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August 13, 2007
w:st='on'>
id='1'
name='1'>U.S.
Higher Chapter 11 Fees in Budget Proposal
Companies in chapter 11 would
pay significantly more in quarterly fees to the federal government, in
some cases triple what they're paying now, under a budget proposal set
to take effect Jan. 1, Dow Jones Newswires reported today. The U.S.
Trustee Program has proposed a 30 percent fee increase and wants to
triple the fees for the biggest companies.
size='3'>A company with disbursements of between $1 million and $1.9
million in a quarter, for example, would pay a $5,000 fee now, which
would jump to $6,500 under the trustee's budget proposal for fiscal year
2008. The office also wants to add new tiers
that would force large companies to pay even more. The most a business
is required to pay now is $10,000 per quarter. But those companies will
now face quarterly fees of between $15,000 and $30,000 depending on
their disbursements. Andrea Wuebker, a spokeswoman for the Office of
Management and Budget, said the fee increase was requested to fulfill
new responsibilities given to the U.S. Trustee under the 2005 overhaul
to the Bankruptcy Code, including new enforcement and reporting
requirements.
href='http://www.denverpost.com/ci_6608175?source=rss'>Read
more.
href='http://www.usdoj.gov/jmd/2008justification/pdf/23_ustp.pdf'>Click
here to read the budget proposal.
Requests San Diego Diocese to Defend Bankruptcy
A federal judge found
Friday that the Roman Catholic Diocese of San Diego misrepresented its
finances and ordered it to explain why its bankruptcy case shouldn't be
dismissed, the Associated Press reported on Friday. The church
undervalued real estate holdings and failed to disclose 'material facts'
to the court, Bankruptcy Judge
size='3'>Louise DeCarl Adler found. She named
federal statutes that would allow the case to be dismissed on grounds of
the diocese's 'gross mismanagement' and 'unexcused failure' in its
financial reporting. The diocese filed for chapter 11 bankruptcy
protection Feb. 27, the night before trial was set to begin in the first
of several civil suits filed by people claiming they were sexually
abused by priests. More than 140 people have filed claims against the
church. The diocese has proposed a $95 million settlement. Attorneys
representing people who say they were abused are seeking a settlement of
about $200 million. Judge Adler has scheduled a hearing Sept. 6.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/10/AR2007081002423_pf.html'>Read
more.
name='3'>Commentary: Pack Mentality Among Hedge Funds Fuels Market
Volatility
According to bankers and
investors, the strategies employed by hedge funds tend to be not only
duplicable but broadly followed — the result being a packlike
tendency that has helped increase market volatility and, for some hedge
funds, has led to losses in the last month, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Wild swings in
stock prices have become the norm as fears about the mortgage securities
market have expanded into the broader markets. Last week, the Dow Jones
industrial average was sharply higher on Monday and Wednesday, only to
drop 387 points on Thursday, eventually ending the week about where it
began. A common thread has often been a rise or fall in prices late in
the day, a pattern that many analysts attribute to computer models,
which are driving a much larger volume of the trading. Experts say this
predilection for lemming-style buying or selling from investors using
similar computer models could turn what would normally be a market
setback into a wider contagion. The problems of these quantitative funds
mirror those of the hedge fund industry as a whole; many funds have seen
sharp declines in the last couple of months as the credit markets have
dried up.
href='http://www.nytimes.com/2007/08/13/business/13hedge.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Mortgage
Lending
name='4'>HomeBanc Files for Chapter 11
Regional mortgage lender
HomeBanc Corp. has filed for bankruptcy protection, the latest casualty
of a housing market that continues to weaken, the Associated Press
reported on Friday. The Atlanta-based company filed its chapter 11
petition dated Thursday in the U.S. Bankruptcy Court for
the District of
w:st='on'>
size='3'>Delaware
filing, the company listed estimated assets and liabilities of more than
$100 million each. A list of creditors holding the largest unsecured
claims against HomeBanc included JP Morgan Chase Bank, KeyBank,
Commerzbank, US Bank and French bank BNP Paribas, which earlier this
week froze three investment funds heavily invested in securities backed
by subprime mortgages.
href='http://biz.yahoo.com/ap/070810/homebanc_bankruptcy.html?.v=1'>Read
more.
name='5'>Laid-off Workers Sue American Home
Mortgage
A group of American Home
Mortgage Corp. employees who were axed last week have filed a putative
class action against the bankrupt home lender for back pay, arguing they
were let go without fair warning, Bankruptcy Law360 reported on
Friday. The employees, who were fired as part of mass layoffs ordered by
AHM before it filed for bankruptcy on Monday, claim the firm violated
their rights under the Worker Adjustment and Retraining Notification
Act. They allege the Mellville, N.Y., lender, which laid off one-third
of its workforce, was obligated under the WARN Act to give the workers
60 days' advance notice of their termination and owes them two months'
worth of wages and pension benefits. The case is
face='Times New







Roman'
size='3'>In re American Home Mortgage Holdings Inc.,
size='3'>case number 07-11047 in the U.S. Bankruptcy Court for the
District of Delaware.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=32142'>Read
more. (Registration required.)
name='6'>New Century to Settle Deutsche Bank
Dispute
Bankrupt New Century Financial
Corp. and Deutsche Bank subsidiary DB Structured
face='Times New Roman'>Products Inc. (DBSP) have taken a
step toward settling their breach-of-contract dispute through a deal
that would be funded by the sale of some of New Century's
mortgages, Bankruptcy
Law360 reported on Friday. In a motion filed
Wednesday, New Century asked the bankruptcy court to allow it to sell
nearly $59 million worth of residential mortgage loans that the first
$14 million of the proceeds would be then paid to DBSP.
DB Structured Products Inc. struck
two repurchase agreements with New Century, one in September 2005 and
one in April 2006, the company said in its complaint, filed on
Wednesday. The accords stated that DBSP would purchase mortgage loans
from New Century, and that the lender would buy them back for a higher
price. The complaint also claimed that New Century told DBSP that about
235 mortgage loans were not properly transferred to their new owner, and
refused to hand over documents about the loans while still collecting
funds from them.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32157'>Read
more. (Registration required.)
name='7'>Commentary: The Pain, and Gain, of the Subprime
Meltdown
The subprime cycle that
began in the late 1990s mirrors that of the junk bond market that
emerged in the 1980s and the tech boom of the late 1990s, according to
an op-ed in today's
size='3'>Washington Post. Lenders figured out
that there was no reason to deny mortgages to households with a history
of poverty or unreliability; they should be welcome to borrow provided
that they paid a premium to reflect their high risk of default. By 2006
subprime mortgages accounted for a fifth of all home loans, and the
social consequences were marvelous. The homeownership rate, which had
been stuck around 65 percent between the mid-1950s and the mid-1990s,
hit 69 percent. Some 12 million new homeowners emerged, roughly half of
them members of racial minorities. Every boom-and-bust cycle has its
expert enablers. In the case of the subprime downturn, the enablers were
the ratings agencies, Standard & Poor's and Moody's, which assigned
ratings to no-doc loans that failed to advertise the risks involved.
When the tech bubble imploded, the chief victim was the day trader. In
the mortgage market, we are discovering, the rating agencies' victims
included unsuspecting European banks.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/12/AR2007081200815.html'>Read
more.
name='8'>California
w:st='on'>
size='3'>Town
face='Times New Roman' size='3'> Goes from Housing Haven to
Foreclosure Leader
Once considered a safe
alternative to the overheated Bay Area real estate market,
size='3'>Stockton
w:st='on'>
size='3'>Calif.
streets are now filled with “For Sale” signs and evidence of
foreclosures, the New York Times reported today. While hundreds
of thousands of people nationwide are being affected by troubles in the
lending market,
face='Times New Roman' size='3'>Stockton
has the highest foreclosure rate of any city in the
country, according to RealtyTrac, a real estate data firm. “A year
to two years back, this area was seen as being affordable compared to
other areas, the Bay Area, the South Bay,” said Stockton Mayor
Edward J. Chavez. “But what was once a vibrant market has kind of
hit a brick wall.” Average single-family houses here can still be
bought for $350,000. However, many of the recent house deals, brokers
and local officials say, were financed by subprime loans, some of which
offered 100 percent financing for a small down payment, occasionally
even no money down. But those deals quickly soured for new homeowners
when higher monthly payments kicked in after two or three years.
href='http://www.nytimes.com/2007/08/13/us/13stockton.html?ref=business'>Read
more.
name='9'>Battered Auto-Parts Makers Could Face More
Pain
While the struggles
of
size='3'>Detroit
makers make headlines,
w:st='on'>
size='3'>U.S.
size='3'>auto-parts makers have slashed more than four times as many
manufacturing jobs as the big auto makers during the past six years, and
the shakeout appears likely to accelerate, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. About 185,000 supplier manufacturing jobs
have been eliminated in the United States,
size='3'>compared with about 38,000 auto-assembly jobs, according to the
Bureau of Labor Statistics. Large suppliers that have recently filed for
bankruptcy protection, such as Delphi Corp. and Collins & Aikman
Corp., are each eliminating more than 10,000 jobs. Industry observers
say that woes among parts makers could get worse as the
size='3'>U.S.
size='3'>auto giants shift more purchasing to lower-wage countries, in
part to offset their own high labor costs. At the same time, Asian auto
makers such as Toyota Motor Co. are producing more cars and trucks in
the United States, but they use fewer traditional U.S.-based suppliers
than their
face='Times New Roman' size='3'>Detroit
rivals.
href='http://online.wsj.com/article/SB118696186233195492.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='10'>Delta Retired Pilots Seeking $100 Million in
Benefits
Retired pilots accused
Delta Air Lines Inc. of twisting tax law and asked a bankruptcy judge to
award them $100 million in pension benefits they say Delta has avoided
paying, Bankruptcy
Law360 reported on Friday. In defending its
claims, the proposed pilot class said that Delta has misconstrued and
inconsistently applied the Internal Revenue Code and the limitations it
places on pension payment, effectively leaving its pilots with
substantially less than what they should be receiving in benefits. Delta
transferred its pension plan on the Pension Benefit Guarantee Corp.
(PBGC) in January. Just how much the PBGC will cover, however, is still
being decided.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32202'>Read
more. (Registration required.)
name='11'>Implant Maker Eyes September Asset Auction
After less than two
months under chapter 11 protection, MediCor Ltd., one of the world's
largest breast implant makers, has asked a bankruptcy court for
permission to sell most of its assets,
size='3'>Bankruptcy Law360 reported on Friday.
Las Vegas-based MediCor Ltd. filed for bankruptcy on June 29 in the U.S.
Bankruptcy Court for the District of Delaware, listing assets of
$120,354,097 and debts of $121,439,609. MediCor wants an auction sale
scheduled for Sept. 18 in
size='3'>Santa Barbara,
size='3'>Calif.
the
size='3'>Delaware
size='3'>bankruptcy court scheduled for Sept. 24. MediCor asks the court
to conduct an initial hearing to approve the bid procedures and schedule
the auction, and then conduct a second hearing to approve whatever sale
transactions the debtors select.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32165'>Read
more. (Registration required.)
name='12'>Adelphia Creditors Await Payout
As John Rigas and son
Timothy are set to enter prison more than five years after their arrests
for accounting fraud and corporate looting of Adelphia, the
company’s creditors, who lost billions of dollars when it
collapsed, are still waiting for a payout from a government fund of more
than $800 million designed to compensate victims, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported on Saturday. Adelphia's assets were sold through a
bankruptcy process to Time Warner Inc. and Comcast Corp. in a deal
valued at close to $18 billion. Proceeds went to debt holders, leaving
former stockholders with nothing so far. Shareholders have their eye on
the restitution fund set up by the Securities and Exchange Commission
and the
face='Times New Roman'
size='3'>U.S.
size='3'>attorney's office. It has collected more than $600 million of
the $715 million in cash and stock it negotiated from Adelphia, in
exchange for an agreement not to prosecute the company, and from seized
Rigas assets. Adelphia's former accounting firm, Deloitte & Touche
LLP, contributed $50 million; two of its suppliers, Motorola Inc. and
Scientific-Atlanta, now part of Cisco Systems Inc., paid $25 million and
$20 million, respectively.
href='http://online.wsj.com/article/SB118678021194494565.html'>Read
more.
International
name='13'>Elektrim Files for Bankruptcy in
size='3'>
w:st='on'>Poland
Polish telecom and power
conglomerate Elektrim has filed for bankruptcy with a Polish court in
the latest episode in a fight over its mobile telecom assets and debts
to bondholders that stretches back several years, AFXNews.com reported
on Friday. Elektrim said that it had asked the court to rule on the
divide of its disputed assets, which include a controlling stake in
power group PAK, the subject of a bid for control by copper producer
KGHM. The company is also involved in Deutsche Telekom and Vivendi's
long legal battle for control of Poland's third-largest mobile network
PTC, relating to a 1990s joint venture with Elektrim. Almost all of
Elektrim's assets are tied up in claims by holders of bonds it issued in
several years ago. A court suspended proceedings the last time it filed
for bankruptcy in 2003.
href='http://www.forbes.com/afxnewslimited/feeds/afx/2007/08/13/afx4012115.html'>Read
more.
name='14'>TROUBLED COMPANIES IN THE NEWS
The business news articles
below are taken from the U.S. Business Journal’s Daily Summary of
Troubled & Fast Growing U.S. Companies which is published by Bastien
Financial Publications.
face='Times New Roman' size='3'>ABI
size='3'>Members receive a 50% discount off of our regular subscription
rate of $500 when subscribing to the complete Daily
Summary.
To subscribe email
steve@creditnews.com <mailto:steve@creditnews.com> or call
800-407-9044—use
face='Times New Roman' size='3'>ABI
size='3'>Code 37
size='3'>BP PLC is now the subject of an
expanded federal probe in the
w:st='on'>
size='3'>U.S.
face='Times New Roman'>regarding commodities trading,
adding yet another headache for the U.K.-based oil giant’s new
CEO, Tony Hayward. The probe, by the U.S. Commodity Futures
Trading Commission and the U.S. Justice Department, is looking back as
far as 1999, three years earlier than they had initially been interested
in.
Buca
Inc.
size='3'>’s stock price plunged more than 20% after the
Minneapolis, Mn. restaurant firm reported a widened second quarter loss
of $3.2 million, more than four times its loss in the year-earlier
period. Sales bumped up slightly–to $62 million. Buca cited
increased expenses, especially labor costs.
DemandTec
Inc.’s stock price slid 15% from its
initial public offering price of $11 a share. While the
size='3'>San Francisco
face='Times New Roman'>, Ca. firm has been increasing its
revenue, it still hasn’t reported a full year in the black and is
warning that it can’t predict when it might reach profitability.
DemandTec’s specializes in consumer-demand-management software.
/>
Dairy Farmers of
America, a
face='Times New Roman' size='3'>Kansas City
size='3'>,
size='3'>Mo.
cooperative, is cutting seventy jobs at its operations in
size='3'>Minnesota
reorganization of its American Cheese unit. The firm will trim another
300 positions at a plant in
w:st='on'>
size='3'>Corona
size='3'>, Ca.
Friendly Ice Cream
Corp., a
Wilbraham, Ma. restaurant operator, reported a second quarter net loss
of $290,000. Sales edged up less than 1%–to $142 million.
/>
Gap Inc.
size='3'>, the
face='Times New Roman' size='3'>San
Francisco
size='3'>, Ca. operator of the Gap, Old Navy and Banana Republic apparel
retailing chains, reported that total sales edged up 1% in July, to just
over $1 billion, although same-store sales sank 7% in the month. Gap
also provided an update on its restructuring, saying that it has cut
1,500 jobs so far this year, resulting in reorganization costs of about
$20 million. The firm has also shut down its Forthe & Towne chain,
resulting in another 550 lost jobs and $9 million in expenses.
H&R Block
Inc., the
w:st='on'>
size='3'>Kansas City
w:st='on'>
size='3'>Mo.
size='3'>tax-service firm, warned that further cost-cutting will take
place at its Option One Mortgage Corp. unit in anticipation of the sale
of the business. Few details were revealed, but back in April H&R
Block said that the sale of Option One to Cerberus Capital Management LP
would be valued at $300 million, minus the value of Option One’s
tangible net assets at the time the deal closes. H&R Block also
warned that the completion of the deal may be delayed until the end of
the year.
Tarragon
Corp., a
w:st='on'>
York
size='3'>real estate development and management firm, saw its stock
price plummet 67% after it warned that it will incur charges of more
than $125 million related to property impairment and other writedowns.
The firm also said it will delay spinning off its homebuilding unit.
/>
Technical Olympic USA
Inc., dba
size='3'>Tousa Inc., a
w:st='on'>
size='3'>Hollywood
homebuilder, reported a second quarter net loss of $132 million,
including pretax charges of $155 million mostly from a settlement and
impairments. Revenue declined 9%–to $565.7
million.