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March 20, 2009
In New Dilemma, Banks Cite Two Paths to Disaster
Some bank executives warned that the government is forcing them toward a disastrous choice between accepting restrictions on compensation that could cripple their ability to compete with rivals, or returning billions in federal aid, which could retard lending and damage the economy, The Washington Post reported today. The possibility of a newly weakened banking industry also raised concerns among businesses in the wider economy that already are struggling to find financial firms willing to lend them needed money. Some members of Congress, however, said those concerns were overstated and that limits on pay schemes tied to short-term profits were long overdue. Legislative action regarding the recent furor over AIG bonuses could trigger the unraveling of the broader federal bailout of troubled banks, which has grown increasingly unpopular on Capitol Hill and across the country. The bill passed yesterday by the House would impose large pay cuts on thousands of employees at eight of the nation's largest banks. The version pending before the Senate would force dozens more banks to cut the pay of thousands of additional employees. The average bonus for a Wall Street employee in 2007 was more than $180,000, but top employees make much more. Read more.
name='2'>Hearing Today on Capitol Hill
The House Financial Services Committee will hold a hearing today on 'Federal and State Enforcement of Financial Consumer and Investor Protection Laws,' at 10 a.m. ET in Room 2128 in the Rayburn House Office Building. This will be a full committee hearing to examine whether federal and state law enforcement agencies have all the tools and resources they need to aggressively pursue financial institutions and individuals that commit fraud, abuse their positions and violate the law. Click here for the witness list.
Autos
name='3'>Fiat Denies Plan to Assume Chrysler Debt
Italy's Fiat SpA denied today that it would assume any current or future debt from Chrysler LLC, with which it plans to form a partnership, Reuters reported today. 'Fiat Group intends to make it absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness of Chrysler,' it said in a statement. Chrysler said yesterday that Fiat would assume 35 percent of its debt to the U.S. government. Fiat shares, which had been trading more than 4 percent lower early in the session, were off 2.6 percent. Read more.
name='4'>Study: Half of U.S. Auto Suppliers Face Bankruptcy
More than half of the top U.S. auto parts suppliers could file for bankruptcy protection in 2009 with at least one million job losses, according to a study by global consultants A.T. Kearney, Reuters reported yesterday. The survey encompassed 60 top North American auto parts suppliers, but did not name any of the suppliers. It was compiled through interviews with senior executives at U.S. suppliers. The U.S. government has pledged up to $5 billion to aid financially stressed auto parts makers that are crucial to General Motors Corp and Chrysler. A.T. Kearney looked at three scenarios for the supply base. The other two scenarios include a 'soft landing' resulting in 35 percent of the companies restructuring in bankruptcy and a 'pessimistic' reading pushing that to 70 percent or more with many liquidations. In each scenario, the study found that suppliers faced increased risk of bankruptcy through 2010. The study found that the larger suppliers expect up to 23 percent of the smaller companies that supply them with parts to face financial distress within a year. Read more.
name='5'>Bank of America Involved in Merrill Writedowns
Bank of America Corp. was involved in accounting for fourth-quarter writedowns at Merrill Lynch & Co. before it acquired the brokerage firm, the Financial Times reported yesterday. Bank of America's chief accounting officer, Neil Cotty, was reportedly influential in determining writedowns for complex debt instruments and leveraged loans among other assets at Merrill. Merrill Lynch said in February it lost $15.84 billion in the fourth quarter, about $533 million more than the loss estimated by Bank of America in January. Read more.
name='6'>FedEx Profit Drops 75 Percent, More Than Estimated
The FedEx Corporation said on Thursday that it was taking market share from competitors despite a recession that drove its profit down 75 percent, according to a report in the New York Times today. The company also announced additional cost cuts, including reducing capacity at its FedEx Express and FedEx Freight units, and slashing personnel and work hours. The company, based in Memphis, Tenn., reported net income for its fiscal third quarter, which ended Feb. 28, of $97 million, or 31 cents a share, down from $393 million, or $1.26 a share, in the period a year earlier. Analysts had expected 46 cents a share, according to Reuters estimates. FedEx said third-quarter revenue fell 14 percent, to $8.14 billion, from $9.44 billion in the quarter a year ago. Read more.
name='6'>Marcus Kitchens Files for Bankruptcy
Pittsburgh-based Marcus Kitchens Inc. closed shop and laid off its four employees after the Feb. 27 chapter 7 filing in the U.S. Bankruptcy Court for the Western District of Pennsylvania, according to a report from the Pittsburgh Business Times today. The kitchen design business has been in business for nearly seven decades. The company listed less than $50,000 in assets, not including the property, and between $100,001 and $500,000 in debt. Among its 49 creditors listed in the bankruptcy filing were cabinetmaker Topcraft Inc. and Wood-Mode Inc. Read more.
Newsprint Firm Tries to Revamp Debt to Avoid Bankruptcy
The newsprint industry is now following in the troubled footsteps of the newspaper industry, the New York Times reported today. AbitibiBowater, a large purveyor of newsprint, was struggling yesterday to restructure its debt and avert bankruptcy. The company faces a deadline today to reach an agreement with its bondholders, without which it may be forced to file for bankruptcy protection. As newspaper companies grapple with a sharp decline in advertising, AbitibiBowater - which provides what is often the biggest expense for publishers, has come under pressure. The price of newsprint has plummeted in recent years, forcing paper companies to shutter mills and take losses. Last year, newsprint consumption tumbled 14 percent and 16 percent among daily newspapers, Paul Quinn, an analyst at RBC Capital Markets, wrote in a research note this week. Last month, the company began two bond-exchange offers in an effort to trim its debt by about $2.4 billion. Under the terms of the offers, existing holders of nearly $250 million in AbitibiBowater bonds that mature later this year would invest additional capital to gain new, secured debt in the company. The deadlines for those offers have already been extended twice. Shares in AbitibiBowater closed at 54 cents on Thursday, having plunged 92.5 percent in the last 12 months. Read more.
name='8'>Greenbrier Resort Files for Chapter 11
The posh Greenbrier resort, which has housed presidents and royalty in West Virginia, has filed for chapter 11 bankruptcy and signed a deal to sell itself to hotel giant Marriott International, the Associated Press reported yesterday. The four-star resort said its owner, Jacksonville, Fla.-based railroad company CSX Corp., would lend Marriott $50 million to operate the hotel for two years. Bethesda, Md.-based Marriott would repay the loan and also pay CSX between $60 million and $130 million within seven years. The Greenbrier has struggled with the poor economy and lost $35 million in 2008. Guests have included President Eisenhower and Monaco's Prince Rainier and Princess Grace. It is also the site of a once-secret Cold War bunker to house Congress in case of a nuclear attack. Read more.
name='9'>Foamex Wins Final DIP Approval
Foamex International Inc. has been given enough of a financial cushion to begin crafting an asset sale, TheDeal.com reported yesterday. The Media, Pa., maker of foam cushions said that the U.S. Bankruptcy Court in Wilmington, Del., granted it final approval of a $95 million DIP loan from MatlinPatterson Global Opportunities Partners III LP and Bank of America NA. MatlinPatterson's DIP will help alleviate some of Foamex's prepetition debt problems and also kick-start an auction. Court papers show that the DIP will roll up the $39 million due on Foamex's prepetition senior revolver with lenders led by Bank of America. This leaves about $56 million in new money to finance the debtor's operations along with cash collateral. The DIP will mature on the earlier of 120 days from Foamex's Feb. 18 petition date and 60 days after the court approves bidding procedures. Foamex filed for chapter 11 on Feb. 18, marking its second trip to bankruptcy court since Sept. 19, 2005. The company listed $363.82 million in assets and $379.71 million in debts in its new petition. Read more.
name='10'>Pittsburgh Corning Awaits Hearing
Pittsburgh Corning Corp. is now inching toward an exit from its nine-year stint in chapter 11, TheDeal.com reported yesterday. Hon. Judith K. Fitzgerald of the U.S. Bankruptcy Court in Pittsburgh is set to convene a hearing on the company's disclosure statement on May 29. Meanwhile, the court on Feb. 18 ordered the vacation of a previous order approving the appointment of an examiner for the Pittsburgh building products manufacturer. Before the company could go forward with its case, it needed to deal with the potential examination, which was requested by then-U.S. Trustee Kelly Beaudin Stapleton and approved by Judge Fitzgerald on Nov. 13, 2007. Stapleton had sought the appointment to investigate fraud allegations lodged against accounting and financial advisory firm L. Tersigni Consulting PC. L. Tersigni, however, filed its own chapter 11 petition on Nov. 14, 2007, in the U.S. Bankruptcy Court in Bridgeport, Conn., amid several investigations into its business practices advising asbestos claimants in bankruptcies. An examiner was subsequently appointed in the case, eliminating the immediate need for one in Pittsburgh Corning's proceeding. Read more.
name='11'>Sun Coast Files Settlement
Sun Coast Hospital Inc. will seek approval of a settlement that could end an adversary proceeding over the correct designation of a claim from bondholder Bank of New York Co. (BoNY), TheDeal.com reported yesterday. Hon. Michael G. Williamson of the U.S. Bankruptcy Court in Tampa, Fla., will convene a hearing on Sun Coast's motion sometime in May. Under the settlement, filed on March 17, roughly $6.02 million of BoNY's $20.95 million in claims would be designated as secured. The rest would be treated as an unsecured claim under Largo, Fla.-based Sun Coast's reorganization plan, which was confirmed on Aug. 12. The secured amount would be increased by 50 percent of the net recovery from the proceeds of the additional collateral held by Sun Coast's other secured creditorsÑsubsequently decreasing the unsecured amount. Sun Coast's liquidating agent would also be required to pay the bank 50 percent of the net recoveries received from accounts receivable as of the petition date no later than 30 days after the end of each calendar quarter, beginning on June 30. Sun Coast and its creditors committee filed an adversary proceeding on May 6 seeking to subordinate BoNY's secured claim to unsecured status. Sun Coast filed for chapter 11 on Dec. 28, 2007, with plans to sell its assets to Largo Medical Center Inc. under its stalking-horse offer. The bid from Largo Medical, a unit of HCA West Florida's network of 15 area hospitals, went unchallenged and was approved by Judge Williamson on Feb. 29. Read more.
International
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