href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
January 5, 2009
name='1'>Obama Eyes $300 Billion Tax Cut
President-elect Barack Obama and congressional Democrats are crafting a
plan to offer about $300 billion of tax cuts to individuals and
businesses, a move aimed at attracting Republican support for an
economic-stimulus package and prodding companies to create jobs, the
Wall Street Journal reported today. The size of the proposed
tax cuts -- which would account for about 40 percent of a stimulus
package that could reach $775 billion over two years -- is greater than
many on both sides of the aisle in Congress had anticipated. It may make
it easier to win over Republicans who have stressed that any initiative
should rely more heavily on tax cuts rather than spending. The largest
piece of tax relief in the new plan would involve cuts for people who
pay income taxes or who claim the earned-income credit, a refund
designed to lessen the impact of payroll taxes on low- and
moderate-income workers. This component would serve as a down payment on
the 'Making Work Pay' proposal Obama outlined during his election
campaign, giving a credit of $500 per individual or $1,000 per
family.
href='http://online.wsj.com/article/SB123111279694652423.html'>Read
more. (Subscription required.)
As Vacant Office Space Grows, So Does
Lenders' Crisis
Vacancy rates in office buildings exceed 10 percent in virtually every
major city in the country and are rising rapidly, a sign of economic
distress that could lead to yet another wave of problems for troubled
lenders, the New York Times reported today. With job
cuts rampant and businesses retrenching, more empty space is expected
from New York to Chicago to Los Angeles in the coming year. Rental
income would then decline and property values would slide further. The
Urban Land Institute predicts 2009 will be the worst year for the
commercial real estate market since the 1991-92 industry depression.
Banks and other financial companies have not had the problems with
commercial properties in this recession that they have had with
residential properties. However, many building owners, while struggling
with more vacancies and less rental income, will need to refinance
commercial mortgages this year.
href='http://www.nytimes.com/2009/01/05/business/05real.html?_r=1&ref=business&pagewanted=print'>Read
more.
Credit Card Companies Willing to Deal
Over Debt
After helping to foster the explosive growth of consumer debt in recent
years, credit card companies are realizing that some hard-pressed
Americans will not be able to pay their bills as the economy
deteriorates, the New York Times reported on Saturday.
Increasingly, lenders and their collectors are stretching out payments
and accepting dimes, if not pennies, on the dollar as payment in full.
Banks and card companies are bracing for a wave of defaults on credit
card debt in early 2009, and they are vying with each other to get paid
first. So even as many banks cut consumers' credit lines, raise card
fees and generally pull back on lending, some lenders are trying to give
customers a little wiggle room. Bank of America, for instance, says it
has waived late fees, lowered interest charges and, in some cases,
reduced loan balances for more than 700,000 credit card holders in
2008.
href='http://www.nytimes.com/2009/01/03/business/03collect.html?emc=eta1&pagewanted=print'>Read
more.
name='4'>FDIC Agrees to Sell IndyMac to Investor Group
/>
The federal government has agreed to sell the skeleton of IndyMac Bank,
the aggressive California mortgage lender whose July failure assisted to
the crisis of the financial system, to a group of private investors, the
Washington Post reported today. The investing group, IMB
HoldCo, is led by Steven Mnuchin, a former Goldman Sachs executive, and
includes the veteran banking investor J. Christopher Flowers, computer
maker Michael S. Dell and hedge fund manager John Paulson, who made
billions betting on the very collapse of the mortgage market that killed
IndyMac. The sale of IndyMac has a total value to the government of
about $13.9 billion. The FDIC estimates that even after that payment,
IndyMac's failure ultimately will cost the agency between $8.5 billion
and $9.4 billion, consistent with the agency's earlier estimate of $8.9
billion. There is no direct cost to taxpayers because the agency is
funded by fees collected from the banking industry.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/01/02/AR2009010202228_pf.html'>Read
more.
name='5'>GMAC Agrees to End Deal with GM for Bailout
Money
Auto financing giant GMAC relinquished its exclusive right to provide
financing to people buying General Motors vehicles in exchange for up to
$6 billion in federal aid, the Washington Post reported on Saturday. The
deal abruptly ends a 10-year contract between GM and GMAC, according to
the lender's filing with the Securities and Exchange Commission
yesterday. In the past, whenever GM offered vehicle financing and
leasing specials, such as below-market interest rates, it did so through
GMAC. The lender paid an annual fee to GM for the exclusivity and was
required to meet sales targets. According to the filing, over the next
two years, the automaker can offer incentive programs through other
lenders under certain requirements. After that period, the terms will
gradually loosen until 2013, when GM will have the right to offer
programs through any lender -- including GMAC -- without any
restrictions or limitations.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/01/02/AR2009010201829_pf.html'>Read
more.
name='6'>Commentary: How the SEC Can Prevent More
Madoffs
The billion-dollar financial scandal involving Bernard Madoff
underscores the need for a 21st century regulatory approach, not
shuttering the Securities and Exchange Commission, according to a
commentary in today's Wall Street Journal by former SEC Chairman Arthur
Levitt Jr. The complexity of today's products, markets and investment
strategies calls for a laser-like focus on risk assessment. A regulatory
agency's leadership must identify the biggest possible risks to
investors, according to Levitt, and to the entire system and focus
resources on these areas. Risk assessment must be central to the SEC's
efforts, and the agency needs an office that will collect information
from all of the agency's divisions and propose inspection and
examination priorities. It should identify problems such as excessive
leverage and risks posed by new structured financial products. Once
problem areas or firms are identified, the SEC must have a robust
oversight and inspection capability as well as, when needed, an
enforcement agency that is empowered and enabled to pursue
leads.
href='http://online.wsj.com/article/SB123111989471152931.html'>Click
here to read Levitt's full commentary.
name='7'>General Growth Properties Switches Its Bankruptcy
Counsel
Debt-laden mall owner General Growth Properties Inc. has changed
bankruptcy counsel, parting with Sidley Austin LLP to hire Weil, Gotshal
& Manges LLP, the Wall Street Journal reported today.
General Growth, which owns and manages more than 200 U.S. malls, is
struggling to restructure or postpone payment on $27 billion in debt as
large installments of it come due in the coming months. The
Chicago-based company hasn't filed for bankruptcy protection but has
warned that it might need to do so if it can't sell assets or win
agreement on deadline extensions with its lenders.
href='http://online.wsj.com/article/SB123111371319952447.html'>Read
more. (Subscription required.)
name='8'>Clothing Manufacturer Files for Chapter 7
Couture manufacturer Bill Blass Ltd. has moved to liquidate its assets,
after the company shut down and terminated all of its employees last
week, the Wall Street Journal reported on Saturday. The
company filed a chapter 7 petition last Wednesday listing assets of
$192,000 and debts of $829,000, court papers show. The bankruptcy
petition shows the company has $11,250 in miscellaneous assets,
including office equipment, $25,000 in inventory, about $90,000 in its
bank account and $155,361 in accounts receivable. The bankruptcy filing
comes a little more than five months after NexCen Brands Inc. acquired
the iconic sportswear designer. The company recently sold its Bill Blass
licensing business for about $10 million to pay off debt associated with
the business.
href='http://online.wsj.com/article/SB123092742774049709.html'>Read
more. (Subscription required.)
name='9'>Recycled Paper Greetings Seeks Bankruptcy
Protection
Recycled Paper Greetings Inc., the third-largest U.S. greeting-card
maker, sought bankruptcy protection as part of a planned sale to larger
rival American Greeting Corp., Bloomberg News reported on Friday.
The Chicago-based company, controlled by private-equity firm Monitor
Clipper Partners, listed both debt and assets of $100 million to $500
million in documents filed today in U.S. Bankruptcy Court in Wilmington,
Del. American Greetings, the second-largest greeting-card maker, agreed
to buy Recycled Paper through a prepackaged chapter 11 reorganization on
Dec. 30, in a transaction valued at $151.1 million, according to court
filings. Recycled Paper will seek court approval to borrow as much as
$10 million from American Greeting to fund operation while
reorganizing.
href='http://www.bloomberg.com/apps/news?pid=20601127=aK.ySKtf4WBY'>Read
more.
name='10'>H&R Block to Pay $4.85 Million Settlement Over Loan
Program
The California attorney general has settled a lawsuit against H&R
Block over a widely used loan program, the Associated Press reported
today. California Attorney General Jerry Brown said that the $4.85
million settlement will stop H&R Block from offering high-cost loans
it has marketed as early tax refunds. Former California Attorney General
Bill Lockyer sued the company in 2006, adding California to a long list
of others that sued over its 'refund anticipation loans.' The company
arranges the cash advances for customers so they won't have to wait an
extra one to four weeks for a check from the federal government.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202427194653'>Read
more.
name='11'>Constar Files for Chapter 11
Plastic bottle maker Constar International Inc. sought bankruptcy
protection Tuesday, filing a prearranged restructuring plan expected to
slash the company's debt by $175 million through a debt-for-equity swap,
Bankruptcy Law360 reported on Wednesday.
Philadelphia-based Constar filed a chapter 11 petition listing assets of
$420 million and $538 million in debt, as well as a disclosure statement
with the proposed restructuring plan attached. The company expects to
continue with business as usual during the restructuring. A hearing on
the disclosure statement is slated for Feb. 3.
href='http://bankruptcy.law360.com/articles/81400'>Read
more. (Subscription required.)
name='12'>Government Sends Chrysler $4 Billion Bridge
Loan
Chrysler LLC and the U.S. Treasury Department said on Friday that the
government had supplied the automaker with a $4 billion loan that was
necessary to keep it operating, the Associated Press reported on
Saturday. Chrysler CEO Bob Nardelli said in a statement the loan would
'allow the company to continue an orderly restructuring, while pursuing
our vision to build the fuel-efficient, high-quality cars and trucks
people want to buy.' Nardelli described the funding as an 'initial
loan.' The automaker had asked Congress to borrow $7 billion. Chrysler,
which is 81 percent owned by Cerberus Capital Management LP, was nearing
the minimum level of cash - $2.5 billion - it needed to operate and has
been fending off parts suppliers and other vendors demanding cash
payments on delivery.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/01/03/AR2009010300607_pf.html'>Read
more.
name='13'>Auto Industry Still Coming to Grips with the Damage of
2008
Carmakers will close out one of the most tumultuous and miserable years
in their history today when they report what is certain to be another
tough batch of monthly sales figures, the New York
Times reported today. Each of the six largest automakers,
including foreign and domestic brands, is expected to say that its sales
in the United States fell at least 30 percent in December. The bleakest
numbers will most likely come from General Motors and Chrysler, which
both received billions of dollars in loans from the federal government
at the end of December to help them remain solvent. George Pipas, Ford
Motor Company's chief sales analyst, projected total industry sales for
2008 of about 13.5 million, a full three million fewer than in 2007. Not
since 1974 has the market collapsed that much in a single year, he
said.
href='http://www.nytimes.com/2009/01/05/business/05auto.html?ref=business&pagewanted=print'>Read
more.
International
Click here to review
today's global insolvency news from the GLOBAL INSOLvency site.