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April 16, 2010

Commentary: Allow Bankruptcy Courts to Help
Fight the Foreclosure Crisis

Lawmakers should revive the fight to let troubled homeowners use
bankruptcy court to avoid foreclosure, according to a New York
Times editorial today. From the start, the central concern about
President Obama?s antiforeclosure effort has been that it would postpone

foreclosures but ultimately not prevent enough to ease the economic
strain from mass defaults. In the first quarter of 2010, there were
930,000 foreclosure filings -- an increase of 7 percent from the
previous quarter and 16 percent from the first three months of 2009,
according to recent data from RealtyTrac, an online marketer of
foreclosed properties. The surge seems to indicate that homes that were
in the foreclosure pipeline are now being lost for good. The
administration's figures are not encouraging either, according to the
editorial. The Treasury reported recently that as of March, nearly
228,000 troubled loans qualified under the Obama plan for long-term
payment reductions; another 108,000 long-term modifications were
pending. That?s up from February, but still far behind the need.
Currently about six million borrowers are more than 60 days delinquent.
A big advantage of bankruptcy over government-subsidized modifications,
according to the editorial, is that bankruptcy is a difficult process
that does not entice anyone to purposely default in order to get better
repayment terms.

href='http://www.nytimes.com/2010/04/16/opinion/16fri1.html?ref=opinion'>Read

more.

Two Fremont General Plan Sponsors Join
Forces

The jockeying to reorganize bankrupt mortgage lender Fremont General
Corp. continues as two of the plan proponents in the case have teamed
up, leaving three competing restructuring proposals on the table as an
April 27 confirmation hearing nears, the Deal Pipeline reported
yesterday. Signature Group Holdings LLC and New World Acquisition LLC
have reached a settlement whereby the two will agree to support each
other's chapter 11 plans, with Signature's plan as the first choice if
it is confirmed. Unlike former plan proponent Ranch Capital LLC, which
in February withdrew its reorganization plan for Fremont to support a
proposal filed by the equityholders' committee, New World has not
withdrawn its chapter 11 plan. Rather, New World has agreed to support
Signature's plan. If Signature's plan is deemed unconfirmable by the
bankruptcy court, Signature will join with New World in its plan. With
Signature and New World essentially joining forces, three competing
restructuring proposals remain for Fremont. The main rival to the
Signature-New World proposals is the plan filed by the equity committee
and supported by Ranch Capital. The unsecured creditors' committee has
also filed a plan of its own.

href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005415487'>Read

more. (Subscription required.)

Lehman Receives Approval to Create Asset
Management Company

Lehman Brothers Holdings Inc., which filed the largest bankruptcy in
U.S. history, received Bankruptcy Judge James Peck's approval
yesterday to create a new asset management company it says will help it
raise more money to pay back creditors, Reuters reported today. The
creation of the company, known as LAMCO, will enable Lehman to unwind
some of its assets over a longer period of time, potentially allowing it

to make more money. The move to create a new company, which some Lehman
creditors had initially fought because of concerns about oversight and
disclosures, is unusual in bankruptcies that are undergoing a
liquidation. The firms that had been objecting to the move, such as
Lehman's international entities and Wall Street creditors such as Bank
of America and Credit Suisse, came to agreements with the company ahead
of the hearing. Lehman, which proposed the creation of the new company
as part of the plan to emerge from bankruptcy that it submitted to the
court on Wednesday, said that the company will manage its private equity

investments, real estate assets and other derivative assets.

title='Read more.'
href='http://www.reuters.com/article/idUSN1525349020100415'>Read
more.

Analysis: Consensus on Finance Bill is That

There Should Be No More Bailouts

As the Obama administration and Senate Republicans clash over the
future of the nation's financial regulatory system, there is one
principle on which they agree: Taxpayers should never again have to bail

out giant financial institutions, the New York Times reported
today. President Obama says that his legislation would let the Treasury
Department, with court approval, take over and dismantle failing
companies without costing the public a dime. It would resemble the
process used since the Depression to take over failing commercial banks.

Republicans say that the bill would make future bailouts even more
likely. They worry that designating large financial institutions as
'systemically important' would feed the markets' perception that the
companies have implicit government backing. The bill would stop
taxpayer-financed bailouts because if a company was on the verge of
collapse, leading firms in the financial services industry would have to

pay to clean up the mess. The Democratic bill in the Senate would try to

charge the largest financial companies for the costs - potential
and actual ; of dismantling their failing brethren, and it would
ban the use of taxpayer money to do so.

href='http://www.nytimes.com/2010/04/16/business/16fail.html?ref=business&pagewanted=print'>Read

more.

Smurfit Says Creditors Back Reorganization
Plan, but Battle Looms with Shareholders

Bankrupt packaging maker Smurfit Stone Container Corp. touted
'overwhelming' support for its reorganization plan yesterday, but
initial hearings to approve the plan indicated a battle looms with
shareholders, Reuters reported yesterday. The confirmation hearings are
scheduled to run 10 days. The most contentious objections will come from

shareholders, who beginning next Tuesday will present evidence that they

say will show that management is undervaluing Smurfit, and therefore
denying them a recovery. Smurfit Stone unveiled its reorganization plan
in December, proposing to pay secured lenders in cash and giving
unsecured claim holders equity in the company. The case is In re:
Smurfit Stone Container Corp., U.S. Bankruptcy Court, District of
Delaware, No. 09-10235.
href='http://www.reuters.com/article/idUSN1525291920100415'>Read
more.

Senate Panel Faults Regulators in WaMu
Failure

An investigation by a Senate panel concluded that a turf war between
federal regulators allowed Washington Mutual Inc. to ramp up risky
lending and likely worsened the biggest bank failure in U.S. history,
the Wall Street Journal reported today. According to the Senate
Permanent Subcommittee on Investigations, which today holds its second
hearing this week on the September 2008 failure, examiners at the Office

of Thrift Supervision repeatedly identified problems in the Seattle
thrift's lending operations from 2003 to 2008. However, when the
warnings were ignored by WaMu, the OTS failed to respond with more
serious sanctions, according to the subcommittee's review of company
documents, emails and interviews. Meanwhile, the agency resisted FDIC
efforts to turn up the regulatory heat, excluded the FDIC from
examinations and fended off a push to lower a crucial rating of the
thrift's soundness. The FDIC was faulted by the subcommittee for failing

to break the bureaucratic logjam.

href='http://online.wsj.com/article/SB10001424052702304628704575186441501114822.html?mod=WSJ_business_whatsNews#'>Read

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Resilient Says Six Flags Bondholders Are
Undervaluing the Company

Resilient Capital Management, a Six Flags preferred shareholder, said

that the enterprise value of bankrupt theme park operator Six Flags Inc.

is at least $180 million more than the deal offered by a group of
bondholders, Reuters reported yesterday. Resilient, which holds
preferred income equity redeemable shares in Six Flags, said that the
company is worth $2.68 billion, and that holders of the preferred shares

were entitled to a 100 percent recovery. Resilient said that the deal
offered by SFI Bondholders, a group led by Milwaukee-based hedge fund
Stark Investments, and endorsed by Six Flags valued the company between
$2.3 billion and $2.5 billion. Under the proposed reorganization plan,
SFI Bondholders will invest $725 million in new equity in Six Flags and
the company's current management will have warrants and options worth up

to 15 percent of the equity. The rest will be owned by the SFI group.

id='m373' title='Read more.'
href='http://www.reuters.com/article/idUSSGE63E0JI20100415'>Read
more.

St Vincent's Hospital Files for Chapter
11

The historic St. Vincent's Hospital in New York City's Greenwich
Village on Wednesday filed for chapter 11 protection, after more than
160 years of treating patients, Reuters reported yesterday. The
voluntary chapter 11 filing by Saint Vincents Catholic Medical Centers
of New York came just eight days after the hospital's board voted to
halt inpatient services, and transfer or close outpatient clinics. St.
Vincent's said in its filing that  it has between $100 million and
$500 million of assets, more than $1 billion of liabilities, and between

25,000 and 50,000 creditors. St. Vincent's previously filed for
bankruptcy in July 2005 and emerged two years later. However, it lost
close to $80 million last year, the state has estimated, and was unable
to find a stronger partner despite the efforts of state and local
politicians and community advocates to keep it afloat.
title='Read more.'
href='http://www.reuters.com/article/idUSTRE63D59L20100414'>Read
more.

Verizon Objects to FairPoint Creditors' Bid

for Investigation

Verizon Communications Inc. is objecting to a bid by FairPoint
Communications Inc.'s unsecured creditors to probe the $2.3 billion sale

of Verizon's New England landlines that loaded up FairPoint with debt,
Dow Jones Daily Bankruptcy Review reported today. In court papers

filed on Wednesday, Verizon urged the U.S. Bankruptcy Court for the
Southern District of New York to deny FairPoint's unsecured creditors'
committee's  request in conjunction with the 2008 deal that allowed

Verizon to divest itself of landline assets, but which left FairPoint
highly leveraged. That committee said that FairPoint may have claims
against Verizon in connection with the transaction, which it said not
only placed a lot of debt on FairPoint's balance sheets, but also failed

to provide sufficient infrastructure to operate the approximately 1.7
million landlines in Maine, New Hampshire and Vermont that it acquired.
The committee said the documents it is seeking from Verizon will aid its

investigation of the transaction and help determine if claims
exist.  

LyondellBasell Seeks to Hold $157 Million

to Pay Disputed Claims

LyondellBasell Industries AF is seeking to set aside $157.4 million
from a settlement it reached with unsecured creditors in order to
satisfy disputed claims, currently totaling $5.95 billion, Dow Jones
Daily Bankruptcy Review reported today. Establishing the reserve
amount is critical to LyondellBasell's effort to emerge from Chapter 11
protection shortly, the company said in papers filed on Wednesday. With
the funds set aside, LyondellBasell will not have to decide which of the

4,167 unresolved claims are valid before it exits bankruptcy. Requiring
LyondellBasell to determine the value of the disputed claims 'would
unduly delay the administration of the case,' the company said in court
papers. LyondellBasell is slated to seek confirmation of its chapter 11
plan at an April 23 hearing.

Bank of America Continues to
Improve

Bank of America said today that it had clawed back to profitability
in the first quarter, after two consecutive periods of losses, the
New York Times reported today. For the first three months, Bank
of America reported net income of $3.2 billion, or 28 cents a share.
Total revenue was $32 billion, down from $35.7 billion. Income
attributed to common shareholders was $2.8 billion. That compared with a

loss of $194 million in the last quarter of 2009 and $1 billion in the
quarter before that. Bank of America was once considered critically ill
by experts and regulators, requiring $45 billion in government bailout
money. Bank of America paid back the government money last year.
id='b_w:' title='Read more.'

href='http://www.nytimes.com/2010/04/17/business/17bank.html?ref=business&pag…'>Read

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