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December 14,
2009
Mortgage Cramdown Amendment
Defeated
In a stunning reversal, the House on Friday rejected
an amendment to the massive financial services overhaul bill to allow
bankruptcy judges to modify home mortgages in chapter 13.
The vote was 188-241, with 71 Democrats joining nearly
all Republicans in opposition. An identical
proposal passed the House in March before being defeated in the
Senate. Foreclosures continue to rise as the
administration's voluntary program to modify mortgages has delivered
disappointing results to date. The cramdown
amendment was offered as a way to break the foreclosure trend -- without
using taxpayer money -- for those with enough current income to fund a
chapter 13 plan. Opponents argued that the
amendment wouldn't help many homeowners and would have unintended
adverse consequences for lenders in securitized markets.
The 'Wall Street Reform and Consumer Protection Act of
2009' passed the House on Friday and heads to the Senate, where it faces
an uncertain future. The controversial bill
will need 60 votes to win approval there.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/presscfpa_121109…'>Click
here to read the House Financial Services Committee’s
press release on the passage of the “Wall Street Reform and
Consumer Protection Act of 2009.”
Analysis: Interest Rates Are
Low, but Banks Balk at Refinancing
Though mortgage rates in the U.S. have dropped to
their lowest levels since the 1940s, banks that once handed out home
loans freely are imposing such stringent requirements that many
homeowners who might want to refinance are effectively locked out,
the
size='3'>New York Times reported yesterday. An
estimated six of 10 homeowners with mortgages have rates that exceed the
4.8 percent rate currently available on 30-year fixed mortgages, the
least risky form of home loans. Nevertheless, only half as many
refinancing applications were reported last week than were reported at
the beginning of January, the peak level for the year. The total dollar
volume of refinancing activity in 2009 will be about $1 trillion. In
2003, another year when rates fell, it was $2.8 trillion. President
Obama is scheduled to meet with banking executives at the White House
today in another administration effort to increase the flow of loans to
consumers and small businesses. Among those expected to attend are
representatives from Citigroup, JPMorgan Chase, Bank of America, Wells
Fargo and Goldman Sachs.
href='http://www.nytimes.com/2009/12/13/business/economy/13rates.html?em=&pag…'>Read
more.
Citigroup Reaches Deal to
Repay Bailout Funds
Citigroup reached a deal today to exit the
government’s bailout program after persuading regulators that it
was sound enough to stand on its own, the
face='Times






New
Roman'
size='3'>New York Times reported. Citigroup
executives announced a broad program that will replace the $20 billion
of remaining federal aid with funds from private investors, facilitate
the sale of the government’s $25 billion stock investment and
begin to wean itself off other forms of government assistance. To help
replenish its coffers, Citigroup expects to raise about $17 billion by
selling stock as early as this week and issue another $4.2 billion in
tangible equity units and subordinated notes. With its regulatory
permission, Citigroup plans to redeem $20 billion of preferred stock
that the government received as part of the bank’s first two
rescues late last year. It will also end a loss-sharing agreement with
the government on about $250 billion of troubled real estate and credit
card assets. The Treasury Department, meanwhile, plans to wind down its
34 percent ownership stake in Citigroup, which it acquired by converting
$25 billion of preferred shares into common stock in a third rescue this
year. It expected to sell its nearly 7.7 billion shares through a series
of large stock sales to institutional investors over the next 6 to 12
months. The first sale, for up to $5 billion of Citigroup shares, is
expected to occur alongside this week’s $17 billion stock
offering.
href='http://www.nytimes.com/2009/12/15/business/economy/15bank.html?_r=1&hp=…'>Read
more.
Autos
Commentary: Arbitrators
Should Rule Quickly in Auto Dealership Closures
As Congress has seized the wheel from General Motors
and Chrysler to stop the automakers from shutting about 2,000 car
dealerships as part of cost-saving reorganization plans, arbitrators who
must now consider which dealers stay open must be wise and fast for the
sake of national recovery, according to an editorial in
today’s
size='3'>New York Times. An initial House
measure would have ordered all closings to be reversed, but the final
measure the Senate enacted last week will let certain dealerships bring
their cases to arbitration. The legislation will give arbitrators the
final say, weighing the economic interests of the auto companies, the
dealers and the public. Required balancing factors include
dealers’ profitability histories, the automakers’ overall
recovery plans and customers’ satisfaction ratings. The companies,
and many outside experts, decided that the closings were necessary after
the failing Detroit giants were bailed out with federal financing and
promised to modernize outdated marketing practices. Read the
href='http://www.nytimes.com/2009/12/14/opinion/14mon4.html?ref=opinion&pagew…'>full
editorial.
Ex-Subsidiary Says GM
Can’t Scrap Contract over Asbestos Claims
Remy International Inc., formerly the auto
maker’s Delco Remy parts division, said that GM’s chapter 11
estate should not be able to terminate a 15-year-old contract in an
effort to avoid paying legal costs related to asbestos claims, Dow
Jones
size='3'>Daily Bankruptcy Review reported
today. GM had indemnified Remy and had paid legal expenses associated
with product-liability claims–including asbestos claims–for
parts made before the 1994 sale until shortly after the automaker filed
for bankruptcy in June. However, GM is now seeking to reject the deal in
court. Remy also said the insurance policies that protected it from the
asbestos suits have been assumed by the portion of GM that emerged from
bankruptcy.
Obama Administration Pushes
to End Private Student Lending
The Obama administration is pushing colleges and
universities to abandon private student lenders in favor of the
government's direct loan program,
face='Times






New
Roman'
size='3'>CongressDaily reported today. Obama
wants to end the Federal Family Education Loan Program, replace it with
the Education Department's Direct Lending program and use the estimated
$79.6 billion in savings to boost aid to low-income students --
seriously threatening private student lenders and limiting their role to
loan servicing. A bill passed the House in September, but it has stalled
in the Senate. In October, Education Secretary Arne Duncan sent a letter
to college and university presidents advising them to abandon the FFEL
program and switch to Direct Lending. Several banks, including Bank of
America, have announced they will no longer offer FFEL loans. At
least 575 colleges and universities -- including top names such as Yale
-- are planning to switch to direct lending in 2010 regardless of the
legislation's fate.
Icahn Buys Bankrupt Trump
Casino's Debt from Beal
Carl C. Icahn said Friday that his affiliated entities
purchased Trump Entertainment Resorts Inc.'s debt from Beal Bank, adding
a new player to the battle over competing bankruptcy plans between Beal
Bank and an ad hoc noteholders’ committee supported by Donald
Trump, Bankruptcy
Law360 reported on Friday. Donald Trump and
Beal Bank started out as allies in support of a reorganization plan
filed by the debtors, but in November Trump withdrew his support and
threw his weight behind a plan filed by the company's ad hoc
noteholders’ committee. The committee's plan would let bondholders
purchase the casinos. Beal then filed its own plan to compete with the
committee's. The bank's plan would convert the bank's loan to the
casinos into an equity stake in the reorganized company and provide for
a $225 million rights offer to holders of certain secured and unsecured
claims.
href='http://bankruptcy.law360.com/print_article/138880'>Read
more. (Subscription required.)
Panolam Pre-packaged Chapter
11 Plan Confirmed
Bankruptcy Judge
face='Times






New
Roman'
size='3'>Mary F. Walrath on Thursday confirmed
Panolam Industries International Inc.'s pre-packaged reorganization plan
just more than a month after it entered chapter 11 to restructure its
laminate manufacturing business,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported on Friday.
The prepackaged plan calls for the company to exchange its senior debt
for a combination of cash and notes of the reorganized company and to
exchange its senior subordinated notes for shares of common stock in the
new Panolam. All existing equity interests will be canceled in exchange
for warrants to acquire shares of common stock in the reorganized
company, the company said. Under the plan, Panolam said it will honor
all obligations to its customers, pay all vendors and suppliers and
continue to pay employees as usual. The case is
face='Times New





Roman'>
face='Times






New
Roman'
size='3'>In re Panolam Holding Co., case
number 09-13896, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/print_article/138891'>Read
more. (Subscription required.)
Fairfield Files for Chapter
11
Privately-held real estate company Fairfield
Residential LLC filed for bankruptcy protection on Sunday, saying that
the collapse of the U.S. real estate and capital markets has made it
difficult to continue without restructuring, Reuters reported yesterday.
The company said that it has agreed with its significant lenders on the
framework of a reorganization plan that would allow it to continue its
property management, asset management, construction services and general
partner functions. Fairfield specializes in multifamily housing and is
based in San Diego, Calif. The case is
face='Times






New
Roman'
size='3'>In re Fairfield Residential LLC, U.S.
Bankruptcy Court, District of Delaware, No. 09-14378.
Southern Lawmakers Seek
Emergency Aid for Farmers
Some Southern lawmakers are seeking billions of
dollars in emergency aid for farmers after recent natural disaster
declarations in at least 20 states, the Associated Press reported
yesterday. A farm disaster program authorized by Congress last year
still isn't fully in place, and even if it was, some lawmakers say that
its design could keep many farmers with losses this year waiting for
help until January 2011. The U.S. Department of Agriculture's disaster
declarations allow farmers affected by weather ranging from hail to
volcanic emissions to seek low-interest loans or other assistance, but
some debt-laden farmers say that the last thing they need is another
loan. In Louisiana and Mississippi, early season drought and late-season
rains compounded the losses many growers suffered due to the 2008
hurricanes. Lawmakers from Mississippi and Arkansas are helping lead a
push for at least $2.1 billion in emergency farm aid and hope to gain
approval by year's end from Congress.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/12/14/AR20091…'>Read
more.
Hawaii Biotech Declares
Bankruptcy
Hawaii Biotech Inc. has filed for chapter 11
protection, the Associated Press reported on Friday. The company said
that the filing is intended to allow Hawaii Biotech to continue its
human clinical trials, keep its staff in place, pursue funding and
protect current investors.The company has been developing vaccines to
protect people from West Nile virus, dengue fever and tick-borne
encephalitis.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/12/11/AR20091…'>Read
more.
International
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