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October 5, 2009
Labor Department Seeks
Exemption for Chrysler Health Care Plan
The Labor Department said Friday that it was seeking
an exemption to facilitate Chrysler's move under bankruptcy proceedings
to transfer company securities into a new retiree health care trust that
would cover 120,000 Chrysler retirees and dependents, the Associated
Press reported on Saturday. Under the bankruptcy arrangement, the United
Auto Workers union is getting a 55 percent stake in the new Chrysler,
which will be used to fund its retiree health care obligations. The
proposed exemption would implement Chrysler's plan to transfer a $4.59
billion promissory note and company securities into the health
trust.
href='http://www.app.com/article/20091002/BUSINESS/91002057/1003/business&source=rss'>Read
more.
Trustee Seeks $200 Million
from Madoff Family
Trustee Irving H. Picard has sued
Bernard L. Madoff's sons, brother and niece in an attempt to recover
nearly $200 million for defrauded investors, Bankruptcy
Law360 reported on Friday. The four were
executives at Bernard L. Madoff Investment Securities (BLMS) and were
derelict in their duties, failing to detect or stop the fraud and
thereby “enabling and facilitating the Ponzi scheme,' the suit
said. Instead, BLMIS was operated as if it were the “family piggy
bank,” the suit says. Each of the four allegedly took huge sums of
money out of the fund for personal business ventures and personal
expenses, such as homes, cars and boats.
href='http://bankruptcy.law360.com/articles/126269'>Read
more. (Subscription required.)
FDIC Chair Eyes Bank
Creditor Claims
Federal Deposit Insurance Corp. Chairman Sheila Bair
said that ensuring that secured creditors face losses when a financial
institution fails could help rein in excessive risk-taking and
strengthen the financial system, Reuters reported today. Bair said
officials might want to consider 'the very strong medicine' of limiting
secured claims to 80 percent, although she said such a proposal would
need to be carefully weighed. She addedthat curbing claims would
encourage secured creditors, who are protected from losses when a bank
fails, to more closely monitor the risks a bank is taking and could
speed up the process when an institution needs to be wound down.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/05/AR2009100500379_pf.html'>Read
more.
Lyondell Hit with New
Noteholder Suit over Merger
Holders of more than $1.3 billion in LyondellBasell
Industries AF SCA senior notes issued in 2005 have sued the company for
allegedly breaking their indenture agreement by subordinating their debt
to finance Basell AF SCA's acquisition of now-bankrupt Lyondell Chemical
Co.,
size='3'>Bankruptcy Law360 reported on Friday.
The Wilmington Trust Co. filed an adversary complaint Thursday in the
U.S. Bankruptcy Court for the Southern District of New York alleging
that Basell violated the indenture agreement by taking on $20 billion in
new senior debt to fund its completely leveraged buyout of Lyondell in
2007. Under the indenture agreement, the trustee said, Basell wasn't
allowed to incur any new senior debt or substantially restructure its
debt without the noteholders' consent, according to the trustee.
Furthermore, the trustee said that the merger violated an intercreditor
agreement to which Basell and the noteholders were parties, which
likewise prohibited debt restructuring.
href='http://bankruptcy.law360.com/articles/125992'>Read more.
(Subscription required.)
Analysis: Bank of
America’s Growth May Hurt It as Regulation Looms
The last time the federal government rewrote the rules
of banking starting in the 1980s, Bank of America was not the huge
banking conglomerate that as recently as 2006 earned $21.1 billion,
the
size='3'>Washington Post reported on Saturday.
Now, as the rules of banking are rewritten again, Bank of America may
face the greatest struggle to adjust. The company's sheer size, long its
greatest advantage, increasingly looms as a liability. The U.S.
government has shown a growing determination to penalize large banks for
posing inherently greater risks to the economy. Regulators and
legislators also are pushing Bank of America and its rivals to retreat
from the practice of luring customers with cheap loans and services,
then racking up profits with hefty penalty fees and interest-rate
increases. Bank of America is the largest of a triad of banks, together
with JPMorgan Chase and Wells Fargo, that dominate the landscape of
American banking. Together the companies now hold about a third of the
nation's deposits. They sell roughly half of all new mortgages and issue
about two-thirds of all credit cards.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/02/AR2009100205138_pf.html'>Read
more.
Private Equity Firm Submits
Rival Six Flags Chapter 11 Plan
Resilient Capital Management LLC has become the second
stakeholder in the Six Flags Inc. bankruptcy to shoot down management's
proposal to turn the majority of the theme park operator over to
lenders, putting forward a reorganization plan that would keep control
in the hands of existing shareholders,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported on
Friday.Creditors who hold over $1.1 billion of debt in a STP Term Loan
would have their securities replaced with a senior secured note
convertible to 13.4 million shares of a new Six Flags, and holders of
notes due in 2010, 2015 and 2016 would receive new notes with extended
maturity dates and a chance to convert the notes to stock.The plan would
also limit capital expenditures and cap management's payout to 500,000
shares of common stock plus stock options. The case is
In re Premier International Holdings Inc. et
al., case number 09-12019, in the U.S.
Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/articles/126027'>Read more.
(Subscription required.)
Buyout Firms Profited as a
Simmons’ Debt Soared
Simmons Bedding Co. says it will soon file for chapter
11 protection as part of an agreement by its current owners to sell the
company — the seventh time it has been sold in a little more than
two decades — all after being owned for short periods by a parade
of different investment groups mostly with borrowed money, the
size='3'>New York Times reported today. The
company’s bondholders alone stand to lose more than $575 million.
However, Thomas H. Lee Partners of Boston has not only escaped
unscathed, it has made a profit. The investment firm, which bought
Simmons in 2003, has pocketed around $77 million in profit, even as the
company’s fortunes declined. THL collected hundreds of millions of
dollars from the company in the form of special dividends. It also paid
itself millions more in fees, first for buying the company, then for
helping run it. Wall Street investment banks also cashed in as they
collected millions for helping to arrange the takeovers and for selling
the bonds that made those deals possible. All told, the various private
equity owners have made around $750 million in profits from Simmons over
href='http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?_r=1&ref=business&pagewanted=print'>Read
more.
Lehman Creditors Could
Receive Payouts Soon
Lehman Brothers Holdings Inc.'s hedge-fund creditors
in London, with as much as $16 billion tied up in the securities firm's
bankruptcy, plan to seek permission to remove the claims from U.K.
courts and dole out assets directly to creditors, if enough hedge funds
are willing to go along with the move, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. Steven Pearson, joint administrator of Lehman Brothers
International (Europe) and a partner at PricewaterhouseCoopers, said
that he hopes to gain the support of 90 percent of creditors. That would
reduce the risk that creditors who don't participate could file claims
later against those who do. The assets have been snarled since Lehman
tumbled into bankruptcy in September 2008, frustrating some hedge funds
that made trades through the firm before it collapsed. In August, the
U.K. High Court denied the Lehman administrator's plan to begin
returning the hedge-fund assets in the first quarter of 2010.
href='http://online.wsj.com/article/SB125470896979863433.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Government’s Toxic
Asset Program to Get $1.94 Billion Investment
The Treasury Department plans to announce today that
three more investment funds will invest almost $2 billion into a federal
government program to purchase soured real estate-related assets,
the
size='3'>Wall Street Journal reported today.
The three additional firms are BlackRock Inc., Wellington Management Co.
and AllianceBernstein LP, and its sub-advisers, Greenfield Partners LLC
and Rialto Capital Management LLC. As part of its Public Private
Investment Program, Treasury will match the $1.94 billion investment
dollar for dollar and provide debt financing, which will bring the
purchasing power of the three funds to $7.74 billion. Last week,
Treasury announced that two other firms, Invesco Ltd. and TCW Group
Inc., have agreed to invest $1.13 billion in the program. Adding in the
financial support from Treasury, those two funds will have $4.52 billion
href='http://online.wsj.com/article/SB125471117442863547.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Analysis: Debt Plan Falls
Short of Fixing CIT Lending
CIT Group Inc.'s proposed debt-restructuring plan,
even if successful, may do little to fix the company's broken lending
business, the Wall Street Journal reported
today. The aim of the debt exchange is to get bondholders with about $31
billion in debt to cut it by at least $5.7 billion and to extend debt
maturities. If a sufficient number of creditors sign on, this reduction
in debt load will help CIT avoid bankruptcy court, for now. However, it
may not help the lender grow its way out of its troubles. CIT's ability
to raise funds cheaply, a key requirement for any lender, remains
limited by low credit ratings and restrictions imposed by a banking
regulator. Unless these hurdles are removed, the company can do little
to revive its lending business, analysts say. Adam Steer, an analyst at
CreditSights Inc., saidthat CIT needs to reduce its total debt by about
$9.3 billion -- a far cry from CIT's target minimum of $5.7 billion --
in order to get access to the capital markets. A heftier debt reduction
would also give CIT a better shot at persuading the Federal Deposit
Insurance Corp. to lift restrictions on CIT Bank's ability to grow
deposits.
href='http://online.wsj.com/article/SB125470475051063285.html?mod=WSJ_hps_sections_business'>Read
more. (Subscription required.)
Report on Bailouts Says
Treasury Misled Public
The inspector general who oversees the
government’s bailout of the banking system is criticizing the
Treasury Department for some misleading public statements last fall and
raising the possibility that it had unfairly disbursed money to the
biggest banks, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The report set to be released today by special
inspector general Neil M. Barofksy says that Bank of America appeared to
qualify for more aid earlier, under the government plan. The bailout
formula called for banks to get an amount equal to as much as 3 percent
of their risk-weighted assets, with aid capped at $25 billion for each
institution, according to the report. Barofsky’s office also says
that regulators were wrong to tell the public last year that the
earliest bailout recipients were all healthy.Former Treasury Secretary
Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were
“healthy,” and that they accepted the money for “the
good of the U.S. economy.” The banks, he said, would be better
able to increase their lending to consumers and businesses.In truth,
regulators were concerned about the health of several banks that
received that first bailout, according to the Barofksy’ report.
Rea
href='http://www.nytimes.com/2009/10/05/business/economy/05bank.html?ref=business&pagewanted=print'>d
more.
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