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July 10, 2009
Autos
name='1'>General Motors Emerges from Bankruptcy
The new General Motors
Co. exited chapter 11 protection today with the automaker emerging as a
leaner, more-focused company after only 40 days in bankruptcy court,
the Wall Street
Journal reported today. The chances of a
sustained turnaround hinge on a revamped board of directors the
government has installed, in particular the new chairman, Edward E.
Whitacre Jr. The former AT&T executive was hand-picked by the
government's auto task force and was charged with keeping a tight watch
over GM management and its performance. Whitacre and the directors of
the new GM will be overseeing a dramatically slimmed-down company. The
automaker is exiting bankruptcy with $48 billion in debt, down from $176
billion when it sought chapter 11 protection on June 1, and is going
forward with just four brands -- Chevrolet, Cadillac, Buick and GMC. The
company will sell or close Hummer, Saturn, Saab and Pontiac. By the end
of the year GM expects to have 68,500 employees, down from 91,000 at the
href='http://online.wsj.com/article/SB124722154897622577.html#mod=testMod'>Read
more. (Subscription required.)
In related news, GM's
undesirable remnants -- the 'old GM' -- could languish in bankruptcy
court for years, the
size='3'>Wall Street Journal reported today.
Unsecured creditors, including GM bondholders, are promised an eventual
10 percent stake in the new GM. However, those with certain claims,
including injuries from car accidents and asbestos, will have to fight
over the bankruptcy estate's scraps. The U.S. government is providing
GM's estate, now called Motors Liquidation Co., $1.175 billion to wind
down. That's up from an initial $950 million after some unsecured
creditors questioned in court whether the estate would be left with
enough resources. Al
Koch, a managing director at turnaround firm
AlixPartners LLP, will serve as the estate's chief restructuring
officer, leading the liquidation effort. He testified last week that
winding down the old GM could take two or three years but that 'there
undoubtedly will be some aspects that may drag on a couple of years
longer than that.'
href='http://online.wsj.com/article/SB124718618976020585.html'>Read
more. (Subscription required.)
name='2'>Lear Gains Access to Cash Collateral
Bankruptcy Judge
Martin Glenn
size='3'>on Wednesday granted interim approval to a number of automotive
seat manufacturer Lear Corp.'s first-day motions, including the use of
cash collateral,
size='3'>Bankruptcy Law360 reported yesterday.
In addition to the continued use of cash collateral, Judge Glenn signed
interim orders authorizing the payment of shippers and suppliers
incurred prior to the bankruptcy filing, approving notification
practices for the transfer of common stock and approving other
administrative processes. Southfield, Mich.-based Lear and 23 affiliates
filed for bankruptcy protection Tuesday, almost a week after the auto
parts maker unveiled a restructuring plan that offers lenders a
combination of new debt holdings and stock in the reorganized company.
Lear listed total assets of $1.27 billion and total liabilities of $4.54
billion at the time of the filing.
href='http://bankruptcy.law360.com/articles/110370'>Read
more. (Subscription required.)
name='3'>Mortgage Firms Prodded to Modify More Loans
The Obama administration
is pressing mortgage-servicing companies to step up their efforts to
modify troubled loans under its housing-rescue program, the
Wall Street Journal
reported today. 'We believe there is a general need for
servicers to devote substantially more resources to this program for it
to fully succeed and achieve the objectives we all share,' Treasury
Secretary Timothy Geithner and Housing and Urban Development Secretary
Shaun Donovan said in a letter to 25 mortgage-servicing firms. The
letter was sent Thursday to the chief executives of companies that have
signed contracts to participate in the government program, which
provides financial incentives for mortgage companies and investors to
reduce borrowers' payments to affordable levels. More than 270,000
borrowers have received modification offers under the program. But
housing counselors complain many borrowers are waiting for help as
mortgage-servicing companies get up to speed. The administration has
said its program could help as many as four million homeowners.
href='http://online.wsj.com/article/SB124718320592520315.html#mod=testMod'>Read
more. (Subscription required.)
name='4'>Federal Reserve Faces Skeptical Congressional Panel
Regarding Expanded Regulatory Powers
Facing a skeptical
Congress, Federal Reserve Vice Chairman Donald Kohn testified yesterday
that the central bank's monetary policy role would not be harmed if its
powers were expanded to be a top regulator, CongressDaily reported today.
Kohn was repeatedly questioned during a House Financial Services
Domestic Monetary Policy Subcommittee hearing regarding whether the Fed
would face a conflict of interest between its primary monetary policy
role in pursuit of full employment and stable prices and an Obama
administration proposal that it be the sole regulator to monitor risk
throughout the financial system. 'I think there are minimal
possibilities,' Kohn said. 'In my view, I think there really is a
congruence of stability of the financial system and monetary policy... I
don't see important instances in which there would be conflicts.'
However, an expansion of the Fed's power is an unpopular idea among
lawmakers of both parties. Most Republicans believe that the Fed should
focus on monetary policy and too often has acted as a de facto bailout
agency by lending out $2 trillion in emergency loans during the banking
crisis. Some Democrats lament what they say is its lack of transparency
and insufficient consumer protection. Kohn said that the Fed increase in
power would not be that great of an expansion from its current duties as
a lender of last resort for bank holding companies. He also said the
central bank would be accountable through GAO audits, testimony to
Congress and by working in conjunction with other regulatory bodies as
part of an advisory council for its systemic-risk role.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_070909.shtml'>Click
here to read the prepared testimony from the
hearing.
In related news, the House
Financial Services and Agricultural Committees will hold a joint hearing
today at 10 a.m. ET titled “A Review of the Administration’s
Proposal to Regulate the Over-the-Counter Derivatives
Market.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_081009.shtml'>Click
here for a link to the live Webcast of the hearing and to
review the witness list.
name='5'>Congressional Oversight Panel Says Bank Stock Warrants
Undervalued
The Congressional
Oversight Panel charged with overseeing the government’s financial
bailout program said that the Treasury Department could be undervaluing
billions of dollars worth of stock warrants that it received from banks
that took out loans through TARP, the
size='3'>New York Times reported today. The
panel, headed by Prof.
size='3'>Elizabeth Warren of Harvard
University, estimated that the government’s approach could cost
taxpayers as much as $2.1 billion if it were to be applied to all the
banks and Wall Street firms that have borrowed a total of $240 billion
since last fall. Under the Treasury’s rescue program, banks and
other financial institutions received capital injections from the
government in order to shore up their balance sheets and restart the
frozen credit markets. In exchange, the government received preferred
shares that paid guaranteed dividends as well as warrants that gave it
the right to purchase shares in each of the companies at roughly the
price of their shares at the time of the deals. Ten of the biggest
firms, led by JPMorgan Chase, Goldman Sachs and Morgan Stanley, repaid
$68.2 billion in June. But bank executives have wrestled with Treasury
officials for months over how much the banks should have to pay to
reclaim their stock warrants.
href='http://www.nytimes.com/2009/07/10/business/10tarp.html?_r=1&ref=business&pagewanted=print'>Read
more.
name='6'>Survey: Few Economists Favor More Stimulus
A survey released today
by the Wall Street
Journal shows that most economists do not
think that the U.S. needs another round of stimulus now despite
expectations of continued severe job losses. Just eight of 51 economists
in the survey said that more stimulus is necessary, suggesting an
average of about $600 billion in additional spending. On average, the
economists forecast an unemployment rate of at least 10 percent through
next June, with a decline to 9.5 percent by December 2010. When asked
how much the stimulus has helped the economy, 53 percent of respondents
said it has provided somewhat of a boost but that the larger effect is
still to come. Most economists appear content to take the wait-and-see
approach, as on average they are expecting the just-ended second quarter
to be the last in which gross domestic product contracts. They forecast
growth rising more than 2 percent on a seasonally adjusted annualized
basis in the first half of 2010. Meanwhile, the median forecast sees the
end of the recession next month.
href='http://online.wsj.com/article/SB124708099206913393.html#mod=testMod'>Read
more. (Subscription required.)
Debt
Settlement Firms Ramp Up Lobbying Efforts
A small but controversial
part of the financial industry that claims to lower consumers’
debt is hiring its first Washington, D.C., lobbyists just as some of its
biggest firms come under fire from state officials and members of
Congress, The
Hill reported today. As household budgets fell
further into the red over the last decade, hundreds of debt-settlement
firms sprang up, enticing consumers with offers to negotiate lower
payments with banks and card issuers. But over the past few months,
state officials and federal lawmakers have zeroed in on the industry,
alleging that the firms do little to help consumers and sometimes engage
in false and deceptive business practices. New York State Attorney
General Andrew Cuomo, the most critical of the state officials, has
called the firms part of a “rogue industry” and has launched
a nationwide investigation with subpoenas issued to 14 companies and
lawsuits filed against two. Meanwhile, the Federal Trade Commission has
sought greater power over the industry. A handful of House members are
already on record as supporting new federal regulations.
href='http://thehill.com/the-executive/under-fire-debt-settlement-firms-turn-to-k-street-2009-07-09.html'>Read
more.
name='8'>Lehman’s Legal Bills Top $262 Million
A total of $262.6 million
has been paid to lawyers and other restructuring professionals since
Lehman Brothers Holding Inc. entered chapter 11 in September 2008, with
almost half of the money going to restructuring advisory firm Alvarez
& Marsal LLC,
size='3'>Bankruptcy Law360 reported yesterday.
Lehman tapped Bryan Marsal and his advisory services firm to manage the
chapter 11 process only hours before filing, with the court formally
approving his appointment as chief restructuring officer in December
2008. After being denied a government bailout, Lehman filed the largest
bankruptcy in history on Sept. 15, 2008, listing $639 billion in assets
and $613 billion in debts on its petition.
href='http://bankruptcy.law360.com/articles/110521'>Read more.
(Subscription required.)
NHL
Blasts Coyotes Discovery Bid as a Stall Tactic
The NHL on Wednesday
objected to a bid by the owner of the Phoenix Coyotes to examine various
league documents, claiming that the move amounts to a ploy to stall the
sale of the bankrupt hockey team,
size='3'>Bankruptcy Law360 reported yesterday.
The NHL’s objection, filed in the U.S. Bankruptcy Court for the
District of Arizona, argues that Coyotes owner Jerry Moyes' motion to
examine league and other documents related to a proposed sale lacks good
cause to justify such 'disruptive and intrusive' discovery. According to
Moyes' motion, filed July 2, he holds an unsecured claim of $104
million, by far the largest in the proceedings. The motion claims that
an examination is necessary to evaluate whether the proposed sale of the
team is a bona fide offer. The motion also refers to a term sheet
submitted by a group of investors led by Jerry Reinsdorf — who
currently owns the Chicago Bulls and the Chicago White Sox — to
buy the team and related arena lease rights for $148 million. Reinsdorf
is in the process of preparing a purchase proposal, which is due July
24. His bid is seen as a favorite because it keeps the team in Glendale,
Ariz.
href='http://bankruptcy.law360.com/print_article/110384'>Read
more. (Subscription required.)
Seeks Clearance for More Bonuses
American International Group is
preparing to pay millions of dollars more in bonuses to several dozen
top corporate executives after an earlier round of payments four months
ago set off a national furor, the Washington Post reported today. AIG
doesn't actually need the permission of Kenneth R. Feinberg, who
President Obama appointed last month to oversee the compensation of top
executives at seven firms that have received large federal bailouts.
However, officials at AIG, whose federal rescue package stands at $180
billion, have been reluctant to move forward without political cover
from the government. The payments coming due next week include $2.4
million in bonuses for about 40 high-ranking executives at AIG,
according to administration documents from earlier this year. Though the
actual sum may have changed since then, the payments are much smaller
than those that caused the upheaval in March.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/09/AR2009070902702_pf.html'>Read
more.
name='11'>Brobeck Plan, Chapter 7 Trustees Spar over $4 Million
Claim
Six years after Brobeck
Phleger & Harrison LLP collapsed, its retirement savings plan
trustee and its chapter 7 trustee are fighting in federal court over a
more than $4 million claim for missed contributions,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In the U.S. District Court for the Northern
District of California on Wednesday, Brobeck plan trustee Nicholas L.
Saakvitne argued in a reply brief that settlements the bankruptcy estate
brokered with 200 ex-Brobeck partners didn't preclude the plan trustee's
claim. By making these settlements, Saakvitne contended that none of
these settling partners had the right to waive claims for unpaid
contributions because only the plan's trustee can release these claims.
His brief came in response to chapter 7 trustee
face='Times New Roman' size='3'>Ronald F. Greenspan's
size='3'>suggestion that Saakvitne was remiss in not opposing the
partner releases until 2008, according to the brief. Saakvitne countered
that he wasn't alerted to the possibility that the partners had released
the claims until May 2008. At issue is whether §502(a)(1)(B) of the
Employment Retirement Income Security Act allows participants to make
claims for unpaid contributions. In April, the plan trustee filed suit
in federal court, asking the judge to reverse the bankruptcy court's
order sustaining the chapter 7 trustee's objection to the plan trustee's
claim against the estate for $4.4 million.
href='http://bankruptcy.law360.com/articles/110377'>Read more.
(Subscription required.)
name='12'>Judge Approves Syntax-Brillian Liquidating
Plan
A bankruptcy judge has
signed off on television manufacturer Syntax-Brillian Corp.'s second
amended chapter 11 liquidating plan,
size='3'>Bankruptcy Law360 reported yesterday.
The order puts a trustee in charge of two trusts, seen as critical in
the dispersal of remaining company assets to creditors, and also tasks
the trustee with closing the bankruptcy case. Under the amended plan,
prepetition lenders will have a total allowed claim of $125 million, of
which $70 million will be an unsecured deficiency claim. The plan
provides for many of Syntax-Brillian's assets to be put into a trust for
the benefit of its prepetition and debtor-in-possession lenders, while
all other assets of the estate will vest in a separate liquidation
trust. The secured portion of the prepetition lenders' claim will be
paid from the lender trust, while the deficiency claim will come from
the liquidation trust.
href='http://bankruptcy.law360.com/articles/110373'>Read
more. (Subscription required.)
name='13'>Bankrupt Gas Co.'s $29 Million Asset Sale
Approved
Bankruptcy Judge Lettia
Z. Paul yesterday approved a $29.3 million sale of assets of bankrupt
Houston-based natural gas exploration company CDX Gas LLC to EnerVest
Energy Institutional Fund LP,
size='3'>Bankruptcy Law360 reported yesterday.
The deal includes certain assets owned by CDX Gas and all of the assets
of CDX Barnett LLC and CDX Shale LLC. The sale also includes CDX's
equity interests in Arkoma Gathering LLC, according to a motion filed by
CDX in April. After administrative and priority claims are paid out in
full from funds generated from the EnerVest sale, CDX will satisfy a
first-priority mortgage claim from the Bank of Montreal, court documents
said. Read
more. (Subscription required.)
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