href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
May 27, 2009
size='3'>Autos
GM Moves Closer to
Bankruptcy as Bondholder Offer Falls Short
General Motors Corp. said that it won't proceed with
the repurchase of any of the $27.2 billion of notes it sought, saying
bondholder interest was far below the 90 percent threshold it was
looking for, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The automaker had been seeking to swap the debt
for a 10 percent stake in a restructured company that is on the brink of
filing for bankruptcy. GM, which is surviving on government loans, said
it faced bankruptcy if less than 90 percent of bondholders accepted the
deal, a take rate that many analysts considered almost impossible to
meet. GM hopes to rush through bankruptcy court in as few as 30 days,
but the drive for an expedited bankruptcy could be challenged by GM's
investors and dealers. GM and the United Auto Workers have agreed to a
new restructuring plan that would give the union a significantly smaller
stake in the company than previously envisioned, and leave the U.S.
government owning as much as 70 percent of the car maker. The
government's plan also calls for paying off in full GM's secured lenders
– including banks such as Citigroup Inc. and JPMorgan Chase &
Co., which are owed about $6 billion.
href='http://online.wsj.com/article/SB124342448629658299.html'>Read
more. (Subscription required.)
Judge Rejects Challenge
on Chrysler
U.S. District Judge Thomas Griesa yesterday declined
to hear a challenge by a group of Indiana pension funds that Chrysler
LLC's sale is unconstitutional because of the U.S. government's heavy
involvement in the deal, the Wall Street Journal reported
today. Judge Griesa refused to move the Chrysler case from bankruptcy
court to the federal court in Manhattan, allowing a sale hearing today
to proceed as planned. 'At this late stage, when the bankruptcy court is
nearing the completion of its work, it would be disruptive to remove the
issues from a bankruptcy judge who has the background and is ready to
complete his work,' Judge Griesa wrote in his opinion.
Analysis: A Brief Review of
Judge Sotomayor's Bankruptcy Opinions
President Barack Obama yesterday nominated Judge Sonia
Sotomayor to fill Justice David Souter's seat on the Supreme Court. To
read a brief review of Judge Sotomayor's reported decisions arising in
bankruptcy cases from the bankruptcy blog “A Clean Slate,”
please
href='http://bklawblog.blogspot.com/2009/05/brief-review-of-judge-sotomayors.html'>click
here.
Commentary: Some Mortgage
Re-default Rates May Reach 75 Percent
On the evidence so far, the mortgage modification push
favored by the government has had little impact on reducing foreclosure
rates or on housing prices, according to an editorial in
today’s Wall Street Journal. A Fitch
Ratings report released yesterday found that a conservative projection
was that between 65 and 75 percent of modified subprime loans will fall
delinquent by 60 days or more within 12 months of having been modified
to keep the borrowers in their homes. This is an even worse result than
previous reports by federal regulators. Even loans whose principal was
reduced by as much as 20 percent were still re-defaulting in a range of
30 to 40 percent after 12 months. Many of the borrowers never could
afford these homes in the first place, yet the political pressure has
been strong to modify loans even for these borrowers. As home prices
continue to fall in some markets, borrowers remain underwater and many
of them simply walk away from the home and thus re-default. As for the
housing market, the quickest way to begin a recovery is to more quickly
let prices find a bottom. Read the
href='http://bklawblog.blogspot.com/2009/05/brief-review-of-judge-sotomayors.html'>full
editorial. (Subscription required.)
Panel Calls on Federal
Reserve to Monitor Systemic Risk
An independent group called on Congress yesterday to
make the Federal Reserve the nation's super-regulator to monitor
systemic risk across the financial services industry, rejecting a
competing proposal that would share the duties within a council made up
of different federal regulators,
face='Times
New
Roman' size='3'>CongressDaily reported
yesterday. The Committee on Capital Markets Regulation argued that such
authority should be vested with the central bank because it would ensure
there would be clear accountability and authority to act to prevent a
collapse of a major firm that could imperil the U.S. economy. The panel
also called for greater regulation of the derivatives market, requiring
that most over-the-counter trades be made through a clearinghouse system
that has reporting requirements. The committee includes Hal Scott, a
Harvard University law professor Glenn Hubbard, chairman of the Council
of Economic Advisers under former President George W. Bush, John
Thornton, chairman of Brooking, and Wilbur L. Ross Jr., chairman of WL
Ross & Co.
11 in FDIC-Brokered Deal
BankUnited FSB, the largest independent bank in
Florida, has filed for chapter 11 protection as part of a deal brokered
by the Federal Deposit Insurance Corp. (FDIC) to sell the failed bank's
operations, deposits and assets to a consortium of private-equity
investors that will pump $900 million of new capital into a newly
chartered savings bank,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The bank is the 34th institution insured by
the FDIC to fail this year, and the third in Florida, according to the
agency. Although the bank's chapter 11 petition listed just $37 million
in assets, the FDIC said the figure was $12.8 billion as of May 2. The
bank's liabilities total $560 million, according to the petition. The
newly chartered savings bank was purchased by a group of investors led
by John Kanas, the former chairman and CEO of North Fork Bancorporation,
and includes affiliates of Blackstone Capital Partners V LP, Carlyle
Investment Management LLC, Centerbridge Capital Partners LP and WL Ross
& Co. LLC, among others. The case is
face='Times New Roman' size='3'>In re BankUnited Financial
Corp., case number: 09-19940, in the U.S.
Bankruptcy Court for the Southern District of Florida.
href='http://bankruptcy.law360.com/articles/103095'>Read more.
(Subscription required.)
S&P Says GMAC’s
Financial Position Improved after Government Aid
Standard & Poor’s said that GMAC LLC, the
auto and home lender that has received $13.5 billion in federal funds,
is in a better position to withstand further economic deterioration
because of the government’s support, Bloomberg News reported
yesterday. GMAC’s credit ratings may be evaluated for an upgrade
over the next two years if the additional capital “were to combine
with a resurgent auto-finance sector and return to full financial health
for General Motors Corp. and Chrysler LLC,” S&P said today in
a statement. S&P reaffirmed its CCC rating on Detroit-based
GMAC’s debt. The company still faces “possible negative
ratings pressure” from Chrysler’s bankruptcy and a potential
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=adKNAUAITk44&refer=home'>Read
more.
to Navistar for $52 Million
Bankruptcy Judge
face='Times
New
Roman' size='3'>Kevin J. Carey cleared the way
for recreational vehicle maker and resort operator Monaco Coach Corp. to
sell substantially all of its RV assets to truck manufacturer Navistar
Inc. for nearly $52 million,
face='Times









New
Roman'
size='3'>Bankruptcy Law360 reported yesterday.
Judge Carey on Friday approved the asset purchase agreement among
Monaco, purchaser Workhorse International Holding Co. and guarantor
Navistar. According to Monaco's motion to approve bidding procedures and
the stalking-horse deal, Navistar will pay $52 million in cash for all
assets related to the design, manufacture, marketing, distribution and
sale of gasoline and diesel-powered motor homes and towable recreational
vehicles and chassis, including the Bison Trailer Business. Navistar
also assumed up to $2 million in liabilities, according to the
motion. Read
more. (Subscription required.)
Analysis: Banks Aiming to
Play Both Sides of Coin on Toxic Asset Purchases
Banking trade groups are lobbying the Federal Deposit
Insurance Corp. for permission to bid on the same assets that the banks
would put up for sale as part of the government's Public Private
Investment Program (PPIP), the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. PPIP was launched by the Obama administration as a way for banks
to sell hard-to-value loans and securities to private investors, who
would get financial aid as an enticement to help them unclog bank
balance sheets. The program, expected to start this summer, will get as
much as $100 billion in taxpayer-funded capital. That could increase to
more than $500 billion in purchasing power with participation from
private investors and FDIC financing. The lobbying push is aimed at the
Legacy Loans Program, which will use about half of the government's
overall PPIP infusion to facilitate the sale of whole loans such as
residential and commercial mortgages. Federal officials haven't
specified whether banks will be allowed to both buy and sell loans, but
a list released by the FDIC and Treasury Department of the types of
financial firms likely to be buyers made no mention of banks.
href='http://online.wsj.com/article/SB124338836675757049.html#mod=testMod'>Read
more. (Subscription required.)
Recession Imperils Loan
Forgiveness Programs
The current economic recession is forcing states
across the country to put their loan forgiveness programs on the
chopping block, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Typically founded by their states to help
students pay for college, the state agencies and nonprofit organizations
that make student loans and sponsor these programs are getting less
money from the federal government and are having difficulty raising
money elsewhere as a result of the financial crisis. The organizations
say the repayment programs have been hurt by a broader effort by
Congress to tackle the high cost of the federal student loan program by
reducing subsidies to lenders. Curbing the programs will make it harder
to lure college graduates into high-value but often low-paying fields
like teaching and nursing.
href='http://www.nytimes.com/2009/05/27/your-money/student-loans/27forgive.html?ref=business'>Read
more.
Hedge Funds Agree to
Return $235 Million in Madoff Case
Two Caribbean hedge funds operated by Banco Santander,
the Spanish financial giant, have agreed to return $235 million they
withdrew from their accounts with Bernard L. Madoff in the months before
his global Ponzi scheme collapsed, the
face='Times
New
Roman' size='3'>New York Times reported today.
The agreement was announced on Tuesday by trustee
face='Times New



Roman'>
face='Times
New
Roman' size='3'>Irving H. Picard of Baker
Hostetler. It is the first negotiated settlement by any of the giant
investment funds that steered clients’ money to Madoff. The deal
requires the two hedge funds to return 85 percent of the money they
withdrew in the 90 days before the fraud surfaced with Madoff’s
arrest in mid-December.
href='http://www.nytimes.com/2009/05/27/business/27madoff.html?ref=business&pagewanted=print'>Read
more.
Computer Maker Pystar
Files for Bankruptcy
Psystar abruptly filed for bankruptcy protection in
the state of Florida last week in a move that's likely to delay or end
its ongoing legal proceedings with Apple over the sale of unauthorized
Mac clone computers, AppleInsider.com reported yesterday. The chapter 11
petition filed last Thursday indicated that Psystar has more than
$259,000 in debt. Looking to block the Florida-based firm's online sale
of knock-off Mac systems running hacked versions of the Mac OS X
operating system, Apple last July sued Pystar on grounds of copyright
infringement. Pystar retaliated with a counterclaim of is own, alleging
that Apple was violating anti-trust laws through the terms of its Mac OS
X end user license agreement, which forbids the installation of the
software on non-Apple hardware. Psystar attributed its bankruptcy filing
to the turbulent global economy and pullback in consumer spending,
saying that the crisis has spilled over to its creditors, who have
tightened their terms and become more demanding for immediate payments.
href='http://www.appleinsider.com/articles/09/05/26/psystar_files_for_bankruptcy_likely_delaying_apple_case.html'>Read
href='http://www.appleinsider.com/articles/09/05/26/psystar_files_for_bankruptcy_likely_delaying_apple_case.html'>
International
href='http://global.abiworld.org/?q=news'>Click here to review
today's global insolvency news from the GLOBAL INSOLvency
site.