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April 17, 2009
name='1'>Analysis: After the Bank Failure Comes the Debt
Collector
Clashes between owners of bad
commercial debt and struggling borrowers are increasingly taking place
across the country, as banks struggle through their worst crisis in a
generation, the New York
Times reported today. The niche industry that buys
struggling commercial debt prices the hard-to-collect commercial loans
that the Federal Deposit Insurance Corp. (FDIC) auctions off after it
seizes a failed bank. They take on the most troubled assets that most
other investors aren’t willing to touch in exchange for
potentially lucrative returns. Nationwide, the FDIC has seized 58 banks
over the last 15 months and through loan auctions has sold about $2.2
billion worth of loans. The $1.2 billion generated for the government
has gone into the fund to insure deposits at other banks. Many of the
auctioned loans are considered “performing,” meaning the
borrowers are current on their payments. However, a portion of them are
delinquent and the FDIC does not have rules to protect struggling small
businesses, whose loans are more typically sold at the FDIC
auctions.
href='http://www.nytimes.com/2009/04/17/business/smallbusiness/17debt.html?_r=1&ref=business&pagewanted=print'>Read
more.
Card Issuers
Face New Scrutiny from Obama Administration
Under pressure for questionable
industry practices, top executives of 14 of the nation's largest credit
card companies are heading to the White House on Thursday for a meeting
with senior administration officials, the
face='Cambria' size='3'>Washington Post
size='3'>reported yesterday. The executives plan to talk about their
efforts to increase transparency and help the economy. The credit card
industry has been under intense scrutiny in the past year for practices
such as arbitrarily raising interest rates, charging excessive fees and
giving customers little time between billing them and requiring payment.
In December, the Federal Reserve approved new rules that would ban such
practices. But consumer groups and several members of Congress
criticized the Fed's efforts because the new regulations don't take
effect until July 1, 2010. Bills have been introduced in both the House
and Senate to accelerate that timeline.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041603579_pf.html'>Read
more.
Autos
Experts
Say GM Would Require Quick Bankruptcy
A bankrupt General Motors Corp.
could be reorganized in as little as a month, a top bankruptcy attorney
said yesterday, and a Delaware bankruptcy judge said that if the case
lingered then a 'tremendous sinkhole' could open in the U.S. economy,
Reuters reported. GM would have to reach agreement with most parties
prior to filing and then move its healthy operations quickly to a new
entity that is free of pre-bankruptcy liabilities, said
face='Cambria' size='3'>Mark D. Collins,
director of Richards, Layton & Finger in Wilmington, Del. The judge
who handles the case, should GM file, would be under pressure to
accelerate the proceedings, said Bankruptcy Judge
face='Cambria' size='3'>Kevin Gross (D. Del.;
Wilmington). Judge Gross and fellow Delaware Bankruptcy Judge
Kevin J. Carey
size='3'>said that they had no special knowledge of whether GM might
file or how the case may proceed, although they both said they expected
the company to enter bankruptcy.
href='http://www.washingtonpost.com/?sub=AR&reload=true'>Read
more.
In related news, General Motors
Corp. is coming under pressure from the U.S. government to consider
shedding its GMC brand as the company races to transform itself by June
1, the Wall Street
Journal reported today. GMC, comprised mostly
of pickup trucks and sport-utility vehicles, was slated to remain part
of GM even after the company shrunk. However, the Obama administration's
auto task force has questioned whether it makes sense to keep GMC when
the company sells the same trucks and SUVs under the Chevrolet
label.
href='http://online.wsj.com/article/SB123989177238225323.html#mod=article-outset-box'>Read
more. (Subscription required.)
Nardelli
Sees New Leaders at Chrysler if Pact Clears
Chrysler CEO Bob Nardelli said
that the company LLC will likely get a new chief executive and board of
directors appointed by Italy's Fiat SpA and the U. S. government if
Chrysler and Fiat follow through on their plans to form an alliance,
the Wall Street
Journal reported today. Nardelli said that a
new board of directors will be appointed by the federal government and
Fiat once a deal is completed, while the majority of the directors will
be independent. Nardelli was installed as Chrysler's CEO by Cerberus
Capital Management LP, which acquired the automaker in 2007. The
private-equity firm is expected to give up all or most of its equity in
Chrysler under its reorganization, which opens the door for Fiat to name
href='http://online.wsj.com/article/SB123994324841228591.html#mod=testMod'>Read
more. (Subscription required.)
Auto
Retiree Groups Push to Keep Benefits
White-collar retirees of the Big
Three auto makers and supplier Delphi Corp. are banding together in
hopes of preserving their benefits and pensions, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. Representatives of more than 200,000 salaried
retirees from General Motors Corp., Chrysler LLC, Ford Motor Co. and
Delphi this week plan to renew a push for a meeting with the Obama
administration's auto taskforce. Retirees at GM and Chrysler fear they
could be stripped of many benefits in the government-led reorganization
of those two companies. In March, Delphi, which has been stuck in
bankruptcy protection for more than three years, cut the health care
benefits of its salaried retirees.
href='http://online.wsj.com/article/SB123992739229927517.html#mod=article-outset-box'>Read
more. (Subscription required.)
Examiner
Finds Trading by Executives Led to SemGroup’s
Bankruptcy
A bankruptcy examiner’s report
alleged that mismanagment by SemGroup LP executives including CEO Thomas
Kivisto led to the energy-storage business filing for bankruptcy,
Bloomberg News reported yesterday. Kivisto, who co-founded Tulsa,
Okla.-based SemGroup in 2000, “engaged in a complex trading
strategy that introduced increased risk to SemGroup at the time of an
unprecedented rise in the price of oil,” according to a report by
bankruptcy examiner and former FBI Director Louis Freeh. “There
were aspects of Kivisto’s trading strategy that made it
speculative and which ultimately led to the filing of the debtor’s
bankruptcy petitions. Kivisto engaged in mismanagement in this
regard.” SemGroup sought protection on July 22 from creditors.
Freeh was appointed Oct. 14 to probe about $2.4 billion in losses at the
energy company after creditors said SemGroup may have used unauthorized
trading strategies.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aHuP3HsY5JYE&refer=home'>Read
more.
Newsprint
Company Files for Chapter 11
AbitibiBowater Inc., North
America's largest newsprint producer, filed yesterday for chapter 11
protection, citing falling revenues due to price competition and the
growth of electronic media,
size='3'>Bankruptcy Law360 reported. The
Montreal-based company and 31 of its affiliates petitioned the U.S.
Bankruptcy Court for the District of Delaware, with a plan to file today
in Canada. AbitibiBowater also announced that it had secured $200
million in debtor-in-possession financing, which is still subject to
court approval, from Fairfax Financial Holdings Ltd. and Avenue
Management LLC. A further $210 million will be available for its
accounts receivable through the continuation of a subsidiary's existing
securitization program, according to the company. The case is
In re AbitibiBowater Inc. et
al., case number 09-11296, in the U.S.
Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/articles/97208'>Read
more. (Subscription required.)
Investor
Pushes for MGM Mirage Bankruptcy Filing
Activist investor Carl Icahn is
pushing casino operator MGM Mirage to restructure in bankruptcy court,
the Wall Street
Journal reported today. Icahn and
private-equity fund Oaktree Capital Management separately have acquired
hundreds of millions of dollars in MGM Mirage debt in recent months. MGM
Mirage has been working hard to avoid bankruptcy while laboring under
$14 billion of debt as its revenues plummet and its expenses rise. Ichan
and the investors told MGM Mirage, which must make a new equity payment
by today on the $8.6 billion Las Vegas City Center project, that they
would support a restructuring in bankruptcy court. City Center is MGM
Mirage's resort and residential project on the Las Vegas Strip that it
owns jointly with Persian Gulf investment vehicle Dubai World. Dubai
World is suing MGM Mirage over what it says is mismanagement and cost
overruns at the development. Dubai World skipped its last equity payment
on the project in March. The joint-venture partners are facing another
deadline payment today of $70 million. It is unclear if Dubai World will
pay its half, or if MGM Mirage will foot the entire bill.
href='http://online.wsj.com/article/SB123991207123426359.html#mod=testMod'>Read
more.
In its latest attempt to restart
financial markets, the Federal Reserve is weighing a twist in one of its
rescue programs that it hopes will encourage investors to buy long-term
commercial-mortgage-backed securities, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. The Term Asset-backed Securities Loan Facility
(TALF) offers three-year loans to investors who use them to buy
asset-backed securities. Fed officials are considering whether to offer
investors in commercial real-estate securities loans of as long as five
years to make the program more appealing.
href='http://online.wsj.com/article/SB123991092969726305.html'>Read
more. (Subscription required.)
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