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April 13, 2009
'Surgical' Bankruptcy Possible for GM
The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite GM's public contention that it could still reorganize outside court, the New York Times reported today. GM, which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently. The preparations are aimed at assuring a GM bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders. Read more.
name='2'>Bankruptcy-related M&As on the Rise
According to new data, bankruptcy-related mergers and acquisitions have hit their highest level globally since August 2004 and are set to keep rising, The Financial Times reported Sunday. The data, compiled by Thomson Reuters, identified 34 such deals announced in March alone as more companies are forced into distressed sales. In total, the data showed that there have been 67 bankruptcy-related mergers and acquisitions announced this year, most of which were in the United States or Japan. Among the highest-profile deals were those of Delphi and BearingPoint. Practitioners around the world forecast that the number of transactions involving distressed companies must rise further. Monthly totals for bankruptcy M&A peaked at 87 in July 2002 and slumped to seven in May 2007, just before the credit crunch hit. In the last downturn, a flurry of telecoms and technology company failures led to asset sales to strategic and private-equity buyers. More recently, industrial and retail companies have been the most prominent distressed sellers, but private-equity buyers have been few because debt has become far more expensive. Read more.
name='3'>Judge Permits Inquiry, Lawsuit in Midway Games Bankruptcy
The judge overseeing the chapter 11 case of Midway Games has allowed the company's creditors to investigate and pursue litigation against the Chicago-based video game publisher's mysterious owner, as well as former majority shareholder Sumner Redstone, the Chicago Tribune reported on Saturday. The authorization, granted in a Thursday order, is the latest salvo in a bankruptcy case pitting Midway's owner, Mark Thomas, against a creditor committee that has voiced suspicions over how he came to acquire Redstone's controlling stake in the embattled company. The judge's order also allows Midway to continue tapping cash reserves over the objections of the unsecured creditors' committee. However, the order allowed the creditors to investigate the transaction that led Thomas to own his 87 percent stake in Midway, and their inquiry can involve anyone related to the deal, including Redstone and Midway's board of directors. Read more.
name='4'>Express Scripts to Be Near a Deal for WellPoint's Pharmacy Unit
Express Scripts is close to acquiring the pharmacy benefit management business of WellPoint in a deal valuing the unit at about $4.7 billion in cash and stock, according to the New York Times today. Many analysts have said that they expect insurers like WellPoint, Aetna and UnitedHealth to divest themselves of their pharmacy benefit manager units, which manage employee drug programs. If consummated, the acquisition of the WellPoint business, which includes its NextRx unit, would give Express Scripts the expanded presence it had previously sought in the pharmacy benefit manager sector. By expanding, pharmacy benefit managers would gain clout when negotiating prices with drug makers for clients, typically big corporations and their employees. WellPoint, one of the nation's biggest corporate insurers, describes its pharmacy benefit management business as the nation's fourth largest, behind Medco Health Solutions, CVS Caremark and Express Scripts. Read more.
name='5'>Personal Bankruptcy for Madoff More Likely
Over the objections of the government, a federal judge cleared the way on Friday for Bernard L. Madoff to be forced into personal bankruptcy, a ruling that could help those who invested with one of the many big hedge funds that lost money in his vast Ponzi scheme, the New York Times reported on Saturday. Judge Louis L. Stanton of Federal District Court in Manhattan removed a roadblock to a bankruptcy filing that he had put in place in December, ruling that the advantages of forcing Madoff into personal bankruptcy outweighed the possible increase in time and expenses. Lawyers in the case said the bankruptcy petition would be filed today against Madoff, who is in jail awaiting sentencing after pleading guilty to a fraud involving client accounts totaling almost $65 billion. Read more.
name='6'>Bailed-out Banks Face Probe over Fee Hikes
The committee overseeing federal banking-bailout programs is investigating the lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees, the Wall Street Journal reported today. Since the Troubled Asset Relief Program (TARP) was launched last October, banks bolstered by capital infusions have boosted charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticized as predatory by consumer advocates. The TARP funds are intended to open lending spigots and make it easier for people to borrow money. Last week, for example, Bank of America Corp. told some customers that interest rates on their credit cards will nearly double to about 14 percent. The Charlotte, N.C.-based bank, which got $45 billion in capital from the U.S. government, also is imposing fees of least $10 on a wide range of credit card transactions. Citigroup Inc., another recipient of government cash, is trying to entice customers to borrow at high rates. 'You could get $5,000 today,' Citigroup's consumer-finance unit wrote in fliers mailed to customers. The ads don't disclose that the loans often carry annual interest rates of 30 percent. Read more. (Subscription required.)
name='7'>Analysis: Foreclosure Sales Stalled by Red Tape
As bargain-hunters turn their attention to foreclosures, many are discovering that the toughest challenge is dealing with the banks that repossessed the homes, the Washington Post reported today. Though the banks are usually quick to accept a bid and write a contract, the closer buyers get to the settlement table, the greater the potential for bureaucratic wrangling and the chance the buyers will give up. For one prospective homeowner, the bank discovered it did not legally own the house on closing day because the necessary paperwork had not been done. The homebuyers were told they had to wait as the bank sorted through the mess with its foreclosure lawyer. Read more.
Six Flags, which announced last week that its stock was being delisted from the New York Stock Exchange, faces a more than $300 million payment to preferred stockholders in August that the company says it cannot afford, the Washington Post reported today. Fitch Ratings recently warned that a 'default is imminent or inevitable.' Despite a turnaround in operations last summer, Six Flags still needs to clear up more than $2 billion of long-term debt incurred by the firm's previous owners. The firm is looking at two possibilities to resolve its debt issues: a bankruptcy filing or negotiate with the company's bondholders to get them to swap the debt in exchange for equity. The deal on the table involves about $900 million in debt and $300 million in preferred stock. Read more.
name='9'>Boston Globe in Financial Peril
Ever since The New York Times Co. threatened 11 days ago to sell or close the Boston Globe unless it accepted deep cost cuts, the city of Boston has been in a state of near shock, the New York Times reported today. Civic leaders and Bostonians have spoken out about the central role of the Globe in the life of a region that cares deeply about local culture and local politics and fashions itself as the higher education capital of the nation. However, there is widespread agreement that, good ownership or bad, local or far away, no company could absorb the losses the Globe has suffered without taking drastic action. Times executives told labor leaders last week that the Globe was on pace to lose $85 million this year. Read more.
name='10'>Anheuser Explores Sale of Struggling Rolling Rock
Brewing giant Anheuser-Busch InBev NV is exploring the sale of its storied but struggling Rolling Rock brand, the Wall Street Journal reported today. The potential sale comes three years after Anheuser-Busch Cos. bought Rolling Rock from Belgian brewer InBev NV for $82 million. InBev acquired Anheuser-Busch for about $52 billion this past autumn to form the world's largest beer maker by sales, and is selling assets to help repay debt from the deal. Sales of Rolling Rock have been on the decline in recent years, but the brand could appeal to beer companies seeking to expand in the U.S. market by scooping up an established name. A spokeswoman for Anheuser-Busch InBev, which is based in Leuven, Belgium, declined to comment on the possibility of a sale. One possible suitor could be North American Breweries Inc., owned by New York private-equity firm KPS Capital Partners LP. Another potential suitor could be C2 Imports LLC, which also vied for Labatt USA. C2 Imports is a California-based beer importer led by former Anheuser executive Charlie Cindric. When Anheuser bought Rolling Rock in 2006, it sought to reposition the brand to compete in the fast-expanding, small-batch 'craft' beer segment but sales, which already were declining under InBev, have continued to wane. Last year, Rolling Rock sales slipped 13 percent from a year earlier in volume terms to 7.4 million cases, according to Beverage Information Group. In 2004, Rolling Rock sold nearly 11 million cases. Read more.
name='11'>Department of Labor Subpoenas Tribune Co.
The Department of Labor has begun an investigation into Tribune Co.'s employee stock ownership plan, a major piece of Sam Zell's plan to take his media company private, the Associated Press reported on Saturday. A subpoena sent March 2 to the Chicago-based media company, which owns the Chicago Tribune and Chicago Cubs, requested 'an extensive range of documents,' Tribune said in Thursday's filing with the U.S. Bankruptcy Court in Delaware. Tribune 'substantially complied' with the subpoena on March 31, the paperwork said. The Labor Department's investigation deals with the Tribune's employee stock ownership plan, or ESOP, as part of an investigation under the federal Employee Retirement Income Security Act, the filing said. The ESOP has been scrutinized since real estate mogul Zell orchestrated a complex $8.2 billion buyout of Tribune in 2007. In taking the company private under the ownership of an ESOP, and Zell's firm individual control, Zell left Tribune with a $13 billion debt burden. Read more.
name='12'>San Diego County's Bankruptcy Filings Reach 10-year High
Last year, debtors filed 13,637 personal and business bankruptcies in San Diego County, Calif., a 78 percent increase from 2007, SignOnSanDiego.com reported Monday. Aside from 2005, when an unusual number of bankruptcies were filed before a major change in the law that made it harder to file personal bankruptcy, there hasn't been a greater number of bankruptcies since 1999. Chapter 7 was up 91 percent from 2007, for a total of 11,454 filings. Chapter 11 was up 119 percent, or 79 filings, over 2007. Chapter 13, which is being used now by many consumers to reorganize their debt and stave off home foreclosures, rose 30 percent, to 2,104 filings. This year is shaping up to outdo last year. In January, local consumer and business debtors filed 1,277 bankruptcies, a 52 percent increase over January 2008. In February, they filed 1,345 bankruptcies, a 48 percent increase from February 2008. March saw the greatest number of San Diego County bankruptcies - 1,663 filings, up 80 percent over March 2008 - recorded in a single month in more than a decade, except for two months in 2005 leading up to the change in the bankruptcy law. While the number of San Diego bankruptcies is climbing, the region has a way to go to match the worst year on record. That was in 1997, when 19,285 chapter 7, chapter 11 and chapter 13 bankruptcies were filed. Read more.
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