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December
19, 2007
name='1'>Federal-Mogul to Emerge from Bankruptcy
Federal-Mogul Corp. said
yesterday that it will emerge from six years of bankruptcy protection on
Dec. 27, the date its reorganization plan becomes effective, the
Associated Press reported. The plan was confirmed Nov. by the U.S.
Bankruptcy Court on Nov. 8 and affirmed by U.S. District Court on Nov.
14. The Southfield, Mich.-based company filed for bankruptcy protection
in 2001as it faced 365,000 lawsuits seeking hundreds of millions in
damages stemming from asbestos liability claims. The company took on the
liability in 1998 when it bought several companies facing their own
asbestos claims.
href='http://biz.yahoo.com/ap/071218/federal_mogul_bankruptcy.html?.v=2'>Read
more.
Mortgage
Lending
name='2'>Fed's New Rules on Mortgages Draw
Hostility
The Federal Reserve
proposed new rules that would sharply curtail the kinds of high-risk
mortgages largely responsible for the global credit crunch, but the
proposal drew a lukewarm, and occasionally hostile, reaction from
lawmakers and other critics, who called for more aggressive action,
the Wall Street
Journal reported today. Lawmakers pounced on
the central bank for having failed to act before the current wave of
home foreclosures and for not seeking bigger changes in
mortgage-industry practices. They noted the Fed's proposal comes too
late to help many homeowners, and that it addresses a market for risky
mortgages (or subprime home loans) that has largely dried up. One big
test of the Fed's overall response will come today when the central bank
announces the results of an auction of as much as $20 billion in
low-rate, 28-day loans to banks. The auction was designed to encourage
banks to lend to each other, greasing the engine of the nation's
financial system.
href='http://online.wsj.com/article/SB119798901839036859.html?mod=hpp_us_whats_news'>Click
here to read more. (Registration required.)
name='3'>Commentary: Paulson's Dangerous
Precedent
Treasury Secretary Henry
Paulson's rescue plan for the subprime mortgage market does not achieve
the necessary balance between assisting homeowners and not harming the
investors behind the mortgage loans, according to a
face='Times New Roman' size='3'>Wall Street Journal
size='3'>commentary today. Borrowers under the plan will be able to
preserve their value proposition as they are able to 'freeze' attractive
rates and enjoy the future benefits of potential property appreciation.
Investors, however, will not be able to enjoy the original value
proposition and could face significant further losses. The plan aims to
minimize foreclosures and protect borrowers of good character who got
into trouble. Still, the Paulson plan is fundamentally flawed because it
all but ignores the losses that 'real world' investors - pensioners,
retirees, 401(k) participants, money market investors and many others -
are experiencing. There has been a tendency in the media to portray the
lenders as solely investment banks, when in fact they directly hold a
very small percentage of the mortgage securities.
href='http://online.wsj.com/article_print/SB119802939432038365.html'>Read
more. (Registration required.)
name='4'>Fiber-Optic Network Files for Chapter 11
The Independent Optical
Network (ION) fiber-optic network owned by 15 rural telephone companies
filed for chapter 11 protection, the
size='3'>Albany Times-Union reported
yesterday. The company listed $7.9 million in assets and $10.3 million
in debts in its filing. ION was formed in 2004 to allow rural telephone
companies to offer their customers high-speed Internet and
telecommunications services over a fiber-optic network that otherwise
would have been too expensive for any of them to build on their own. The
bankruptcy petition states that Rural Telephone Finance Cooperative, a
nonprofit in
face='Times New Roman' size='3'>Herndon
size='3'>,
size='3'>Va.
largest secured creditor of ION, with a claim of nearly $8
million.
href='http://www.timesunion.com/ASPStories/Story.asp?StoryID=648148&Category=BUSINESS&LinkFrom=RSS'>Read
more.
Ordered in Bear Stearns' Dispute with Bankrupt Fund
Investment bank Bear
Stearns Securities Corp. won the latest round in its fight to avoid
paying $160 million to the estate of bankrupt firm Manhattan Investment
Fund after a district court judge partially overturned a bankruptcy
court decision that found Bear Stearns failed to adequately monitor
illegal money transfers made before the fund's collapse,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In a ruling handed down on Monday, Judge
Naomi Buchwald of the U.S. District Court for the Southern District of
New York overturned in part a ruling by Judge
face='Times New Roman' size='3'>Burton Lifland
size='3'>of the U.S. Bankruptcy Court for the Southern District of New
York. Judge Lifland's ruling denied Bear Stearns' motion to dismiss
claims filed by the trustee in the Manhattan Investment Fund bankruptcy
and granted the trustee's motion for summary judgment. Judge Buchwald
ruled that Bear Stearns made an effort to investigate the fraud that
eventually felled the fund. The judge also said that a trial would be
necessary to determine whether Bear Stearns undertook adequate diligence
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=42639'>Read
more. (Registration required.)
name='6'>Meridian Trustee Opposes Vacating Order
The litigation trustee in
the recently reopened bankruptcy case of
w:st='on'>
size='3'>Meridian
settlement reached between the auto parts maker and one of its vendors,
arguing that it will result in no direct benefit to the company's
creditors, Bankruptcy
Law360 reported yesterday. In an objection
filed on Monday in the U.S. Bankruptcy Court for the District of
Delaware, the Mas Litigation Trust and trustee Ocean Ridge Capital
Advisors LLC petitioned against a settlement reached between
size='3'>Meridian
vendor Plastech Engineered Products Inc. that would necessitate vacating
a previous order. The trust, which is also party in two avoidance
actions against Plastech that claim that the vendor received $5.6
million in excess preferential transfers, claims that vacating the order
and allowing the settlement would be detrimental to the debtor's estate.
In addition, the trust claims that Plastech did not notify the court of
the potentially harmful aspects of the settlement.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=42683'>Read
more. (Registration required.)
name='7'>Mediation Doesn't Settle Pacific Lumber Bankruptcy
Dispute
An attempt to settle the
Pacific Lumber Co. bankruptcy through mediation has failed, sending the
matter back into court Friday, the
size='3'>San Francisco Chronicle reported
today.
size='3'>Pacific Lumber filed for chapter 11 protection in
size='3'>Texas in January
after missing a payment on about $714 million in bonds. Pacific Lumber
filed its reorganization plan in October, looking to sell roughly 29,000
acres of its best redwoods to raise $600 million to help in its
reorganization. Creditors said that the trees weren't worth nearly that
much, and faced with their objections, Judge Schmidt ordered the parties
to meet with a mediator in an attempt to work out a compromise.
href='http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/12/19/BU2KU0UG5.DTL&type=printable'>Read
more.
name='8'>Lionel Seeks Extension to Line Up Exit
Financing
Bankruptcy Judge
Burton R. Lifland
signed off on a bridge order maintaining
model-train-maker Lionel LLC's control of its chapter 11 proceedings
while the court considers whether to grant the company's seventh bid for
an extension of its exclusive rights to file a restructuring
plan, Bankruptcy
Law360 reported yesterday. The company
submitted its motion on Monday, asking to have the debtors' exclusive
filing rights extended through March 31, 2008, and the exclusive
solicitation deadline extended through May 30,
face='Times New Roman' size='3'>2008. Lionel's exclusive filing and
solicitation rights were slated to expire on Dec. 17, and in February
2008, respectively.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=42681'>Read
more. (Registration required.)
name='9'>Lawyer for Refco Indicted in Fraud Case
A Chicago lawyer was accused
yesterday of violating federal securities laws by misleading investors
who lost more than $1 billion in the financial downfall of the
commodities brokerage powerhouse Refco, the Associated Press reported
yesterday. Joseph P. Collins, a partner with Mayer Brown, was charged in
a criminal indictment with conspiracy to commit securities fraud, wire
fraud, bank fraud, money laundering and with filing false documents with
federal securities regulators. Collins was Refco's primary outside
lawyer from 1994-2004 and continued to work for Refco until October
2005, the SEC said. The indictment said Collins's law firm charged the
company more than $40 million in fees from 1997-2005.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/12/18/AR2007121801981_pf.html'>Read
more.
name='10'>Pension Fund Shortages Create Hard Choices
A comprehensive study by
the
face='Times New Roman' size='3'>Pew
size='3'>Center
States showed that almost half of the states have been underfunding
their retirement plans for public workers and may have to choose in the
years ahead between their pension obligations and other public programs,
the New York
Times reported today. All together, the 50
states have promised to pay some $2.7 trillion in pension and retiree
health benefits over the next 30 years, according to the study, which
spent more than a year studying the issue. The amount does not include
separate retirement plans run by local governments. While some states
are managing their costs reasonably well, the center found that others,
like
size='3'>New Jersey
size='3'>West Virginia
have made serious mistakes and are now cutting education and health
programs as they struggle with costs incurred decades ago. Still more
states are at risk of being caught in a similar squeeze, the center
said, because they are not setting aside enough money now, as their
populations age and more public employees approach retirement.
href='http://www.nytimes.com/2007/12/19/business/19pension.html?_r=1&ref=business&oref=slogin'>Read
more.
name='11'>Banks Study Bailing Out Struggling Bond
Insurer
Officials from Merrill
Lynch, Bear Stearns and other major banks are in talks to bail out a
struggling bond insurance company that has guaranteed $26 billion in
mortgage securities, according to two people briefed on the situation,
because the insurer’s woes could force the banks to take on
billions in losses they had insured against, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The insurer, ACA Capital Holdings, which lost
$1 billion in the most recent quarter, has been warned by Standard &
Poor’s that its financial guarantor subsidiary may soon lose its
crucial A rating. If it did, the banks that insured securities with the
ACA Financial Guaranty Corporation would have to take back billions in
losses from the insurer under the terms of the credit protection they
bought from the company.
size='3'>The troubles at ACA could also serve as the first real test for
credit default swaps. In June, the value of bonds underlying credit
default swaps rose to $42.6 trillion, up from just $6.4 trillion at the
end of 2004, according to the Bank for International
Settlements.
href='http://www.nytimes.com/2007/12/19/business/19swaps.html?ref=business&pagewanted=print'>Read
more.
International
name='12'>Canadian Television Network Files for
Bankruptcy
Canadian television
network TQS Inc., a subsidiary of Cogeco Inc., has filed for bankruptcy
protection from creditors, the
size='3'>Toronto Globe and Mail reported
yesterday.
size='3'>TQS, with more than 600 employees, said it obtained a Quebec
Superior Court order under the Companies' Creditors Arrangement Act
allowing it to reorganize. The broadcaster has five of its own stations
- in
size='3'>Montreal
w:st='on'>
size='3'>Quebec
size='3'>Sherbrooke
- and four affiliates in
size='3'>Gatineau,
w:st='on'>
size='3'>Ottawa
Rouyn-Noranda,
face='Times New Roman' size='3'>Rimouski
and Riviere-du-Loup. The company cited the gradual loss
of advertising revenue to specialty TV networks and content accessible
over the Internet, combined with increased production costs.
href='http://www.globeinvestor.com/servlet/story/RTGAM.20071218.wtqs1218/GIStory/'>Read
more.