May 142009

 

Senate Rejects 15 Percent
Cap on Credit Card Interest Rates

Despite complaints that banks and credit card
companies are gouging customers by charging outrageous interest rates,
the Senate yesterday turned back an effort to cap interest rates at 15
percent, the

size='3'>New York Times reported today. The
amendment, sponsored by Sen. Bernard Sanders (I-Vt.), drew only 33 of 60

votes required for the amendment to pass as a part of a larger credit
card reform measure. The Senate is continuing its work on the bill,
which still contains provisions that would prohibit companies from
raising interest rates on existing balances unless a cardholder is 60
days behind, and then would require the rate to be restored to its
previous level if payments are on time for six months. Consumers would
have to be notified of rate increases 45 days in advance. Companies
would not be allowed to charge late fees if they were late in processing

a payment. 

href='http://www.nytimes.com/2009/05/14/us/politics/14cards.html?ref=business&pagewanted=print'>Read

more.

Report: Prepackaged
Bankruptcies Hit Eight-year High in First Quarter

Standard & Poor's reported that prepackaged
bankruptcies in the United States hit an eight-year high in the first
quarter of 2009 and the trend is likely to gain momentum as companies
seek a speedy alternative to chapter 11 filings, Reuters reported
yesterday. In the first three months of the year, six companies with
bonds worth $16.5 billion filed prepackaged bankruptcies, according

to the S&P report. By comparison, there were just four prepackaged
bankruptcies by companies with publicly-listed shares or bonds in all of

2008, affecting only $1 billion in debt. More prepacks are likely on the

way, with the junk bond default rate expected to hit 14.3 percent by
March 2010, the rating agency said. Globally, $541 billion of debt
defaulted in the first quarter, S&P said. 

href='http://www.reuters.com/article/marketsNews/idUSN1346008820090513'>Read

more.

Obama Urges Rules on
Investments Tied to Financial Crisis

In its first detailed effort to overhaul financial
regulations, the Obama administration yesterday sought new authority
over the complex financial instruments that were a major cause of the
financial crisis and have gone largely unregulated for decades,
the
size='3'>New York Times reported today. The
administration asked Congress to move quickly on legislation that would
allow federal oversight of many kinds of exotic instruments, including
credit-default swaps, the insurance contracts that caused the
near-collapse of the American International Group. Treasury Secretary
Timothy F. Geithner said that the measure should require swaps and other

types of derivatives to be traded on exchanges or clearinghouses and
backed by capital reserves, much like the capital cushions that banks
must set aside in case a borrower defaults on a loan. Taken together,
the rules would probably make it more expensive for issuers, dealers and

buyers alike to participate in the derivatives markets. 

href='http://www.nytimes.com/2009/05/14/business/14regs.html?_r=1&ref=business&pagewanted=print'>Read

more.

Mortgages

U.S. Foreclosures
Increase to Record Rate in April

RealtyTrac reported that U.S. foreclosure activity in
April jumped 32 percent from a year ago to a record high, and should
continue to mount because temporary freezes on foreclosures ended in
March, according to a Reuters report yesterday. One in every 374
households with mortgages got a foreclosure filing in April, the highest

monthly rate since RealtyTrac began tracking it in January 2005. Filings

were reported on 342,038 properties last month. Nevada was the state
with the highest foreclosure rate even though filings fell 18 percent in

April from March and bank repossessions dropped 44 percent. With one of
every 68 households with loans getting a filing, more than five times
the national average, total foreclosure activity in Nevada surged 111
percent from April 2008. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051300974_pf.html'>Read

more.

More Homeowners Getting
Government Aid, but Demand Continues to Increase

In the two months since it launched, the Obama
administration's foreclosure prevention plan has outperformed the
government's previous attempts, offering more than 50,000 homeowners
lower-cost mortgages, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. However, the $75 billion program, known as
Making Home Affordable, has been implemented unevenly by lenders,
leaving some homeowners frustrated and bewildered. The demand from
distressed borrowers has overwhelmed many lenders and nonprofit
organizations, which have hired more staff to cope. There is also
growing concern about whether the plan can reach its goal of helping 4
million homeowners without tackling the issue of borrowers who owe more
than their home is worth. Treasury Secretary Timothy F. Geithner is
scheduled today to release details of a $10 billion insurance plan that
will help shield lenders from losses associated with falling home
prices. He also is set to announce plans to offer incentives to lenders
that help borrowers sell their homes for less than they owe. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051303440.html'>Read

more.

General Growth Wins $400
Million Bankruptcy Loan, Use of Cash

General Growth Properties Inc., which filed the
biggest real estate bankruptcy in U.S. history, won court approval of a
$400 million loan from a group led by Farallon Capital Management LLC
and the right to use cash on hand to fund its operations, Bloomberg News

reported today. The company received approval to use the cash collateral

and borrow on the loan over objections from lenders on some properties.
The lenders had argued that many of General Growth’s malls
shouldn’t be in bankruptcy at all and the parent company
shouldn’t have access to those properties’ cash flow.
Bankruptcy Judge
face='Times New Roman' size='3'>Allan Gropper
size='3'>overruled the objections yesterday, saying that the
lenders’ rights were protected and General Growth should have
access to cash collected at its subsidiaries. The case is
In

re General Growth Properties Inc., 09-11977,
U.S. Bankruptcy Court, Southern District of New York. 

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aRqD.0uCw5Sk&refer=us'>Read

more.

Autos

Small Auto Suppliers Seek

Help in Wake of Giants' Woes

Small auto parts companies are appealing for
additional federal aid, arguing that financial troubles at Chrysler and
General Motors continue to weaken the industry's supply chain,
the
size='3'>Washington Post reported today. Work
is disappearing for companies that make carburetors, tire rubber and
other parts for carmakers. Chrysler's chapter 11 filing has left unpaid
bills for millions of dollars in parts and suppliers fear that a GM
bankruptcy would exacerbate their cash troubles. The Treasury Department

created a $5 billion program to aid the automakers' tier 1 suppliers.
However, tier 2 and tier 3 suppliers say that the money isn't trickling
down. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051303382_pf.html'>Read

more.

In related news, General Motors Corp. said today that
it plans to make critical payments to its direct-material suppliers
nearly a week before a Treasury-imposed deadline for an out-of-court
restructuring, the Wall Street Journal reported today. GM told
suppliers that it will pay them on May 28 instead of June 1. 

href='http://online.wsj.com/article/SB124230063788919147.html#mod=testMod'>Read

more. (Subscription required.)

Chrysler Fights Bid for
Nonunion Retiree Committee

Chrysler LLC has objected to a bid by the National
Chrysler Retirement Organization (NCRO) to appoint an official committee

of nonunion retirees in Chrysler's bankruptcy case, calling the request
premature,

size='3'>Bankruptcy Law360 reported yesterday.

In its objection, filed Tuesday in the U.S. Bankruptcy Court for the
Southern District of New York, Chrysler said that the NCRO's motion was
premature because Chrysler had not yet asked to terminate any retiree
benefits. Chrysler currently provides retirement benefits to about
19,000 nonunion retirees, according to its objection. The NCRO, which
represents about 16,000 of those retirees, moved to appoint an official
retiree committee on May 6. 
href='http://bankruptcy.law360.com/articles/101286'>Read more.
(Subscription required.)

Homebuilder Kirk Corp. Files

for Chapter 11

Homebuilder Kirk Corp. filed for chapter 11 protection

on Tuesday, listing assets and liabilities of between $50 million and
$100 million,

size='3'>Crain’s Chicago Business
size='3'>reported today. Kirk becomes the third Chicago-area
homebuilder, after Neumann Homes Inc. and Kimball Hill Inc., to file for

bankruptcy protection since the housing bubble burst in 2007. Kirk has
built more than 50 communities in the Chicago area. The bankruptcy
filing says the company has more than 200 creditors. 

href='http://www.chicagobusiness.com/cgi-bin/news.pl?id=34037&seenIt=1'>Read

more.

Charter Wins Ruling to
Block Some of DirecTV’s Bankruptcy Ads

DirecTV Inc., the largest U.S. satellite-television
provider, was blocked by a court order from running ads that a Charter
Communications Inc. unit said misleads consumers about the status of its

bankruptcy case, Bloomberg News reported today. U.S. District Judge
Rodney Sippel barred some of the allegedly offending ads yesterday after

hearing argument from company lawyers in St. Louis federal court. The
Charter unit had sued DirecTV on May 11, accusing it of unfair
competition and defamation. Judge Sippel’s order prevents DirecTV
from running TV, radio or print ads that question whether Charter can
deliver the most up- to-date technologies and most high-definition
channels to its subscribers. The case is

face='Times






















New






















Roman'

size='3'>Charter Communications Inc. v. DirecTV Inc.
size='3'>, 09cv730, U.S. District Court, Eastern District of Missouri
(St. Louis).

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=axatprqsp6NE&refer=us'>Read

more.

AIG Says Revamping Could
Take 3 to 5 Years

American International Group Chairman Edward M. Liddy
said yesterday that the company would probably need three to five years
to carry out its restructuring plan and fully repay the taxpayer bailout

money, the

size='3'>New York Times reported today. AIG,
once the nation’s biggest insurance conglomerate, has received
more than $170 billion from the Federal Reserve and the Treasury since
it nearly collapsed in September. The Treasury currently owns almost 80
percent of AIG’s voting shares, and Fed officials recruited Liddy
to unwind its exposure to subprime mortgages and salvage its
comparatively healthy insurance businesses. Testifying before the House
Committee on Oversight and Government Reform, Liddy said that the
company has devised a long-range plan, named Project Destiny, to sell or

spin off most of its insurance subsidiaries and other business
units. 

href='http://www.nytimes.com/2009/05/14/business/14aig.html?ref=business&pagewanted=print'>Read

more.

Asarco Wins Exclusivity
Extension to Push for Reorganization Plan

Bankruptcy Judge

face='Times






















New






















Roman'

size='3'>Richard S. Schmidt's extended Asarco
LLC's exclusivity period until Sept. 30 for the company to gain approval

of its fifth amended reorganization plan,
face='Times New





















Roman'>

face='Times






















New






















Roman'

size='3'>Bankruptcy Law360 reported yesterday.

Judge Schmidt’s order on Tuesday also left the door open for
Asarco parent Grupo Mexico SAB to launch a competing plan by Friday.
Asarco said again that the confirmation of a $1.7 billion sale of its
operating assets to India-based copper producer Sterlite Industries Ltd.

would allow the debtors to restructure and use the proceeds from the
sale to pay off claims, including all unsecured asbestos-related
personal injury claims. 
href='http://bankruptcy.law360.com/articles/101228'>Read
more. (Subscription required.)

West Virginia Sues over
Credit Counseling Scheme

West Virginia Attorney General Darrell McGraw has sued

a credit counseling company and owner for money the lawsuit claims state

consumers were overcharged, the

face='Times






















New






















Roman'

size='3'>West Virginia State Journal reported
today. The state filed a suit May 7 alleging that James R. Armstrong
Jr., of Coral Springs, Fla., wanted to make money through exorbitant
fees by providing debt-management services with defendant Family Credit
Counseling Corp. to consumers in debt, according to court filings.
Armstrong also controls Family Credit Counseling Corp. and other named
defendants. The lawsuit claims Armstrong solicited West Virginia
consumers to pay substantial up-front and service fees to establish debt

management plans. 

href='http://www.statejournal.com/story.cfm?func=viewstory&storyid=58874&catid=166'>Read

more.

SEC Poised to Charge
Countrywide Co-founder with Fraud

The Securities and Exchange Commission staff is
readying civil fraud charges against Countrywide Financial Corp.
co-founder Angelo Mozilo, in what would be the highest-profile
government legal action against a chief executive connected to the
financial crisis, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The charges the SEC is considering include
alleged violations of insider-trading laws and alleged failure to
disclose material information to shareholders. Mozilo sold $130 million
of Countrywide stock in the first half of 2007 under an executive sales
plan, according to securities filings, compared with $60 million in the
year-earlier period. He had modified his prearranged plan in late 2006
to accelerate the sales. Mozilo’s lawyers said that the sales were

proper. Mozilo has also been named in civil suits by attorneys general
in four states. 
href='http://online.wsj.com/article/SB124224647957816523.html'>Read
more. (Subscription required.)

International

Click here to review

today's global insolvency news from the GLOBAL INSOLvency site.