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February 20,
2008
on the Brink of Bankruptcy
The city of
face='Times New Roman'
size='3'>Calif., is on the
brink of becoming
the first city in the state to declare bankruptcy, NBC11.com reported
yesterday.
w:st='on'>
size='3'>Vallejo
size='3'>may run out of cash as early as March, council member Stephanie
Gomes said. 'Not only that, but now we
have 20 police and fire employees retiring because they are afraid of
not getting their payouts,' Gomes said.
'That means we have another few million dollars in payouts that we had
not expected. So the situation is quite
dire.' In a report to the city council dated Feb. 13, Vallejo Finance
Director Rob Stout projected that without
deep cuts, including assumed agreements negotiated with police and fire
departments by June 30, the City will be
$6 million in debt and will have spent every last penny of its $4
million in reserves. Council members Joanne
Schivley and Gomes have announced that they will host a town hall
meeting tomorrow to discuss the
href='http://www.nbc11.com/news/15345539/detail.html?rss=bay&psp=news'>Read
more.
New
w:st='on'>
face='Times New Roman' size='3'>
name='2'>Maryland
size='3'>Regulations Aim to Aid Those Facing Risk of
Foreclosure
Citing an alarming rate
of mortgage foreclosures in
size='3'>Maryland, Gov.
Martin O'Malley (D) announced emergency
regulations yesterday requiring loan service companies to tell the state
when residents are in danger of losing
their homes so the government can offer preemptive help, the
size='3'>Washington Post reported yesterday.
O'Malley said that the mortgage industry
has failed to help troubled homeowners, pointing to poor customer
service at major loan service companies, which
collect mortgage payments and are authorized to negotiate and modify
loan terms. The governor has summoned
industry officials to meet with him in
w:st='on'>
size='3'>next week.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/19/AR2008021901529_pf.html'>Read
more.
name='3'>Administrator Recommends Dismissal for Nifong
Chapter 7 Case
Bankruptcy administrator
Michael D. West recommended dismissal for
the chapter 7 case of Mike Nifong, the former Durham District Attorney
who lost his job and law license for
misconduct in the Duke lacrosse case, due to his high amount of income,
the Raleigh News & Observer
size='3'>reported today. West filed a statement in
the case late last week saying that Nifong's case should be 'presumed to
be an abuse' because his annual income
would be higher than federal limits. If a judge agrees, that could make
it more difficult for Nifong to hide in
bankruptcy court from the three exonerated lacrosse players who are
suing him.
href='http://www.freerepublic.com/focus/f-news/1973034/posts'>Read
more.
name='4'>Sharper Image Files for Chapter
11
Sharper Image Corp., the
store and catalog retailer whose products
include air purifiers and massage chairs, filed for chapter 11
protection yesterday, saying declining sales and
three straight years of losses led to a shortage of liquidity, Reuters
reported. The
San Francisco-based company said that it had $251.5 million of assets
and $199 million of debts as of Jan. 31,
according to the filing. Cash on hand totaled about $700,000, the filing
shows.
size='3'>Sharper Image CFO Rebecca Roedell said that the company has
suffered from increased competition,
narrowing margins, litigation, lower consumer and market confidence,
tighter credit from suppliers, and poorly
performing stores. “The foregoing has been compounded by the
ever-tightening and volatile credit and
financing markets,' she added. Sharper Image is seeking a $60 million
loan arranged by Wells Fargo Retail Finance
LLC to keep operating, court papers show.
1031
Tax Group Owner Loses Court
Bid
Bankruptcy Judge
size='3'>Martin Glenn denied a bid by 1031 Tax
Group owner Edward Okun to back out of
his deal to sell his collection of luxury items to repay some of the
$150 million owed to creditors of his failed
real estate tax shelter, the Associated Press reported yesterday. Judge
Glenn ordered Okun and his
representatives to hand over four cars to Gerald McHale, the chapter 11
trustee for Okun's 1031 Tax Group. Okun
tried to get out of the agreement, claiming McHale hadn't held up his
end of a deal, which called for the couple
to keep two multi-million dollar homes and two automobiles. Judge Glenn
rejected Okun's request to toss the deal
and issued a permanent injunction barring the
w:st='on'>
size='3'>businessman from interfering with McHale's
bid to take ownership of Okun's assets.
href='http://www.chron.com/disp/story.mpl/ap/fn/5552947.html'>Read
more.
name='6'>Military Food Supplier Files for Chapter
11
Wornick Company, a major
supplier of ready-to-eat military meals
for the Department of Defense, and five of its affiliates filed for
bankruptcy protection on Thursday,
Bankruptcy Law360
reported yesterday. Wornick,
a private company based in Blue Ash,
w:st='on'>
listed total assets of about $92 million and
total liabilities of more than $177 million. DDJ Capital Management LLC
has agreed to provide Wornick with a $35
million debtor-in-possession credit facility, according to court
documents. The largest unsecured creditor is
Rexam Containers, which has a balance of about $1.3 million, followed by
Bruce PAC, which is owed about $700,000,
according to the company's SEC statement. The majority of the 30 largest
unsecured claims are from trade
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=47557'>Read
more. (Registration required.)
OKs Summit Global Probe
Bankruptcy Judge
size='3'>Donald H. Steckroth ordered an
examiner to look into details of Summit Global
Logistics Inc.'s plan to go private in a management-led buyout, the
Associated Press reported yesterday. U.S.
Trustee Kelly Beaudin
Stapleton had
requested the probe into the $56.5 million sale, which she alleged
mainly benefits the logistic firm's management
and the company's senior lender, Fortress Credit Corp., at the expense
of other creditors. Summit Global, an East
Rutherford, N.J.-based shipping firm, filed for bankruptcy late last
month with a deal in hand to sell its
business to an investment vehicle called TriDec Acquisition. TriDec is
owned by a number of
w:st='on'>
size='3'>Summit
size='3'>insiders, including Chief Executive Robert Agresti. As part of
the proposed deal, Fortress has agreed to
provide a $5 million loan to fund the chapter 11 case and will get
warrants to take a 30 percent stake in the
reorganized company, according to court papers.
href='http://www.forbes.com/feeds/ap/2008/02/19/ap4671375.html'>Read
more.
name='8'>Travelers’ $500 Million Asbestos
Settlement Overturned
Travelers Cos. Inc. announced
Tuesday that the Second Circuit U.S.
Court of Appeals has overturned a bankruptcy court’s approval of a
$500 million asbestos-related insurance
settlement, BusinessInsurance.com reported yesterday. The decision, made
late Friday, would reverse a $500
million settlement in March 2006 of certain insurance claims arising
from a suit by Denver-based Johns-Manville
Corp. The case has been remanded to the U.S. District Court for the
Southern District of New York for
reconsideration. In its decision, the New York-based federal appeals
court said the bankruptcy court that
approved the settlement had no legal jurisdiction to do so. Travelers,
Manville’s longtime primary insurer,
agreed in 2004 to settle three groups of “direct action”
lawsuits filed against it by claimants
allegedly injured by products made by Manville. The plaintiffs argued
that Travelers violated state and common
law in handling the claims and did not disclose what it knew of the
asbestos hazards.
href='http://www.businessinsurance.com/cgi-bin/news.pl?id=12305'>Read
more.
face='Times New Roman' size='3'>
name='9'>Delphi
size='3'> Cuts
CEO Bonus for Bankruptcy Exit
Delphi Corp. has cut the
cash bonus it had planned to give its
chief executive by more than $4 million when the company exits
bankruptcy, the Detroit Free Press reported
today. In a filing yesterday with the
Securities and Exchange Commission, the parts supplier said that CEO
Rodney O'Neal is slated to receive a
$1-million bonus, down from $5.3 million. The cut follows an order from
Bankruptcy Judge
face='Times New
&
#13; 



&
amp;amp;amp;#13;
Roman' size='3'>Robert Drain
for
w:st='on'>
size='3'>Delphi to reduce the $80
million in cash bonuses it planned to give top executives to $16.5
million. Separately,
w:st='on'>
size='3'>Delphi said yesterday its
fourth-quarter loss narrowed to $542 million.
href='http://www.freep.com/apps/pbcs.dll/article?AID=/20080220/BUSINESS01/802200428'>Read
more.
name='10'>Music Label Files for Chapter
11
TVT Records, long ranked
as one of the top independent labels in
the recording industry, filed for chapter 11 protection yesterday as
part of an overhaul that involved staff
cutbacks and the closing of certain international offices, the
size='3'>New York Times reported today. Until
recently, TVT, based in
w:st='on'>
York
size='3'>, had been able to weather the industry’s sales falloff
with hits from artists like rapper Lil'
Jon. However, the company was hit last year with a $9.1 million court
judgment after a federal jury in
size='3'>Miami decided that
it had interfered with another
company’s plan to release old recordings of the rapper Pitbull,
who is now on TVT’s roster. Steve
Gottlieb, who founded the label in 1985, said that the company had laid
off about 20 people, or about half its
href='http://www.nytimes.com/2008/02/20/business/media/20music.html?sq=bankruptcy&st=nyt&scp=2&pagewa
nted=print'>Read more.
name='11'>Ex-Refco Chief Faces Civil Fraud
Charges
The Securities and
Exchange Commission filed civil fraud charges
yesterday against Phillip R. Bennett, former CEO of the commodities
broker Refco Inc., days after he pleaded
guilty to criminal charges in a scheme to mask the company’s
financial health, Dow Jones Newswires reported
yesterday. The lawsuit, filed in
w:st='on'>
size='3'>Federal District Court
size='3'>in
w:st='on'>
size='3'>Manhattan
size='3'>, contends that Bennett orchestrated a plan to hide hundreds of
millions of dollars owed to Refco by a
private entity he controlled and to use practices that artificially
inflated Refco’s results. The complaint
seeks a permanent injunction and civil penalties against Bennett, as
well as the surrender of ill-gotten
href='http://www.nytimes.com/2008/02/20/business/20refco.html?sq=bankruptcy&st=nyt&scp=5&pagewanted=p
rint'>Read more.
Containers Removes Hurdle to
Confirmation
Sea Containers Ltd. has
achieved a crucial benchmark in its
chapter 11 case after reaching a $194 million settlement with two
pension schemes whose claims under U.K.
law had threatened to delay the transport company's
emergence from bankruptcy,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Under the
settlement, the two creditors – the Sea Containers 1983 Pension
Scheme and the Sea Containers 1990 Pension
Scheme – will receive a single allowed unsecured claim of $194
million, with $153.8 million ultimately to
go to the 1983 scheme and $40.2 million to go to the 1990 one. A status
conference on the motion has been
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=47424'>Read
more. (Registration required.)
Seeks to Restructure Debt, Reviving
Credit-Crunch Worries
A unit of
w:st='on'>U.S.
size='3'>private equity giant Kohlberg Kravis
Roberts & Co. has asked for a restructuring of billions of dollars
in short-term debt, reviving concerns of a
credit crunch, the
size='3'>Wall Street
Journal reported today. KKR Financial Holdings
LLC, the listed affiliate of KKR, said
in a regulatory filing that it was discussing a restructuring of debt
issued by two vehicles it runs and had
delayed repayment for obligations that came due last Friday. This is the
second time in six months the firm has
delayed repayment on short-term debt. A chunk of the debt is now due
March 3, and another chunk is due March
13. KKR Financial
Holdings, in which KKR owns a 12 percent stake, has struggled as the
subprime-debt crisis caused banks and other
lenders to pull back from investing in 'jumbo' mortgages of more than
$417,000. In September, KKR founders Henry
Kravis and George Roberts, along with other KKR partners, helped to
inject cash in the affiliate through a $270
href='http://online.wsj.com/article/SB120349759626179715.html?mod=hpp_us_whats_news'>Read
more. (Registration
required.)
name='14'>Credit Suisse Says Traders’ Pricing
Errors Will Cause $2.85 Billion in Write-Downs
Credit Suisse announced
yesterday that pricing errors by traders
on asset-backed securities would result in write-downs of $2.85 billion,
the New York Times reported today.
The write-downs, which will knock $1
billion from first-quarter earnings, come a week after Credit Suisse
announced fourth-quarter results that
indicated that it had been relatively unscathed by the turmoil in the
credit markets and had limited exposure to
the subprime crisis, which has caused large losses at other
banks. The traders
involved have been suspended. Credit Suisse CEO Brady W. Dougan said
that an internal review would determine how
much of the write-downs was linked to the pricing errors and how much
was a result of deterioration in the credit
market. The bank is also reviewing whether it may need to restate its
2007 results.
href='http://www.nytimes.com/2008/02/20/business/worldbusiness/20credit.html?_r=1&oref=slogin&ref=busines
s&pagewanted=print'>Read more.
International
name='15'>Bank of
w:st='on'>
size='3'>France
size='3'>Says Markets Drove Fed to Deeper
Cuts
The Bank of France said
that the U.S. Federal Reserve
interest-rate cuts this year were deeper than they otherwise would have
been because of market declines amplified
by new financial products, Bloomberg News reported yesterday. An
unsigned article in the Paris-based bank's
monthly bulletin said that novel products, such as credit-default swaps,
exaggerated market moves that can
produce “stronger monetary reactions than what would otherwise be
necessary, as shown by the recent
decision of the Federal Reserve.” The Bank of France said in a
subsequent statement that it didn't intend
to criticize the Fed reductions and that it was making an observation
because the Fed has recently implemented a
strong change in monetary policy. By highlighting the Fed's cuts, the
article may have underscored the European
Central Bank's reluctance to follow its
w:st='on'>
size='3'>U.S. and
w:st='on'>U.K.
size='3'>counterparts in cutting rates to cushion
against an economic slowdown. The ECB left its benchmark rate at 4
percent this month even as growth prospects
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aHVtzMqt3jRw&refer=home#'>Read
more.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aHVtzMqt3jRw&refer=home'>