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April 15, 2008
name='1'>Retailing Chains Caught in a Wave of
Bankruptcies
The consumer spending
slump and tightening credit markets are unleashing a widening wave of
bankruptcies in American retailing, prompting thousands of store
closings that are expected to remake suburban malls and downtown
shopping districts across the country, the
size='3'>New York Times reported today. Since
last fall, eight mostly midsize chains — as diverse as the
furniture store Levitz and the electronics seller Sharper Image —
have filed for bankruptcy protection as they staggered under mounting
debt and declining sales. However, the troubles are quickly spreading to
bigger national companies, such as Linens ‘n Things, the
bedding and furniture retailer with 500 stores in 47 states, which may
file for bankruptcy as early as this week. Even retailers that can avoid
bankruptcy are shutting down stores to preserve cash through what could
be a long economic downturn. Over the next year, Foot Locker said that
it would close 140 stores, Ann Taylor will start to shutter 117, and the
href='http://www.nytimes.com/2008/04/15/business/15retail.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='2'>Congressional Hearings Focus on Student Lending, Mortgage
Lending and Financial Literacy
Three congressional
committees will hold hearings today to address the topics of student
lending, mortgage lending and financial literacy. The Senate Banking
Committee will hold a hearing titled 'Turmoil in U.S. Credit Markets
Impact on the Cost and Availability of Student Loans' at 10 a.m. ET in
room 538 of the
w:st='on'>
size='3'>Dirksen
face='Times New Roman' size='3'>Senate
size='3'>Office
face='Times New Roman'
size='3'>Building
House Financial Services Committee will also hold a hearing at 10 a.m.
ET titled 'Financial Literacy and Education: The Effectiveness of
Governmental and Private Sector Initiatives' in room 2128 of the
size='3'>Rayburn
face='Times New Roman' size='3'>House
size='3'>Office
face='Times New Roman'
size='3'>Building
Finally, the House Financial Services Subcommittee on Capital Markets,
Insurance, and Government Sponsored Enterprises will hold a hearing on
H.R. 5579, 'the Emergency Mortgage Loan Modification Act of 2008' at 2
p.m. ET in room 2128 of the Rayburn House Office Building. All hearings
will be viewable via Webcasts by clicking on the links
below.
href='http://banking.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=08955ff1-d3cc-434c-b32a-60972599a048'>Click
here to view the witness list and read the written testimony for the
Senate Banking Committee hearing.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/press041508.shtml'>Click
here to view the witness list and read the written testimony for the
House Financial Services Committee hearing.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht041508.shtml'>Click
here to view the witness list and read the written testimony for the
House Financial Services Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises hearing.
Links Financial Executives' Pay with Credit Crisis
The AFL-CIO said yesterday that
pay packages for banking industry executives were partly to blame for
the credit crisis, encouraging risky investment strategies that ended up
hurting shareholders and consumers, the Associated Press reported. The
labor federation, a major shareholder in public companies through
union-sponsored pension funds, made the critique as it unveiled the 2008
version of its 'Executive PayWatch' Web site, which includes a CEO
compensation database. Labor leaders want Congress to pass so-called
'say on pay' legislation giving shareholders a vote on executive
compensation at major corporations. Such legislation passed the House
last year, but has stalled in the Senate. Nearly 100 companies —
from General Electric Corp. to Wal-Mart Stores Inc. — will be
voting on 'say on pay' proposals this spring. Last year, the average
level of support for 51 say-on-pay-type resolutions in 2007 was 42
percent, according to RiskMetrics Group. The union group's leaders
argued that executive-pay packages are too-often linked to short-term
measures of performance, such as revenue growth, that can mask
potentially catastrophic risks taken by the company.
href='http://www.chron.com/disp/story.mpl/business/5699351.html'>Read
more.
and Northwest in $3 Billion Deal
Delta Air Lines and
Northwest Airlines agreed late Monday to merge, in a $3.1 billion deal
that would create the world’s biggest airline and could prompt
other airlines to pursue mergers of their own, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Another leading merger candidate is a
combination of United Airlines and Continental Airlines, which have
explored the idea. The airlines now may try to get the deal wrapped up
within the next 30 days. The Delta-Northwest agreement came despite
failed efforts to get pilots at both airlines to agree on how to combine
their own ranks, an issue that could lead to labor unrest and
disruptions to flight operations in the coming years. Northwest pilots
immediately said that they would oppose the deal.
href='http://www.nytimes.com/2008/04/15/business/15air.html?ref=business&pagewanted=print'>Read
more.
name='5'>Report: Fannie, Freddie Could Hurt
w:st='on'>
size='3'>U.S.
size='3'>Credit
Standard & Poor's
reported yesterday that the performance of government-sponsored
enterprises (GSEs) like Fannie Mae and Freddie Mac could have a direct
impact on the national economy and, more importantly, U.S. credit
standing, the Wall
Street Journal reported today. The GSEs enjoy
implicit government guarantees and could cause the United States
to lose its sterling triple-A rating if the government
were forced to come to their rescue, according to the S&P report.
While the credit crunch has hurt financial markets, S&P notes that
it hasn't threatened the standing of the nation's credit quality.
However, should a protracted recession cause Fannie and Freddie to
buckle, the
w:st='on'>
size='3'>U.S.
size='3'>rating would be in danger. The cost to the
w:st='on'>
size='3'>U.S.
size='3'>government in such a scenario would be as much as 10 percent of
gross domestic product, according to S&P.
href='http://online.wsj.com/article_print/SB120818189112412691.html'>Read
more. (Registration required.)
Energy Files for Chapter 11
Capco Energy Inc., an
onshore and offshore gas company, filed for chapter 11 protection last
week, citing $22 million in debt owed primarily to Union Bank of
size='3'>California
size='3'>, Bankruptcy
Law360 reported yesterday. The company said
that it owes the bank approximately $14 million, $3.7 million of which
is in the form of letters of credit issued to cover ongoing operations.
Capco also cited 100 to 199 unsecured creditors claiming debt up to $10
million and listed up to $10 million in assets. Capco said its largest
unsecured debt of approximately $2 million was to Hoactzin LP, who
joined Capco in acquiring various oil properties. The company also cited
$8 million of trade debt to vendors for goods and services.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=53004'>Read
more. (Registration required.)
Environmental Group’s Reorganization Plan Rejected
Save Our Springs Alliance
(SOS), an Austin, Texas-based environmental group, had its
reorganization plan rejected by Bankruptcy Judge Craig
Gargotta as he was critical of the groups efforts to raise
money to pay off its creditors, the Austin
American-Statesman reported yesterday. SOS,
which had developed a reputation for aggressively battling development
in the Hill Country,
w:st='on'>
size='3'>Texas
bankruptcy a year ago after it lost a pair of lawsuits against
developers and was ordered to pay attorneys' fees totaling nearly
$500,000. The repayment plan, which would have paid creditors out of a
$60,000 settlement fund, was challenged in court by developer and
creditor Bill Gunn, who argued that SOS was unfairly denying him money
in its coffers. Gunn, the developer of the Sweetwater subdivision,
alledged that with bankruptcy looming, the environmental group funneled
its money into other environmental groups and instructed donors to
earmark their contributions for particular purposes, thus keeping them
out of the hands of creditors. Judge Gargotta found no evidence that SOS
had acted in bad faith, but he said the group had offered no evidence
that it could raise money for the settlement fund.
href='http://www.statesman.com/news/content/news/stories/local/04/15/0415sos.html?cxtype=rss&cxsvc=7&cxcat=52'>Read
more.
Fund Co-Founder Gets 20 Years in Prison
U.S. District Judge
Colleen McMahon sentenced Samuel Israel III, the co-founder of bankrupt
hedge fund Bayou Group LLC, to 20 years in prison for his role in a
scheme that allegedly defrauded investors out of more than $450
million, Bankruptcy
Law360 reported yesterday. Judge McMahon also
ordered
face='Times New Roman'
size='3'>Israel
size='3'>to pay $300 million in restitution and ordered him to report to
prison by June 9.
w:st='on'>
size='3'>Israel
size='3'>pled guilty in 2005 to conspiracy, investment adviser fraud and
mail fraud charges. He faced a possible maximum sentence of 30
years.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=53006'>Read
more. (Registration required.)
Bond
Insurer Stung by Subprime Mortgages Ponders Its Options
FGIC, a money-losing bond
insurer owned by the Blackstone Group and the PMI Group, is seeking
investors and may consider selling the company as it approaches a
deadline to shore up its capital, Bloomberg News reported yesterday.
FGIC, which reported a $1.89 billion fourth-quarter net loss last month,
is considering raising money for a new AAA-rated guarantor that would
back only public finance securities, the company said yesterday. Other
options include selling all or part of the business or reinsuring
guarantees with a third party, the statement said. FGIC is among the
most damaged of the bond insurers after straying from its business of
guaranteeing municipal bonds into backing securities that relied on
subprime mortgage payments.
href='http://www.nytimes.com/2008/04/15/business/15bond.html?ref=business&pagewanted=print'>Read
more.
name='10'>Bear Stearns Receives SEC Notice Regarding Municipal
Securities
Bear Stearns said in a
securities filing yesterday that it had received a notice from the
Securities and Exchange Commission (SEC) that civil charges could be on
the horizon for anticompetitive practices in its bidding for municipal
securities, the Wall
Street Journal reported today. That notice
comes in connection with a probe the SEC and the Justice Department are
conducting on the conduct of Wall Street firms that packaged and sold
municipal derivatives (securities based on underlying assets such as
city bonds) beginning in 1990. Bear Stearns expects an opportunity to
respond to the charges before the SEC staff makes a formal
recommendation to the commission. In addition, the Federal Trade
Commission has said that it believes Bear Stearns and its EMC Mortgage
Corp. mortgage-servicing unit have violated federal consumer-protection
statutes, according to the filing. Bear Stearns said that it is
cooperating with both agencies.
href='http://online.wsj.com/article_print/SB120821732482314435.html'>Read
more. (Registration required.)
name='11'>McCain to Propose Tax Cuts, Medicare and Student Lending
Reforms
Presidential candidate
Sen. John McCain (R-Ariz.) is laying out an economic plan that includes
increased Medicare premiums for wealthy seniors and a one-year freeze on
spending along with a proposal to review a vast swath of federal
programs, the Wall
Street Journal reported today. He plans to aid
students caught in the credit crunch who may have trouble obtaining
college loans and to call for another big tax cut -- this one helping
families with children. On taxes, McCain will propose doubling the
exemption for dependents from $3,500 per dependent to $7,000. That would
cost $65 billion per year, the campaign said. McCain has already
proposed a variety of other tax breaks, including reducing the corporate
tax break to 25 percent from 35 percent at a cost of about $100 billion
per year.
href='http://online.wsj.com/article_print/SB120822316466914917.html'>Read
more. (Registration required.)
href='http://online.wsj.com/article_print/SB120822316466914917.html'>