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June 28, 2007
name='1'>Bankruptcy Filings Increase 66 Percent Over First Quarter
2006
The total number
of
face='Times New Roman'
size='3'>U.S.
size='3'>bankruptcies filed during the first three months of 2007
increased 65.83 percent over the same period in 2006 in all bankruptcy
court districts. As total filings reached 193,641 during the first
calendar year quarter of 2007 (January 1-March 31), the total surpassed
the 116,771 new cases that were filed over the same period in 2006. They
also represent a 9.03 percent increase from the 177,599 bankruptcies
filed during the fourth quarter of 2006 (Oct. 1 – Dec. 31, 2006).
Consumer filings increased 66.27 percent to 187,361 for the three-month
period ending March 31, 2007 from the 2006 first quarter total of
112,685. Business filings for the three-month period ending March 31,
2007 totaled 6,280, representing a 53.7 percent increase over the first
quarter 2006 total of 4,086. 'Though bankruptcy filings are still low
from a historical outlook, new cases are being filed at much higher
rates than a year ago as more households feel the stress of high debt
burdens - a trend that is likely to continue,' said
size='3'>ABI
Director Samuel J. Gerdano.
href='http://www.abiworld.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=47794'>Read
ABI’s press release on the 2007 first quarter
filings.
name='2'>Commentary: Strong Regulations Needed for Housing and Hedge
Funds
The two big Bear Stearns
hedge funds that neared collapse last week were full of risky
investments tied to subprime mortgages, but intervention by the
government to guard against such collapses would only serve to prop up
such investments, according to an editorial in today’s
New York Times
size='3'>. In the past two years, Wall Street firms have issued
investments similar to the Bear Stearns holdings, worth about $500
billion on paper. Mortgage lenders must be restricted to recommending
loans that are reasonably within the borrowers’ ability to repay
over time. Federal bank regulations must be streamlined and toughened to
avoid a repeat of the disjointed and ultimately lax response to the
reckless lending of the housing boom. Hedge funds should be regulated if
they accept pension money, because doing so exposes everyday Americans
to outsized investment risks. Regulation should also cover hedge funds
with large sums of borrowed money.
href='http://www.nytimes.com/2007/06/28/opinion/28thu1.html'>Read
more.
Conversely, an editorial
in the Wall Street
Journal today said that the financial bets
taken in the hedge-fund meltdown at Bear Stearns is not a crime and that
the capitalist economic system will weed out the bad financial actors.
Financial innovation has been a great boon to the American economy, but
innovation entails risk, and risk means the potential for failure. The
key point is that, when financial players step out too far on the risk
curve in order to earn larger rewards, they are then allowed to suffer
the requisite market penalties for reckless driving. Regulators’
main goal should be to protect the financial system from any specific
failures, not to protect the bankers and their investors who made the
failed bets.
href='http://online.wsj.com/article/SB118299636829951024.html?mod=opinion_main_review_and_outlooks'>Read
more. (Registration required.)
name='3'>Realtors Fight Pacific Lumber's Bid to Halt
Suits
The plaintiffs in
two qui tam
suits accusing Pacific Lumber Co. of fraud in connection
with a $390 million deal with
face='Times New Roman' size='3'>California
size='3'>and the United States asked the court to
deny the debtors' bid to halt the suits, Bankruptcy Law360 reported
yesterday. The plaintiffs filed their opposition papers Tuesday in
response to a joint motion filed by Pacific Lumber and two bankrupt
subsidiaries on June 5, which sought an injunction and asked the court
to extend the automatic stay afforded bankrupt companies to Pacific
Lumber's non-bankrupt parent company Maxxam Inc. and Maxxam's president
and CEO Charles Hurwitz, as well as a supplement to the June 5 motion
that was filed on June 18. The plaintiffs' opposition papers blasted the
debtors for trying to gain an unfair advantage by trying to block
the
size='3'>qui tam litigation without serving
the affected parties or their counsel, and failing to back up their
motion with sufficient evidence. Pacific Lumber's bankruptcy case
is In re Scotia
Development LLC, case number 07-20027 in the
U.S. Bankruptcy Court for the Southern District of Texas.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28039'>Read
more. (Registration required.)
size='3'>Autos
name='4'>Collins & Aikman Looks to Continue Operations into
July
As Collins & Aikman
Corp. continues to wind down operations, the bankrupt auto supplier has
asked a judge to endorse an agreement with some of its big-name
customers, as well as JP Morgan Chase, that would allow the company to
continue producing crucial parts into July, Bankruptcy Law360 reported
yesterday. Collins & Aikman asked U.S. Bankruptcy Judge
Steven Rhodes yesterday to sign off on an agreement
with Daimler Chrysler, General Motors Corp. and JP Morgan Chase, the
agent of the lenders, that was tentatively reached last December. Under
chapter 11 protection since 2005, Collins & Aikman had initially
planned to reorganize. The company soon realized, however, that its
plans weren't feasible, and opted instead to liquidate. While the
supplier is currently trying to sell off its assets, the customer group
and Collins & Aikman agreed that they would work out a deal if both
sides felt the need for continued parts production after June
30.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28005'>Read
more. (Registration required.)
name='5'>Hedge Funds Look to Recover $2 Million in Fees from Tower
Auto
Three hedge funds that
previously reneged on a $250 million rights offering for bankrupt auto
parts
size='3'>maker
face='Times New Roman' size='3'>Tower
Automotive Inc. have demanded $2 million in unreimbursed
fees and expenses,
size='3'>Bankruptcy Law360 reported yesterday.
Strategic Value Partners LLC, Wayzata Investment Partners LLC and Stark
Investments LP asked the U.S. Bankruptcy Court in Manhattan on Monday to
require Tower to pay the costs they incurred conducting due diligence
for the underwriting. According to the motion, Tower Chief Financial
Officer James Mallek and other executives repeatedly assured the hedge
funds that they would be reimbursed for all expenses they incurred
during the due diligence process. A hearing on the matter has been
scheduled for July 11.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=27976'>Read
more. (Registration required.)
name='6'>Employees Balk at Solutia’s Disclosure
Statement
Two Solutia Inc.
employees have objected to the chemical company's disclosure statement
on behalf of the members of the Solutia employee retirement plan, saying
that it doesn't adequately explain the ramifications of the employees'
claim, Bankruptcy
Law360 reported yesterday. The employees, one
former and one current, argued on behalf of the creditors of the Solutia
Inc. Savings and Investment Plan (SIP) that the company's disclosure
statement is silent regarding the existence and limits of the insurance
that applies to their claims. The motion also said the disclosure
statement fails to address the evidence related to the merits of the
group's claims of breach of fiduciary duty. The creditors of the plan
have filed an unsecured claim in the case in an attempt to recover
losses of more than $290 million, which they allege was caused by the
company's alleged breaches of fiduciary duties owed under the Employee
Retirement Income Security Act of 1974.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=27989'>Read
more. (Registration required.)
name='7'>Bally Total Fitness Seeks Noteholder
Approval
Bally Total Fitness Holding
Corp. said that it is seeking noteholder approval for a plan to
reorganize under chapter 11 protection, the Associated Press reported
today. The fitness center operator is asking holders of senior notes due
2011 and senior subordinated notes due 2007 to vote on the plan. Bally
expects to continue normal club operations during the process and
throughout its anticipated chapter 11. Last week Bally entered an
agreement with the noteholders to vote in favor of the reorganization.
The plan would increase the annual interest rate on the senior notes and
allow Bally to keep cash that would have been used for a July 15
interest payment. Senior subordinated noteholders would receive rights
to participate in a $90 million rights offering of new senior
subordinated notes.
href='http://www.chron.com/disp/story.mpl/ap/fn/4926050.html'>Read
more.
name='8'>Court Denies Bonus for Granite CEO
The U.S. Bankruptcy Court
in
size='3'>Manhattan
size='3'>yesterday denied Granite Broadcasting Corp.'s bid to pay a
$460,000 bonus to CEO W. Don Cornwell, the Associated Press reported
yesterday. The 2006 bonus, considered prebankruptcy debt, was held up by
creditor and shareholder protests. Cornwell, who was criticized by a
court-appointed examiner for bargaining on his own behalf while Granite
struggled, received millions in benefits under the chapter 11 plan
confirmed in May by Judge
size='3'>Allan Gropper. The company emerged
from chapter 11 protection earlier this month under the control of
buyout firm Silver Point Capital. Under the reorganization plan, a $3.3
million loan Granite made its CEO was forgiven, his $2.5 million tax
liability on that loan forgiveness was covered and Cornwell kept his
job.
href='http://www.chron.com/disp/story.mpl/ap/fn/4926087.html'>Read
more.
name='9'>Restaurant Chain Files for Chapter 11
Everglades-themed
restaurant operator R.J. Gator's and 10 companies it controls filed for
Chapter 11 bankruptcy protection in
w:st='on'>
Beach,
w:st='on'>
size='3'>Fla.
MSN.com reported yestereday. The Jupiter, Fla.-based chain of
restaurants has $3 million in debt and assets of about the same amount.
The company's largest unsecured creditor is Sysco Corp., a Riviera
Beach, Fla.-based food distributor, with $1.3 million in unpaid
billings. R.J.
Gator's has 23 restaurants, but only eight are owned by the parent
company and included in the chapter 11 filing. The company may close
restaurants as it recapitalizes and gets rid of unprofitable sectors,
but there are no immediate plans to lay off any of the company's 410
employees.
href='http://news.moneycentral.msn.com/provider/providerarticle.aspx?Feed=ACBJ&Date=20070627&ID=7095656'>Read
more.
name='10'>Five-Count Indictment for Boy-Band Mogul
Lou Pearlman, the creator
of the Backstreet Boys and 'N Sync, was indicted yesterday by a federal
grand jury on charges he defrauded a bank out of $20 million the
Associated Press reported yesterday. Pearlman was indicted on three
counts of bank fraud, and single counts of mail and wire fraud for
business with Evansville, Ind.-based Integra Bank N.A., according to
court documents.
size='3'>Florida
size='3'>investigators separately allege Pearlman defrauded more than
1,000 individual investors out of more than $315 million. Several banks
say he collectively owes them more than $120 million, according to
bankruptcy court documents.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062702169_pf.html'>Read
more.
size='3'>International
name='11'>Commentary:
size='3'>Asia
Recovery
An Asian Development Bank
review of the five countries most affected by the region’s
financial crisis 10 years ago — Thailand, Indonesia, Malaysia,
South Korea and the Philippines — found that incomes per person
had all recovered to at least their levels before 1997, the
New York Times
size='3'>reported today. Trade balances, foreign currency reserves,
corporate governance, depth of financial markets and quality of
government regulation, as well as various indicators of public health:
all these are now stronger than before. However, the economies of all
five countries grew more slowly from 2000 to 2006 than they did from
1990 to 1996, with annual growth rates an average of 2.5 percent below
the previous period. “The losses we have suffered are really in
that sense permanent,” said Rajat M. Nag, the Asian Development
Bank’s managing director general, attributing slower growth to
greater business and government caution about investments.
href='http://www.nytimes.com/2007/06/28/business/worldbusiness/28asia.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='12'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each quarter.
The business news articles
below are excerpts taken from the most recent Weekly Summary of Troubled
U.S. Companies and Other Business News published by Bastien Financial
Publications.
To begin receiving this
news, each morning, through Bastien Financial
Publication’s DAILY e-Summary, that
emails you information on over 70 such companies each morning, email
steve@creditnews.com your name, company name, address, phone and
fax. We’ll set you up within 24
hours.
The
size='3'>ABI
is only $250 for an annual subscription.
size='3'>Indicate “
face='Times New Roman'
size='3'>ABI
your email.
Alliant
Techsystems Inc.,
w:st='on'>
size='3'>Edina
the Justice Department, which joined in a lawsuit that was earlier filed
against the
face='Times New Roman' size='3'>Minnesota
firm.
w:st='on'>
size='3'>Alliance
accused of knowingly manufacturing defective flares for the U.S.
Navy. The company denies the charges.
Crane
Plumbing LLC, a privately-held
size='3'>Mansfield
manufacturer of plumbing fixtures, is closing a steel manufacturing
plant in Dallas, Tx. in August, resulting in the loss of 100 jobs.
Crane will continue operating its acrylic operations at the
size='3'>Dallas
size='3'>site.
Danka
Business Systems PLC, the St. Petersburg, Fl.
distributor of printers and other automated office equipment, reported a
fourth quarter net loss of $17 million, on an 11% revenue
decline–to $113.5 million. This compares with a loss of
$23.2 million for the same period one year earlier. For the year,
the company reported a net loss of more than $29 million, on a 13%
revenue decline–to $450 million.
Kinder
Morgan Energy Partners L.P. of
size='3'>Houston
reported its first quarter net declined 36%–to $75.2 million, on a
10% revenue decline–to $2.1 billion.
Navistar
International Corp., the Warrenville, Il.
manufacturer of trucks and diesel engines, said that worldwide sales of
its schoolbuses, trucks and other products sank 31% in the quarter ended
4/31, due to “difficult” conditions in the truck
sector. Truck sales have been affected by cyclical market factors,
but new federal regulations on cleaner diesel engines have dampened
sales this year. Specific numbers weren’t provided, as
Navistar is still wrapped up in an audit of financial accounting from
the past several years. Navistar, whose stock price has soared threefold
over the past twelve months, says it still has sufficient liquidity
despite the slump in the market that could have an impact on its working
capital and cash balance.
Standard
Microsystems Corp., the Hauppauge, N.Y.
supplier of I/O chips to the PC market, reported its first quarter net
declined 63%–to $3.2 million, on a 5% revenue decline–to
$81.5 million.