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April 10, 2009
U.S. Takes
Hard Line with Automaker Creditors
The federal government is taking
an increasingly hard line with the creditors of General Motors Corp. and
Chrysler LLC, trying to squeeze billions of dollars in concessions out
of banks, bondholders and others, the
size='3'>Wall Street Journal reported today.
In both cases, the U.S. government is managing negotiations for the car
companies as they prepare for what could be chapter 11 filings. The
Treasury Department is pushing GM to offer its bondholders, who are owed
$29 billion, a small portion of shares in the company. That's a sharp
cut from a bond-exchange offer GM made two weeks ago, which included
about $8.5 billion in cash and new debt in the company as well as 90
percent of GM's stock.
href='http://online.wsj.com/article/SB123932036083306929.html'>Read
more. (Subscription required.)
New Tool for Home Refinancing
Some of the nation's biggest
lenders, including Bank of America Corp., J.P. Morgan Chase & Co.
and Wells Fargo & Co., are beginning to roll out a new program
established by the Obama administration as part of its housing-rescue
plan to help refinance homeowners who otherwise couldn't get new loans,
the Wall Street
Journal reported today. One key component of
President Obama’s housing plan announced in February was to allow
as many as five million homeowners to refinance their mortgages, even
though they have little equity or owe slightly more than their home is
worth. The program is open to borrowers who are current on their
payments, have loans owned or guaranteed by government-controlled
mortgage giants Fannie Mae or Freddie Mac and owe between 80 and 105
percent of their home's current value.
href='http://online.wsj.com/article/SB123931996530606873.html#mod=testMod'>Read
more. (Subscription required.)
Commentary:
Rein in Predatory Mortgage Brokers
Mortgage brokers are supposed to
be impartial advocates who search out the best possible deal for
prospective homeowners seeking a loan, but the mortgage crisis has
revealed a different truth, according to an editorial in
today’s New York
Times. Too many brokers were far more
interested in earning fees for steering their clients to highly priced
loans that the borrowers could never hope to repay. According to a 2008
analysis by the Center for Responsible Lending, subprime borrowers who
went through brokers actually fared worse than those who went directly
to lenders. Borrowers who used brokers paid additional interest costs
ranging from $17,000 to $43,000 for every $100,000 they
borrowed. As Congress
considers steps to rein in such practices, lawmakers should outlaw the
kickbacks that lenders pay brokers for steering clients into costlier
loans.
href='http://www.nytimes.com/2009/04/10/opinion/10fri1.html?ref=opinion&pagewanted=print'>Read
more.
Tribune
Financing Amendments Approved
Bankruptcy Judge
face='Cambria' size='3'>Kevin J. Carey on
Wednesday approved financing amendments in Tribune Co.'s chapter 11
proceedings that will allow the media giant to extend and modify its
financing as it restructures,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Carey approved amendments to Tribune's securitization facility and
letter-of-credit facility and reduced the company's aggregate commitment
from $300 million to $220 million. Tribune's aggregate commitment now
comprises an aggregate revolving loan commitment of $75 million and an
aggregate term commitment of $150 million, according to the order. The
amended financing agreements will allow Tribune and its affiliates to
“assure sufficient sources of working capital and financing to
continue to carry on the operation of their businesses,” Judge
Carey wrote.
href='http://bankruptcy.law360.com/articles/96234'>Read more.
(Subscription required.)
Second
Circuit Refuses to Allow Oneida to Discharge PBGC Fees
The U.S. Court of Appeals for the
Second Circuit on Wednesday found that former bankrupt flatware maker
Oneida Ltd. may not discharge fees owed to the Pension Benefit Guaranty
Corp. in connection with terminating a benefit plan, reversing a ruling
by the bankruptcy court judge,
size='3'>Bankruptcy Law360 reported yesterday.
In the appeals court opinion, authored by Judge Jed S. Rakoff, the court
noted that the Pension Protection Act of 2006 unambiguously states that
certain pension plan termination obligations in connection with
bankruptcy proceedings do not apply to the debtor until after the
completion of the case, barring the termination fees from being
classified as prepetition debt. “The obvious purpose of this rule
is to prevent employers from evading the termination premium while
seeking reorganization in bankruptcy,” Judge Rakoff wrote in the
opinion, noting that Congress specifically intended to prevent employers
from discharging the premiums through the bankruptcy process by enacting
the special rule in the statute.
href='http://bankruptcy.law360.com/articles/96213'>Read
more. (Subscription required.)
Monaco Coach
Seeks to Auction Off RV Resorts
Recreational vehicle manufacturer
and resort operator Monaco Coach Corp. asked for court permission to
auction off its resort business,
size='3'>Bankruptcy Law360 reported yesterday.
In a motion filed Tuesday in the U.S. Bankruptcy Court for the District
of Delaware, Monaco asked the court to set an auction of its RV resort
assets for May 8, with bids due May 1. Those assets include RV resorts
in California, Nevada, Michigan and Florida. Monaco has not yet obtained
a stalking-horse bid, according to the motion. However, the company,
through investment bank Avondale Partners LLC, has contacted about 75
potential buyers about the sale, about 30 of which have already executed
confidentiality agreements with Monaco, the motion said.
href='http://bankruptcy.law360.com/articles/96187'>Read
more. (Subscription required.)
In a
Downturn, More People Act as Their Own Lawyers
Financially pressed Americans are
increasingly representing themselves in court, according to judges,
lawyers and courthouse officials across the country, the
face='Cambria' size='3'>New York Times
size='3'>reported today. The trend raises questions of how just the
outcomes are and the effect the trend is having on courthouses already
facing their own budget woes as clerks spend more time helping people
unfamiliar with forms, filings and fees. Judges complain that people
miss deadlines, fail to bring the right documents or evidence and are
simply unprepared for legal proceedings. Such mistakes make it more
likely they will fare poorly — no matter the merit of their
cases.
href='http://www.nytimes.com/2009/04/10/business/10lawyer.html?_r=1&ref=business&pagewanted=print'>Read
more.
Commentary:
How to Make the Bank Asset Plan Work
The government has finally
figured out how to get us out of a credit crisis caused by leverage and
securitization: more leverage and securitization, according to a
commentary by the Wall Street
Journal. Under the Public Private Investment
Program (PPIP) unveiled last month, the Treasury plans to partner with
private investors to purchase 'legacy' (formerly known as 'toxic') loans
and securities from banks, with leverage guaranteed by the FDIC (for
loan purchases) or provided by the Federal Reserve or Treasury (for
securities purchases). The aim of the PPIP is to put a price on illiquid
assets, which will enable banks to sell those assets, make new loans and
raise new capital. Once that occurs, the spigots of securitization will
be reopened and consumer credit will be expanded. It is a combustible
combination, and it will only work if, for investors, the anticipated
financial rewards outweigh the potential legal risks.
href='http://online.wsj.com/article/SB123932903393607633.html'>Read
more. (Subscription required.)
Signs of
Revival In Retail, Banks
The ailing financial and retail
sectors showed tentative signs of strength yesterday, an encouraging
shift for an economy whose prospects are tied to their recovery,
the Washington Post
reported today. Ahead of its official earnings report,
Wells Fargo, one of the nation's largest banks, said that it earned
record profits from January to March and that its mortgage business was
'exceptionally strong.' The San Francisco-based bank, which benefited
from having acquired Wachovia late last year and writing down losses
then, easily surpassed analysts' expectations. Some retailers yesterday
reported better-than-expected results and sounded more positive about
the future than they have in months. Wholesale clubs such as Costco and
BJ's turned in particularly strong results, with sales rising 4.6
percent in March excluding the impact of fuel. However, the recession
remains severe, and economists still stress that the worst for U.S.
workers is still to come. Americans are still claiming jobless benefits
at record levels, with the number of people receiving unemployment
insurance now approaching 6 million.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/09/AR2009040901727_pf.html'>Read
more.
Colony
Quits MGM Mirage Deal Talks
Colony Capital LLC has broken off
talks with struggling MGM Mirage about a potential investment that could
have given the casino company cash it needs to meet its looming
financial obligations, the Wall
Street Journal reported today. The collapse of
talks with Colony means that MGM Mirage must find other ways to service
its $13.5 billion in debt, as well as fund payments on its City Center
project, an $8.6 billion development on the Las Vegas Strip. MGM Mirage
is a 50-50 partner in the City Center project with Dubai World, a
conglomerate owned by the Dubai government. The two must come up with a
$70 million payment on the project by Monday in order to prevent
construction from shutting down. However, relations between the partners
have soured, and Dubai World has filed suit alleging that MGM Mirage let
costs at City Center get out of control.
href='http://online.wsj.com/article/SB123932444088607343.html'>Read
more. (Subscription required.)
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