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February 14, 2007
Autos
Chrysler to Announce Job Cuts, Plant Closings
The Chrysler Group is set to announce a restructuring plan today that is expected to include the elimination of about 11,000 blue- and white-collar jobs along with the closing of one and possibly two assembly plants, the New York Times reported today. Chrysler may shut smaller plants elsewhere and announce other cost-cutting measures to meet its stated goal of reducing costs by about $1,000 a vehicle. Along with those steps, Chrysler may announce a project to share more parts and engineering technology with Mercedes-Benz. Chrysler has already had two overhauls this decade both under the guidance of Dieter Zetsche, who ran the Chrysler Group from 2000 until 2006, when he became DaimlerChryslerÕs chief executive. Read more.
name='2'>Delphi Loss Widens on Buyouts
Bankrupt auto parts maker Delphi Corp. posted a wider quarterly net loss yesterday as it took more than $1 billion in charges to buy out unionized U.S. hourly workers and sales to General Motors Corp. fell, Reuters reported yesterday. The net loss widened to $1.97 billion, or $3.51 per share, in the third quarter ended Sept. 30, from $788 million, or $1.40 per share, a year earlier. Delphi, which filed for bankruptcy in October 2005, is in talks with its unions and former parent GM over agreements needed to complete a $3.4 billion plan to emerge from bankruptcy. Read more.
name='3'>Lionel Seeks Extension for Chapter 11 Plan
Lionel LLC, the model-train maker, is seeking a fourth extension of its period of exclusive control over its bankruptcy case as it struggles to settle a years-old dispute over trade secrets, the Associated Press reported yesterday. Lionel said it can't file a reorganization plan until the Sixth U.S. Circuit Court of Appeals in Cincinnati makes a final decision in the trade-secrets lawsuit filed by rival Mike's Train House against Lionel. Lionel was sued after its South Korean supplier, Korea Brass, allegedly misappropriated trade secrets from Mike's. The 2004 decision and $40.8 million judgment derailed the 105-year-old train-maker, pushing it into bankruptcy. Read more.
Mortgages
name='4'>Subprime Lender ResMAE Files for Bankruptcy
Subprime lender ResMAE Mortgage Corp. filed for bankruptcy protection, the latest sign of stress in the market for low-end home loans, MarketWatch.com reported yesterday. ResMAE said it plans to sell most of its assets to Swiss bank Credit Suisse for $19 million as part of its bankruptcy reorganization, according to the Monday filing. ResMAE is the latest subprime lender to descend into crisis; Mortgage Lenders Network USA had to be bailed out by Lehman Brothers earlier this year, while rival Ownit Mortgage Solutions filed for bankruptcy in late December. By cutting costs and lifting the interest rates it charged on loans, ResMAE said that it was able to make a small profit last year 'despite the industry collapsing around it.' But Merrill Lynch, which had become the largest buyer of ResMAE's loans, asked the company to repurchase more than $300 million worth of loans. That 'enormous' repurchase request, which ResMAE disputes, triggered a liquidity crisis and forced the company to put itself up for sale. Read more.
name='5'>Home Lenders Reducing 'Piggyback' Mortgages
A rise in defaults is prompting some lenders to clamp down on the use of 'piggyback' mortgages, a risky type of loan that helped prolong the housing boom by allowing borrowers to finance up to 100 percent of the purchase price, the Wall Street Journal reported today. Fremont General Corp., a major lender to people with weak credit records, has stopped providing these second mortgages, which are frequently used by financially stretched 'subprime' borrowers who can't scrape together a down payment. A spokeswoman for Fremont, based in Santa Monica, Calif., confirmed the decision, which was first announced to mortgage brokers earlier this week, but she declined to comment further. Fremont's move comes amid a rapid tightening of credit standards by subprime lenders as they find that investors no longer are eager to buy the types of loans deemed particularly prone to default. Read more. (Registration required.)
Copeland Sports Files Reorganization Plan
Retailer Copeland Sports Inc. has filed its reorganization plan Monday, which will not leave much to equityholders and even less to unsecured creditors, the Associated Press reported yesterday. Unsecured creditors are to recover an estimated 0.2 percent to 1.9 percent on their claims. If additional cash surfaces after the liquidation of remaining assets, it will be turned over to the unsecured creditors. Holders of Copeland's subordinated notes, owed about $13.8 million, will recover 21 percent. The San Luis Obispo, Calif.-based company said it has already repaid its lenders using proceeds from the sale of most of its assets. Read more.
name='7'>Congress Probes Timely Sale of Sallie Stock
Congressional investigators are looking into Sallie Mae Chairman Albert L. Lord's sale of $18.3 million worth of company stock this month, just days before President Bush proposed a huge cut in subsidies to the lending industry that caused Sallie Mae shares to nosedive, the Washington Post reported today. The chairmen of the House Financial Services and Education committees sent letters yesterday to the White House counsel, the education secretary and Sallie Mae, asking for detailed information on all contact between the Reston, Va.-based student lending giant and the Bush administration over the past three months. Lord sold 400,000 shares of Sallie Mae stock on Feb. 1 and 2. Three days later, Bush announced a budget that would cut subsidies to the student-lending industry by about $19 billion over five years, which caused Sallie Mae's stock to plummet about 9 percent that day, to its lowest closing price in more than two years. Read more.
name='8'>Mall Developer Mills Corp. Plans to Take Simon Takeover Offer
Struggling mall developer The Mills Corp. said that it now favors a $1.6 billion offer from Simon Property Group Inc. and hedge fund Farallon Capital Management LLC in a deal that tops an earlier takeover agreement Mills made with Brookfield Asset Management Inc., the Associated Press reported yesterday. Chevy Chase, Md.-based Mills said its board of directors concluded that the Simon-Farallon deal, at $24 per share, is 'superior' to Brookfield's proposed $21-per-share deal, valued at $1.35 billion. The board authorized Mills to end the Brookfield deal. Mills said in a statement that it will give Toronto-based Brookfield three days to top its previous offer, however, before it breaks the original agreement, signed Jan. 17. Along with the higher price, Mills said its board preferred the Simon-Farallon deal because it could be closed more quickly than the Brookfield proposal. Read more.
TROUBLED COMPANIES IN THE NEWS
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Applebee's International Inc., the Overland Park, Ks. firm which is the nation's largest operator of casual-dining restaurants with more than 1,940 owned or franchised outlets, is exploring strategic alternatives that could include a possible sale of the firm. The company has come under pressure from hedge fund operator Breeden Partners of Greenwich, Ct. to do something about what Breeden refers to as a 'dreadful' performance' by the Kansas firm. Breeden owns more than 5% of Applebee's.
Coca Cola Enterprises Inc, which reported a fourth quarter net loss of $1.7 billion on a 6% sales increase--to nearly $4.8 billion, now expects to cut its workforce by nearly 3,500 jobs (5% of its workforce). The loss compares with a loss of $57 million for the same period one year earlier. The results however include an impariment charge of $2.9 billion. CCE, which cited rising prices for corn syrup and aluminum, anticipate earnings per share for 2007 to be down as much as 10% from 2006 results. For the year, CCE reported a net loss of $1.1 billion on a 6% sales increase--to nearly $19.8 billion.
Gaylord Entertainment Co., the Nashville Tn. hospitality and attractions firm, reported a fourth quarter net loss of $93.7 million on an 8% revenue increase--to $239.3 million. The loss, which includes impairment charges of $109.8 million, compares with a $13 million loss for the same period one year earlier. For the year, the company reported a net loss of $79 million on a 9% revenue increase--to $948 million. The fiscal loss included impairment charges of $110 million.
KB Homes Inc., the Los Angeles, Ca. homebuilder, reported a fourth quarter net loss of $49.6 million on a 13% revenue increase--to $3.5 billion. Ths loss included a $343 million charge for inventory and joint-venture impairments
Monolithic Power Systems Inc., the Los Gatos, Ca. maker of silicon chips, reported a fourth quarter net loss of $1.6 million. Revenue declined 19%--to $26.4 million. For the year, it lost $2.9 million on a 6% revenue increase--to $105 million. The quarter and year included patent-litigation charges of $1.9 million and more than $14.5 million respectively
Smith & Wollensky Restaurant Group in New York reported a third quarter net loss of $1.8 million on a 3% sales increase--to $27.5 million. The loss is an improvement over the $3.2 million loss the company incurred for the same period one year earlier.
Sport-Haley Inc., a Denver, Co. maker and seller of golfwear and active apparel, reported a second quarter net loss of $220,000. Sales fell 5%--to $4.2 million.
Zale Corp., the Irving, Tx. firm which is North America's largest specialty jewlery retailer, reported a widened first quarter net loss of $26.3 million on a slight revenue increase--to $432.4 million. The loss compares with a loss of $23.6 million for the same period one year earlier.
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