href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
December
10, 2007
Finds Numerous Variables Influence Total Cost of Professional Fees in
Chapter 11 Cases
The results of a
ground-breaking study funded by the American Bankruptcy Institute
Endowment Fund revealed that numerous factors, such as the presence of
creditors’ committees, influenced the total professional costs of
chapter 11 bankruptcy cases. The study examined a total sample of 1,026
cases filed in 2004 as 945 chapter 11 cases were pooled into a
“random” sample and 99
cases were considered in a “big
case” dataset. The average firm in the big-case dataset had
scheduled assets of $423.4 million and scheduled liabilities of nearly
$776 million, while the average firm in the random sample had scheduled
assets of $21.2 million and scheduled liabilities of more than $37
million. Study reporter Stephen J. Lubben, Daniel
J. Moore Professor of Law at Seton Hall University School of Law, found
that for both samples, professional fees totaled 4 to 4.5 percent of the
bankrupt firms’ assets and liabilities, but he cautioned against
reporting cost in relation to size, since the data evidenced significant
economics of scale. Specifically, for every 1 percent increase in debtor
size, fees increase 0.38 percent.
href='http://www.abiworld.org/AM/TemplateRedirect.cfm?template=/CM/ContentDisplay.cfm&ContentID=50032'>Click
here to read the ABI press release.
Mortgage
Lending
name='2'>House Judiciary Committee Looks to Consider Mortgage
Modification Bill
The House Judiciary
Committee is considering holding a Wednesday markup on legislation that
would allow a borrower to ask a bankruptcy judge to reduce the interest
rate and extend the length of a mortgage if the foreclosure process has
been started,
size='3'>CongressDaily reported today.
Democrats are attempting to secure a deal on a compromise bill with Rep.
Steve Chabot (R-Ohio) who had sponsored a rival measure. Chabot wants to
limit the scope to prevent higher-income families from taking advantage
of the change. An earlier proposal to limit the bill to those who are at
150 percent of their county median income level triggered opposition
from
size='3'>California
size='3'>lawmakers. Judiciary Committee members are searching for
another barometer to limit relief as well as the scope of loans covered,
possibly excluding safer fixed-rate loans.
name='3'>Commentary: Mortgage Crisis Rivals S&L
Meltdown
While the potential
losses in the
w:st='on'>
size='3'>U.S.
size='3'>mortgage industry look manageable compared with the
savings-and-loan crisis of the 1980s and the tech-stock crash of
2000-02, the housing debacle could yet take years to work out due to its
sheer complexity, the
size='3'>Wall Street Journal reported today.
Until the mess is cleaned up, investors will remain jittery and banks
will likely hold back on all kinds of lending - a credit crunch that is
already damping global growth and could tip the
w:st='on'>
size='3'>U.S.
size='3'>economy into recession. The new financial system - shifting
risk from banks to securities markets - has worked 'pretty well' up
until now, says former Federal Reserve Chairman Paul Volcker. 'We're
going to find out if it works well for a major-league crisis.' The
ultimate extent of the crisis will depend largely on how steeply the
price of the average American home falls. That will play a pivotal role
in determining how many people are at risk of foreclosure as payments on
adjustable-rate mortgages tick upward and in the size of losses on
securities backed by those loans.
href='http://online.wsj.com/article/SB119724657737318810.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='4'>Commentary: Bush Mortgage Relief Plan Too
Limited
As only an estimated
250,000 borrowers are likely to benefit from the Bush
Administration’s mortgage relief plan to implement a five-year
freeze on certain adjustable loans’ introductory rates, it does
not go far enough to help the coming wave of troubled homeowners from
staving off foreclosure, according to a
size='3'>New York Times editorial on Sunday.
From mid-2007, some 800,000 homeowners have entered foreclosure and
there will be an estimated 3.5 million loan defaults from next year
through mid-2010 when the last of the potentially eligible loans would
otherwise reset to sharply higher payments. Many mortgage servicers
— lenders and private companies that collect mortgage payments on
behalf of investors — have been reluctant to modify at-risk loans,
even though the alternative is to foreclose on thousands of homeowners.
That is because they fear being sued by mortgage investors. The new plan
establishes guidelines that lenders can use to determine which troubled
borrowers might qualify for a rate freeze. However, even lenders that
stick to the government-brokered guidelines have no guarantee that they
cannot be sued.
href='http://www.nytimes.com/2007/12/09/opinion/09sun1.html?ref=opinion&pagewanted=print'>Read
more.
Big
Banks Scale Back Plan to Aid in Debt Crisis
Some of the
country’s largest banks are scaling back a plan set in motion by
the Treasury Department to shore up troubled investment vehicles and
calm the debt markets, the
size='3'>New York Times reported today.
Citigroup, the financial giant that first proposed the initiative, is
devising a separate rescue plan as HSBC and several other European banks
are moving to solve their problems on their own. The new superfund,
called a Master Liquidity Enhancement Conduit, or M-LEC, was expecting
to raise as much as $80 billion that could prevent a sharp sell-off in
securities owned by structured investment vehicles, or SIVs. Now, the
M-LEC, known on Wall Street as the Super SIV, may raise just $60
billion, in part because many of the troubled SIVs are winding down
themselves.
href='http://www.nytimes.com/2007/12/10/business/10finance.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
UBS
Writes Down $10 Billion Loss Related to Subprime Crisis
UBS revealed a $10
billion writedown today and an emergency injection of funds from
size='3'>Singapore
Middle East, making it the biggest victim of the
w:st='on'>
size='3'>U.S.
size='3'>subprime crisis to date among major European banks, Reuters
reported today.
w:st='on'>
size='3'>Singapore
size='3'>is taking 9 percent of UBS in a deal that mirrors actions taken
by U.S.-based Citigroup. Citi expects to write off between $8 billion
and $11 billion and has secured funding from the Abu Dhabi Investment
Authority. The writedown comes after a 4.2 billion Swiss franc ($3.7
billion) hit that UBS suffered at the end of October, and which was also
related to
w:st='on'>
size='3'>U.S.
size='3'>subprime mortgages. The Swiss bank,
w:st='on'>
size='3'>Europe
replaced plans for a cash dividend with a stock dividend, and said it
would examine its investment bank thoroughly and weed out low-profit
divisions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/12/10/AR2007121000241_pf.html'>Read
more.
Autos
name='7'>Remy Emerges from Chapter 11
Remy International Inc.
emerged from chapter 11 and gained access to an exit financing facility
worth up to $330 million, which includes a $120 million revolver and
$210 million in term loans on Dec. 6,
size='3'>Bankruptcy Law360 reported on Friday.
Remy began soliciting votes for its joint prepackaged reorganization
plan at the end of August. Remy’s bankruptcy filing came months
after the company began working through restructuring deals with
bondholders, including senior noteholders holding a $145 million claim
and senior subordinated noteholders holding a $315 million
claim.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=41871'>Read
more. (Registration required.)
face='Times New Roman' size='3'>
name='8'>Delphi
size='3'> Takes Step Toward Exiting
Bankruptcy
Delphi Corp. will begin
soliciting votes for its plan to exit bankruptcy, the company said on
Friday, a major step toward the auto-parts maker proceeding with a
restructuring that would shed thousands of jobs in plants across the
country, the Associated Press reported on Saturday.
w:st='on'>
size='3'>Delphi
size='3'>Jack Butler said that Bankruptcy
Judge Robert
Drain verbally approved the order on Friday
and that if all changes the judge requested meet his requirements, he
would enter an order today.
face='Times New Roman' size='3'>Delphi
size='3'>'s reorganization plan includes shrinking its unionized work
force to a fraction of its former size and shifting manufacturing
overseas. Its proposal would ultimately eliminate 27,000 of 33,000 union
jobs and would sell or close 20 factories across the nation and one
in
face='Times New Roman'
size='3'>Mexico
Remaining and future workers are left with a two-tier wage structure,
with new United Auto Workers members earning wages of $14-$18.50 an
hour, down from $27 per hour. The company expects to begin sending
voting material to creditors Dec. 15 and has scheduled a hearing to
begin Jan. 17 to confirm its plan.
href='http://money.cnn.com/2007/12/07/news/companies/delphi_votes.ap/index.htm?section=money_latest'>Read
more.
size='3'>Sale
size='3'> of Bankrupt
Approved
A federal judge has
approved the sale of a bankrupt resort in West Texas to a
size='3'>Dallas
for $13.5 million, the Associated Press reported on Saturday. The
approved bid came from Kelcy Warren, co-founder of Energy Transfer
Partners LP, a natural gas and propane distributor.
w:st='on'>
size='3'>Warren
keep Lajitas, The Ultimate Hideout open for now, but wouldn't say
what his long-term plans were for the 25,000-acre resort, which features
a golf course, luxury hotel and restaurants. The Lajitas resort was
purchased by an
face='Times New Roman' size='3'>Austin
communications mogul for over four million dollars in
2000. He then pumped another $100 million into the property in a failed
effort to create a secluded desert destination for the
rich.
href='http://www.ktre.com/global/story.asp?s=7469411&ClientType=Printable'>Read
more.
href='http://www.ktre.com/global/story.asp?s=7469411&ClientType=Printable'>