Do you need a financial planner?

If you have questions regarding your finances, investments, taxes, or retirement, speaking with a financial planner can provide the answers you need. A certified financial planner (CFP) can help you organize your personal finances and establish a retirement plan. They can also help you make sense of financial problems, whenever they may arise.

Most respectable planners will advise you if they think you can handle your finances on your own. However, you cant always count on them to turn you away, which is why weve covered some of the top reasons to hire a financial planner, as well as what to expect once you hire them.

1. You Need to Change Your Retirement Plan

Whether you are changing your retirement plan, or havent started planning at all yet, a financial planner can assist. They can help you develop a plan for financial security both now and into retirement. If you need to save more, they can help you develop a solid plan to increase your savings and contributions. That said, many people are comfortable planning for their own retirement, and if youre investment-savvy enough to do so on your own, a financial planner may be unnecessary.

Peabody Energy’s Senior Unsecured Debt Can Be Undermined By Secured Lenders

Under a full conversion of 2018 unsecured debt into equity, the interest coverage ratio will not improve significantly enough to provide a large margin of safety.

EBITDA must improve by a lot over the next two quarters or a major restructuring must happen to keep secured lenders at bay.

Many different things must go right for unsecured debt holders to profit and there are many more things that can go wrong than right in todays situation.

Climate Change and Financial Stability: Which Risk Is Most Critical?

Which risk posed by climate change to financial stability is the most critical for investors?

Its a complex but pertinent question, especially in the wake of the COP21 deal reached in Paris by almost 200 nations. Before we attempt to answer it, lets first achieve some clarity on the meaning of financial stability and the risks climate change poses to it.

What Is Financial Stability?

Financial stability is a favorite term of central banks. So how do they define it?

According to the European Central Bank (ECB), Financial stability can be defined as a condition in which the financial system — intermediaries, markets and market infrastructures — can withstand shocks without major disruption in financial intermediation and in the effective allocation of savings to productive investment.

The Bundesbank defines financial stability as the financial systems ability to perform its key macroeconomic functions, and particularly so in periods of stress and upheaval.

The Bank of Japan (BOJ) says that financial stability refers to a state in which the financial system functions properly, and participants, such as firms and individuals, have confidence in the system.”

While the central banks each put it differently, the various definitions are consistent with an intuitive understanding: You have financial stability when financial systems can, by and large, continue to function despite shocks.

How Does Climate Change Threaten Financial Stability?

Mark Carney, the governor of the Bank of England, explained how he thinks climate change could affect financial stability in Breaking the Tragedy of the Horizon — Climate Change and Financial Stability, a speech he gave at Lloyds of London in September 2015:

There are three broad channels through which climate change can affect financial stability:

  • First, physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade;
  • Second, liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible. Such claims could come decades in the future, but have the potential to hit carbon extractors and emitters — and, if they have liability cover, their insurers — the hardest;
  • Finally, transition risks: the financial risks which could result from the process of adjustment towards a lower-carbon economy. Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent.

This gives us a good idea of how a central banker may view climate change risks and financial stability. But investors are going to be more worried about which of these three risks will affect them the most.

Poll: Transition Risk Tied with Physical Risk

We asked readers of CFA Institute Financial NewsBrief which type of risk is most critical for investors to consider. Among our 322 respondents, transition risk and physical risk each received 40%. In what may be disappointing news to those in the legal profession, liability risk came in a distant third (20%).

Regarding climate change and its potential impact on financial stability, which of the three risks identified by the governor of the Bank of England is the most critical for investors?

It is interesting that while climate change is strongly associated with the physical risks of floods and storms, transition risks are perceived as equally worrisome. What would explain that? The answer likely lies in the fact that financial markets operate based on the expectations of changes to come. And long-term investors need to take into account long-term trends, such as the transition to a low-carbon economy — a shift that may have more wide-ranging effects than climate change-induced natural disasters in the years ahead.

Many are expecting some sectors, such as coal energy, to suffer because of the growing pressure to reduce carbon emissions. At the same time, much is being written about companies that appear to be leading the transition. In an interview with CFA Institute, David Blood, co-founder of Generation Investment Management and former CEO of Goldman Sachs asset management, said that for long-term investors, when they debate hold or divest coal or tar sands assets, the answer will be divest. It’s a no-brainer. It is also a testament to the influence of transition risks that terms like stranded assets are finding their way into investment vocabulary.

Much can be said about the transition to a low carbon economy, but in short, it is a part of the broader move towards sustainability. In investing that means the integration of environmental, social, and governance (ESG) issues into traditional investment analysis and decision-making processes.

Final Word

No word resonates more with investment professionals than risk, and climate change is becoming the risk of the 21st century. As the threats posed to financial markets by climate change are understood with greater clarity, some investors seem to be taking note.

And if this survey is any indication, transition risk – as well as physical risk — should be at the front of their minds when they look at their portfolios.

If you would like to know more about how climate change relates to investing, considering reading Climate Change and Investment Decisions: Selected Reading. You may also be interested in Environmental Social amp; Governance Issues in Investments: A Guide for Investment Professionals, which was published by CFA Institute to offer a comprehensive introduction to ESG considerations in investing.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Getting It Perfect in Cross-border Financings: Cash Collateral


In addition to its geographical proximity to, and robust trading
partnership with, the US, a key reason Canada is perceived as a
favorable place for secured lending is that Canadian and American
laws of secured transactions share many commonalities. In fact,
Article 9 (Article 9) of the
Uniform Commercial Code (the
UCC) was the template for the
Personal Property Security Act (Ontario) (the
PPSA). Since then, all of the other
common law provinces and federal territories in Canada have enacted
their own personal property security legislation that is
substantially similar to the Ontario PPSA.1 As such,
most of the legal concepts and rules central to secured lending in
Canada are already familiar to US lenders.

It is critical, however, for US lenders operating in the
Canadian market to understand the key differences between the PPSA
and the UCC, as such differences can have serious consequences for
the validity, priority and perfection of their security interests.
One of these key differences currently receiving attention in
Canada concerns security in cash.

Security in Cash under Article 9: Perfection by Control

A secured lender#39;s security interest in cash needs to be
perfected in order to (i) notify future creditors of the debtor
that the secured lender has or may have a security interest in the
debtor#39;s cash, and (ii) protect its security interest against
competing claims to the cash made by the debtor#39;s trustee in
bankruptcy (if the debtor becomes bankrupt) or judgment
creditors.2 Under Article 9, a security interest in a
commercial deposit account3 may be perfected by
control. A secured party can obtain control in a
deposit account under Article 9 in one of three ways. First, the
secured party will automatically have control if it is the bank
that maintains the deposit account in the debtor#39;s
name.4 Second, where the secured party is not the
deposit bank, it can obtain control by entering into a control
agreement with the debtor and the deposit bank.5 A
control agreement is an agreement pursuant to which the deposit
bank agrees to comply with the secured party#39;s instructions
regarding the disposition of funds in the deposit account without
the debtor#39;s further consent. The third way in which a secured
party can obtain control in a deposit account is by becoming the
bank#39;s customer with respect to the deposit account, thereby
gaining the right to dispose of funds in the deposit

In the event of competition between multiple security interests
in the same deposit account, the priority rules set out in Section
9-327 of Article 9 apply, and a secured party perfected by control
prevails over competing secured parties who do not have
control.7 Where two security parties have control of a
deposit accountconceivable because control can be obtained
in three waysthey rank according to priority in time of
obtaining control, with first priority accorded to the secured
party who obtained control the earliest.8 Finally, if
the bank maintaining the deposit account has control, that bank
ranks in priority to all competing secured parties except for one
who becomes the bank#39;s customer with respect to that deposit

Security in Cash under the PPSA: Perfection by

Unlike Article 9, the PPSA does not include a control regime for
deposit accounts or other forms of cash as collateral. Rather, the
sole method available for perfecting security interests in cash
collateral is pursuant to registration in the PPSA registry. The
PPSA registration system is similar to the notice filing system
established by Article 9. A secured party files a financing
statement, which presents basic information about a security
agreement that the secured party did or will enter into, including
the names and addresses of the parties, a skeletal description of
the collateral (often no more than an indication of the collateral
classes), and the duration of the registration.10

From a secured lender#39;s perspective, perfection by registration
has several shortcomings as a method of perfecting a security
interest in cash as compared to perfection by control. Having
control of cash collateral in accordance with Article 9 provides a
secured lender with more certainty with respect to priority of its
security interest in such cash collateral. Conversely, the priority
rules in the PPSA with respect to cash collateral are complex and
contain numerous exceptions, which means, unlike perfection by
control as provided by Article 9, perfection by registration under
the PPSA does not guarantee the secured lender certainty with
respect to priority over competing secured parties. For example,
consider a situation where one secured party (Secured
Party A) holds a security interest in a deposit
account, and the credit balance in that deposit account represents
the proceeds of the sale of a piece of collateral that was subject
to a security interest in favour of another secured party
(Secured Party B). According to PPSA
rules, Secured Party B#39;s security interest could enjoy
super-priority over Secured Party A#39;s security interest in the
resulting cash collateral given by the debtor.11 In
other words, the priority rule that the secured party that is first
to register its security interest gains priority over all other
secured parties who register subsequently,12 which
generally governs competition among perfected security interests
under the PPSA, does not apply in these circumstances.13
For this reason, secured parties holding cash collateral cannot be
certain as to priority under the PPSA merely by perfecting their
security interests by registration. In contrast, the Article 9
control regime establishes much simpler priority rules for cash
collateral, capable of giving lenders with control of such
collateral assurance of priority over other secured lenders without

OBA Proposal for amendments to Ontario PPSA

The trend toward harmonization of Canadian and US law on
security in cash collateral appears to be gathering momentum. In
February 2012, the Ontario Bar Association submitted a proposal
(the OBA Proposal) to the government
of Ontario, recommending amendments to the PPSA to establish a
control regime for perfecting security interests in cash
collateral. The stated purpose of these proposed amendments is
to facilitate the use of cash … as collateral for loans and
other secured obligations.14 The OBA Proposal is
largely modeled on the Article 9 control regime.15

The OBA Proposal has become a significant impetus behind
legislative reform of the law on security in cash collateral in
Canada. In its 2012 budget working papers, the government of
Ontario announced, plans to propose legislative changes …
to make it easier for businesses and financial institutions to
provide or obtain a first priority security interest in cash
collateral.16 Unfortunately, when the official
budget was passed, it did not include the amendments proposed by
the OBA.17 A recent change to Quebec law,
however, furnishes another positive sign that Canadian lawmakers
are increasingly receptive to reforms that bring their secured
lending legislation into greater alignment with the UCC. On April
21, 2015, the Quebec government amended its Civil Code to
facilitate the perfection of security interests in cash collateral
by control in a manner similar to Article 9. This legislative
reform was referenced in Ontario by a panel of experts on the PPSA
who, once again, recommended the introduction of a control regime
to the PPSA with respect to cash collateral in order to harmonize
the PPSA with Article 9 as well as the provisions of Civil Code of
Quebec governing security interests in cash

Practical Considerations in the Meantime

Until the PPSA is actually amended to establish a control regime
with respect to cash collateral similar to Article 9, US secured
lenders into Canada need to understand and plan for the differences
between the current PPSA rules and Article 9 discussed above.
Lenders taking a security interest in cash collateral should: (a)
continue to register a PPSA financing statement against the debtor
in the appropriate PPSA jurisdiction, and (b) conduct PPSA searches
against the debtor in such jurisdiction and negotiate with those
secured parties with prior-perfected (and hence higher-ranking)
security interests in the same cash collateral for subordination,
waiver or estoppel agreements.

As an additional step, lenders should consider entering into a
deposit account control agreement (the
DACA) with the financial institution
that maintains the cash collateral in Canada, even though such an
agreement does not relate to perfection of a security interest in
most of Canada. Ideally, where the debtor is a US entity, the
DACA should expressly state that it shall be governed by US law
(for example, the law of the state of New York). This step assists
with issues arising from the differences between the conflict of
law rules in Article 9 and those in the PPSA. The PPSA conflict
rules provide that the law governing the validity, perfection and
priority of a security interest in intangible assets (such as a
deposit account) is determined by the debtor#39;s jurisdiction,
which is usually the location of the debtor#39;s chief executive
office.19 In contrast, the Article 9 conflict rule
points to the local law of [the] bank#39;s
jurisdiction.20 Consider the following situation:
a New York-based subsidiary of an Ontario borrower provides a
guarantee of the borrower#39;s indebtedness by granting to the
lender a security interest in a deposit account maintained by a
Toronto-based bank.21 The law governing the deposit
account would be New York law pursuant to the PPSA conflict rules
(since the debtor#39;s jurisdiction is New York), whereas the
Article 9 conflict rules would point to Ontario law as the
applicable law (since the deposit bank#39;s jurisdiction is
Ontario). This legal conundrum could potentially cause the
lender#39;s security interest in the deposit account to be found
unperfected, if the court held that New York law governed the
security interest and the lender had not perfected by control in
accordance with Article 9, or if the court applied Ontario law and
the lender had not perfected by registration under the PPSA.

To avoid the foregoing difficulties associated with conflict of
laws, the secured lender in the situation discussed above can enter
into a DACA with the deposit bank and the debtor, which expressly
provides that the governing law is New York law. Such
governing law provision has two salutary effects from
the secured party#39;s perspective. First, it precludes the courts
from applying the PPSA to determine the interpretation of the DACA
and the underlying deposit account. Second, the governing law
provision of a DACA determines the local law of [the]
bank#39;s jurisdiction for the purposes of Article 9
conflict of law rules.22 Thus, although the deposit bank
is located in Toronto, it is the law of New York, and not of
Ontario, that governs the perfection and priority of the
lender#39;s security interest in the deposit account. Therefore,
by entering into the DACA the lender achieves perfection by control
in accordance with Article 9. The challenge with this approach may
be in convincing a deposit bank based in Canada to enter into a
DACA governed by foreign law.


For secured lenders looking to globalize their business, Canada
is, and will likely remain, an attractive market. The similarities
between Canadian and US laws relating to secured lending provides
some comfort to lenders looking to engage in cross-border lending
deals between Canada and the US Nonetheless, US lenders should
take great care to understand the differences between the PPSA and
Article 9, especially those differences with respect to perfection
of security interests in cash collateral. Whereas Article 9
facilitates perfection by control, the PPSA currently does not and,
instead, requires registration in order to perfect security
interests in cash collateral. Such differences between the two
regimes can create difficulties for lenders, including the
uncertainty of priority and the conflict of laws issues discussed
above. Although there is a trend toward harmonizing Canadian law
with the UCC with respect to perfecting security interests in cash
collateral, it is unclear when the proposed reforms will be
legislated in Ontario or the other PPSA jurisdictions. In the
meantime, US secured lenders need to take the necessary steps in
perfecting their security interests in cash collateral in
cross-border deals.

1Ronald CC Cuming, Catherine Walsh, and
Roderick J. Wood, Personal Property Security Law, 2nd ed,
(Toronto: Irwin Law Inc., 2012) at 1.

2Cuming, Walsh and Wood, at 296.

3The Article 9 control regime does not apply to
consumer deposit accounts. See Ingrid Michelson Hillinger, David
Line Batty and Richard K. Brown, Deposit Accounts under the
New World Order (2002), 6 NC Banking Inst. 1, at 8.

4UCC sect; 9-104(a)(1).

5UCC sect; 9-104(a)(2).

6UCC sect; 9-104(a)(3).

7UCC sect; 9-327(1).

8UCC sect; 9-327(2).

9UCC sect; 9-327.

10Cuming, Walsh, and Wood, at 324.

11An example of a type of security interests
that have a super-priority status is the purchase money security
interest (PMSI). Pursuant to section 33 of the PPSA, a PMSI ranks
in priority to all other security interests in the same collateral
given by the same debtor. Personal Property Security Act
(Ontario), RSO 1990, c P10 [PPSA], s. 33.

12PPSA, s. 30(1).

13Robert M. Scavone, Cash Collateral
under the PPSA: the Case for Control, 53 Can. Bus. LJ 263
2012 at 271.

14Ontario Bar Association, Personal Property
Security Law Subcommittee, Perfecting Security Interests in
Cash Collateral, report submitted to The Ministry of Consumer
Services; and The Ministry of Finance, February 6, 2012 [OBA
Proposal] at 2.

15The OBA Proposal differs from the control
regime in Article 9 in the two respects. First, control is the only
method permitted under Article 9 for perfecting security interests
in deposit accounts as original collateral, whereas the OBA
proposal would enable a secured party to perfect such security
interest either by control, or by registration. See Ontario Bar
Association, Personal Property Security Law Subcommittee,
Cash Collateral Details of Proposal for Amendments to
Ontario PPSA, report submitted to The Ministry of Consumer
Services; and The Ministry of Finance, February 6, 2012 at 1.
Second, the scope of the control regime in Article 9 is limited by
the definition of deposit account, which excludes
investment property and accounts evidenced by an instrument, as
well as accounts maintained by any non-bank financial institution.
In contrast, the OBA Proposal uses a different term,
financial account, defined broadly to include not only
deposit accounts but also monetary obligations of non-bank
financial institutions related to any funds held by such financial
institutions as security. As a result, control under the OBA
Proposal is a method available for perfecting security interests in
all cash collateral arrangements involving a financial institution.
See OBA, Cash Collateral Details of Proposal for
Amendments to Ontario PPSA at 24.

16Ontario, Ministry of Finance, 2012
Ontario Budget: Budget Papers, (Toronto: Queen#39;s
Printer for Ontario, 2012) at 55.

17Strong Action for Ontario Act (Budget
Measures), 2012, SO 2012, c 8.

18The Business Law Agenda Stakeholder Panel, Business Law Agenda: Priority Findings amp;
Recommendations Report, June 2015.

19PPSA, s. 7(1).

20UCC sect; 9-304.

21Scavone at 273.

22UCC sect; 9-304(b)(2).

The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.

copy; McMillan LLP 2015

American Apparel’s ousted founder makes fresh bid to take over the company …

The power struggle between the ousted founder and now-bankrupt Los Angeles-based cloth retailer American Apparel Inc took a new turn after the founder Dov Charney announced the hiring of Cardinal Advisors LLC to regain its control and a fresh bid for take over. Charney founded the made-in-America clothing line in 1989. He was ousted in December 2014 after allegations of misconduct and financial failures.

Charney in a statement said, he is “exploring plans with investors and industry executives in an effort to develop a value-maximising solution for American Apparel, reports Middle Market.

“Charney is confident that new and existing investors, working with him and his team of industry leaders, would be able to realize significant long-term value for American Apparels stakeholders, a statement by Cardinal Advisors added.

The bankrupt company is now running the operations under a group of lenders including New York hedge fund Standard General LP. However, American apparel played down the ex founder’s move as a mere expression of interest.

“We can confirm that there is currently no transaction to consider and that Mr. Charney has submitted nothing more than an indication of interest,” an American Apparel representative said.

“American Apparel evaluates all indications of interest consistently, and in the ordinary course,” the spokesperson explained.

Bankruptcy plan

American Apparel filed a bankruptcy protection plea on Oct. 5 backed by a pre-arranged plan which proposes its takeover by the companys secured lenders, including Standard General, reports The Wall Street Journal.

Prior to bankruptcy, American Apparel underwent a series of setbacks including the ouster of Charney and a stark decline in year-over-year sales, by 17.4 percent and a series of store closures.

American Apparel announced store closures as part of the companys turnaround plan for implementing US$30 million (AU$42 million) led by cost-cutting initiatives and upgrading of the brands apparel lineup. After the exit of Charney, the brand also worked towards toning down the explicit sexiness in its advertising.

Charney strategy

Apparently, the founder has chosen an appropriate time to strike back. American Apparel is more attractive in the bankruptcy phase for acquisition, according to analysts. A confirmation hearing for American Apparels reorganisation plan with no role for Charney is coming up on Jan. 20, 2016. It shows Charney will have an uphill battle in winning back the company.

Charney made a big contribution in raising the visibility of the brand as a hip retailer known for its sexy, classic T-shirts and leggings. He was also admired for his commitment to manufacture in the US. But his leadership did not help in improving the company’s financial position.

Risk of reorganisation

The reorganization comes with a risk for all shareholders. It would exchange about US$200 million (AU$278 million) worth of debt for equity and erase the wealth of shareholders, including Charney, who is the largest stockholder.

The companys financial mess was massive. It lost US$65 million (AU$90 million) on US$385 million (AU$534 million) in sales for the nine months that ended on Sept. 30. American Apparel has 9,000 employees and runs more than 200 stores.

For feedback/comments, contact the writer at or let us know what you think below.

Ally Financial Partners with Beepi to Finance Used Cars

After revealing its plans to introduce limited direct originations in 2016 as part of its strategy to expand bank products, Ally Financial Inc. (ALLY – Snapshot Report) is now looking forward to offer consumer auto financing products for vehicles purchased on Beepi, an 18-month-old Internet-based used car retailer that delivers vehicles to buyers homes without a test drive.

With an aim to broaden the customer base, Ally auto financing products will be available to Beepi customers on nearly all makes and models. Through the new service, Ally Financial plans to capitalize on the shifting consumer trend towards online vehicle purchases. Ally and Beepi are also exploring other opportunities to expand their relationship.

Through Beepi, qualified customers across the credit spectrum are presented a finance option from Ally. Upon acceptance, the consumer finalizes the transaction with Beepi and completes their purchase.

At Ally, we realize the way consumers are shopping for and purchasing vehicles is evolving and were able to leverage our inherent digital capabilities to support this shift, said Tim Russi, president of auto finance at Ally. As a leader in the industry, Ally is well-positioned to provide a range of financial products to auto consumers, whether they purchase a vehicle at a traditional auto dealership, or through an online marketplace like Beepi.

As more and more customers are getting used to the idea of buying a used car online, Beepi plans to grow its presence in every major city. The Silicon Valley start-up is changing the way people buy and sell preowned vehicles by eliminating the hassles of visiting auto dealers to negotiate or take a test drive.

Ally Financial, which provides a full spectrum of financial products and services, such as leasing, insurance, remarketing, and used vehicle inventory, has been trying to expand its client base. The Detroit-based major auto lender, which is the former lending unit of General Motors Company (GM – Analyst Report), became the preferred financing source in the US for Mitsubishi Motors Corp. as well as luxury sports-car maker Aston Martin Lagonda Ltd. early this year to help expand sales.

Currently, Ally Financial carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same space are Credit Acceptance Corp. (CACC – Snapshot Report) and Cash America International, Inc. (CSH – Snapshot Report). While Credit Acceptance sports a Zacks Rank #1 (Strong Buy), Cash America International holds a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report gt;gt;

Treasury, Warren warn against GOP financial reg roll-backs

The US Treasury and Sen. Elizabeth Warren warned Monday that a slew of bills set to be considered by a House panel Tuesday would be a step toward another financial crisis.

By advancing legislation to change the governance of the council of regulators set up by the 2010 Dodd-Frank financial reform law, Congress is threatening to turn back the clock and potentially pave the way for a future crisis, Treasury official Patrick Pinschmidt wrote in an op-ed for CNBC.

Warren, the Massachusetts Democrat and prominent critic of Wall Street, wrote on her Facebook page that Republicans want to make it much harder for regulators to monitor huge financial institutions and prevent future economic meltdowns.

Democrats must stand strong and fight back Republican efforts to weaken oversight, Warren said.

Blog: A Holiday Present from the Third Circuit? The Court of Appeals Uphols a …

What better time than the holiday season to discuss gifting in the context of chapter 11 cases. Gifting commonly refers to the situation where a senior creditor pays (or allocates a portion of its collateral for the benefit of) one or more junior claimholders. Gifting is often employed as a tool to resolve the opposition of a junior class of creditors, who are typically out-of-the-money, to the manner in which the bankruptcy case is being administered. For instance, creditors committees may seek gifts from senior creditors to guarantee a recovery for general unsecured creditors in cases where a debtors administrative solvency or ability to confirm a chapter 11 plan are in doubt.

While gifting may provide flexibility in certain chapter 11 cases, some have argued that the technique runs afoul of the so-called absolute priority rule embodied in Section 1129 of the Bankruptcy Code. The absolute priority rule prohibits confirmation of a plan that provides for a distribution of property to junior creditors unless all senior creditors either receive the full value of their claims or consent to alternative treatment under the plan.

The Third Circuit Court of Appeals, whose rulings bind the Delaware bankruptcy courts in which a significant number of large chapter 11 cases are administered, first addressed gifting in 2005 in In re Armstrong World Industries, Inc. In that case, the plan provided that if one class of general unsecured creditors rejected the plan, then another class of general unsecured creditors (asbestos personal injury claimants), would receive, but immediately waive receipt of, certain warrants, which would then be issued to equityholders. While the Third Circuit concluded that such a plan violated the absolute priority rule, it reasoned that the carve out from the secured creditors collateral for the benefit of a junior claimant may not offend the absolute priority rule because the property belongs to the secured creditor, not the bankruptcy estate. Delaware bankruptcy courts have relied on Armstrong and other cases to permit gifting outside of a chapter 11 plan. This permits secured lenders and third-party purchasers to provide funds to general unsecured creditors where a recovery may not otherwise have been possible.

More recently, in September 2015, the Third Circuit confirmed that a gift made by a secured lender to junior creditors does not offend the absolute priority rule, at least under certain circumstances. In ICL Holding Company, Inc., the debtors senior lenders credit bid approximately 90% of their claims for the purchase of the company. The offer did not include any cash, though funds were escrowed to pay certain chapter 11 professionals. Two parties objected to the sale: (i) the creditors committee, which argued that the sale only benefited the secured lenders and would leave the estates administratively insolvent, and (ii) the United States Government, which argued that the sale would result in capital gains taxes of approximately $24 million, giving the United States an administrative claim that would go unpaid while other administrative claims (namely professional fees) would be paid in full. Before the court ruled on the objections, the creditors committee struck a deal, withdrawing its objection in exchange for a $3.5 million cash payment from the lenders for the benefit of general unsecured creditors. The debtors did not reach an agreement with the government.

The Bankruptcy and District Courts rejected the governments arguments, concluding that the funds set aside for general unsecured creditors and chapter 11 professionals were not property of the Debtors estates and therefore not subject to the absolute priority rule. In an opinion written by Judge Ambro, a former bankruptcy practitioner, the Third Circuit agreed with the lower courts. Judge Ambro reasoned that because the funds paid by the lenders to general unsecured creditors were not proceeds from the lenders liens, never belonged to the debtors, and would never become part of the debtors estate even as a pass-through, they were not property of the estates. The Third Circuit also held that the funds set aside to pay professional fees and other wind down costs were similarly not property of the estates, because any unused escrowed funds were to be returned to the lenders, not the estates.

While the ICL Holdings decision authorizes a gift from a senior lender to a junior creditor, the facts present a fairly easy case, and there is dicta in the opinion indicating that gifts effectuated through means unlike those at issue in ICL Holdings may be more problematic. Most notably, Judge Ambros opinion explains that a gift effectuated through a carve out of a secured lenders collateral for the benefit of a junior class would likely be a gift of property of the estate. Such a gift may still be permissible, but after ICL Holdings, it will be harder for courts in the Third Circuit to conclude that it does not implicate property of the estate.

[View source.]

Ophthalmology Times introduces Money Matters financial educational resource center

Ophthalmology Times and the Grande Financial Services Inc. are pleased to announce an addition to its continued collaboration. Together, we are launching this Money Matters Resource Center. This project is included as part of the Practice Management section of the publication.

Much of the information presented in this resource center is aimed to providing valuable financial educational information based on the many questions, planning, and interactions encountered over the years by working closely with ophthalmologists.

It is through these interactions that Grande Financial Services have gained the unique insights into the needs of physicians. Through this landing page, Grande Financial Services can address physicians concerns and needs, and be instrumental in keeping readers informed on important financial matters.

What readers can expect

Readers can expect timely monthly articles addressing a wide range of economic, financial, planning, and investment topics, as well as updated educational videos designed to assist physicians in their finances. These reports will include: Monthly Index Performance (Performance for major US indices); Semi-Annual Financial Outlooks (Strategists outline their thoughts on what investors might expect over the next six months); Monthly Market Commentary (Recap of how the Samp;P 500 performed for the month and the events that contributed to its performance); Asset Allocation Strategy (Flagship report covering investment and asset allocation strategy); Financial Planning Insights (Monthly articles covering a wide range of financial planning topics).

Grande Financial Services hopes the educational guidance presented through this resource center will help physicians who wish to formulate a realistic financial plan that will help them and their families.

Please check out the content offered in the Money Matters Resource Center at:

Physicians may also visit the Grande Financial Services website at for additional information, articles, newsletters, and financial calculators.

About Grande Financial Services

American Financial Growing on Startups, Buyouts, Launches

On Dec 17, 2015, we issued an updated research report on American Financial Group, Inc. (AFG – Analyst Report).

American Financial has been actively involved in startups, small to medium-sized acquisitions, and launch of products over the past decade. A solid capital base is helping the company to enhance its product and service portfolio apart from achieving double-digit returns on capital in specialty and casualty business.

The company is also aligning its business to brace up its operations and focus more on the annuity business.

The property and casualty insurer has been witnessing price strengthening. The last reported quarter marked the 16th straight quarter for the same. The company projects Property and Casualty renewal pricing to be either flat or to see a 2% rise in 2015. Also, stable loss cost trends offer the company a favorable long-term growth environment.

However, a prolonged low interest rate environment has affected the investment results of the company. Moreover, the companys earnings have traditionally been affected by catastrophes. Nonetheless, American Financial has been reporting better combined ratio than the industry average for the larger part of the last three decades. Specialty niche focus, product line diversification, stringent underwriting discipline and alignment of compensation incentives are expected to keep the trend alive.

Moreover, a low leveraged balance sheet, with good cash flow and interest coverage ratio helps the company to engage in shareholder-friendly moves.

American Financial posted lower-than-expected earnings in the third quarter of 2015 owing to lower core operating earnings at the Annuity segment. With respect to the surprise trend, the insurer posted positive surprises in three of last four quarters, with an average beat of 2.3%.

The Zacks Consensus Estimate for 2015 and 2016 is currently pegged at $5.52 and $5.65, respectively. These translate into a year-over-year increase of 14.5% for 2015 and 2.4% for 2016.

American Financial is a niche player in the property and casualty, and annuity markets. Improving industry fundamentals will drive overall growth. The expected long-term earnings growth for the stock is 8%

Zacks Rank

American Financial currently carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers are RLI Corp. (RLI – Analyst Report), Hallmark Financial Services Inc. (HALL – Snapshot Report) and Cincinnati Financial Corp. (CINF – Analyst Report). Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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