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June 22, 2009
by Eight Attorneys General
Eight state attorneys general are opposing a provision
in General Motors Corp.'s bankruptcy plan that would free the automaker
from liability for vehicle defects, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Attorneys general from Connecticut, Kentucky,
Maryland, Minnesota, Missouri, Nebraska, North Dakota and Vermont filed
an objection in U.S. Bankruptcy Court in the Southern District of New
York Friday, arguing that GM's plan to shed these liabilities would bar
accident victims from 'key legal rights.' The states could face an
uphill battle. Chrysler Group LLC emerged from bankruptcy earlier this
month free of such liabilities and legal precedent shows that most
companies have wide latitude to leave claims behind in bankruptcy court.
Under GM's proposed terms, consumers suffering injuries or death from
vehicles currently on the road would not be able to bring claims against
the 'New GM.' Instead, they would be left as unsecured creditors seeking
claims against GM's old estate in bankruptcy court, where they would
likely receive little recompense.
href='http://online.wsj.com/article/SB124544333400432269.html#'>Read
more. (Subscription required.)
In related news, agroup of General Motors Corp.
bondholders and some of the automaker's labor unions filed objections on
Friday to GM's plan to sell its assets to a new company that can emerge
from bankruptcy protection, the Associated Press reported. Their
opposition, along with additional objections filed by consumer groups, a
handful of states and cities, and individual retirees, shareholders and
bondholders, threatens to put the brakes on what has so far been a
speedy trip through the chapter 11 process. In its motion, the
bondholders group accused GM and the U.S. government of unjustly
speeding the case through the bankruptcy process at the expense of the
bondholders and dividing the new company's assets 'among a few select
favored classes.' 'GM's bondholders appear to be the most disfavored and
discriminated class in the scheme,' the group wrote, pointing to the
larger 17.5 percent stake the United Auto Workers union is slated to get
under the sale. The group claims to represent about 1,500 bondholders
with holdings worth more than $400 million. It is also asking the court
to grant it permission to form a formal committee that would be able to
negotiate with GM separately from larger bank and investment firm
bondholders. A hearing on that request is scheduled for Tuesday.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/19/AR2009061902288_pf.html'>Read
more.
Senate Panel to Examine
Regulation of Over-the-Counter Derivatives
The Senate Banking Securities, Insurance, and
Investment Subcommittee will hold a hearing today titled
“Over-the-Counter Derivatives: Modernizing Oversight to Increase
Transparency and Reduce Risks.” The hearing will take place at 3
p.m. ET and will include two witness panels. Witnesses on first panel
include Securities and Exchange Commission Chairman Mary Schapiro,
Commodity Futures Trading Commission Chairman Gary Gensler and A.
Patricia White, associate director of the Division of Research and
Statistics, Board of Governors of the Federal Reserve System.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_id=34ee16e5-5bf4-4bb1-85db-d05d911c08a0'>Click
here for more information on the hearing.
Housing
Condo Loans
Two Democratic lawmakers are calling on Fannie Mae and
Freddie Mac to relax recently tightened standards for mortgages on new
condominiums, saying that they could threaten the viability of some
developments and slow the housing-market recovery, the
face='Times New Roman'>Wall
Street Journal reported today. In March,
Fannie Mae said that it would no longer guarantee mortgages on condos in
buildings where fewer than 70 percent of the units have been sold, up
from 51 percent. Fannie Mae also won't purchase mortgages in buildings
where 15 percent of owners are delinquent on condo association dues or
where one owner has more than 10 percent of units, which the firm sees
as signals that a building could run into financial trouble. Freddie Mac
will implement similar policies next month. In a letter to the chief
executives of Fannie and Freddie, Reps. Barney Frank (D-Mass.) and
Anthony Weiner (D-N.Y.) warned that the 70 percent sales threshold 'may
be too onerous' and could lead condo buyers to shun new developments.
The legislators asked the companies to 'make appropriate adjustments' to
their underwriting standards for condos.
href='http://online.wsj.com/article/SB124562533240635581.html#mod=article-outset-box'>Read
more. (Subscription required.)
HUD Chief Confident
FHA’s Mortgage Program Will Rebound
HUD Secretary Shaun Donovan stood by the Obama
administration's claim that the Federal Housing Administration's
mortgage program will make a substantial profit over the next year as it
attracts clients and expands market share,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported on Friday. Donovan told the House Transportation-HUD
Appropriations Subcommittee that he expected the program to generate
nearly $1 billion more in income than will be paid out in losses over
the life of the loans. 'We are projecting our 2010 business [will] be in
the black,' he said. Donovan added that the default risks of the program
had been lowered by the banning of seller-financed down payments in
FHA-financed mortgages.
Builders Stay Alive
While the recession wiped out many small builders,
mortgage lenders and homeowners, the nation's biggest builders have hung
on, in part through favorable land deals, loan agreements and tax
strategies, the
size='3'>Wall Street Journal reported today.
Now, the worst appears to be over for most of them as new-home sales are
showing signs of bottoming out. The stocks of the big homebuilders have
rebounded from their November lows, and some have bolstered their cash
and borrowing ability. Lennar and Toll Brothers Inc. each sold $400
million of bonds in April, and Ryland Group Inc. sold $230 million
worth, a sign that some investors think these companies will
survive.
href='http://online.wsj.com/article/SB124562564321835575.html#mod=testMod'>Read
more. (Subscription required.)
Ruling Forced Chapter 11 Filing
Telecommunications holding company Metromedia
International Group Inc. has filed for bankruptcy protection, blaming
what it said was a “debilitating” $188 million judgment
entered against the company earlier in June stemming from a post-merger
appraisal dispute,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. The company said in court documents that
since 2005, all of Metromedia's operating businesses have been located
in the country of Georgia and operated through its subsidiaries and
affiliates. In an affidavit filed with the bankruptcy court, Metromedia
CFO Peter Nagle described a two-year battle Metromedia has waged in
Delaware Chancery Court, attempting to defend itself in an appraisal
action stemming from a 2007 merger deal brought by a group of preferred
shareholders against the company. Not only has the two-year legal fight
built up significant litigation costs, a $188 million judgment entered
against Metromedia on June 5 has finally pushed the company into chapter
11 protection, Nagle said.
href='http://bankruptcy.law360.com/articles/107192'>Read
more. (Subscription required.)
States Turning to Last
Resorts in Budget Crisis
With state revenues in a free fall and the economy
choked by the worst recession in 60 years, governors and legislatures
are approving program cuts, layoffs and, to a smaller degree, tax
increases that were previously unthinkable, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. All but four states must have new budgets in
place less than two weeks from now — by July 1, the start of their
fiscal year. However, most are already predicting shortfalls as tax
collections shrink, unemployment rises and the stock market remains in
turmoil. Even with the stimulus funds, political leaders in at least 19
states are still struggling to negotiate budgets. In all, states will
face a $121 billion budget gap in the coming fiscal year, according to a
recent report by the National Conference of State Legislatures, compared
with $102.4 billion for this fiscal year.
href='http://www.nytimes.com/2009/06/22/us/22states.html?hp=&pagewanted=print'>Read
more.
Looks to Wind Down
Construction materials manufacturer Propex Inc. filed
a liquidation plan and disclosure statement on Thursday laying out a
blueprint for winding down its estate, now that substantially all of its
assets have been sold to an affiliate of debtor-in-possession lender
Wayzata Investment Partners LLC,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. While the sale to Xerxes Operating Co. LLC
and Xerxes Foreign Holding Corp. disposed of pretty much all of Propex's
assets, some still remain, as well as about $4.8 million in cash,
according to the disclosure statement. The company said that the
competitive asset sale would allow the buyer to take on the debtors'
ongoing consumer and vendor obligations and would also make sure Propex
employees continued to work for the company.
href='http://bankruptcy.law360.com/articles/107319'>Read
more. (Subcription required.)
Union Oil Sues Pacific
Energy for Alaska Oil Profits
Union Oil Co. of California has filed an adversary
complaint against bankrupt Pacific Energy Resources Ltd. (PERL),
alleging that it deserves first priority to proceeds from two Alaskan
offshore oil fields because a PERL subsidiary owes it more than $26.3
million in unpaid operating expenses and expenditures,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on Friday.
In 1962, Union, Marathon Oil Co. and others entered into oil and gas
leases with Alaska for two oil fields in Cook Inlet, near Anchorage,
according to the suit. Union currently is the operator of both oil
fields, and after a series of acquisitions, PERL purchased 46.8 percent
of the working interest in the fields, the suit states. Union currently
prepares monthly invoices to send to other working interest owners in
the area, but a Pacific subsidiary fell behind on its payments in the
spring of 2008, according to the suit.
href='http://bankruptcy.law360.com/print_article/107345'>Read
more. (Subscription required.)
Former NFL Quarterback
Files for Bankruptcy
Former NFL quarterback Bernie Kosar filed for
bankruptcy protection on Friday in Florida, Bloomberg News reported on
Saturday. Kosar played for teams including the Cleveland Browns, Miami
Dolphins and Dallas Cowboys in an NFL career that spanned from 1985 to
1996. In chapter 11 documents filed yesterday in U.S. Bankruptcy Court
in Fort Lauderdale, Kosar listed debt of as much as $50 million and
assets of less than $10 million. Kosar holds the title of managing
member of two companies that also filed for bankruptcy, KHOC LLC and BJK
LLC. KHOC listed assets of as much as $50 million and debt of less than
$10 million. BJK listed assets of less than $10 million and debt of up
to $50 million. The 20 largest creditors without collateral backing
their claims are owed a total of $19.6 million, court papers
show.
href='http://www.bloomberg.com/apps/news?pid=20601079&sid=ao852irVHEeg'>Read
more.
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