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January 13, 2009
Obama Requests Rest of Bailout Money
President-elect Barack Obama has launched an aggressive campaign to persuade Congress to permit him to spend another $350 billion to stabilize the U.S. financial system, as the Bush White House formally notified lawmakers of Obama's intention to use the money, The Washington Post reported today. Obama plans to appear today at a luncheon in the Capitol, where he will ask Senate Democrats to stand with him on an issue that is shaping up as an early test of his ability to build bipartisan consensus. He was forced to relent on Monday to skepticism by dropping his proposal to give businesses a $3,000 tax credit for every job they save or create. The Treasury Department has already committed the first $350 billion of the financial rescue program. Lawmakers from both parties have complained that the Bush administration rushed the bailout through Congress and then badly mismanaged the program. Some lawmakers were upset that no help came for struggling homeowners. Others said banks and other financial institutions that have received money have failed to resume lending. Congress has 15 days to approve a resolution blocking the funds. Read more (subscription required).
name='2'>Wagoner: GM Is Working on an Overhaul Tied to the Bailout
General Motors is stepping up talks with its unions, dealers and lenders ahead of a Feb. 17 deadline to complete reorganization plans tied to its federal loans, the New York Times reported today. GM Chairman, Rick Wagoner said that its $13.4 billion federal aid package is sufficient to keep the company solvent until the end of March. The automaker is now focused on its latest plan for how it will cut its labor costs, reorganize its debt and reduce the number of dealers and brands. Both GM and Chrysler are required to submit their overhaul plans to the government by Feb. 17. The companies expect that by then, the president will have designated a 'car czar' to assess their plans. The companies will then have until March 31 to show progress in executing the plans, or risk having the loans recalled. Chrysler received a $4 billion loan. GM was in danger of running out of enough cash to operate its business before the federal loans were approved by President Bush in December. Wagoner said that while GM was not '100 percent' certain it would survive long term, he said the company was confident it could avoid a bankruptcy filing this year. Read more.
name='3'>Circuit City Bankruptcy Auction Begins Today
Circuit City goes on the auction block at noon today, the Richmond (Va.) Times-Dispatch reported today. Potential buyers can bid on the consumer electronics company as a whole, per store or on individual assets. The auction, being carried out in the Manhattan offices of Circuit City Stores Inc.'s attorneys, is scheduled to finish tomorrow. According to an order filed yesterday by U.S. Bankruptcy Judge Kevin Huennekens, when the auction is completed the company must post the results on the retailer's bankruptcy Web site, http://www.kccllc.net/circuitcity. On Friday, the chain will seek the judge's approval for a deal or deals, or to get ongoing financing if necessary, according to a court order. Judge Huennekens also allowed the chain to enter into a stalking-horse agreement. If the company fails to find a buyer or secure additional financing, it could be forced to liquidate, the retailer said. Circuit City has been losing money for nearly two years and struggled through the recent holiday shopping season. It filed for bankruptcy Nov. 10 after announcing it was closing 155 stores and cutting about 700 jobs at its headquarters. Read more.
name='4'>HUD Secretary: Housing Aid Plan Needs Fix
A $300 billion federal program meant to prevent foreclosures is doing almost nothing to aid U.S. homeowners, Reuters reported today, but it could become effective if Washington slashes cumbersome red tape, the nation's top housing policymaker said. At issue is the Hope for Homeowners program created by Congress in July to help 400,000 troubled homeowners secure a new loan. The program has aided fewer than 1,000 borrowers since it began in October and it is a flop with both lenders and borrowers discouraged by its excessive costs and paperwork, said Housing and Urban Development Secretary Steve Preston. As originally written, the housing rescue bill required mortgage companies to write down the loan by 10 percent and homeowners could have to share future home price gains with the federal government. Still, he said, the program's safeguards have made it all but ineffective. Democrats who control Congress and the Obama transition team both seem to understand that the Hope for Homeowners program has serious flaws, Preston said, and they seem prepared to fix them. Preston warned policymakers not to relax lending standards to the point where the government begins to underwrite excessive risk. Read more.
name='5'>Arbios Files for Chapter 11 Bankruptcy Protection
Arbios Systems, a developer of medical devices and cell-based therapies, has filed for chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware, TradingMarkets.com reported today. The company said it intends to file a motion to implement bid procedures for the sale of the company or its assets. Arbios previously announced in August 2008 that it had suspended operations except for its efforts to raise capital to support the development of its Sepet technology or enter into a strategic transaction. The company's principal assets also include a hemofiltration device designed to support patients suffering from cirrhosis due to chronic liver disease and who are hospitalized with acute complications resulting from worsening liver dysfunction and portal hypertension. Read more. (Subscription required.)
name='6'>Tarragon Corp. Files for Chapter 11
Residential real estate developer Tarragon Corp. said yesterday that it and some of its subsidiaries have filed for chapter 11 protection because of financial losses caused by falling prices and slower sales in its home building division, the Associated Press reported today. Tarragon, a multifamily housing developer with operations concentrated in the Northeast, Florida, Texas and Tennessee, said that it will seek additional outside financing and participation of a new investor or investor group. Tarragon said it has received a commitment for debtor-in-possession financing from an affiliate of ARKO Holdings Inc., an Israeli company. Read more.
name='7'>Domino's says Nine Franchisees Filed for Chapter 11
Domino's Pizza Inc. CEO David Brandon said that nine franchisees have filed for chapter 11 protection since November 2007, leading to the closure of 10 locations, Reuters reported yesterday. Brandon called the time when the nine franchisees filed for chapter 11 a 'perfect storm.' The filings occurred between November 2007 and January 2009, according to information provided by the company. Domino's added 70 new franchisees in the first nine months of 2008, compared with 93 in all of 2007, Brandon said. The company announced plans in October to save cash and said it may make loans directly to franchisees. The company also said it might help its best franchisees buy weaker operators. Read more.
name='8'>Colorado's Shane Co. Jewelry Store Files for Bankruptcy
Jewelry store retailer Shane Co. has filed for chapter 11 bankruptcy protection, saying the business suffered a disappointing holiday season, the Associated Press reported today. The company filed paperwork Monday in U.S. Bankruptcy Court in Denver, requesting to be able to continue paying its 542 employees in stores in 14 states. The court filings show that the company has between $100 million to $500 million in estimated assets and liabilities. The company listed about 6,000 creditors. Its largest creditor was listed as New-York based Dison Gems, Inc., with about $4.7 million, with the 20 largest unsecured claims totaling $26.2 million, according to court documents. The company said it plans to continue business without interruption while it executes a restructuring plan. Read more.
Legacy Liabilities Send Tronox into Chapter 11
Pigment producer Tronox Inc. has filed for chapter 11 bankruptcy protection, citing a liquidity crunch caused in part by a 2006 spinoff that left the company liable for its corporate predecessor's hefty environmental remediation and litigation costs, according to yesterday's BankruptcyLaw360.com. Tronox and 14 affiliated debtors filed in the U.S. Bankruptcy Court for the Southern District of New York, listing assets of $1.56 billion and liabilities of $1.22 billion. The debtors asked the court on Monday to approve a $125 million debtor-in-possession financing facility from its existing lending group led by Credit Suisse that the debtors said provides enough liquidity to continue their business operations as they reorganize. The Oklahoma City-based publicly-held producer of titanium dioxide pigments for the coatings, plastics, paper and specialty markets said it filed for protection to address legacy liabilities that resulted from its March 2006 spinoff from Kerr-McGee Corp., which was acquired by Anadarko Petroleum Corp. for $16.4 billion in cash in August 2006. Tronox said it was in the best interests of its businesses, creditors and stakeholders to reduce its legacy liability obligations by reallocating them to their rightful obligors. Read more (subscription required).
name='10'>Equal Sweetener Maker Seeks Access to $20M in DIP Cash
Merisant Worldwide Inc., the maker of Equal and other low-calorie sweeteners, is urging the bankruptcy court to grant it emergency access to $20 million in debtor-in-possession financing, BankruptcyLaw360.com reported Monday. Two days after the privately-owned company filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, Merisant President Paul Block said the company requires use of the $20 million lifeline provided by Wayzata Capital Management Inc. Merisant's position is perilous, Block said, and without the use of the DIP financing and cash collateral, the debtors' manufacturing operations could abruptly seize up. As little as two days' worth of materials remain on hand at the manufacturing plant, and if vendors refuse to supply Merisant, the company might suffer an irremediable setback, Block said. Read more. (Subscription required.)
name='11'>Interstate Bakeries Still in Bankruptcy Limbo
Interstate Bakeries Corp. has not nailed down financing necessary for the company to exit bankruptcy more than a month after getting a judge's approval, the Associated Press reported yesterday. The Kansas City, Mo.-based maker of Hostess Twinkies and Wonder Bread said that it is still negotiating with lenders. It also said it couldn't be sure that it would get the deal done. Agreements providing the almost $600 million in post-bankruptcy financing expire Feb. 9. A spokesman for the company said that if it can't reach a deal by then and can't get its lenders to extend the deadline, it would likely have to begin liquidating its assets. Interstate Bakeries has been under chapter 11 protection from creditors for more than four years. Read more.
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