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June 3, 2009
Autos
name='1'>Judge to Rule on Chrysler Franchise Terminations; Senate
Panel Examines Dealer Closings
Bankruptcy Judge
Arthur Gonzalez
will rule today on whether Chrysler can terminate the
franchise agreements of 789 of its dealers as part of its ongoing
restructuring, the Associated Press reported today. Auburn Hills,
Mich.-based Chrysler maintains that it needs to reduce its dealer base
to a leaner network of about 2,400 dealers in order to emerge from
chapter 11 protection as a stronger company. Chrysler claims that many
of the dealerships in question, which amount to about a quarter of its
dealer population, were chosen because they are either unprofitable or
located too close to other Chrysler dealerships. However, the dealers
argue that they don't cost the automaker anything, just make it money by
selling Chrysler's cars and trucks. They maintain that if Judge Gonzalez
approves Chrysler's motion it will result in the shuttering of hundreds
of dealerships and thousands of workers will lose their jobs.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/03/AR2009060300006_pf.html'>Read
more.
In related news, the Senate
Commerce Committee will hold a hearing today at 2:30 p.m. ET titled
“GM And Chrysler Dealership Closures: Protecting Dealers And
Consumers.” James Press, the president of Chrysler LLC, Fritz
Henderson, CEO of General Motors, and Pete Lopez, the president of an
auto dealership from West Virginia, will be among those
testifying.
href='http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=9716ac30-a07b-4a69-aec2-189ecaf1beee'>Click
here to view the hearing details and to watch a live Webcast of the
hearing.
name='2'>Detroit’s Woes Wound an Army of
Suppliers
The tens of thousands of
suppliers directly tied to GM and Chrysler are now facing grim futures
as the automakers are forced to shut plants as they work through the
bankruptcy process, the
size='3'>New York Times reported today. Auto
suppliers, which employ more workers than the car companies themselves,
have cut way back, almost hibernating, as they lay off employees earning
$10 to $22 an hour, or cut back their hours. “We are estimating
that 500 suppliers out of 4,000 could go out of business between now and
the end of the year,” said Neil DeKoker, chief executive of the
Original Equipment Suppliers Association. Billings just to the three
Detroit automakers from the nation’s auto suppliers have fallen to
$7 billion a month, on average, from $16 billion in January, he
said.
href='http://www.nytimes.com/2009/06/03/business/03suppliers.html?_r=1&ref=business&pagewanted=print'>Read
more.
name='3'>Chinese Company Buying GM’s Hummer
Brand
General Motors has
reached a preliminary agreement for the sale of its Hummer brand of
large sport utility vehicles and pickup trucks to Sichuan Tengzhong
Heavy Industrial Machinery Co., a machinery company in western China
with ambitions to become a carmaker, the
size='3'>New York Times reported today. The
price was not disclosed, but industry analysts had estimated that the
Hummer division would sell for less than $500 million. The deal,
expected to close in the third quarter, would make Tengzhong the first
Chinese company to sell vehicles in North America, though Hummer’s
operations would remain in the United States. Rea
href='http://www.nytimes.com/2009/06/03/business/03auto.html?ref=business&pagewanted=print'>d
more.
name='4'>Ford Making Inroads Despite Slump
Ford continued to pinch
business from its struggling crosstown rivals last month, increasing its
share of the U.S. auto market to its highest percentage in three years,
the Washington
Post reported today. The automaker now
controls 15.1 percent of the marketplace, and some analysts predict that
Ford could leap past General Motors in sales by the end of the year. As
GM and Chrysler close and idle plants this summer, Ford announced
yesterday that it will be ramping up its North American production by
10,000 vehicles in the second quarter. In the third quarter, it plans to
make 42,000 more vehicles than it did a year ago.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/02/AR2009060203396_pf.html'>Read
more.
Financial Services Committee to Examine Fannie Mae and Freddie
Mac
The House Financial Services
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises will hold a hearing today titled the 'Present Condition and
Future Status of Fannie Mae and Freddie Mac.' The hearing will take
place in room 2128 of the Rayburn House Office Building at 2 p.m.
ET.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrcm060309.shtml'>Click
here to view the prepared witness testimony and to watch a live
webcast of the hearing.
name='6'>Lehman, Deutsche Bank CDS Transfer Terms
Approved
Bankruptcy Judge
James M. Peck
size='3'>approved the terms for Lehman Brothers Holdings Inc. to assign
a credit default swap to Deutsche Bank AG's London branch, a deal that
could yield up to $733 million for one of the investment giant's
subsidiaries, Bankruptcy
Law360 reported yesterday. At issue is a
credit default swap — a deal that purportedly protects the bank
from up to $1 billion in mortgage-backed securities losses —
between Lehman and collateralized debt obligation Libra CDO Ltd. Under
the deal, Lehman has agreed to pay Libra periodically in exchange for
protection against losses from mortgage-backed securities. Lehman and
Lehman Brothers Special Financing asked to be allowed to assign their
interests in the CDS agreement to Deutsche Bank in order to monetize and
preserve the agreement's value. The assignment would yield approximately
$694 million to $733 million for the estate of Lehman Brothers Special
Financing, including about $325 million that has accrued under the
agreement but has not yet been paid, according to a May motion seeking
approval of the deal.
href='http://bankruptcy.law360.com/articles/104235'>Read
more. (Subscription required.)
name='7'>Teamsters Threaten to Shut Down
size='3'>Star Tribune
The Teamsters union is
threatening a strike it says would likely shut down the
face='Times New Roman' size='3'>Star Tribune
size='3'>if the newspaper, which is in bankruptcy protection, is allowed
to scrap its contract with unionized drivers, the Associated Press
reported yesterday. Teamsters Local 638 filed its opposition on Monday
to the newspaper's proposal to reject the contract. The newspaper wants
to pull out of what it calls a 'critically unfunded' multi-employer
pension plan that was costing it more than $1 million a year in
premiums. However, the Teamsters local, which represents about 190 full-
and part-time drivers at the
size='3'>Star Tribune, has authorized a strike
if a federal bankruptcy court allows the newspaper to reject the
contract. The drivers say that if they strike, Teamsters locals that
represent mailers and pressmen at the paper also likely would
strike.
href='http://news.ino.com/headlines/?newsid=68987378717100'>Read
more.
RH
Donnelley Approved to Tap $300 Million in Financing
R.H. Donnelley Corp. received
approval on Monday for all 12 of its first-day motions, allowing the
print and online directory company to access $300 million of its
available cash and to continue to pay pre-petition employee wages and
benefits, Bankruptcy Law360 reported yesterday. Bankruptcy Judge
Kevin Gross authorized R.H. Donnelley to satisfy
pre-petition claims to certain critical vendors, as long as the total
payment stays under $17 million. The company can also continue its
customer programs, provided the amount paid to critical marketing
representatives does not exceed $42 million.
href='http://bankruptcy.law360.com/articles/104248'>Read more.
(Subscription required.)
Bank
of New York Appeals Lyondell’s DIP Order
Bank of New York Mellon
Corp. is appealing a bankruptcy court's order that holders of two sets
of Lyondell Chemical Co. secured notes worth about $475 million are
adequately protected under the company's debtor-in-possession financing
order, Bankruptcy
Law360 reported yesterday. In a notice filed
Monday, Bank of New York, which acts as trustee for the so-called Arco
and Equistar noteholders, set forth the issues it will ask the U.S.
District Court for the Southern District of New York on appeal. Bank of
New York will ask the district court to consider whether the bankruptcy
court wrongly decided that the Arco and Equistar noteholders were
entitled to protection inferior to that of the senior secured lenders,
whether it wrongly determined that the noteholders were adequately
protected and whether it wrongly compelled Bank of New York to waive its
right to invoke the doctrine of marshaling against the senior secured
lenders.
href='http://bankruptcy.law360.com/articles/104244'>Read
more. (Subscription required.)
name='10'>Investors Seek $11.5 Billion from Federal Reserve Loan
Program
Investors yesterday showed a
bigger appetite for participating in a government program intended to
boost the availability of loans to consumers and small businesses at
cheaper rates, the Associated Press reported yesterday. Investors
requested $11.5 billion worth of loans, the Federal Reserve Bank of New
York said, up from $10.6 billion requested last month and the largest
amount since the program started in March. Investors are buying newly
issued securities backed by, among other things, auto and student loans,
credit cards, business equipment and loans guaranteed by the Small
Business Administration. The Term-Asset-Backed Securities Loan Program
(TALF) figures prominently in efforts by the Fed and the Obama
administration to ease credit, stabilize the financial system and help
end the recession. The TALF has the potential to generate up to $1
trillion in lending for households and businesses.
href='http://www.kansas.com/508/story/836775.html'>Read
more.
Ready to Require More Pay Disclosures
The Securities and
Exchange Commission plans to propose that companies disclose in general
terms how they compensate lower-ranking employees, expanding disclosures
for the first time beyond the executive suite, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. SEC Chairman Mary Schapiro said yesterday
during congressional testimony that the rules could be taken up by the
agency next month. They would then go through a public-comment period
and require final approval by the agency. Currently, companies are
required to explain executive-pay plans for only its five highest-paid
executives. Financial firms, movie studios, pharmaceutical companies and
others often have superstar traders, producers or salespeople who are
paid more than executives. The proposals wouldn't require companies to
say how much they pay these star performers, but they would have to
disclose in more-general terms how lower-ranking employees are paid,
especially when it affects the company's overall risk management. That
would apply in particular to financial firms, where traders have
received big bonuses for executing trades that put the entire company in
href='http://online.wsj.com/article/SB124397831899078781.html#mod=testMod'>Read
more. (Subscription required.)
name='12'>Banks, Money Managers Make Derivatives
Pitch
A group of large banks
and money managers made commitments to improve disclosures and reduce
systemic risk in the derivatives markets over the next few months, as
the threat of legislation looms, the
size='3'>Wall Street Journal reported today.
In an eight-page letter to William Dudley, president of the Federal
Reserve Bank of New York, market participants mapped out a timeline to
record all their over-the-counter derivative trades in central
repositories and expand access to credit-default-swap clearinghouses to
clients of banks. The group also pledged to come up with a mechanism to
resolve disputes over derivative valuations and level the playing field
between dealers and investment firms. Key among the goals was a
commitment to register all credit-derivatives trades in either a central
clearinghouse or a trade warehouse by July 17.
href='http://online.wsj.com/article/SB124399037747779743.html#mod=testMod'>Read
more. (Subscription required.)
name='13'>Investing in Lawsuits for a Share of the
Awards
Juridica Capital
Management is one of a few financial services companies that run a fund
investing in one side of a lawsuit in exchange for a share of any
winnings, the New York
Times reported today. A small but growing
number of investors are exploring this idea, helping companies avoid
some of the risks and costs of litigation in exchange for part of any
money paid out when the case is settled or resolved by a court. Credit
Suisse has a unit devoted to this kind of investing, as well as Juris
Capital, a Chicago firm backed by two hedge funds. Firms in this
business do not reveal which cases they invest in, but they claim strong
href='http://www.nytimes.com/2009/06/03/business/03litigate.html?ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/06/03/business/03litigate.html?ref=business&pagewanted=print'>
name='14'>Mattress Producer Files for Bankruptcy
Consolidated Bedding
Inc., the company that makes Spring Air mattresses and bedding products,
has filed for bankruptcy protection after selling its key assets and
brand name to a former executive, Reuters reported yesterday. The
company has sold many of its assets, including its brand name and
intellectual property, to E&E Bedding Co, according to court papers.
E&E Bedding is run by former Spring Air executive Edward Bates.
Consolidated's remaining corporate assets and 19 affiliates have ceased
business operations and filed for chapter 7 protection from creditors in
Delaware last week. Spring Air said in court documents it had been
running at an operational loss for at least a year, and closed several
facilities and laid off staff in attempts to reorganize itself. The case
is In re Consolidated
Bedding Inc., U.S. Bankruptcy Court, District
of Delaware, No. 09-11875.
href='http://www.reuters.com/article/mergersNews/idUSN0252154520090602'>Read
more.
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