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September 4,
2007
name='1'>Congress, Treasury Set to Look at Credit Raters’
Involvement in Subprime Meltdown
Congress and other
federal agencies are looking into some of the causes of the subprime
mortgage meltdown and are beginning to look into the role that
credit-rating firms had in the downturn, the Wall Street
Journal reported today. The President's
Working Group on Financial Markets is looking into what role the ratings
firms played. The Securities and Exchange Commission has opened more
than a dozen related investigations and has begun notifying firms that
it will soon start a series of onsite examinations. Congress is holding
hearings, including one tomorrow by the House Financial Services
Committee with regulators and industry professionals and another next
month specifically about credit-rating concerns. Since the
subprime-market collapse, the ratings firms have come under fire for
giving overly favorable ratings to mortgage-backed financial instruments
and for being slow to downgrade them.
href='http://online.wsj.com/article/SB118886257662516353.html'>Read
more. (Registration required.)
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/090507.shtml'>Click
here to view the witness list for tomorrow’s House Financial
Service Committee hearing titled “Recent Events in the Credit and
Mortgage Markets and Possible Implications for U.S. Consumers and the
Global Economy.”
name='2'>Senators Cautious on Private Equity Tax Plan
The spring rush to raise
taxes on private-equity firms and hedge funds has turned into a crawl as
congressional tax writers, particularly in the Senate, take a cautious
approach to crafting the legislation, the Washington
Post reported today. As lawmakers return today
from their summer break, the boldest version of the tax legislation
appears to have a good shot at passing in the House before year's end,
but its prospects in the Senate are not as strong, and President Bush is
also likely to have reservations about the measure. Senate Finance
Committee Chairman Max Baucus (D-Mont.) and Sen. Charles Grassley
(R-Iowa), the committee’s ranking Republican, said that they had
not decided whether they favor raising tax rates on the profit paid to
fund managers, called carried interest, prior to the committee’s
Thursday hearing on the issue. A hearing on the same general topic is
planned on the same day before the House's tax-writing panel, the Ways
and Means Committee.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/03/AR2007090300884_pf.html'>Read
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/03/AR2007090300884_pf.html'>
name='3'>Former Subprime Leader Ameriquest Closes
Ameriquest Mortgage Co., once
the nation's largest subprime lender, will close without much fanfare
after the other assets of its parent company were sold Friday to
Citigroup Inc., the Associated Press reported on Saturday. Ameriquest,
which saw its fortunes soar during the housing boom by lending to people
with less-than-stellar credit, is the latest victim of a mortgage crisis
that has left bankrupt companies and cash-strapped borrowers in its
wake. Along with shuttering Ameriquest, Orange, Calif.-based ACC Capital
Holdings also said that it was selling its wholesale mortgage
origination operation and a mortgage servicing business to Citigroup for
an undisclosed sum. Ameriquest had been operating on a greatly
diminished scale since closing its national network of offices late last
year and consolidating operations into several retail call
centers.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/01/AR2007090100083_pf.html'>Read
more.
Autos
name='4'>Dana Corp. Files Bankruptcy Plan
Dana Corp. moved a step
closer to exiting bankruptcy Friday by filing a reorganization plan that
calls for up to $750 million in new investments in the company, largely
from private equity firm Centerbridge Capital Partners LP, the
Associated Press reported on Saturday. Dana's reorganization plan is
structured around an investment from Centerbridge as well as agreements
with labor unions representing 6,500 employees at 25
w:st='on'>
size='3'>U.S.
size='3'>plants. Centerbridge will invest between $250 million and $500
million in Dana, and other investors will provide up to another $250
million. In July, the United Auto Workers and United Steelworkers agreed
to a two-tier wage structure and to eliminate Dana's obligation to
provide non-pension retiree benefits. Dana also announced a key deal
this week to continue to supply parts to Chrysler LLC, but at higher
prices than they did before. The settlement still needs a judge's
approval.
href='http://www.zanesvilletimesrecorder.com/apps/pbcs.dll/article?AID=/20070903/NEWS01/709030310'>Read
more.
name='5'>Commentary: Uncertainty Surrounds UAW over Contract
Talks
The biggest questions in
contract negotiations between the United Automobile Workers union and
the Detroit automakers have yet to be answered, including if the UAW
will agree to the health care overhaul sought by the carmakers,
the New York
Times reported today.
face='Times New





Roman'>
size='3'>Contracts expire at midnight on Sept. 14, so talks are expected
to pick up this week and accelerate toward the deadline. Discussions
between the two sides have focused on the creation of a giant health
care trust, which the UAW would administer and which would provide
benefits for active and retired workers.
size='3'>Creation of the trust, a voluntary employees’ beneficiary
association, would take up to $100 billion in health care liabilities
off the automakers’ books. In return, the companies would
contribute tens of millions of dollars to create the trust. If the union
rejects the idea of creating a trust to shift the burden for health
care, the companies are likely to ask for significant concessions in
other aspects of the contract, including wages, benefits and work
rules.
href='http://www.nytimes.com/2007/09/04/business/04labors.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1188907307-EmqLpy5+pJaerIeszT8D5A&pagewanted=print'>Read
more.
name='6'>Verizon Challenges IRS Appeal in WorldCom
Case
Verizon Business, a unit
of Verizon Communications Inc., asked the U.S. Bankruptcy Court for the
Southern District of California on Thursday to dismiss an IRS appeal in
WorldCom’s chapter 11 case, claiming that the court had not
entered a final order regarding the tax dispute and that the IRS
improperly filed an appeal from an interlocutory order without seeking
leave, Bankruptcy
Law360 reported on Friday. Verizon Business
and the IRS each filed opposing claims that were eventually consolidated
in the bankruptcy court over the application of an excise tax, which was
imposed on local telephone service to a data service known as COBRA,
which stands for central office based remote access. The IRS claimed in
July 2004 that Verizon Business owed additional tax for the service, but
the company argued that it should receive a refund of taxes previously
paid for the service. In June, the bankruptcy court entered an opinion
in favor of Verizon Business and ordered the IRS to refund the company
for telephone-excise taxes that were paid between 1998 and 2004 in
association with purchases of COBRA service.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33862'>Read
more. (Registration required.)
name='7'>Trustee Slams Rowe Cos. Disclosure Statement
The U.S. Trustee
overseeing the contentious chapter 11 case of The Rowe Companies
objected to the debtor's disclosure statement, saying it is overly vague
and doesn't provide creditors with sufficient information about the
company's assets,
size='3'>Bankruptcy Law360 reported on Friday.
U.S. Trustee W. Clarkson McDow, Jr. questioned the debtor's contention
“that holders of all claims will enjoy recoveries at least equal
to what would be available for their respective claims in a chapter 7
liquidation,” criticizing that assertion as unsupported. The
debtor said that no assets would be available for distribution to
creditors in a chapter 7 liquidation, implying that there would be a
distribution in chapter 11, which the trustee found
“perplexing.” McDow also claimed that whatever assets the
company may still have weren't described or valued.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33851'>Read
more. (Registration required.)
Mills' Largest Secured Creditor Objects to Plan
GMAC Commercial Finance
LLC objected to Delta Mills Inc.'s proposed restructuring plan and asked
the bankruptcy court to deny confirmation, arguing that the plan
violates the terms of deals struck between the lender and the
company, Bankruptcy
Law360 reported on Friday. Delta Mills secured
more than $20 million of debtor-in-possession (DIP) financing from GMAC
in October. In return for receiving DIP financing and “factoring
arrangements” from GMAC, Delta Mills agreed to irrevocably waive
the right to file or support any chapter 11 plan unless the plan
resolved GMAC's claims and obligations in their entirety, according to
GMAC's objection. According to GMAC, Delta Mills does not “have
the right to request that this court confirm the plan and make cash
distributions to junior creditors, while the senior secured
superpriority claims of GMAC CF remain unresolved.”
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=33790'>Read
more. (Registration required.)
w:st='on'>
name='9'>U.S.
face='Times New Roman' size='3'> Energy May File for
Bankruptcy
U.S. Energy Systems Inc. will
not be able to continue operations without a refinancing or capital
infusion and may need to file for chapter 11 bankruptcy, the company
said in a Securities and Exchange Commission filing, the Associated
Press reported on Friday.
size='3'>U.S. Energy, which produces electricity and alternative energy
in the United Kindgdom, said that it will need about $21 million in
September to meet operating and contractual obligations.
face='Times New Roman' size='3'>U.S. Energy is discussing options to
restructuring its existing debt with lenders, including asset sales and
access to $25 million in restricted cash reserves. The company received
a nonbinding letter of intent for the sale of its U.S. Energy Biogas
Corp. subsidiary, but no definitive agreements have been
reached.
href='http://biz.yahoo.com/ap/070831/us_energy_bankruptcy.html?.v=1'>Read
more.
International
name='10'>HSBC Agrees to Buy Majority Stake in the Korea Exchange
Bank
HSBC's agreement to buy a
majority stake in Korea Exchange Bank (KEB) is putting the South Korean
banking sector under even more pressure to consolidate, amid growing
prospects of privatization and sales, Reuters reported yesterday. HSBC
Holdings Plc said yesterday that it agreed to buy 51 percent of the
country's sixth-largest bank by assets from
w:st='on'>
size='3'>U.S.
size='3'>private equity firm Lone Star for $6.3 billion. The deal, if
finalized, will bring another strong foreign player into
size='3'>South Korea
size='3'>'s crowded banking industry, which has combined deposits of
more than $750 billion. Citigroup and Standard Chartered Plc became key
players by buying local rivals in 2004 and 2005, respectively. HSBC's
acquisition, which is conditional on the resolution of several legal and
regulatory hurdles, comes as South Korean banks are seeking to expand
into lucrative nonbanking financial services including wealth
management, brokerage and insurance.
href='http://news.yahoo.com/s/nm/20070904/bs_nm/keb_hsbc_dc_7'>Read
more.
name='11'>Australia
face='Times New Roman' size='3'> Likely to Keep Interest Rate
Unchanged at 6.5 Percent
Australia's central bank
probably will keep the benchmark interest rate unchanged at 6.5 percent
as it seeks signs that last month's increase to an 11-year high is
enough to curb inflation, Bloomberg News reported
yesterday. Reserve Bank of Australia
Governor Glenn Stevens joins policy makers in England, Europe, Canada
and South Korea, who are all expected to keep rates unchanged this week
as they gauge whether financial market turmoil, sparked by losses in the
U.S. subprime mortgage industry, will derail global economic growth.
Federal Reserve Chairman Ben S. Bernanke said last week that the Fed
will do what's needed to stop the credit rout from wrecking expansion in
href='http://www.bloomberg.com/apps/news?pid=20601081&sid=aOCXfJwuXBwU&refer=australia'>Read
more.
name='12'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
face='Times New Roman' size='3'>ABI
size='3'>Members receive a 50% discount off of our regular subscription
rate of $500 when subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>or
call 800-407-9044—use
face='Times New Roman' size='3'>ABI
size='3'>Code 37
size='3'>Bombardier Inc., the
w:st='on'>
size='3'>Montreal,
w:st='on'>
size='3'>Quebec
and aircraft, reported a second quarter net loss of $71 million,
including a $161 million writeoff charge related to its investment in
Metronet, a business that operates and maintains much of the underground
train network in
face='Times New Roman' size='3'>London
size='3'>,
size='3'>England
size='3'>. Revenue increased 15%–to
more than $4 billion. Also on the positive side, Bombardier’s
aerospace unit’s order backlog soared to a record $18.2
billion.
size='3'>Chrysler LLC lost money on operations
during its last quarter as a unit of DaimlerChrysler AG.
However, when depreciation costs are included, Chrysler
and Chrysler Financial ended up with $549 million in earnings for the
period. Chrysler is now under the wing of
Cerberus Capital Management, which earlier in the month closed on its
deal to purchase about 80% of the
w:st='on'>
size='3'>U.S.
size='3'>carmaker from the German parent
company.
size='3'>CPI Corp.’s recent second
quarter loss stemmed largely from costs associated with its recent $100
million acquisition of Portrait Corp. of
w:st='on'>
size='3'>America
size='3'>in June. CPI, the
w:st='on'>St.
Louis
w:st='on'>
size='3'>Mo.
operates the Sears Portrait Studios, recently reported a second quarter
net loss of $3.4 million, compared to a profit of $644,000 in the
year-earlier period. Revenue increased 22%
increase–to $68.6 million.
size='3'>EquiFirst, a
w:st='on'>
size='3'>Charlotte
w:st='on'>N.C.
subprime mortgage unit of Barclays PLC of
size='3'>Great Britain
size='3'>, will trim its payroll by an undisclosed number of
jobs.
size='3'>Fiskars Brands Inc., a
size='3'>Madison
w:st='on'>
size='3'>Wi
knives and other products, said that it will recall more than 150,000
pocket knives because a reported danger of exposed
blades.
Citing market
conditions,General
Motors Corp.,
face='Times New Roman' size='3'>Detroit
size='3'>, Mi., reported it will trim its workforce by 1,000 employees
at the beginning of 2008 at its pickup truck manufacturing facility
in
size='3'>Ontario,
size='3'>Canada
size='3'>.
size='3'>Jo-Ann Stores Inc., a Hudson, Oh.
retailer of fabrics, crafts and notions, reported a second quarter net
loss of $18.4 million. Sales increased 7%–to almost $389
million.
size='3'>Krispy Kreme Doughnuts Inc.,
the
size='3'>Winston-Salem
size='3'>N.C.
donut shops, trimmed its payroll by twenty workers, primarily at its
corporate headquarters. The layoffs are reportedly part of an ongoing
realignment of its franchisee and company-owned store
businesses.
size='3'>RAE Systems Inc., a
w:st='on'>
Jose
and radiation detection monitors, said it will reduce the size of its
staff by an undisclosed amount and write down certain fixed
assets. The moves, which will result in
third quarter charges of between $4 million and $5 million, will
hopefully save RAE $1.7 million a year.
size='3'>TiVo Inc., the Alviso, Ca. provider
of digital video recorders and services, reported a second quarter net
loss of $17.7 million, including an $11.2 million inventory-writedown
charge. The loss, compared to a $6.4 million loss in the year-earlier
second quarter, was wider than analysts had expected.
size='3'>Revenue increased 6%–to $62.7 million.
We The People Foundation for Constitutional
Education and We
The People Congress, two Web operations that offer
advice on how individuals can stop paying taxes legally, were ordered
shut down by a federal judge, who argued that the Constitution’s
First Amendment does not protect the two organizations or their founder,
Robert Schulz, of
w:st='on'>Queensbury
w:st='on'>N.Y.
sites’ advice amounts to urging criminal conduct.