October 282009

 

size='3'>Bill Seeks to Shift Rescue Costs to Big
Banks

The Obama administration and House Financial Services
Committee Chairman Barney Frank (D-Mass.) unveiled legislation yesterday

that would create a special fund, paid by assessments on financial
companies with more than $10 billion in assets, to bear the costs of big

firms that fail, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The measure, directed at institutions whose
troubles might pose risks to the financial system, would create a
powerful financial services oversight council, led by the Treasury
secretary and composed of top regulators, to set policy and tougher
regulations for the largest companies and mediate disputes between
federal agencies. It would also give the Federal Reserve Board a lead
role in directly supervising many of the largest financial
conglomerates. The legislation would impose new restraints on industrial

loan companies and, in the future, would not permit any more commercial
companies to own banks. The legislation would permit the government to
impose tough new capital requirements on the largest companies as well
as take them over, making their shares virtually worthless, and remove
management when they fail. The House Financial Services Committee is
scheduled to hold a hearing on the legislation on Thursday. 

href='http://www.nytimes.com/2009/10/28/us/politics/28regulate.html?_r=1&ref=business&pagewanted=print'>Read

more.

href='http://www.house.gov/apps/list/press/financialsvcs_dem/presstitleone_102709.shtml'>Click

here to read the House Financial Services Committee press release
summarizing the legislation.

House Panel Set to Pass Bill

Cracking Down on Credit-Rating Agencies

The House Financial Services Committee is set to
approve legislation today that would make it easier for investors to sue

credit-rating agencies, which have been blamed for their role in the
financial crisis by giving favorable grades to mortgage-backed
securities based on predatory and faulty loans,

face='Times New Roman' size='3'>CongressDaily
size='3'>reported today. The panel is slated to approve the bill
introduced by Capital Markets Subcommittee Chairman Paul Kanjorski
(D-Pa.) that would allow investors to sue if the agencies 'knowingly or
recklessly' fail to review key information in their ratings and violate
securities laws. The language is similar to a bill sponsored by Senate
Banking Securities Subcommittee Chairman Jack Reed (D-R.I.). The House
committee adopted an amendment by Rep. Jeb Hensarling (R-Texas)
requiring the SEC to study the differences in the way municipal and
corporate bonds are rated. The SEC would consider whether there are
factors other than loss potential to consider. 

href='http://www.house.gov/apps/list/speech/financialsvcs_dem/markup_102109.shtml'>Click

here to read more information on the mark-up
hearing.

GMAC Asks Government for
Another Financial Lifeline

GMAC Financial Services Inc. and the Treasury
Department are in advanced talks to prop up the lender with its third
injection of taxpayer money, the

face='Times





New




Roman' size='3'>Wall Street

Journal reported today. The U.S. government is

likely to inject $2.8 billion to $5.6 billion of capital into the
Detroit company, on top of the $12.5 billion that GMAC has received
since December 2008. The latest infusion would come in the form of
preferred stock. The government's 35.4 percent stake in the company
could increase if existing shares eventually are converted into common
equity. The willingness by Treasury officials to deepen taxpayer
exposure to GMAC reflects the troubled company's importance to the
revival of the auto industry. GMAC has $181 billion in assets and is a
major financier for 15 million borrowers and thousands of General Motors

and Chrysler car dealerships in the U.S. The new capital would help firm

up GMAC's balance sheet and solidify its auto-loan business. Federal
officials also are moving to shore up GMAC's ability to fund its daily
operations, with the Federal Deposit Insurance Corp. telling the company

yesterday that the agency will guarantee an additional $2.9 billion in
debt. 

href='http://online.wsj.com/article/SB125668489932511683.html?mod=WSJ_hps_LEFTWhatsNews'>Read

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Pay Czar Increased Base Pay
at Firms

While Treasury Department pay czar Kenneth Feinberg
last week announced he would cut total compensation by half for
companies under his purvey, he substantially increased one important
element -- regular salaries, according to a

face='Times New Roman' size='3'>Wall Street Journal
size='3'>analysis. Feinberg oversees seven firms that accepted bailout
packages: American International Group Inc., Citigroup Inc., Bank of
America Corp., General Motors Corp., GMAC Financial Services, Chrysler
Group and Chrysler Financial. The Treasury Department assigned him the
job of tying more compensation at the companies to long-term performance

and cutting pay deemed 'excessive.' All 136 employees and executives
working at the seven companies under his review will earn much less this

year than in 2008, even after accounting for the rise in base salaries.
While slashing perks and bonuses, Feinberg adjusted base salaries for
the bulk of those employees, in some cases boosting them by hundreds of
thousands of dollars, according to an analysis of government data by
the

face='Times New Roman' size='3'>Journal
size='3'>. 
href='http://online.wsj.com/article/SB125665671513110557.html'>Read
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GPX International
Tire’s U.S. Operations File for Chapter 11

Tire maker GPX International Tire Corp.said yesterday
that its U.S. operations filed for chapter 11 protection as a result of
44 percent anti-dumping duties levied by the U.S. Commerce Department
against its manufacturing facility in China, Reuters reported
yesterday.GPX, which specializes in making tires for off-road use, said
that it would use the restructuring process to split its operations into

three parts and sell them separately. Under the restructuring plan,
Alliance Tire Corp. will acquire GPX's U.S. operations, including
worldwide rights to the Galaxy and Primex brands, the company's medium
radial truck tire distribution business, and the company's South African

entity, GPX Tyre South Africa.The bankruptcy filing applies only to GPX
and not to its foreign subsidiaries, including Canada's Dynamic Tire and

China's Starbright Group Inc., the company said. The case is
In

re GPX International Tire Corp., U.S.
Bankruptcy Court, District of Massachusetts (Boston), No.
09-20170. 

href='http://www.reuters.com/article/companyNews/idUSBNG51198220091027'>Read

more.

Lyondell Gets Court Approval

to End Executive Benefits

Lyondell Chemical Co. won bankruptcy court approval
yesterday to cancel the remaining executive benefit plans —
including enhanced health coverage, company-sponsored life insurance
policies and supplemental pensions — of almost a dozen former top
employees who objected to the move,

face='Times





New




Roman' size='3'>Bankruptcy
Law360 reported yesterday. Bankruptcy
Judge

face='Times





















New











Roman'

size='3'>Robert E. Gerber approved Lyondell's
motion to terminate the executive benefit plans, refusing to grant
carveouts requested by 11 employees who once held senior posts at the
company's affiliates. Lyondell said that it could recover about $57
million for the estate and eliminate ongoing costs of about $1.5 million

per year by dispensing with the upper-tier benefits. The case
is

size='3'>In re Lyondell Chemical Co. et al.,
case number 09-10023, in the U.S. Bankruptcy Court for the Southern
District of New York. 
href='http://bankruptcy.law360.com/print_article/130788'>Read more.
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Muzak’s Chapter 11
Disclosure Statement Wins Approval

Bankruptcy Judge

face='Times





New




Roman' size='3'>Kevin J.
Carey yesterday approved Muzak Holdings LLC's
disclosure statement and allowed the company to seek approval of its
chapter 11 reorganization plan from its creditors,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.

The reorganization plan currently has the support of Muzak's largest
secured and unsecured creditor, Silver Point Capitol Advisors LP, as
well as unsecured creditors’ committee and the company's senior
unsecured noteholders’ committee, according to a statement from
Muzak. The reorganization plan would reduce Muzak's outstanding debt by
more than one-half, to $230 million. Under the plan, the holders of
secured bank debt claims of $96 million will receive payment in full in
cash with the proceeds of an exit facility, according to the disclosure
statement. The holders of $220 million in 10 percent senior unsecured
notes will receive new senior notes at a $135 million face amount with 8

percent cash and a 7 percent payment-in-kind coupon, as well as $85
million of payment-in-kind preferred stock, according to the
company. 
href='http://bankruptcy.law360.com/print_article/130845'>Read more.
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DBSD North America Wins

Approval of Bankruptcy Plan

DBSD North America Inc. won approval of its bankruptcy

plan as Bankruptcy Judge Robert Gerber yesterday
confirmed the plan and overruled objections from Dish Network Corp.,
owner of the satellite company’s first-lien debt, Bloomberg News
reported yesterday. Judge Gerber confirmed the plan saying that a new
four-year loan will give the development-stage company time to find
financing. Dish and unsecured creditor Sprint Nextel Corp. opposed the
plan. Dish’s $51 million claim, which usually would be among those

first in line to be repaid, would be replaced under the plan with an
amended loan carrying a 12.5 percent interest rate. The rate is the same

as in July, when Dish bought all of DBSD’s first-lien debt. The
case is In re DBSD
North America Inc., 09- 13061, U.S. Bankruptcy

Court, Southern District of New York (Manhattan). 

href='http://www.bloomberg.com/apps/news?pid=20601127&sid=aGKw7IJ0z_yg'>Read

more.

N.Y. Fed Pushed AIG on
Contracts

The Federal Reserve Bank of New York said yesterday
that it had no choice but to instruct American International Group last
November to reimburse the full amount of what it owed to big banks on
derivatives contracts, a move that ended months of effort by the
insurance giant to negotiate lower payments, the
face='Times New Roman'>
size='3'>Washington Post reported today. Fed
officials offered the explanation in a rare response to a media report
after Bloomberg News said that the New York Fed, led at the time by
then-President Timothy F. Geithner, directed AIG to make the payments
after it received a massive government bailout. The officials said AIG
lost its leverage in demanding a better deal once the company had been
saved from bankruptcy. AIG, the recipient of a $180 billion federal
rescue package, ended up paying $14 billion to Goldman Sachs over months

and $8.5 billion to Deutsche Bank, among others. Before the New York Fed

intervened, AIG had been trying to persuade the firms to take
discounts. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR2009102703963_pf.html'>Read

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International

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