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March 13, 2007
Go on Subprime Offensive
Amid mounting defaults in
the market for subprime mortgages, some big banks and mortgage companies
are striking out in their efforts to wrest compensation from originators
of those high-risk, high-return loans, the
size='3'>Wall Street Journal reported
today.Led by
HSBC Holdings PLC, banks and others are trying to force small mortgage
lenders to buy back some of the same loans the banks eagerly bought in
2005 and 2006 by using 'repurchase agreements.' Squeezed by the
onslaught of defaults, many originators are saying they can't afford to
buy back their loans or are pursuing bankruptcy protection. New Century
Financial Corp. said yesterday that, starting last Wednesday, it
had received a wave of default notices from its major Wall Street
creditors, and may owe creditors a combined $8.4 billion for mortgage
repurchases. It said if all its lenders demand repurchases, it can't
afford to pay. Subprime loan originations totaled about $605 billion
last year, or about a fifth of the overall market for
w:st='on'>
size='3'>U.S.
size='3'>home loans, according to trade publication Inside Mortgage
Finance.
href='http://online.wsj.com/article/SB117369890345734007.html?mod=home_whats_news_us'>Read
more . (Registration required.)
name='2'>Commentary: Hedge Funds Learning the Political
Ropes
While hedge funds
confidently flex their muscles in the markets and in boardrooms,
in
size='3'>Washington,
w:st='on'>
size='3'>D.C.
experiencing the awkward growing pains of a relatively new industry
coming to grips with its own power, according to a
face='Times New Roman' size='3'>New York Times
size='3'>commentary today. Some hedge funds like D. E. Shaw and Cerberus
Capital Management have spent time and money in the capital, but most
funds have been mostly quiet with activities in
w:st='on'>
size='3'>Washington
w:st='on'>
size='3'>D.C.
by a desire to avoid stringent regulation and a healthy sense of
competition — there are three hedge fund lobbying groups —
the industry seems resigned to no longer being a wallflower and looks
set to join the dance with Congress. House Financial Services Committee
Chairman Barney Frank (D-Mass.) will hold hearings today on hedge funds.
Last week, Senator Charles E. Grassley (R- Iowa) sought to offer an
amendment to a Homeland Security bill that would have required hedge
funds to register, but was rebuffed before it came to a vote.
href='http://www.nytimes.com/2007/03/13/business/13hedge.html?ref=business&pagewanted=print'>Read
more.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht031307.shtml'>Click
here to view the witnesses for today’s House Financial
Services hearing titled “Hedge Funds and Systemic Risk in the
Financial Markets” as well as access a link to watch the hearing
via live Webcast starting at 10 a.m. EST.
name='3'>Bankruptcy Court Grants Exclusivity Extension to
Solutia
Bankruptcy Judge
Prudence Carter
Beatty ruled that Solutia Inc.would be granted
an extension for the exclusive right to file its reorganization plan,
the St. Louis
Post-Dispatch reported today. The extension
would last for a few more weeks, though a precise deadline will be given
once Judge Carter Beatty signs the order. Solutia’s
bondholders’ committee has repeatedly sought permission to
intervene and offer its own reorganization plan, saying that the company
is not making adequate progress.
size='3'>The primary obstacle, however, is a claim made by certain
bondholders that their debt was improperly classified as unsecured by
Solutia. A hearing on the matter was held last summer, but Judge Beatty
has yet to rule on the bondholders' dispute.
href='http://www.stltoday.com/stltoday/business/stories.nsf/story/8BE8AE4330F690EC8625729D000B2C82?OpenDocument'>Read
more.
Seeks Extension to Pay Deutsche Bank Claim
Bankrupt auto
parts
face='Times New Roman' size='3'>manufacturer
size='3'>Tower
size='3'>Automotive Inc. is seeking court approval to extend its payment
on $97.2 million worth of credit issued by Deutsche Bank Trust
Co., Bankruptcy
Law360 reported yesterday. In November, Tower
and Deutsche agreed to extend the maturity dates of the second-lien
letters of credit from Feb. 7 to June 7, according to court documents.
Tower said that its negotiations with Deutsche have been in good faith
and that in exchange for Deutsche’s agreement to extend the expiry
of the credit, the auto parts maker has agreed to pay the bank’s
legal expenses. A hearing has been scheduled for March 21 before U.S.
Bankruptcy Judge Allan
L. Gropper to consider the matter, according
to court documents.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=20332'>Read
more. (Registration required.)
Creditors Take Aim at Underwriters
The official creditor
committee in the Refco chapter 11 case has asked the U.S. Bankruptcy
Court for permission to examine the financial records of the
size='3'>eight Wall Street
size='3'>firms that underwrote Refco’s $583 million initial public
offering, Bankruptcy
Law360 reported yesterday. Targeted in the
motion are Goldman Sachs Group, Credit Suisse First Boston, Deutsche
Bank, J.P. Morgan & Chase Co., Sandler O’Neil & Partners,
Bank of America Corp., HSBC Holdings PLC and Merrill Lynch & Co. The
creditors claim that these banks should have uncovered the $430 million
in debt owed to the company by former Refco CEO Philip Bennett. The
committee has demanded the documents under a provision of the Bankruptcy
Code that compels disclosure if the documents in question may effect the
administration and distribution of the debtor’s estate.However,
the banks have asked a bankruptcy court to avoid ruling on the motion
until a federal district court has determined whether or not it should
be thrown out.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=20315'>Read
more. (Registration required.)
w:st='on'>
name='6'>Battle
face='Times





New
Roman'
size='3'> over Confirmation Tests FLYi Plan
A battle over the
confirmation of Independence Air’s chapter 11 plan began Monday
between the bankrupt air carrier’s creditors, the Associated Press
reported yesterday. Most of the roughly $100 million to $140 million
cash to be handed out under Independence Air's chapter 11 plan came from
the sale of stock in United Airlines' parent company, UAL Corp. A claim
for damages against UAL, which cut off a contract that made Independence
Air a regional carrier for United, was the single biggest asset of the
bankruptcy case filed in Delaware by Independence Air and its parent
company, Dulles, Va.-based FLYi Inc. If the chapter 11 plan wins
confirmation, Independence Air's creditors will get half the money,
while FLYi's creditors will get the other half in order to ward off
the possibility of prolonged litigation between Independence Air
creditors and creditors of FLYi, said attorney
face='Times New Roman' size='3'>Brad Erens.
However, FLYi creditor QVT Financial LP, and Independence Air creditor
International Lease Finance Corp., said that the reorganization plan is
unfair.
href='http://www.forbes.com/feeds/ap/2007/03/12/ap3508584.html'>Read
more.
Asked to Toss Funeral Home Bankruptcy Case
size='3'>Tennessee officials have
requested a federal judge in
face='Times New Roman' size='3'>Oklahoma
size='3'>to throw out a bankruptcy case filed by a company that owns and
operates funeral home and cemeteries in
w:st='on'>
size='3'>Tennessee and
size='3'>Arkansas
Associated Press reported today. Assistant Tennessee Attorney General
Gill Geldreich said yesterday that filing came 'literally hours before a
hearing the next day to appoint a receiver' for the company, Forest Hill
Funeral Home and Memorial Park East LLC, in a
w:st='on'>
size='3'>Tennessee
The Muskogee-based company owns three
face='Times New Roman' size='3'>Memphis
size='3'>cemetery and funeral home operations and four
w:st='on'>
size='3'>Arkansas
size='3'>cemeteries. The case stems from owner Clayton Smart's
announcement last July that more than 13,000 people with prepaid burial
contracts with Forest Hill would have to pay more. Smart has blamed
inflation and other people's mismanagement. U.S. Bankruptcy Judge
Terrence Michael heard arguments on Monday about whether the case should
remain in an
face='Times New Roman' size='3'>Oklahoma
court.
href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20070313/UPDATE/703130426'>Read
more .
name='8'>Offers to Buy Chrysler Could Come by Month's
End
The pace of activity
around a possible sale of DaimlerChrysler AG's Chrysler Group is
accelerating, after several potential buyers met with management in
anticipation of presenting preliminary offers by the end of the month,
the Wall Street
Journal reported today. DaimlerChrysler is
hoping to narrow the list of serious buyers so its management team can
give an update on a possible sale during DaimlerChrysler's general
shareholders meeting in
w:st='on'>
size='3'>Berlin
4. The interested private-equity firms include Cerberus Capital
Management LLC and a group led by Blackstone Group and Centerbridge
Partners LP.All
three met with Chrysler management last week and signed confidentiality
agreements to pave the way to reviewing detailed financial and
product-development information on the auto maker. Canadian auto-parts
maker Magna International Inc. is also interested in buying all or part
of Chrysler, possibly in partnership with a private-equity firm, and has
met with representatives of both the United Auto Workers and Canadian
Auto Workers to discuss a deal.
href='http://online.wsj.com/article/SB117375131320434969.html?mod=home_whats_news_us'>Read
more. (Registration required.)
International
name='9'>French Bank Up Against $1.4 Billion Class Action
Lawsuit
A Canadian life insurance
company has brought up a proposed class action lawsuit against French
bank Societe Generale, accusing the bank of causing a Canadian hedge
fund to collapse into bankruptcy and asking for $1.36 billion in
compensation, Bankruptcy
Law360 reported yesterday. Toronto-based
Manulife Financial said last week it is proceeding with the suit brought
on behalf of investors in the Ontario Superior Court in
size='3'>Toronto
Societe’s relationship with Portus Alternative Asset Management
Inc., which slid into bankruptcy in 2005 after regulators launched an
investigation into the hedge fund’s business. Manulife filed a
statement of claim last July, seeking damages of $1.36 billion for
negligence, breach of trust and breach of fiduciary duty, or for
assisting those breaches. It also asked for $25.6 million in punitive
damages. Manulife claimed that it had invested about $210 million into
Portus and that it was the biggest investor affected by its bankruptcy.
Portus generated about $683 million from investors.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=20318'>Read
more . (Registration required.)
name='10'>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 taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
Daily e-Summary, that emails you information on over 70 such companies
each morning, email
face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.com
size='3'>your name, company name, address, phone and fax.
We’ll set you up within 24 hours.
Receive an ABI
member’s discount of 50% off the $500 annual subscription
fee. Indicate “ABI CODE 27” in
your email.
size='3'>American Vanguard Corp., a
size='3'>Newport Beach
maker of pesticides, reported its fourth quarter net income fell
31%–to $5.4 million. Revenue fell 10%–to $55.1 million. For
the year, its net income declined 19%--to $15.4 million, on a 2% revenue
increase–to $194 million.
size='3'>Dillard's Inc., a
w:st='on'>
size='3'>Little Rock
operator of department stores, reported that its same-store sales fell
9% in January. Total sales for the month declined nearly 8%–to
$594 million.
size='3'>Ford Motor Co. is close to a deal to
sell its venerable Aston Martin brand, the maker of British sports cars,
to a group led by racing mogul David Richards and two Kuwaiti firms in a
transaction that reportedly pegs the value of the brand at $870 million.
The sale will free up some cash for Ford, which has been restructuring
its ailing North American operations. At the same time, however, Ford
will keep a 15% interest in Aston Martin. The sale, say analysts, could
lead the way for Ford to sell its other British brands, which include
Land Rover and Jaguar, but Ford says so far that it has no intention to
sell those other brands. Separately, the
w:st='on'>
size='3'>Dearborn
carmaker said that it will offer bonuses for both hourly and salaried
workers for 2006. CEO Alan Mulally said that although the company
failed to meet certain profit and marketshare goals, it did achieve some
improvement in quality and in reducing costs. The carmaker is trying to
keep morale up as the company continues with a wrenching
restructuring.
size='3'>Hovnanian Enterprises Inc., a Red
Bank, N.J. homebuilder, reported a first quarter loss of $54.6 million,
compared to net income of $84.1 million in the year-earlier period.
Revenue sank nearly 9%–to $1.2 billion. The results included $93
million in pretax charges related to the slowdown of the housing market
in
size='3'>Florida
size='3'>.
size='3'>National Semiconductor Corp.,
a
size='3'>Santa Clara, Ca.
maker of semiconductors, reported its third quarter net income fell
45%--to $71.5 million, including extra charges of $6.1 million. Revenue
declined 21%--to $431 million. The company cited weaker demand for its
chips, which are used in cellphones, computers and other electronic
equipment. Looking ahead, National Semiconductor said that its fourth
quarter sales will increase by between 3% and 6% over third quarter
sales.
Standard Motor Products Inc., a Long Island City, N.Y. maker
of automotive parts, reported a second quarter net loss of $1.8 million,
down from a $6.2 million loss in the year-earlier period. The results
included a $1.5 million loss from continuing operations and a $355,000
loss from discontinued operations. Sales for the quarter slipped nearly
2%–to $169 million.