Rejected Leases And The Capped Claim. As explained in an earlier post on how commercial real estate leases are treated in bankruptcy, one of a debtor’s options in a Chapter 11 case is to reject uneconomic or otherwise burdensome leases, terminating the debtor’s obligation to pay rent and turning the landlord’s claim for termination of the lease into a prepetition claim. Section 502(b)(6) of the Bankruptcy Code goes further and caps the landlord’s prepetition rejection claim at an amount equal to the greater of (1) one year’s rent or (2) fifteen percent of the remaining lease term, up to a maximum of three years’ worth of rent. The starting date for calculating the claim is the earlier of the date when the bankruptcy petition was filed or when the landlord recovered possession of, or the tenant surrendered, the premises. A landlord with six years left on a rejected lease, for example, would have its claim capped at one year’s worth of rent.

What’s Covered By The Cap? This ability to cap a landlord’s claim in bankruptcy can be a major benefit to debtor tenants. Ever since a 1995 decision by the Bankruptcy Appellate Panel (BAP) of the Ninth Circuit in In re McSheridan, 184 B.R. 91 (B.A.P. 9th Cir. 1995), debtors have been successful in many cases in capping a variety of claims by landlords. In McSheridan, the BAP held that the cap applied to all damages for the lessee’s nonperformance of the lease, not just to claims based on future rent. Landlords have challenged that analysis but, at least in the Ninth Circuit, have had little success — until this week.

The Ninth Circuit’s El Toro Decision. In an eight-page opinion (available here) issued on October 1, 2007 in the In re El Toro Materials Company, Inc. Chapter 11 case,, the U.S. Court of Appeals for the Ninth Circuit took a very different view of the landlord cap under Section 502(b)(6). In the El Toro case, the debtor was a mining company that leased property from the Saddleback Community Church, paying $28,000 per month in rent. After the lease was rejected, Saddleback brought an adversary proceeding against El Toro for $23 million in damages alleging that El Toro left a million tons of wet clay "goo," mining equipment, and other materials on the property.

  • The bankruptcy court held that Saddleback’s claim, which asserted waste, nuisance, and other tort theories, would not be limited by the Section 502(b)(6) cap. 
  • Following its McSheridan precedent, the BAP reversed and held that any damages would be subject to the cap. 
  • Interestingly, two of the three judges on the BAP panel filed concurring opinions, voicing doubts about the wisdom of the McSheridan case. A copy of the BAP’s unpublished El Toro decision from July 2005 is available here.

Judge Kozinski’s Analysis. On appeal, the Ninth Circuit reversed the BAP’s decision, holding that the cap did not apply to the landlord’s tort claims. Judge Alex Kozinski authored the opinion and analyzed the key issues this way:

The structure of the cap—measured as a fraction of the remaining term—suggests that damages other than those based on a loss of future rental income are not subject to the cap. It makes sense to cap damages for lost rental income based on the amount of expected rent: Landlords may have the ability to mitigate their damages by re-leasing or selling the premises, but will suffer injury in proportion to the value of their lost rent in the meantime. In contrast, collateral damages are likely to bear only a weak correlation to the amount of rent: A tenant may cause a lot of damage to a premises leased cheaply, or cause little damage to premises underlying an expensive leasehold.

One major purpose of bankruptcy law is to allow creditors to receive an aliquot share of the estate to settle their debts. Metering these collateral damages by the amount of the rent would be inconsistent with the goal of providing compensation to each creditor in proportion with what it is owed. Landlords in future cases may have significant claims for both lost rental income and for breach of other provisions of the lease. To limit their recovery for collateral damages only to a portion of their lost rent would leave landlords in a materially worse position than other creditors. In contrast, capping rent claims but allowing uncapped claims for collateral damage to the rented premises will follow congressional intent by preventing a potentially overwhelming claim for lost rent from draining the estate, while putting landlords on equal footing with other creditors for their collateral claims.

The statutory language supports this interpretation. The cap applies to damages “resulting from” the rejection of the lease. 11 U.S.C. § 502(b)(6). Saddleback’s claims for waste, nuisance and trespass do not result from the rejection of the lease—they result from the pile of dirt allegedly left on the property. Rejection of the lease may or may not have triggered Saddleback’s ability to sue for the alleged damages.But the harm to Saddleback’s property existed whether or not the lease was rejected. A simple test reveals whether the damages result from the rejection of the lease: Assuming all other conditions remain constant, would the landlord have the same claim against the tenant if the tenant were to assume the lease rather than rejecting it? Here, Saddleback would still have the same claim it brings today had El Toro accepted the lease and committed to finish its term: The pile of dirt would still be allegedly trespassing on Saddleback’s land and Saddleback still would have the same basis for its theories of nuisance, waste and breach of contract. The million-ton heap of dirt was not put there by the rejection of the lease—it was put there by the actions and inactions of El Toro in preparing to turn over the site.

(Footnotes omitted.)

McSheridan Holding Overruled. The Ninth Circuit opinion noted the two concurrences from the BAP decision questioning McSheridan and suggested that the BAP consider adopting an en banc procedure to reconsider such doubtful precedents. Given the Ninth Circuit’s holding, it will come as no surprise that the Court of Appeals also explicitly overruled McSheridan:

To the extent that McSheridan holds section 502(b)(6) to be a limit on tort claims other than those based on lost rent, rent-like payments or other damages directly arising from a tenant’s failure to complete a lease term, it is overruled.

The Ninth Circuit noted that McSheridan also holds that "damages flowing from the failure of a party that has rejected a lease to perform future routine repairs or pay utility bills are capped," but declined to address — or overrule — that holding.

Post-El Toro Ramifications.  At least in the Ninth Circuit, with McSheridan overruled landlords will work hard to characterize their damage claims as arising from tort theories or otherwise not being based on "lost rent, rent-like payments or other damages directly arising from a tenant’s failure to complete the lease term." At the negotiation stage, when the market permits landlords may demand larger security deposits and letters of credit on the view that the Section 502(b)(6) cap no longer limits every type of damage recoverable against such security. They may also structure leases to separate claims for items such as clean-up costs, hazardous waste removal, property damage, and even tenant improvement repayments from rent claims, in an attempt to bolster the argument that these claims fall outside of the cap.

Conclusion. Like a bull charging a matador, the El Toro decision has ripped a hole in the Section 502(b)(6) cape previously used to turn away cap-busting landlord claims. Time will tell just how significant the decision turns out to be, but at first blush it seems that debtors and non-landlord creditors may be the ones who end up seeing red. 

Recent Developments

PIMCO’s Bill Gross On Home Prices, Changes In the Credit Markets, And Their Impact On The Fed’s Future Rate Decisions

Bill Gross, Managing Director at Pacific Investment Management Company LLC, known as PIMCO, has some interesting comments on the credit markets, housing prices, the economy, and how the Federal Reserve should respond. In his October 2007 Investment Outlook newsletter, he offers several cogent observations:

  • "The modern financial complex has morphed into something unrecognizable to many astute market veterans and academics."
  • National housing prices are expected to decline 10% to 15% over the next several years.
  • Home prices have a more significant impact on consumer spending habits and confidence than do stock prices.
  • Fed policy should move rates up like an escalator (25 basis point increases) but down like an elevator (50 basis point cuts).
  • "A U.S. Fed easing cycle historically has required a destination of 1% real short rates or lower. Under a conservative assumption of 2½% inflation, that implies Fed Funds at 3¾% or so over the next 6-12 months."
  • Rate cuts "will likely be interrupted by false hopes of a housing bottom, fears of a dollar crisis, or misinterpreted one month’s signs of employment gains and faux economic strength."
  • "The downward path of home prices, however, will dominate Fed policy over the next several years as will the lingering unwind of related financial structures and derivatives that have yet to be discovered by the public, and marked to market by their conduit holders."

Those tracking how the direction of the economy may impact the level of future Chapter 11 bankruptcy filings will find the entire Investment Outlook well worth reading.