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July 31, 2007
name='1'>Senate Committee Continues to Examine 'Carried
Interest'
The Senate Finance Committee
will hold a second hearing on the issue of the “carried
interest” by hedge fund managers, interest that is a percentage of
the fund’s earnings (usually 15 to 25 percent, once specified
benchmarks are met) and is treated as capital gains under current tax
rules. Senate Finance Committee members on both sides of the aisle were
skeptical of proposals to raise taxes on the managers of hedge funds and
other investment partnerships at the committee's first hearing on the
issue on July 11.
href='http://finance.senate.gov/hearings/other/live.ram'>Click here
to view today's hearing.
Credit Cards
name='2'>House Financial Services Chairman Sets October Goal for
Moving Credit Card Legislation
House Financial Services
Chairman Barney Frank (D-Mass.) said that he wants to move legislation
to crack down on questionable credit card practices by October,
CongressDaily
size='3'>reported yesterday. Frank made the statement during a
closed-door meeting between banking lobbyists and consumer groups
arranged by Financial Services Financial Institutions Subcommittee
Chairwoman Carolyn Maloney (D-N.Y.) Maloney held the forum in an attempt
to determine if she can get a consensus between the two factions on a
'gold standard' for cards that did not contain certain fees and rate
policies that have come under criticism. Maloney said that she will
release a set of principles by the end of the week and use them as a
starting point for writing legislation that should be introduced before
the end of summer. 'We discussed a set of principles that could serve as
a guide to both legislation and self-regulation by the industry,'
Maloney said. 'These principles recognize that the modern risk-based
pricing credit card system requires a shared responsibility between
credit card issuers and their customers.'
name='3'>Commentary: Congress Needs to Rein in Credit Card
Industry
The federal agencies that
are supposed to regulate the banking and credit card industries have
failed to keep pace with deceptive and unfair practices that have become
shamefully standard in the business, according to an editorial in
today’s New York
Times. As a consequence, many hard-working
Americans who pay their bills are mired in debt, so Congress needs to
rein in this sometimes predatory industry. Congressional investigations
and studies by consumer advocates have exposed other unsavory practices.
State usury laws would once have precluded many of these practices, but
those have been preempted by federal regulations that are increasingly
in favor of banks and credit card companies. Passing a bill introduced
by Sen. Carl Levin (D-Mich.) that would limit “penalty”
interest rates to an additional 7 percent above the previous rate would
be a good start, but lawmakers need to ban deceptive card offers
outright, strengthen federal oversight and toughen truth-in-lending
laws.
href='http://www.nytimes.com/2007/07/31/opinion/31tue1.html?pagewanted=print'>Read
more.
name='4'>Audit Finds
w:st='on'>San
Diego
Money
A handful of parishes in
the Roman Catholic Diocese of San Diego deliberately concealed or
inappropriately handled about $500,000 in funds in sometimes 'purposeful
attempts' to circumvent federal bankruptcy proceedings, the Associated
Press reported today. The
w:st='on'>San
Diego
chapter 11 bankruptcy Feb. 27, just hours before going to trial in more
than 140 lawsuits alleging sexual abuse by priests. The auditor’s
report said that 'openly questionable activities' appear to be limited
to a small number of parishes, and most pastors and lay personnel
demonstrate a good-faith effort to comply with church financial
procedures. Still, the 175-page report published late Monday found no
overall system of accounting throughout the diocese. 'As a result
(church officials) are often woefully unaware of the specific financial
operations of individual parishes,' the report said. Bankruptcy
Judge Louise DeCarl
Adler ordered the examination of the diocese's
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/07/31/AR2007073100444_pf.html'>Read
more.
Mortgage
Lending
name='5'>More Lenders Feeling Pain from Defaults
Trading in the shares of
a large mortgage company was suspended yesterday, and the nation’s
largest insurer of home loans said that its stake in a business that
underwrites and invests in mortgage securities may be worthless,
the New York
Times reported today. The developments are the
latest indications that the housing slump will affect a broader segment
of the mortgage industry and that the problems will last longer than
many officials had suggested earlier this year. Just last week, the
nation’s biggest home lender, Countrywide Financial, acknowledged
that defaults on second mortgages to prime borrowers were rising
quickly. The New York Stock Exchange never opened trading in shares of
American Home Mortgage yesterday after the company said late Friday that
it would suspend its dividend and was facing “significant margin
calls” from its banks.
size='3'>The Mortgage Guaranty Insurance Corp. (M.G.I.C.) also said that
it would write down its $516 million investment in Credit-Based Asset
Servicing and Securitization, or C-Bass, possibly to zero. The Radian
Group, which has a $518 million stake in C-Bass, also said it might have
to write off its investment completely. The rest of C-Bass is owned by
its management.
href='http://www.nytimes.com/2007/07/31/business/31subprime.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='6'>GMAC's Home Unit Weighs on Profit
GMAC Financial Services,
General Motor Corp.'s part-owned financing arm, reported a 63 percent
drop in second-quarter profit as its Residential Capital LLC
home-lending unit weighed on results, though the losses from the unit
narrowed markedly from the first quarter, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The company, which significantly scaled back
its nonprime portfolio during the quarter, said that it expects
continued improvement in earnings performance in the second half. Still,
the company said that it expects widespread weakness in the
size='3'>U.S.
size='3'>housing market and mortgage industry to persist in the second
half of the year. GMAC said it intends to restrict the origination of
mortgage products with limited market liquidity and to further reduce
its nonprime mortgage exposure.
href='http://online.wsj.com/article/SB118581867210082389.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Fund Forced to Sell Its Portfolio
Sowood Capital sent out a
letter yesterday to investors indicating that heavy losses in the credit
market had caused the fund to lose more than half its value, prompting
it to sell its portfolio to another hedge fund and return the remaining
$1.5 billion to investors, the
size='3'>New York Times reported today. Sowood
becomes the latest hedge fund hit by a tightening of the credit markets
that started in subprime mortgages and has expanded into the broader
market, including the loans and bonds used to finance leveraged
buyouts. At one time, using leveraged money,
the fund had $12 to $15 billion worth of positions.
face='Times New Roman' size='3'>Like Amaranth Advisors, the $9 billion
hedge fund that last year lost $6 billion in one week, Sowood Capital
got caught with leveraged positions — bonds and derivatives
— whose value plummeted in a remarkably short time in markets with
few buyers and with lenders that started demanding more
collateral.
href='http://www.nytimes.com/2007/07/31/business/31hedge.html?ref=business&pagewanted=print'>Read
more.
Approves Solutia Settlement
Bankruptcy Judge
Prudence Carter
Beatty signed off on a settlement allowing a
group of certificate purchasers to collect millions of dollars worth of
claims against Solutia in its chapter 11 case,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Beatty granted Solutia’s deal
with the purchasers, including units of AIG and Credit Suisse, to have a
secured claim of $20 million and a general unsecured claim of more than
$27.3 million against the St. Louis, Mo.-based chemical company. The
settlement resolves a dispute stemming from a pre-petition financing
deal over Solutia’s corporate headquarters.
face='Times New Roman' size='3'>Judge Beatty said that the claims were
not subject to objection or disallowance, and agreed the claims should
be allocated among AIG Annuity Insurance Co. and American General Life
Insurance Co., Credit Suisse Securities LLC and Latigo Master Fund
Ltd.
href='http://bankruptcy.law360.com/Members/ViewArticlePortion.aspx?Id=30940&ReturnUrl=..%2fsecure%2fViewArticle.aspx%3fId%3d30940'>Read
more. (Registration required.)
name='9'>Trustee Balks at Reimbursement in Marcal
Case
The U.S. Trustee
overseeing Marcal Paper Mills Inc.'s chapter 11 proceedings objected to
Apollo Capital Management LP's quest for reimbursement, arguing that the
private-equity firm should not be eligible for compensation just yet
despite bankrolling the paper company's reorganization plan,
Bankruptcy Law360
reported yesterday. U.S. Trustee Kelly Beaudin
Stapleton filed a protest on Friday in the U.S. Bankruptcy
Court for the District of New Jersey, opposing Apollo's request for
$750,000 to cover the expenses the financier has purportedly incurred
throughout Marcal's bankruptcy proceedings. Apollo is currently seeking
recompense for expenses related to the paper supplier's reorganization,
including legal fees, accounting and tax services, and environmental
costs, according to court documents.
href='http://bankruptcy.law360.com/Members/ViewArticlePortion.aspx?Id=30885&ReturnUrl=..%2fsecure%2fViewArticle.aspx%3fId%3d30885'>Read
more. (Registration required.)
name='10'>Enron Plaintiffs Get More Support on Capitol
Hill
Two key Democratic
lawmakers yesterday became the latest federal officials seeking to
intervene in a Supreme Court case that could determine whether investors
in Enron and other fraud-ridden companies can recover money from third
parties, the Washington
Post reported today. House Financial Services
Committee Chairman Barney Frank (D-Mass.) and House Judiciary Committee
Chairman John Conyers Jr. (D-Mich.) asked to file court papers that
would support shareholders' right to sue bankers, lawyers, accountants
and business partners who knowingly took part in fraud schemes but who
may not have made public statements about them at the time. Earlier this
year, the five-member Securities and Exchange Commission voted to
support shareholders in the case. The Treasury Department and President
Bush opposed the move, however, arguing that it would expose businesses
to too many risks and put
w:st='on'>
size='3'>U.S.
size='3'>companies at a disadvantage to foreign rivals.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/07/30/AR2007073001600_pf.html'>Read
more.
New York's
w:st='on'>
name='11'>St. Vincent
size='3'> Hospital Set to Emerge from
Bankruptcy
St. Vincent Catholic
Medical Centers is set to emerge from bankruptcy more than two years
after filing for chapter 11 protection after a court confirmed its
reorganization plan, the
size='3'>New York Sun reported today. Hospital
officials said that the plan was approved Friday, paving the way
for it to come out of bankruptcy by Labor Day. St. Vincent's, a
hospital operator anchored by its flagship facility in
w:st='on'>
size='3'>Greenwich Village
size='3'>N.Y.
from bankruptcy with $270 million in term debt and $50 million in
revolving credit facility to be financed by GE Healthcare Financial
Services. Read
more.
name='12'>Goldman Family Gets Rights to O.J. Book
Bankruptcy
Judge A. Jay Cristol
approved an agreement to pass the rights to O.J.
Simpson's book If I Did
It to relatives of Ron Goldman, who was
murdered along with Nicole Brown Simpson in 1994, Reuters reported
yesterday. Earlier this year, a
w:st='on'>
size='3'>California
ordered rights to his book put up for public bidding to benefit the
Goldmans' claims. The auction was canceled in April when Lorraine Brooke
Associates, a company set up in the name of Simpson's children to
collect his reported $1 million book advance, declared bankruptcy
in
size='3'>Miami. However,
Judge Cristol ruled in June that Lorraine Brooke Associates was a shell
company formed to conceal Simpson's book earnings from the Goldmans,
paving the way for them to pursue their claim. Under the settlement
hammered out by lawyers earlier this month and approved by Cristol on
Monday, the Goldmans obtained all rights to the book, and to Simpson's
name and likeness in connection with it.
href='http://www.nytimes.com/reuters/arts/entertainment-simpson-book.html?pagewanted=print'>Read
more.
name='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. For more of the latest business news
visit:
face='Times New Roman' size='3'>ABI
size='3'>Members receive a 50% discount off of our regular subscription
rate of $500 when subscribing to the complete Daily Summary.
To subscribe email steve@creditnews.com or call
800-407-9044—use
Code 37
American Axle
& Manufacturing Holdings Inc. wants to shut down a plant
in
workers as part of an ongoing restructuring.
Applied
Micro Circuits Corp., a
w:st='on'>
fabless semiconductor company, reported a first quarter net loss of
$16.4 million, on a 28% revenue decline–to $50 million.
ASV
Inc., a
Rapids, Mn. maker of track-driven vehicles,
reported its second quarter net earnings fell to $3.3 million, down from
$7.6 million a year ago. Sales came in at $51.2 million, compared
to $72.1 million in 2006's second quarter.
Compuware
Corp., a
w:st='on'>Detroit
software and provides related services, reported its first quarter net
declined 99%–to $190,000, including a restructuring charge of $16
million. Revenue declined 6%–to $279 million.
Dover
Motorsports Inc., a
w:st='on'>Dover
nation’s largest race track operators, reported its second
quarter net declined 33%–to $5.6 million, on a 9% revenue
decline–to $41 million.
Insituform
Technologies Inc., a
w:st='on'>Chesterfield
w:st='on'>Mo.
and other services, reported its second quarter profit tumbled
42%–to $3.2 million. Revenue fell 6%–to $145 million.
Keithley
Instruments Inc., a Solon, Oh. firm which manufactures
testing and measurement tools, reported a second quarter net loss of
$460,000, on a 13% revenue decline–to $33.4 million.
Landry's
Restaurants Inc., Houston, Tx., is facing further financial
pressure, with U.S. Bank calling for early redemption of $400 million in
bonds due in 2014. Landry’s is in violation of its credit
agreement and hasn’t filed quarterly reports this year or its
annual report from last year as it reviews its stock-options practices.
Another lender, Wachovia Bank, has granted a waiver for Landry’s
on $450 million in unsecured notes.
PCTEL
Inc., a
w:st='on'>Chicago
w:st='on'>Il
connectivity products to cellular carriers, reported a second quarter
net loss of $3.2 million, including charges of $1.8 million from
restructuring and the sale of certain assets. Revenue declined
29%–to $19 million.
PECO II
Inc., a Galion, Oh. firm which provides power systems for the
telecommunications industry, reported a second quarter net loss of
$740,000, on a 22% revenue decline–to $10.6 million.
Select
Comfort Corp., a
w:st='on'>Minneapolis
w:st='on'>
w:st='on'>U.S.
more than 440 stores, reported its second quarter net declined
73%–to $2.9 million, on a 5% revenue decline–to $179
million.
Standard Pacific
Corp., an
w:st='on'>Irvine
second quarter net loss of $166 million, on a 30% revenue
decline–to $695 million. The loss, which compares with
income of $96 million for the same period one year earlier, includes
more than $300 million in pretax impairment charges.
href='http://www.nytimes.com/reuters/arts/entertainment-simpson-book.html?pagewanted=print'>
href='http://search.news.yahoo.com/search/news?p=bankruptcy&n=20&c=news'>