July 302008

 

Bush Signs Housing Bill
President Bush today signed a broad housing rescue package into law,
ushering in a huge

expansion of the federal government's role in the housing market,
The Hill reported.

The Bush administration last week dropped its previous threats to veto
the legislation after

the near-collapse of Fannie Mae and Freddie Mac earlier this month. The
package - the product

of more than a year of deal-making between key House and Senate players
and the Bush

administration - easily passed Congress last week. It will achieve some
long-standing White

House goals, such as creating a stronger regulator for Fannie Mae and
Freddie Mac and

modernizing the Federal Housing Administration. At the heart of the
legislation is a measure,

authored by House Financial Services Chairman Barney Frank (D-Mass.), to

refinance up to $300

billion in troubled mortgages into more stable 30-year loans backed by
the government. 

href='http://thehill.com/leading-the-news/bush-signs-housing-bill-2008-07-30.html'>Read

more.

In related news, the housing bill's elimination of seller-funded
down-payment assistance on

FHA-backed mortgages may hurt builders as a housing analyst at J.P.
Morgan said that the

omission could eliminate as many as one in 10 home buyers from the
market, the Wall

Street Journal reported today. Starting in October, buyers

using FHA loans can no

longer accept down-payment 'gifts' that are ultimately funded by the
home seller, often a

builder. Currently, the FHA allows a nonprofit group to gift the
downpayment to the buyer. The

nonprofit group is then reimbursed by the builder -- a practice the
housing bill would

stop. 

href='http://online.wsj.com/article/SB121737339689294987.html?mod=us_business_whats_news'>Read

more. (Subscription required.)

Billion-Dollar Bankruptcy Filings
Highest Since

2003
BankruptcyData.com reported that billion-dollar bankruptcies are at
their highest in five years

only halfway through 2008, Reuters reported yesterday. A total of seven
U.S. companies with

more than a billion dollars in assets have filed for bankruptcy
protection so far this year,

according to the firm owned by New Generation Research. The recent spike

in billion-dollar

bankruptcies comes only about halfway through 2008 and is well above the

previous levels. In

2007 only one company listed more than $1 billion in pre-petition
assets, New Century Financial

Corp. In 2006, auto parts maker Dana Corp. had the largest filing,
listing $9 billion in

pre-petition assets. The last time billion-dollar bankruptcy
filings reached such numbers

was 2003, when there were 15 billion-dollar bankruptcies filed. The
number of billion-dollar

bankruptcies peaked in 2001 when there were 25, according to
BankruptcyData.com. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/29/AR2008072901952_pf.html'>

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Consumer Groups Lobbying Hard on
Credit Card Bill

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Consumer groups and their allies are making a last-minute bid for
moderate House Democrats to

support legislation that would curb some questionable credit card
practices, despite a massive

pushback from the banking industry to derail the measure,
CongressDaily reported

today. The lobbying effort over the bill hinges on whether moderate
Democrats on the Financial

Services Committee will support the bill by Financial Institutions
Subcommittee Chairwoman

Carolyn Maloney (D-N.Y.) when it is slated to be marked up by the full
committee this

afternoon. Seven Democrats and seven Republicans sent a July 23 letter
to Financial Services

Chairman Barney Frank asking that another hearing on the issue be held
in Maloney's

subcommittee before taking further action. They noted that Federal
Reserve Chairman Bernanke

has received more than 20,000 letters commenting on his proposed rule to

rein in certain credit

card practices that have been labeled abusive, and would like to review
the regulations to

determine their impact on consumers and the industry.

Bankruptcy Judge Confirms People's
Choice Exit

Plan
People's Choice Home Loan Inc. moved one step closer to emerging from
chapter 11 when

Bankruptcy Judge Robert Kwan confirmed the liquidation
plan drafted by the

mortgage lender's creditors, Bankruptcy Law360 reported
yesterday. The lender's assets

will now be converted to cash for distribution to creditors, who took
over as proponents of the

plan when the debtors balked at pursuing confirmation. The liquidating
trustee has also been

charged with pursuing claims on behalf of the debtor's estate, including

claims for breaches of

fiduciary duties against executives of People's Choice. 

href='http://bankruptcy.law360.com/articles/64112'>Read
more. (Subscription

required.)

Report: Subprime Class Actions
Proliferating
Cornerstone Research and Stanford Law's Securities Class Action

Clearinghouse reported

that the financial services sector produced 63 class action filings in
the first six months of

2008 with the overwhelming majority of the filings involving subprime
mortgages, the Legal

Times reported today. The current figure is more than the total
number from all of last

year and filings in the securities sector are currently outpacing all
other types of class

actions combined. The report also tracks the market cap losses that
sparked the suits, finding

that the median loss associated with suits filed since the beginning of
the year reached $243

million, the highest since the flurry of class actions between 2000 and
2002. 

href='http://www.law.com/jsp/article.jsp?id=1202423361012&pos=ataglance'>Read

more.

Bennigan's Restaurant Chain Files for
Bankruptcy

Protection
Restaurant chains Bennigan's and Steak & Ale have filed for chapter
7 protection and stores

owned by its parent company will shut their doors, the Associated Press
reported yesterday. The

companies owned by privately held Metromedia Restaurant Group of Plano,
Texas, filed for

bankruptcy protection yesterday in the Eastern District of Texas, less
than two months after

Metromedia said it was not preparing to do so. It wasn't clear whether
franchisee-owned

restaurants would be closing as well. The filing lists 38 separate
entities that it classified

as 'debtors' but does not include a list of locations that are shutting
down.

href='http://ap.google.com/article/ALeqM5jFXQtX_0bjIbMqy-KJO6B6c-mFSQD927LVM80'>Read

more.

Mervyns Files for Chapter 11
Protection
Department store chain Mervyns LLC filed for chapter 11 protection
yesterday, the latest

merchant to become a casualty in a harsh retail environment, the
Associated Press reported. The

Hayward, Calif.-based chain said that all of its stores will remain open

and business will

continue as the company reorganizes. The privately held retailer, which
had been languishing

for several years, operates about 175 locations in seven states but
primarily in

California. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/29/AR2008072901737_pf.html'>

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South Dakota Bankruptcies Up 6
Percent
While bankruptcies in South Dakota are up by almost 6 percent,
officials say the

numbers are slowly correcting after a change in law caused a huge influx

of filings in 2005,

the Sioux Falls Argus Leader reported today. Bankruptcy filings

this year through June

30 total 726, according to statistics from the U.S. Bankruptcy Court for

the District of South

Dakota. If this year's filings double by the end of the year, the total
still will be lower

than the 'historical average' said Forrest Allred, a chapter 7 trustee
for northern division of

the U.S Bankruptcy Court for the District of South Dakota. Filings
reached 4,172 in 2005

with the implementation of BAPCPA - more than any other year in two
decades and almost double

the 1994-2004 average of 2,483 for South Dakota. 

href='http://www.argusleader.com/apps/pbcs.dll/article?AID=/20080730/BUSINESS/807300303/1003'>R

ead more.

SemGroup's Collapse Pinches Small Oil
Firms
Small oil producers across the southern Plains states are getting
pinched by the collapse of

SemGroup L.P., a major buyer of crude from across the region, the
Wall Street Journal

reported today. SemGroup filed for bankruptcy protection last week after

losing $2.4 billion

trading in the oil-futures market. Through its subsidiary, SemCrude, the

company collects

541,000 barrels of oil a day from more than 2,000 independent producers,

operators and

aggregators, primarily in Oklahoma, Kansas and Texas. Many producers
haven't been paid for oil

that was delivered to SemGroup in June or July, leaving some of them
strapped for cash. A

bankruptcy court judge is allowing SemGroup to pay $50 million to its
trading partners for past

bills, but that's a fraction of the more than $1 billion the company
actually owes

creditors. 

href='http://online.wsj.com/article/SB121737975058895507.html?mod=us_business_whats_news'>Read

more. (Subscription required.)

U.S. Trustee Calls for Examiner in
Syntax

Case
Acting U.S. Trustee Roberta DeAngelis urged the U.S.
Bankruptcy Court for the

District of Delaware to appoint an examiner to investigate the rapid
decline in the

Syntax-Brillian Corp.'s (SBC) assets, the evaporation of shareholder
equity and the bona fides

of its planned asset sale, Bankruptcy Law360 reported
yesterday. DeAngelis filed a

motion on Monday for an order directing the retention of an examiner
after the assets of SBC

and its two affiliated debtors had plummeted by $375 million and that
the entire $323.2 million

in stockholder equity had “evaporated” since last September.

SBC filed for

bankruptcy on July 8, listing debts of $259.4 million and assets of
$175.7 million. In its most

recent filing to the U.S. Securities and Exchange Commission, dated Nov.

14, 2007, the company

indicated that its assets had a book value of $550.7 million and
liabilities of $227.5

million. Read

more. (Subscription required.)

Software Provider Ciprico Files for
Chapter 11

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Ciprico Inc. filed for chapter 11 protection on Monday, citing
approximately $7.8 million in

debts, Bankruptcy Law360 reported yesterday. Ciprico has been
trying to find a buyer

for all or part of the company and its assets, but has yet to receive an

offer, according

Steven D. Merrifield, president and CEO of the company. The
Minneapolis-based technology

company listed total assets of $6.9 million and total debts of more than

$7.8 million, and

estimated having as many as 199 creditors. 

href='http://bankruptcy.law360.com/articles/64201'>Read more.
(Subscription required.)

Analysis: Mortgage Investment Deal
at Merrill Puts

Spotlight on Other Banks
Merrill Lynch's fire sale of mortgage investments is leaving financial
industry experts

wondering if other banks with similar investments have overestimated
their values, according to

an analysis in today's New York Times. Less than two weeks ago,

Merrill Lynch valued

its mortgage investments at $11.1 billion, but is now selling those
investments for $6.7

billion and financing most of the purchase. Executives at Citigroup,
JPMorgan Chase and Bank of

America began reviewing the bundles of mortgages, known as
collateralized debt obligations

(CDOs), that their companies hold on their books. Those companies may
have to lower their

valuations, and take additional charges, if their assets are similar to
those sold by

Merrill. 

href='http://www.nytimes.com/2008/07/30/business/30merrill.html?ref=business&pagewanted=pri

nt'>Read more.

SEC Extends Short-Sale
Limits
The Securities and Exchange Commission yesterday extended an emergency
limit on short sales in

shares of Freddie Mac, Fannie Mae and 17 brokerage firms as it prepares
broader rules to thwart

stock manipulation, Bloomberg News reported today. The commission pushed

back expiration of its

ban on so-called naked short sales of the firms' stocks to Aug. 12. The
temporary order, which

took effect July 21, requires traders to at least arrange to borrow
shares before selling short

Freddie Mac and Fannie Mae, the government-sponsored mortgage buyers,
and other brokerage firms

with access to the Federal Reserve's discount window. 

href='http://www.nytimes.com/2008/07/30/business/30sec.html?ref=business&pagewanted=print'>

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Ex-Enron Official to Pay Millions in

Settlement

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Federal regulators said that a former top executive of Enron is paying
$31.5 million to settle

charges that he used inside information to profit illegally from sales
of thousands of shares

of company stock in 2001, the Associated Press reported today. The
Securities and Exchange

Commission said the deal with Lou L. Pai, who was chairman and CEO of
the fallen company's

retail energy unit, Enron Energy Services, is one of the largest ever
with an individual on

accusations of illegal insider trading. The SEC gave Pai credit for $6
million due him under

his insurance policy as a company officer that he previously forfeited
as a payment to Enron

shareholders in a class-action lawsuit. He agreed to pay the remaining
$25.5 million into a

fund administered by the SEC for injured Enron shareholders. 

href='http://www.nytimes.com/2008/07/30/business/30enron.html?ref=business&pagewanted=print

'>Read more.