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February 4, 2009
size='3'>Lehman Brothers Liabilities Reduced to $200
Billion
Lehman Brothers Holdings Inc.
said that it has reduced its unsecured liabilities by two-thirds to
about $200 billion since filing for bankruptcy last year, Bankruptcy
Law360 reported yesterday. The former financial services
company listed $613 billion in debts when it filed for chapter 11
protection last September. Lehman's bond prices now stand at 15 cents on
the dollar or less, so investors will likely recover no more than 15
percent, or $30 billion, of the liabilities. Lehman said last month that
it had cash totaling $6.96 billion and had raised about $2 billion in
derivatives contracts.
href='http://bankruptcy.law360.com/articles/85726'>Read more
(subscription required).
In related news, turnaround firm Alvarez & Marsal earned more
than $30 million for less than three months of work for Lehman Brothers
Holdings Inc., a fraction of what could ultimately be paid to advisers,
the Wall Street Journal reported today. The restructuring firm
earned $31.1 million in fees from Sept. 15 to Nov. 30, plus an
additional $1.4 million for expenses, according to court papers filed in
Lehman's bankruptcy case. In addition to Alvarez, Lehman has hired Weil,
Gotshal & Manges as its bankruptcy law firm, where lawyers are
earning up to $950 per hour. Seton Hall University School of Law
professor Stephen Lubben, who said he sees total fees reaching
$800 million, said the $31 million paid to Alvarez isn't unreasonable
given the size and complexity of Lehman's bankruptcy, which involves
selling or restructuring more than $600 billion in debt.
href='http://online.wsj.com/article/SB123371332879446377.html?mg=com-wsj'>Read
more (subscription required).
U.S.
Plans to Curb Executive Pay for Bailout Recipients
The Obama administration is
expected to impose a cap of $500,000 for top executives at companies
that receive large amounts of bailout money, the New York
Times reported today. Executives would also be prohibited from
receiving any bonuses above their base pay, except for normal stock
dividends. President Obama and Treasury Secretary Timothy F. Geithner
plan to announce the executive compensation plan today at the White
House. If the new pay limit applies to all companies that receive
Treasury money, it would be almost as tough as a $400,000 limit proposed
last week by Sen. Claire McCaskill (D-Mo.). The banks that have received
bailout funds already are subject to limits on compensation, but the
Bush administration intentionally left them lax. The top five executives
at banks that get an equity infusion from the government are restricted
from offering golden parachutes, and any compensation above $500,000 is
not tax deductible to the company.
href='http://www.nytimes.com/2009/02/04/business/04pay.html?_r=1&hp=&pagewanted=print'>Read
more.
name='3'>Lyondell Case Shows Bankruptcy Loans Are Available for a
Price
While Lyondell Chemical Co.
obtained the biggest bankruptcy loan in history last month,
debtor-in-possession (DIP) loans are now coming with higher fees and
interest rates, according to Bloomberg News today. Though dozens of
lenders sought to fund the $8 billion DIP loan, allowing the chemical
maker to stay in business, this by no means spells the end of the credit
crisis. Chris Taggert, a senior loan strategist at CreditSights Inc.,
said only firms willing to pay higher fees and interest can get loans.
The increasing frequency of DIP loans that 'roll up' old loans with the
new lending is a sign that bankrupt companies are still having a tough
time getting loans, lawyers said. 'DIPs are still hard to come by as the
cost of capital is extremely high,' Taggert said, noting that Lyondell's
loan came with 13 percent interest and 7 percent in fees. Some of its
lenders may end up getting 20 percent on their one-year investment in
the loan, which matures Dec. 15, according to a report from Standard
& Poor's.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=azqyUe8pwuUM&refer=home#'>Read
more.
Financial Services Chair Backs Regulator for Systemic
Risk
House Financial Services
Committee Chairman Barney Frank (D-Mass.) said at a hearing yesterday
that the first priority in overhauling financial regulation is to set up
an entity to oversee systemic risks of the kind that walloped Wall
Street last year, the Wall Street Journal reported today.
Frank said that this oversight could be given to the Federal Reserve and
a general plan may be in place by April. The idea of a systemic-risk
regulator, proposed by the Bush administration last year, is gaining
adherents in the Obama administration and in Congress. Senate Banking
Committee Chairman Christopher Dodd (D- Conn.) also has mentioned the
possibility of giving that role to the Fed. Among the areas that Frank
said would likely fall to the risk regulator are hedge funds,
credit-rating firms and executive compensation. He didn't provide
details, but said there needs to be 'complete transparency' on hedge
funds, and pay for financial executives needs to be examined to curb
'perverse risk incentives.'
href='http://online.wsj.com/article/SB123370729697045667.html'>Read
more. (Subscription required.)
Bill
Aims for Disclosure by Private Equity
The nation's private-equity
firms could be forced to register with the Securities and Exchange
Commission, while also divulging the value of their funds and names of
all investors, in a new Senate bill titled 'The Hedge Fund Transparency
Act,' the Wall Street Journal reported today. Introduced
late last week by Sens. Carl Levin (D-Mich.) and Charles Grassley
(R-Iowa), the bill has attracted the most attention from hedge funds.
The Levin-Grassley bill applies to any private fund that has at least
$50 million under management, a dollar figure that encompasses virtually
every private-equity firm.
href='http://online.wsj.com/article/SB123371254830046283.html'>Read
more. (Subscription required.)
Casinos
name='6'>Station Casinos Proposes Prepackaged Bankruptcy to Cut
Debt
Station Casinos Inc., the Las
Vegas gambling company taken private by management and Colony Capital
LLC in 2007, proposed filing for bankruptcy in collaboration with
lenders as it struggles to pay the debt from the buyout, Bloomberg News
reported today. The company offered investors 10 cents to 50 cents on
the dollar in secured notes and cash in exchange for about $2.3 billion
of existing bonds, Station Casinos said yesterday. Some secured lenders
have agreed to support the plan, the company said. The proposal comes 15
months after Station's takeover by the Fertitta family and
private-equity firm Colony Capital. The company owns 18 casinos,
including Red Rock Casino and the three-month-old Aliante Station. As
part of the proposal, affiliates of the Fertitta family and Colony
Capital have agreed to invest as much as $244 million to maintain their
current ownership stakes.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aa0HnHnJWYwc&refer=us#'>Read
more.
name='7'>Tropicana Conservator Seeks More Time for
Sale
The conservator overseeing the
sale of Tropicana Atlantic City Casino and Resort has asked the
bankruptcy court for three more months to unload the property as he
makes preparations for an auction, Bankruptcy
Law360 reported yesterday. Gary Stein, the state-appointed
trustee for the Tropicana Entertainment LLC casino, revealed on Monday
that he had petitioned the New Jersey Casino Control Commission for an
extension, with the deadline for the sale originally set to expire on
Wednesday. 'The conservator's financial advisers are engaged in ongoing
negotiations with The Cordish Company regarding a possible sale of the
Tropicana to Cordish,' Stein's office said. Last year, Cordish had
promised to buy the casino for $700 million, but Tropicana had
previously expressed 'grave concerns' over the offer, noting that $250
million of the proposal appeared to simply be an 'IOU.' Cordish will now
act as a stalking horse bidder, expected to close the deal unless better
offers appear at the auction.
href='http://bankruptcy.law360.com/articles/85745'>Read more.
(Subscription required.)
name='8'>Spectrum Brands Files for Chapter 11
Protection
Spectrum Brands Inc. said
yesterday that it filed for chapter 11 protection and reached agreements
with noteholders representing about 70 percent of its outstanding bonds
to pursue a refinancing, Reuters reported yesterday. Spectrum, whose
shares were delisted by the New York Stock Exchange in January, is best
known for its Rayovac batteries. The company said it is operating as
usual and has about $2.6 billion in outstanding indebtedness. The
company said that its international operations are legally separate and
were not included in the chapter 11 proceedings.
href='http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090203&id=9574639'>Read
more.
Auto
Sales Start 2009 at an Abysmal Pace
New-vehicle sales in the United
States fell 37 percent in January to one of the lowest levels in half a
century, and though automakers said that the market was unlikely to get
much worse, they are bracing for most of 2009 to be just as bad, the
New York Times reported today. It was the industry's worst
month since June 1982, and the worst January since 1963. For the first
time, more vehicles were sold in China last month than in the United
States, according to figures from General Motors. Sales fell 55 percent
at Chrysler and 49 percent at GM, providing an ominous backdrop as they
rush to finish the revamping plans that are due at the Treasury
Department in two weeks. The two companies have borrowed $13.4 billion
to help stave off bankruptcy, and must show that they are on a path
toward viability to avoid having the loans recalled. At Ford, which says
it does not need government aid, sales dropped 40 percent. Together, the
three Detroit automakers sold 279,531 cars and trucks, about the same
number that GM alone sold in September, according to
MotorIntelligence.com, which tracks industry sales.
href='http://www.nytimes.com/2009/02/04/business/04auto.html?ref=business&pagewanted=print'>Read
more.
name='10'>Additions by Senate Push Stimulus Package Costs Near $1
Trillion
The Senate yesterday pushed the
cost of the economic stimulus package above $900 billion by adding
billions for medical research and tax breaks for car buyers, the New
York Times reported today. Angling to spur automobile sales as part
of the economic stimulus package, the Senate voted to add an $11 billion
provision to the bill that will allow most Americans to claim a tax
deduction for the sales tax and any loan interest on the purchase of a
new car between Nov. 12, 2008, and the end of 2009. The vote, 71-26, in
favor of the tax break for car buyers came as the Senate began to act on
what is expected to be a long list of amendments to the stimulus
measure. The House last week approved an $820 billion version of the
bill, which is the top priority of President Obama and Democratic
leaders in Congress. Obama has said the final bill should not cost more
than $900 billion.
href='http://www.nytimes.com/2009/02/04/us/politics/04stimulus.html?ref=business&pagewanted=print'>Read
more.
name='11'>Loan Deadline Passes for General Growth
Debt-laden mall owner General
Growth Properties Inc. has hit an unusual snag in its efforts to
postpone debt payments and avert bankruptcy protection as it has not
gotten an extension of a $225 million loan arranged by its primary
advisor, Goldman Sachs Group Inc., the Wall Street Journal
reported today. The payment deadline on the short-term loan passed
Monday without General Growth announcing an extension. Goldman, which
General Growth added in September as one of three financial advisers,
arranged the loan last fall to give the mall owner breathing room to pay
several mortgages coming due and to sell assets to raise cash. Goldman
has at least one unidentified partner in the loan who has balked at
providing an extension, according to people familiar with the talks.
Goldman hasn't moved to foreclose on the malls pledged as collateral for
the loan. If that were to happen, it would trigger cross defaults that
could force General Growth to file for bankruptcy protection. General
Growth, based in Chicago, owns and manages more than 200 U.S. malls.
href='http://online.wsj.com/article/SB123371040112346029.html'>Read
more. (Subscription required.)
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