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April 16, 2009
Large U.S. Mall Owner Files
for Chapter 11
General Growth Properties Inc. filed the biggest real
estate bankruptcy in U.S. history after amassing $27 billion in debt as
it became the second-largest U.S. shopping mall owner, Bloomberg News
reported today. The mall owner will continue operating its more than 200
properties, including South Street Seaport in Manhattan and
Boston’s Faneuil Hall, after it sought Chapter 11 protection in
U.S. Bankruptcy Court in New York. The company listed $29.5 billion in
total assets and debts of about $27.3 billion. The filing lists Eurohypo
AG, a unit of Commerzbank AG, as General Growth’s largest
unsecured creditor with claims totaling $2.59 billion under two loans.
Noteholders are owed about $4 billion in total. Much of the
company’s debt can be traced to its $11.3 billion purchase of
commercial-property developer Rouse Co. in 2004.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aYYnO.QAJPyc&refer=news'>Read
more.
Mortgage Modification
Lawmakers Continue to
Work on Cramdown Legislation
After weeks of negotiation, a compromise may have
emerged over Senate legislation that would give bankruptcy judges
greater power to modify the primary mortgages of chapter 13
debtors,
size='3'>CongressDaily reported yesterday. The
Senate compromise would mandate that if a lender offered a modification
through the Obama plan or a program included in last year's housing
bill, called the Hope for Homeowners Act, the homeowner would be
ineligible to modify their loan through bankruptcy. At-risk low-income
borrowers and those who pay less than 31 percent of their income for
mortgage payments would be ineligible for principal reduction, but they
could have their rates reduced or their loans amortized over a longer
time. If the principal is reduced by a judge, the possible compromise
would allow the lender and borrower to evenly split any profit up to the
original amount of the loan if it is sold while the homeowner is still
in bankruptcy. Only loans that originated before 2009 and amount to less
than $729,750 could be modified in bankruptcy. The program would end in
2014.
Firms to Get Up to $9.9
Billion to Modify Mortgages
The Treasury Department said yesterday that it will
pay the mortgage-servicing arms of Citigroup Inc., JPMorgan Chase &
Co. and four others a combined maximum of $9.9 billion to modify home
loans and avoid foreclosures, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The payments are part of a $75 billion
incentive plan aimed at stemming the foreclosure crisis. The department
said that it has finalized arrangements with six mortgage servicers to
participate in the effort that include Chase Home Finance LLC, Wells
Fargo Bank NA, CitiMortgage Inc., GMAC Mortgage Inc., Saxon Mortgage
Services Inc. and Select Portfolio Servicing. Under the plan unveiled by
the Obama administration last month, Chase could get more than one-third
of the $9.9 billion. It has been allotted up to $3.6 billion for
loan-modification incentives. Wells Fargo has been allotted $2.87
billion and CitiMortgage was allotted $2.07 billion. GMAC has been
allotted $633 million, Saxon $407 million and Select Portfolio $376
million. The figures are based on each companies' volume of business,
according to the Treasury.
href='http://online.wsj.com/article/SB123983952090823017.html'>Read
more. (Subscription required.)
Treasury: TARP Money Not
Moving Forward
The Treasury Department said yesterday that the
largest bank recipients of U.S. government aid are offering less credit
to businesses and consumers, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. In a monthly snapshot of lending by the 21
largest banks receiving Troubled Asset Relief Program (TARP) funds, the
Treasury said credit being offered fell 2.2 percent across all
commercial-lending and consumer-lending categories in February, compared
with the prior month. The report found continued deterioration in
commercial real estate and general business lending, as well as the
credit being made available for student and auto loans. The lone bright
spot remained home loans, with consumers eager to take advantage of
record-low interest rates to refinance their mortgages.
The Treasury said that 16 of the 18 banks surveyed
increased mortgage originations in February, resulting in a 35 percent
increase in mortgage lending from January levels.
href='http://online.wsj.com/article/SB123981607918021761.html'>Read
more. (Subscription required.)
Analysis: Bank Test Results
May Strain Limits of Bailout Funding
As the Obama administration works to complete its
stress tests for gauging the health of major banks, it could confront
another problem in how to pay for shoring up any weaknesses that the
tests reveal, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. The administration would be hard-pressed to ask
Congress for more rescue funds to plug the holes. However, if the
capital requirements of banks prove large, the government may need
billions of dollars in federal aid back from strong financial firms,
which have received that money within the past few months. The
administration may even have to carve money from other rescue programs
being funded from the $700 billion bailout program.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/15/AR2009041503943_pf.html'>Read
more.
SEC Puts Ratings Firms on
Notice
Securities and Exchange Commission Chairman Mary
Schapiro said yesterday that the agency has 'more to do' in regulating
credit-rating firms, adding fuel to a debate that includes ideas such as
changing the way firms are paid, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Many of the ideas that U.S. regulators and
lawmakers are considering focus on changing the system under which the
top ratings firms -- including Moody's Corp., McGraw-Hill Cos.' Standard
and Poor's and Fimalac SA's Fitch Ratings -- receive fees from the
issuers they rate. Critics say that the pay structure leads companies to
shop their business to the firms that will furnish the highest rating.
The so-called issuer-paid model accounts for 98 percent of ratings.
Other credit-rating firms are paid by investors who subscribe to the
rating service. A recent 10-month SEC study found that rating firms put
profits ahead of quality when determining ratings for mortgage-backed
securities.
href='http://online.wsj.com/article/SB123980931135221355.html'>Read
more. (Subscription required.)
Lehman Legal Fees Top $84
Million
The law firms working on various pieces in the Lehman
Brothers bankruptcy have begun submitting their fee applications, and
expenses covering the period from Sept. 15, 2008 (the day Lehman filed
for chapter 11), through Jan. 31, total more than $84 million,
the
size='3'>American Lawyer reported yesterday.
Weil, Gotshal & Manges, Lehman's lead counsel, has billed the bank
$55 million thus far. Ten other firms account for the $27 million or so
in fees and expenses billed on Lehman: Milbank, Tweed, Hadley &
McCloy (counsel for the unsecured creditors’ committee) billed
just over $12.1 million, and Curtis, Mallet-Prevost, Colt & Mosle
(Lehman's conflicts counsel) billed more than $4.6 million.
href='http://www.law.com/jsp/article.jsp?id=1202429920147'>Read
more.
Autos
Delphi Faces a Deadline
on GM Aid
Delphi faces a deadline on Friday to deliver a term
sheet outlining the future of its continued support from General Motors,
which spun off Delphi a decade ago but still has ties to the company,
one of its largest suppliers, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. If it fails to reach agreements with GM, the
Treasury Department and its lenders by April 24, Delphi could lose its
bankruptcy financing. That could mean a liquidation, something the Obama
administration’s task force is preparing for. In that event, the
government hopes that a slimmed-down GM, created through a structured
bankruptcy, would acquire the Delphi plants and equipment necessary to
make the parts it needs. The rest would most likely be sold at fire-sale
prices, leading to little recovery for creditors.
href='http://www.nytimes.com/2009/04/16/business/16delphi.html?_r=1&ref=business&pagewanted=print'>Read
more.
Chrysler-Fiat Talks
Intensify, Saturn Deal Eyed
Fiat SpA Chief Executive Sergio Marchionne turned up
the heat on talks with struggling U.S. automaker Chrysler yesterday as
General Motors Corp. confirmed a possible buyer for its Saturn network,
Reuters reported. An investor group that includes private equity firm
Black Oak Partners LLC and some Saturn dealers has approached GM about
buying the assets of the Saturn brand and distribution network.
Additionally, Marchionne said he saw no reason why Fiat and Chrysler
could not complete a proposed alliance by the end of April, a target set
by the U.S. auto task force that must decide whether to provide more
government aid to the Detroit automaker.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/15/AR2009041502773_pf.html'>Read
more.
Judge Orders
Asarco’s Parent Company to Pay $1Billion and Offer Stake in Mining
Operation
A judge has ordered a unit of mining giant Grupo
Mexico SAB to paymore than $1 billion in cash, and a stake in lucrative
Peruvian copper operations to Asarco LLC, in a case alleging that Grupo
fraudulently shifted the shares that led to Asarco filing for
bankruptcy,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Andrew Hanen of the U.S. District Court for the Southern District
of Texas yesterday issued a final ruling for Asarco in its dispute with
Grupo subsidiary Americas Mining Corp., declaring the company on the
hook for the $1.38 billion cash payment and the transfer of more than
260 million shares of common stock of Southern Copper Corp., formerly
Southern Peru Copper Corp.An additional transfer of more than 43 million
shares of common stock from Southern Copper Corp. from Asarco to
Americas Mining Corp. on March 31, 2003, will also be reversed,
according to the ruling.
href='http://bankruptcy.law360.com/articles/97006'>Read
more. (Subscription required.)
Dial-A-Mattress Receives
Approval to Tap More DIP Cash
Dial-A-Mattress International Ltd. has received
approval to increase its debtor-in-possession financing from a
subsidiary of Sleepy’s Holdings LLC from $550,000 to
$900,000,
size='3'>Bankruptcy Law360 reported today.
Dial-A-Mattress – better-known by the name of its primary
retailer, 1-800-Mattress Corp. - announced the funding boost yesterday,
although the order has not yet been entered into its chapter 11
proceedings underway in the U.S. Bankruptcy Court for the Eastern
District of New York. The case is
face='Times





New
Roman'
size='3'>In re Dial-A-Mattress Operating Corp. et al.,
size='3'>case number 1-09-41966, in the U.S. Bankruptcy Court for the
Eastern District of New York.
href='http://bankruptcy.law360.com/articles/96991'>Read
more. (Subscription required.)
Liquidating AtheroGenics
Sells Off All Its Assets
Startup pharmaceutical company AtheroGenics Inc. has
sold off its assets and ceased conducting business operations as it
moves closer to completing the liquidation process,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
According to an amended disclosure statement filed and approved on
Tuesday by Bankruptcy Judge
face='Times New Roman' size='3'>James E. Massey
size='3'>, AtheroGenics has about $48 million in cash on hand, including
$2 million that it garnered from the sale of its assets to Crabtree
Acquisition Co. LLC last month. Overall, 126 claims have been filed
against AtheroGenics totaling roughly $315 million. As a result, there
will be no distribution to shareholders and only partial distribution to
creditors. The case is
face='Times






New
Roman'
size='3'>In re AtheroGenics Inc., case number
08-78200, in the U.S. Bankruptcy Court for the Northern District of
Georgia. Read
more. (Subscription required.)
Bank Vet Pegged to Run
Bailout
President Barack Obama is expected to tap Fannie Mae
CEO Herb Allison to head the government's $700 billion financial-rescue
program, the
size='3'>Wall Street Journal reported today.
Allison is the former chairman of investment company TIAA-CREF and was a
Merrill Lynch & Co. executive for years. In September, he agreed to
run Fannie Mae after the United States took over the mortgage giant and
its sister firm, Freddie Mac. President Obama could announce his
intention to nominate Allison as assistant secretary for the Office of
Financial Stability as early as this week. Allison would replace Neel
Kashkari, a holdover from the Bush administration, who was asked by
Treasury Secretary Timothy Geithner to stay on until a replacement was
found.
href='http://online.wsj.com/article/SB123966400746315067.html'>Read
more. (Subscription required.)
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