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February 9, 2010
Rights Offering Is Centerpiece of Aleris'
Bankruptcy Exit Plan
Aleris International Inc. has rolled out a reorganization plan
centered on a $690 million backstopped rights offering of equity and
debt, the Deal Pipeline reported yesterday. The Beachwood,
Ohio-based producer of rolled and extruded aluminum products filed the
plan and related disclosure statement on Feb. 5, with the U.S.
Bankruptcy Court for the District of Delaware in Wilmington. In
connection with the plan submission, German affiliate Aleris Deutschland
Holding GmbH, or ADH, filed for chapter 11 in Wilmington the same day.
Under the plan for Aleris, ADH and their debtor affiliates, existing
term lenders would take full ownership of reorganized Aleris through
both the rights offering and the issuance of common shares. Affiliates
of Oaktree Capital Management LP and Apollo Management LP must own at
least 72.1 percent of Aleris on its emergence from bankruptcy, court
papers show.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005387582'>Read
more. (Subscription required.)
Dodd Moving on Financial
Regulatory Overhaul without Shelby
Senate Banking Chairman Christopher Dodd (D-Conn.)
announced on Friday that he will move forward with a revamp of the
nation's financial regulatory system without the support of Senate
Banking Committee ranking member Richard Shelby (R-Ala.),
CongressDaily reported on Friday. Dodd said that he told his
staff to draft a bill he will unveil to the committee later this month
in preparation for a markup, which will very likely occur on a
party-line vote. 'Sen. Shelby assured me that he is still committed to
finding a consensus on financial reform, but for now we have reached an
impasse,' Dodd said. 'While I still hope that we will ultimately have a
consensus package, it is time to move the process forward.' After more
than two months of negotiating, the two are at a deadlock over a
proposed Consumer Financial Protection Agency, an independent agency
that would assume rule-writing, examination, and enforcement over credit
cards, mortgage lending and other services. The Obama administration has
made a CFPA a priority, but banking lobbyists are lined up to kill it
and want to keep such powers with the federal regulators of
jurisdiction.
Lehman Brothers Examiner
Ends Probe of Collapse
The court-appointed examiner investigating the
collapse of U.S. investment bank Lehman Brothers Holdings Inc. revealed
in court documents yesterday that he has completed his probe and is
ready to file a report with the court, Reuters reported
yesterday. Anton Valukas, chairman of law firm Jenner &
Block, was appointed as examiner in the case in January 2009. He was
given the task of reporting on issues surrounding Lehman's collapse and
how it pursued the sale of key assets to Barclays Plc. The probe has
resulted in a 2,200-page report, excluding appendixes, that the Valukas
said should be made public as soon as possible. Valukas received
permission from Bankruptcy Judge James Peck to temporarily
file the report under seal so that the parties involved could address
concerns about confidentiality and privileged information.
href='http://www.reuters.com/article/idUSN0820300520100208'>Read
more.
U.S. to Continue Oversight
of Fannie Mae and Freddie Mac to Carry Out Mortgage Relief
Programs
Federal overseers have instructed Freddie Mac CEO
Charles E. Haldeman Jr. to focus on something that isn't likely to
make the bleak balance sheet of the mortgage giant look any better:
carrying out the Obama administration plan to allow defaulted borrowers
to hang onto their homes, the Wall Street Journal reported today.
Freddie and its larger rival, Fannie Mae, were among the first big
financial institutions to receive massive federal bailouts after the
financial crisis hit in 2008. Government officials have been racing to
fix bailed-out car makers and banks and are pushing to reshape the
financial-services industry. However, Fannie and Freddie remain troubled
wards of the state, with no blueprints for the future and no clear exit
strategy for the government.
href='http://online.wsj.com/article/SB10001424052748704362004575001042824028862.html'>Read
more. (Subscription required.)
Editorial: Harrisburg Faces
Tough Financial Choices, Including Chapter 9
Unless drastic measures are taken, it is almost
certain there will not be enough money to pay Harrisburg, Pa.'s upcoming
debt payments on March 1 or April 1, according to an editorial in the
Harrisburg Patriot-News on Friday. The city will have to consider
filing for chapter 9 bankruptcy even though in some city circles the
possibility is treated like a dirty word or the
face='Verdana' size='2'>“term that shall not
be named.”
size='2'>There seems little way for the city to afford the $65 million
budget Mayor Linda Thompson presented to City Council, much less an
additional $69 million in debt payments. ABI Resident Scholar Prof.
Juliet Moringiello, said that the chapter 9 process
would be more of a focused '
size='2'>negotiation,”
rather than some of the misconceptions that people have
of municipal bankruptcy.
href='http://www.pennlive.com/editorials/index.ssf/2010/02/crunch_time_for_harrisburg_cit.html'>Read
more.
Debt
Fresh off announcing its new chief executive, the CIT
Group said yesterday that it will repay $750 million of its $7.5 billion
first-lien loan, debt that the firm described as
face='Verdana' size='2'>“high
cost,”
size='2'>the New York Times DealBlook Blog reported yesterday.
The money to repay the portion of the loan will come from $5 billion in
cash sitting in CIT’
lang='RU'>s holding company. The payment will be made today and will be
subject to a 2 percent payment premium. There is one creditor that
won’t be repaid: the
federal government, whose $2.3 billion of preferred stock was wiped out
during CIT’s
prepackaged bankruptcy late last year. CIT also said that contingent
value rights that were distributed to creditors as part of its
restructuring last year have expired.
href='http://dealbook.blogs.nytimes.com/2010/02/08/cit-to-repay-750-million-of-debt/'>Read
more.
In related news, John Thain yesterday became the CEO
of the CIT Group, the lender to small and midsize businesses that
emerged two months ago from a swift bankruptcy, the New York
Times reported on Sunday. Thain is seeking to leave behind the
controversies that haunted his final days at Merrill after it was
acquired by Bank of America, a deal he helped engineer to save the
brokerage during the height of the financial crisis. As CIT
lang='EN'>’s new chairman and chief
executive, he will try to rebuild a company whose bet on increasingly
risky businesses led it to the brink of dissolution, only to be saved at
the last minute by its creditors. CIT is now positioning itself as a
crucial player in the administration
lang='EN'>’s effort to preserve and create
jobs.
href='http://www.nytimes.com/2010/02/08/business/08thain.html?scp=3&sq=Thain&st=cse'>Read
more.
Assets Up for Auction
Bankruptcy Judge Kevin Gross approved Champion
Enterprises Inc., a maker of factory-built homes and modular buildings,
to proceed with an auction of its assets next month, Reuters reported
yesterday. Champion, which sought bankruptcy protection in November, has
said it wants to complete the sale process no later than March 18. A
group of the company's secured creditors including its bank lenders and
investment firms Centerbridge, MAK Capital and Sankaty Advisors will
serve as the stalking-horse bidder at the auction, according to court
documents. The 'credit bid' group that would allow the bidders to offer
an $80 million debtor-in-possession bankruptcy financing loan led by
Credit Suisse as part of the bid. The case is In re Champion
Enterprises Inc., U.S. Bankruptcy Court, District of Delaware, No
09-14019.
href='http://www.reuters.com/article/idUSN0824125020100208'>Read
more.
Accuride Confirmation
Hearing Delayed on Shareholder Concerns
Bankruptcy Judge Brendan Shannon yesterday delayed the
confirmation hearing for Accuride Corp.'s reorganization plan by one
week amid concerns from shareholders, Dow Jones Daily Bankruptcy
Review reported today. Judge Shannon said that he wouldn't consider
approving Accuride's debt-repayment plan until Feb. 17 after he heard
from shareholders that were convinced some of their votes had been lost
during the solicitation process. Monika Machen, an attorney for
the shareholders, said that some shareholders who sent in votes weren't
included in the current totals, which list 71 percent of shareholders as
supporting Accuride's plan. A reassessment of the votes could
potentially bring the shareholders closer to the percentage they need to
reject the plan, she said, noting that the allegedly missing votes
represent $500,000 in claims.
FairPoint's Reorganization
Plan Aims to Cut Debt by Two-thirds
Telecommunications provider FairPoint Communications
Inc. yesterday filed a reorganization plan that calls for cutting debt
by about two-thirds and distributing millions of new shares to claim
holders, Reuters reported yesterday. The company proposed cutting $1.8
billion in debt and issuing millions of new shares, subject to creditor
and bankruptcy court approval. The rural telecom services provider still
expects to emerge from bankruptcy later this year. The company said in
court filings that $2.1 billion in allowed pre-petition credit agreement
claims could expect a recovery of about 87.9 cents on the dollar in cash
and new shares.
href='http://www.reuters.com/article/idUSN0818995820100208'>Read
more.
GM Considers Hourly
Pension Contribution Sooner Than Planned
General Motors Co. said on Friday that it may contribute to its U.S.
hourly pension program sooner than initially planned, a move that would
help fend off higher-than-anticipated retiree costs in years to come,
Dow Jones Daily Bankruptcy Review reported yesterday. GM's
financial position is much improved from a year ago, when the
bankruptcy-bound company laid out a plan to wait until 2013 or 2014 to
pay $18 billion into its under-funded hourly pension program. The
stability that came with a $50 billion investment from the U.S.
government and a sweeping reorganization in bankruptcy court has given
GM more flexibility to consider earlier payments. Meantime, GM faces
added costs from its deal to take over some pension obligations from
former parts arm Delphi Corp.
Smurfit-Stone Seeks $650
Million to Exit Bankruptcy
Smurfit-Stone Container Corp., the world's
second-biggest maker of paper boxes and packaging, is seeking a $650
million revolving credit line as part of a loan package to exit
bankruptcy, Bloomberg News reported on Saturday. JPMorgan Chase &
Co. and Deutsche Bank AG are arranging the four-year senior secured
loan, according to a Feb. 3 filing. The proposed interest rate is 3.5
percentage points more than the London interbank offered rate.
Smurfit-Stone seeks the asset-based credit line in addition to a $1.2
billion term loan authorized Jan. 14 by the bankruptcy court. The
Chicago-based company filed chapter 11 protection in January 2009 amid
falling customer demand and heavy debt payments. It listed $5.6 billion
in debt and $7.5 billion in assets as of Sept. 30, 2008.
href='http://www.dailyherald.com/story/?id=357232'>Read
more.
Judge Questions Bank
of America’
lang='RU'>s New Deal with SEC
A federal judge left open the possibility yesterday that he might
reject a new $150 million settlement between the Securities and Exchange
Commission and Bank of America over the bank
lang='EN'>’s controversial takeover of
Merrill Lynch, a move that could force the case to go to trial, the
New York Times reported today. District Judge Jed S. Rakoff
questioned the new settlement announced last week after he rejected a
previous $33 million deal that he thought to be too low. The judge said
that he regarded the $150 million settlement as
face='Verdana' size='2'>“still quite
small”
size='2'>and suggested that $300 million or $600 million would be more
appropriate. He asked the commission for more information about its plan
to distribute the fine to investors. Judge Rakoff also questioned
whether there should not be a role for the court to oversee several
corporate governance changes proposed in the settlement.
href='http://www.nytimes.com/2010/02/09/business/09bank.html?ref=business&pagewanted=print'>Read
more.
Consumer Credit Falls for
Eleventh Straight Month
The Federal Reserve reported on Friday that consumer
credit declined in December for the 11th straight month, but the pace
slowed considerably, CNNMoney.com reported on Friday. Total consumer
borrowing fell a seasonally adjusted $1.8 billion, an annual rate of 0.8
percent, to $2.456 trillion in December, according to the Federal
Reserve. For all of 2009, consumer debt dropped by 4 percent to $2.46
trillion from $2.56 trillion in 2008. Revolving credit, which includes
credit card debt, fell in December by $8.5 billion, or an 11.7 percent
annual rate to $866 billion. Nonrevolving credit, however, increased by
$6.8 billion, or a 5.2 percent annual rate to $1.59 trillion.
href='http://money.cnn.com/2010/02/05/news/economy/consumer_credit_december/'>Read
more.
href='http://online.wsj.com/article/SB10001424052748704362004575001042824028862.html'>
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