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July 25, 2007
Financial Services Committee Hearings Tackle Consumer Protection,
Mortgage Lending Issues
The House Financial Services
Committee will hold a hearing today titled “Improving Federal
Consumer Protection in Financial Services – Consumer and Industry
Perspectives.” The Committee will hear from industry and public
interest group witnesses about how consumer protection at the federal
level can be improved, and whether the current regulatory structure is
adequate for handling unfair and deceptive financial practices. The
hearing is a follow-up to the June 13 hearing on consumer protection
with the federal financial regulators.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht07250710am.shtml'>Click
here to view the witness list and watch the hearing at 10
a.m.
Also scheduled today is a
hearing by the House Financial Services Subcommittee on Oversight and
Investigations titled 'Rooting Out Discrimination in Mortgage Lending:
Using HMDA as a Tool for Fair Lending Enforcement.' The hearing, which
will feature two panels of government officials, industry experts and
public interest groups, will take place at 2 p.m.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht072507.shtml'>Click
here to view the witness list and watch the hearing at 2
p.m.
id='2'>Lender Sees Mortgage Woes for Borrowers with Good
Credit
Countrywide Financial,
the nation’s largest mortgage lender, said yesterday that more
borrowers with good credit are falling behind on their loans and that
the housing market might not begin recovering until 2009 because of a
decline in house prices that goes beyond anything experienced in
decades, the New York
Times reported today. Just a couple of months
ago, some executives were predicting a relatively quick recovery and
saying that most home loans would be fine with the exception of the
subprime market. Countrywide said about 5.4 percent of the home equity
loans to customers with good credit that it held an interest in were
past due at the end of June, up from 2.2 percent at the end of June
2006. By comparison, more than a fifth of subprime loans were past due
at the end of June, up from 13.4 percent a year ago.
href='http://www.nytimes.com/2007/07/25/business/25lend.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
SEC
to Weigh Easing the Path of Rivals in Board Elections
In a move that could
radically alter the way American companies choose their boards, the
Securities and Exchange Commission will vote today on a proposal that
could make it possible for the ballots distributed by companies to
include competing candidates for director, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The commission announced its plan late
yesterday, but did not indicate whether that proposal would be approved
at the meeting. It
also said the commissioners would consider a radically different
proposal that would effectively bar shareholders from supporting
competing candidates for director unless they were willing to go to the
considerable expense of mailing out competing proxies. Under the first
proposal, a shareholder or group of shareholders who owned 5 percent of
a company’s stock — a high threshold but one that some
institutional shareholders could meet — could propose changes to a
company’s bylaws concerning shareholder elections.
href='http://www.nytimes.com/2007/07/25/business/25sec.html?ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2007/07/25/business/25sec.html?ref=business&pagewanted=print'>
id='4'>Abuse Claims Total 153 Filings in
w:st='on'>
size='3'>Davenport
Bankruptcy
A total of 153 people
filed abuse claims against the Diocese of Davenport in bankruptcy court
before last week’s bar date, the deadline for financial claims
stemming from before the bankruptcy filing in October, the
Quad City Times
(Iowa) reported today. “We know this 153
number is not the total of all abuse claims,” said Michl Uhde,
head of the creditors’ committee. “We want to make sure
anyone who comes to the reality down the road will be taken care
of.” The bar date was July 16, but Uhde said the plan is to set up
a fund that will help victims have not yet come forward. The Diocese of
Davenport, with about 100,000 members, has settled 43 cases for about
$10 million. The diocese had a half-dozen lawsuits pending against it
when it filed for bankruptcy; those plaintiffs are included in the list
of 153 bankruptcy claimants, Uhde said.
href='http://www.qctimes.com/articles/2007/07/25//news/local/doc46a6dae5d82f7773198311.txt'>Read
more.
Autos
id='5'>Collins & Aikman's
w:st='on'>
size='3'>Toyota
Court Approval
Bankruptcy Judge
Steven Rhodes
size='3'>allowed Collins & Aikman Corp. to enter into a settlement
deal that will see Toyota Inc. paying $7.5 million for parts it bought
from the bankrupt auto parts maker, Bankruptcy
Law360 reported yesterday. However,
size='3'>Toyota
released from any amounts it owes Collins & Aikman for post-petition
payables related to the soft-trim division that arise from and after
Jan. 1, the order stated.
size='3'>Collins & Aikman had claimed that it supplied
size='3'>Toyota
carpeting and more totaling over $9 million for its vehicles, but
size='3'>Toyota
that the auto parts maker owed it $1.5 million. However, Collins &
Aikman decided to negotiate in June, stating in its motion for approval
of the settlement that it wished to avoid the significant expense of
pursuing litigation and the risk that it would not ultimately
prevail.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=30420'>Read
more. (Registration required.)
id='6'>Dana Woos Appaloosa with Info, Exit Plan
Bankrupt auto parts maker
Dana Corp. has agreed to give Appaloosa Management LP confidential
information about its company, a move that should help the hedge fund
put together a proposal to fund Dana's plan,
size='3'>Bankruptcy Law360 reported yesterday.
Appaloosa had previously voiced concerns with a proposed funding deal
between Centerbridge and Dana, and continued to do so in a supplemental
motion filed Monday in the U.S. Bankruptcy Court for the Southern
District of New York. A hearing on the deal, as well as an agreement
between Dana and the United Steel Workers and the United Auto Workers
unions, is scheduled for Wednesday. In the supplemental motion filed
Monday, Appaloosa said that through the guise of a purported settlement,
Dana is seeking to delegate substantive debtor-in-possession
decision-making power to nondebtor, nonfiduciary third parties.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=30415'>Read
more. (Registration required.)
id='7'>Chrysler's Bankers May Take On Debt
Chrysler's attempt to tap
debt markets for $20 billion hit a critical juncture as bankers began
discussing the likelihood that they will have to step up with a large
part of the money because investor demand hasn't been strong enough,
the Wall Street
Journal reported today. It's an especially
sensitive time because Chrysler and its
w:st='on'>
size='3'>Detroit
size='3'>counterparts are kicking off contract negotiations with the
United Auto Workers. Chrysler Group is being acquired from
DaimlerChrysler AG by
w:st='on'>New
York
Capital Management. The $20 billion will be used to fund Chrysler's auto
operation and its finance unit after it is separated from Daimler in the
coming days.
size='3'>Chrysler's bankers -- including J.P. Morgan Chase & Co.,
Goldman Sachs Group Inc., Citigroup Inc., Bear Stearns Cos. and Morgan
Stanley -- have spent the past month trying to convince investors to buy
$12 billion in loans for Chrysler's auto business and $8 billion in
loans for its financial arm. The underwriters of the debt sale were
yesterday discussing plans to take a half or more of a $10 billion piece
href='http://online.wsj.com/article/SB118532697032777070.html?mod=home_whats_news_us'>Read
more.
id='8'>Solutia’s Proposed Exclusivity Extension Draws
Objections
Solutia Inc.'s
shareholder and bondholder committees have objected to the bankrupt
chemical company's request for a twelfth extension to its exclusivity
period for filing a reorganization plan, Bankruptcy
Law360 reported yesterday. The shareholders
reiterated their opposition to Solutia's settlement with former parent
Monsanto Co., which, along with a retiree settlement, is supposed to
propel the company out of bankruptcy. The bondholders took a less
confrontational point of view, saying the exclusivity period should only
be extended 45 days, and not five months like Solutia requested, to
cover a Sept. 5 hearing in which the court will analyze the Monsanto and
retiree settlements.
size='3'>A hearing on the exclusivity extension is scheduled for
tomorrow.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=30447'>Read
more. (Registration required.)
id='9'>Tweeter Executive Bonuses Delayed
Tweeter Home
Entertainment Group has postponed until September a court hearing on
bankruptcy bonuses for top executives amid allegations from former
employees who say they were induced by false promises of extra pay to
stay at the company, the Associated Press reported
yesterday. The electronics retailer was sold
this month to Schultze Asset Management Inc., a hedge fund, for $38
million in cash in a 'going-concern' deal designed to preserve part of
the business. Top executives and other insiders of the company say
they're entitled to a percentage of the sale proceeds, a position that
has drawn criticism from the
w:st='on'>
size='3'>U.S.
size='3'>trustee monitoring the case. A hearing on the bid for top
executive bonuses was slated for tomorrow, but has been rescheduled for
Sept. 5, according to a document Tweeter filed Tuesday in the U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Wilmington
w:st='on'>
size='3'>Del.
href='http://www.forbes.com/feeds/ap/2007/07/24/ap3947368.html'>Read
more.
id='10'>Comair Pilots Sue Airline,
face='Times New Roman' size='3'>Union
size='3'>over $61 Million Settlement
A group of Comair pilots
have filed a lawsuit for a portion of the $61 million its union
negotiated in a settlement of claims during the airline's bankruptcy
proceedings, Bankruptcy
Law360 reported yesterday. The 11 senior
pilots claim the Air Line Pilots Association is withholding the spoils
of the deal negotiated as part of Comair's bid to modify employment
agreements and exit chapter 11 protection. The suit, filed Monday in the
U.S. Bankruptcy Court for the Southern District of New York, claims the
labor organization is retaliating against the pilots for enforcing
Comair's tough new sick leave policy. It has called for an order
directing the airline to distribute to the pilots their “fair
share” of the settlement proceeds, which amounts to about
$600,000. The pilots allege that ALPA breached its fiduciary duty to
them as both their collective bargaining representative and their
representative during Comair's chapter 11 proceedings, during which time
their employment contracts were modified. Kentucky-based Comair, a
subsidiary of Delta Airlines Inc., exited bankruptcy with its parent
company on May 1.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=30494'>Read
more. (Registration required.)
id='11'>Delta Still Searching for New CEO
Nearly a month after the
newly formed board of Delta Air Lines Inc. was expected to name a
successor to Chief Executive Gerald Grinstein, directors at the Atlanta
airline remain undecided about who will run the company,
theWall Street
Journal reported today. Grinstein and other
Delta executives attribute the longer-than-expected deliberations to the
complicated logistics of repeatedly gathering the new board members and
educating them about the company and the industry. Most directors,
selected by a committee of Delta's largest creditors during its time in
bankruptcy court protection, have no previous airline experience. The
slow pace of the process is raising questions among Delta employees and
analysts about whether the board is looking outside the company for a
new candidate -- passing over two internal contenders backed by
Grinstein.
href='http://online.wsj.com/article/SB118533336353177230.html?mod=us_business_whats_news'>Read
more. (Registration required.)
International
id='12'>Judge Orders Trial in Parmalat Case
An Italian judge indicted
Parmalat SpA founder Calisto Tanzi and other former company executives
on Wednesday for their role in what is shaping up as the most important
trial seeking to assign responsibility for
w:st='on'>
size='3'>Europe
bankruptcy, the Associated Press reported today. The defendants are
charged with fraudulent bankruptcy and criminal association. The case
in
size='3'>Parma
size='3'>Italy
the company's hometown, is one of several against former executives and
others accused of contributing to the alleged fraud that concealed the
company's mounting debt. But it is considered the most important because
of the severity of the charges and penalties of up to 15 years in
prison.
href='http://biz.yahoo.com/ap/070725/italy_parmalat_trial.html?.v=1'>Read
more.
id='13'>TROUBLED COMPANIES IN THE NEWS
The business news articles
below are taken from the U.S. Business Journal’s Daily Summary of
Troubled & Fast Growing U.S. Companies which is published by Bastien
Financial Publications.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
w:st='on'>
size='3'>ABI members that
subscribe in June can do so at a special rate of $99 for a subscription
through the end of 2007.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
27
size='3'>Beazer Homes USA Inc., an
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
size='3'>homebuilder, is now under a formal investigation by the
Securities and Exchange Commission, which is looking into possible
securities laws violations. Beazer had been under an informal probe
since May.
Bowater
Inc., the
w:st='on'>
size='3'>Greenville
w:st='on'>
size='3'>S.C.
which is one of the world’s largest newsprint manufacturers,
reported a second quarter net loss of $62.5 million, on an 11% sales
decline–to $799 million. The loss, which compares with a $10
million loss for the same period in 2006, included gains from the sale
of certain assets of $64 million.
Castleberry’s Food
Co.,
w:st='on'>
size='3'>Augusta
w:st='on'>
size='3'>Ga.
closed a food plant after four cases of botulism were reported among
consumers who allegedly ate Castleberry’s Hot Dog Chili Sauce
Original product. The company recalled more than ninety kinds of
canned foods and dog foods, although it believes only a single product
line has been affected. Castleberry’s is a subsidiary of Bumble
Bee Seafoods LLC of San Diego, Ca.
General Motors
Corp.’s plans to sell its Allison
Transmission unit ran into a problem, after Wall Street firms put off a
sale of more than $3 billion in loans that were to help Carlyle Group LP
and Onex Corp. pay for the acquisition. It’s thought that the
loans will eventually go through, but the delay could cause certain
complications. Last month, GM agreed to sell Allison, a
size='3'>Speedway
In. maker of heavy-truck transmissions, to Carlyle and Onex for $5.6
billion. Part of the financing included $3.5 billion in corporate loans
and $1.1 billion in junk bonds.
Hartford Financial
Services Group Inc., a
w:st='on'>
size='3'>Connecticut
size='3'>insurer, is paying $115 million to settle probes into so-called
market timing at its variable-annuity unit and investigations into
alleged arrangements between brokers and its property-and-casualty
insurance business. Allegedly,
w:st='on'>
size='3'>Hartford
size='3'>permitted illegal mutual-fund trading and paid contingent
commissions to insurance brokers in exchange for steering business its
way.
Maximus
Inc., a Reston,
w:st='on'>
size='3'>Va.
size='3'>government contractor, retained UBS Investment Bank for advice
on possibly putting itself up for sale. Maximus has been under a
financial cloud, recently reaching a $30 million settlement with the
government to resolve Medicaid claims issues.
Mothers Work
Inc., the
w:st='on'>
size='3'>Philadelphia
size='3'>Pa.
which operates 1500 retail outlets, reported its third quarter net
declined 88%–to $1 million, on a 7% sales decline–to $153
million. The earnings decline included a loss, from the
extinguishment of debt, of just over $7 million.
Netflix
Inc.’s stock price sank as much as 12%
after the
face='Times New Roman' size='3'>Los
Gatos
online DVD-rental concern lowered its outlook for profits for the full
year, after it recently reduced prices on subscription plans.
Netflix’s profit in the second quarter jumped 50%–to $25.6
million, on a 27% increase in sales–to $304 million. Results were
boosted by a $4.1 million payment from rival Blockbuster Inc. to settle
a patent dispute. Netflix’s decision to lower its rental
prices worried some analysts. One firm, Jefferies & Co., also warned
that Netflix’s 2007 financial targets are unlikely to be met.
Photon Dynamics
Inc.,
w:st='on'>San
Jose
size='3'>, Ca., said that it will restate past financial reports and
expects to take another $7 million to $8 million in charges.
Photon’s main business is integrated yield management
products for the flat-panel display sector.
Texas Instruments
Inc.’s
second quarter net income sank to $610 million, down from $2.4 billion
in the year-earlier second quarter. While part of the decline was
due to inflated earnings in the year-ago period when the firm benefitted
from a royalty settlement and a sales tax refund, the
w:st='on'>
size='3'>Dallas
company’s sales for the period fell 7%–to $3.4 billion, amid
a decline in orders. Further, Texas Instruments, whose semiconductors
are used in cellphones and other products, also issued a disappointing
forecast for sales in the current quarter, although it said it’s
beginning to see hope for improvement in the semiconductor
market.
href='http://search.news.yahoo.com/search/news?p=bankruptcy&n=20&c=news'>