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August 10, 2007
id='1'>Study: Credit Card Companies Target Consumers Fresh from
Bankruptcy
A study by a
size='3'>University of
size='3'>Iowa
size='3'>professor found that credit card companies target people fresh
out of bankruptcy with credit offers, a finding that raises questions
about the industry’s efforts to paint bankruptcy filers as
“untrustworthy deadbeats,” the Des Moines
Register reported today. The study by
Katherine Porter, an associate professor of law at the
w:st='on'>
size='3'>University
size='3'>Iowa
that nearly 100 percent of more than 300 families surveyed had been
offered credit cards within a year after completing chapter 7 bankruptcy
proceedings. Of 341 families solicited, 87.7 percent received credit
card offers that mentioned their recent bankruptcy filings. More than 20
percent were solicited by creditors whose debt had been discharged
through the bankruptcy. Porter’s research, based on interviews
with the families at the one- and three-year mark after their
bankruptcies ended, found that consumers who’ve erased their debt
through chapter 7 bankruptcy received more credit offers than those who
repaid their debts over time after filing for chapter 13
protection.
href='http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20070809/BUSINESS/70809038'>Read
more.
Private
Equity
id='2'>President Bush 'Very Hesitant' to Change Tax Treatment of
Private Equity Managers
President Bush today said
he is 'very hesitant' about congressional proposals to change the tax
treatment of private equity and hedge fund managers, saying he was
worried that such legislation could harm small businesses that are
structured as partnerships,
size='3'>CongressDaily reported yesterday.
Bush’s comments amplified previous statements by Treasury
Secretary Paulson criticizing proposals that have been put forward by
House and Senate Democrats and Senate Finance ranking member Charles
Grassley (R-Iowa). The House bill by Rep. Sander Levin (D-Mich.) would
tax the 'carried interest' of fund managers at ordinary income tax rates
up to 35 percent, instead of the 15 percent capital gains rate managers
now pay on those profits. The more-targeted Senate bill would apply only
to publicly traded firms such as the Blackstone Group and Kohlberg,
Kravis and Roberts, and would tax those firms as corporations rather
than partnerships. Bush said that any administration proposal to cut
corporate taxes would have to be revenue neutral and indicated it is not
clear that such a proposal would be offered in the first
place.
id='3'>Bankrupt Bear Stearns Funds Get Injunction
Two insolvent Cayman
Islands-based Bear Stearns & Co. Inc. hedge funds were granted their
request by Bankruptcy Judge
size='3'>Burton R. Lifland yesterday for a
preliminary injunction halting any pending lawsuits in the U.S. and
barring the commencement of any new suits, Bankruptcy
Law360 reported yesterday. The funds requested
the protection when they filed for chapter 15 on July 31, after filing
the necessary liquidation proceedings in a
w:st='on'>
size='3'>Cayman Islands court. The
hedge funds sought the temporary restraining order and the injunction in
order to protect themselves from creditors who might file lawsuits and
seek to seize the funds’
w:st='on'>
size='3'>U.S.
size='3'>assets. Both funds listed debts and assets in excess of $100
million in their bankruptcy petitions. The cases are
face='Times New Roman' size='3'>In re Bear Stearns High-Grade Structured
Credit Strategies Master Fund Ltd., case
number 07-12383 and In
re Bear Stearns High-Grade Structured Credit Strategies Enhanced
Leveraged Master Fund Ltd., case number
07-12384 in the U.S. Bankruptcy Court for the Southern District of New
York.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32095'>Read
more. (Registration required.)
Mortgage
Turmoil
id='4'>Mortgage Losses Echo in
face='Times New Roman' size='3'>Europe
size='3'>and on Wall Street
Turmoil in the home loan
market ricocheted from the United States to Europe and back again
yesterday as stocks on Wall Street suffered their biggest one-day
decline since February, reflecting growing concerns about tightening
credit worldwide, the
size='3'>New York Times reported today. Big
losses on packages of American home loan securities sold to investors
turned up unexpectedly in French and Dutch banks yesterday, adding to
worries at hedge funds and financial institutions around the globe. With
trillions of dollars of securities outstanding, those announcements
raised expectations that more problems may soon emerge in other unlikely
places as well. The spreading fears forced the European Central Bank
and, later, the Federal Reserve to inject billions of dollars into the
financial system to help prevent borrowing and lending in credit markets
href='http://www.nytimes.com/2007/08/10/business/10markets.html?ref=business&pagewanted=print'>Read
more.
id='5'>Regulators Comb Books of Wall Street Firms for Subprime
Losses
The SEC is looking into
whether Wall Street brokers are using consistent methods to calculate
the value of subprime-mortgage assets in their own inventory, as well as
assets held for customers such as hedge funds out of concern that the
firms may not be marking down their inventory as aggressively as assets
held by clients, the
size='3'>Wall Street Journal reported today.
While the issue is a technical one, and such checks occur routinely, it
is sensitive for the markets now as a few big Wall Street firms have
reported big subprime losses despite the turmoil roiling the markets.
SEC checks are expected to include the top
w:st='on'>
size='3'>five Wall Street
size='3'>firms and the securities units of major commercial banks. Among
the first firms to be looked at are Goldman Sachs Group Inc. and Merrill
Lynch &
size='3'>Co.
investors have raised questions about whether firms have experienced
as-yet-unreported losses in markets such as subprime mortgages and
collateralized-debt obligations. The checks may also yield information
about whether the hedge funds themselves have reported their results
accurately to investors.
href='http://online.wsj.com/article/SB118671258265093971.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
id='6'>German Bank Ensnared by
w:st='on'>
size='3'>U.S.
size='3'>Subprime Downturn
IKB Deutsche
Industriebank is being bailed out to cover for losses it experienced
from investments in the
w:st='on'>United
States
subprime mortgage market, the
size='3'>Wall Street Journal reported today.
The bailout was organized over a weekend of emergency meetings by
size='3'>Germany
size='3'>'s financial regulator with contributions from major German
banks. To rally the banks, the lead German regulator warned that they
needed to head off the risk of what could become the country's worst
financial crisis since the 1930s. The safety net for IKB consists of
about €3.5 billion, or $4.789 billion, available now to cover
possible losses, plus a further financial backstop of €14.6
billion to keep afloat IKB and the affiliate that invested in
fixed-income securities. The case shows how quickly global investors'
abrupt new appreciation of credit risk can ricochet around the world. As
some strapped homeowners in the
w:st='on'>
size='3'>U.S.
their monthly mortgage payments, among those touched by their defaults
are institutions in
size='3'>Europe that borrowed to buy
bonds backed by the mortgages. Their troubles, in turn, affected others
in the market and injected worry into markets for even some safe
securities.
href='http://online.wsj.com/article/SB118670471880693703.html?mod=hpp_us_pageone'>Read
more. (Registration required.)
id='7'>Commentary: Can International Regulators Contain the Subprime
Crisis?
As
w:st='on'>
size='3'>France
largest bank, BNP Paribas, suffers from the subprime mortgage market
downturn that has sent global equities into a swoon, many are
questioning if the world's regulators and central bankers know how to
contain this incipient financial panic, according to a commentary in
today’s Wall
Street Journal. The European Central Bank took
a sensible step yesterday, pumping €94 billion of short-term
liquidity into the system. This lender-of-last-resort role is
appropriate for a central bank when credit markets seize up, as they did
yesterday after BNP Paribas froze three of its asset-backed securities
funds. Several other European banks have also reported losses from the
subprime debt market, and amid so much uncertainty a surprise like the
one at Paribas can all too easily trigger a full-fledged global run.
The
face='Times New Roman'
size='3'>U.S.
size='3'>subprime market is the heart of the problem, but financial
innovation has spread the risk around the world in a way that wasn't
possible a generation ago. The subprime mess doesn’t need to
derail the global economy, and it is less likely to do so if Paribas and
the other hedge fund operators meet their obligations.
href='http://online.wsj.com/article/SB118669529375093479.html?mod=Leader-US'>Read
more. (Registration required.)
id='8'>Commentary: Getting the Subprime Rescue
Right
When lawmakers return
to
size='3'>Washington,
w:st='on'>
size='3'>D.C.
September, they must complete legislation to help states and localities
provide the ever-increasing numbers of at-risk borrowers with assistance
in modifying their loans, according to a
size='3'>New York Times editorial today. Help
has been slow in coming for the estimated 1.7 million people who will
lose their homes to foreclosure this year and next. A modest bill to
bolster funds for state, local and nonprofit agencies that help
hard-pressed homeowners renegotiate their mortgages and restructure
their debts has been winding through the Senate since April, and it
won’t be passed until October at the earliest if ever. Earlier
this week, Sen.
size='3'>Chris
(D-Conn.), another Democratic presidential hopeful, and Sen. Charles
Schumer (D-N.Y.), called on federal regulators to ease restrictions so
that Fannie Mae and Freddie Mac can buy more mortgages and
mortgage-related securities from lenders. What is absolutely crucial,
however, is that Fannie Mae and Freddie Mac be required to use that
enhanced capacity to help homeowners who are in distress.
href='http://www.nytimes.com/2007/08/10/opinion/10fri1.html'>Read
more.
face='Times New Roman' size='3'>
id='9'>State
Bankruptcy Proceeding
The Washington State Supreme
Court ruled yesterday that Todd Shipyards Corp. can't be sued for a
deceased worker's asbestos exposure because the man missed a filing
deadline in a 20-year-old bankruptcy proceeding, the Associated Press
reported yesterday. In a unanimous ruling, the court said Todd gave the
late Roger Herring sufficient warning about its 1987 chapter 11
bankruptcy filing when it published notices in several
newspapers. Todd filed for chapter 11 in 1987and the bankruptcy
court set a 1988 deadline for filing claims, and Todd sent a written
notice to its known creditors. In 1989, Herring's previously diagnosed
lung thickening developed into asbestosis, or lung scarring. He sued
several manufacturers of products that contain asbestos, but did not sue
Todd, which emerged from bankruptcy that year. Herring was diagnosed
with the asbestos-linked lung cancer mesothelioma in 2002. He filed a
lawsuit based on the diagnosis, and Todd was among the defendants. The
company was not previously aware of Herring's claims.
href='http://www.columbian.com/news/state/APStories/AP08102007news180971.cfm'>Read
more.
id='10'>Collins & Aikman Wins Chapter 11
Extension
Bankruptcy Judge
Steven Rhodes
size='3'>granted Collins & Aikman's request to keep its chapter 11
case open for another six months,
size='3'>Bankruptcy Law360 reported yesterday.
Collins & Aikman filed an ex parte motion with the U.S.
Bankruptcy Court for the Eastern District of Michigan on Tuesday,
seeking until Feb. 28, 2008, to fight anticipated administrative claims
against the company on its planned exit from bankruptcy at the end of
August. Although the auto parts maker said that it expected to
consummate the sale of its carpet and accoustics business and emerge
from bankruptcy on or around Aug. 31, it would need another six months
from the scheduled closing date of Aug 18 to “effectuate certain
actions related to, or arising from” its chapter 11 case.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32042'>Read
more. (Registration required.)
id='11'>Bayou Group Nets $8.2 Million in Settlements
Bayou Group LLC has
agreed to settle 36 adversary proceedings it brought against investors
that pulled their money out of Bayou before it collapsed, exposing it to
what Bayou's attorneys have termed a “fraudulent Ponzi
scheme,”
size='3'>Bankruptcy Law360 reported yesterday.
The settling defendants, which were advised by Altegris Investments
Inc., invested a total of almost $12 million in Bayou's private pooled
investment funds and pulled out approximately $14.4 million, including
about 2.4 million in “fictitious profits,” according to
documents. Under the agreements, each settling defendant will pay an
amount equal to 50 percent of their principal investment, and 100
percent of the purported profits on those investments, for a total of
about $8.2 million.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32010'>Read
more. (Registration required.)
id='12'>Judge Approves Calpine Settlement with
Lenders
Judge
face='Times New Roman' size='3'>Burton R. Lifland
size='3'>signed off on a $100 million settlement between Calpine Corp.
and its second-lien lenders, saying the deal is in the troubled power
company's best interests,
size='3'>Bankruptcy Law360 reported yesterday.
The shareholders’ committee, among others, had filed objections to
the deal, saying that the lenders were not entitled to damages, and that
the proposed $100 million deal wouldn't actually benefit the debtors, as
lenders would still retain all rights to claims. The deal, which aimed
to appease lenders that wanted $288 million in damages, is particularly
troubling for shareholders since it comes on the heels of Calpine's June
filing of its reorganization plan and disclosure statement. The plan
estimated that the reorganized company would have a midpoint
reorganization value of $21.7 billion, including about $1.4 billion in
distributable cash, and that shareholders would receive about $1.80 per
existing share of Calpine stock.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=32009'>Read
more. (Registration required.)
id='13'>Retailers Report Disappointing Sales Figures for
July
As retailers reported
generally disappointing July sales results yesterday, it was clear that
the weakening housing market and more expensive gas had shoppers
limiting their trips to the mall, the Associated Press reported
yesterday. But analysts say stores cannot blame economic conditions for
all their problems. According to the
International Council of Shopping Centers-UBS preliminary tally of 48
stores, July results were up 2.6 percent, compared with the 3.9 percent
gain in the year-ago period. The tally is based on same-store sales, or
sales at stores open at least a year, which are considered a prime
barometer of a retailer’s health. The picture was made more
complicated because of quirks in the retail calendar. Sales for the
first week of August, a key back-to-school week, were reported in the
July period, which helped raise July figures but should reduce business
for August. And results were depressed by a shift in a tax-free sales
week to August in two critical states,
face='Times New Roman' size='3'>Florida
size='3'>and
face='Times New Roman'
size='3'>Texas
analysts say helped delay shopping.
href='http://www.nytimes.com/2007/08/10/business/10shop.html?ref=business&pagewanted=print'>Read
more.
International
id='14'>U.S. Judge Dismisses Two Lawsuits over Parmalat
Collapse
A
size='3'>U.S.
complaints by two former subsidiaries of Parmalat SpA
size='3'>against several banks and accounting firms over the Italian
dairy company's 2003 collapse in
face='Times New Roman' size='3'>Europe
size='3'>'s largest bankruptcy, Reuters reported today. U.S. District
Judge Lewis Kaplan in
w:st='on'>
size='3'>Manhattan
size='3'>yesterday dismissed the second amended complaints in cases
filed by the two companies, Parmalat USA Corp and Farmland Dairies LLC.
The defendants included Bank of America Corp., Credit Suisse and
size='3'>Italy's
Banca Nazionale del Lavoro and Banca Intesa, as well as accounting firms
Deloitte Touche Tohmatsu and Grant Thornton International. The two
companies had alleged that the banks and accounting firms helped conceal
Parmalat's true financial condition, according to the ruling. Parmalat
collapsed under about 14 billion euros ($19.15 billion) of debt after
uncovering a 4 billion euro ($5.47 billion) hole in its accounts. It
emerged from bankruptcy in 2005.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/10/AR2007081000523.html'>Read
more.
id='15'>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.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
size='3'>Code 37
APAC Customer Sercvices
Inc., a
face='Times New Roman' size='3'>Deerfield
face='Times New Roman'>, Il. firm which provides
outsourced customer-management and acquisition services by Internet and
phone, reported a second quarter net loss of $5.4 million, including
charges of $1.6 million. The results compare with a loss of nearly
$800,000 for the same period one year earlier. Revenue declined
8%–to $53.8 million.
Atlas Pipeline Holdings
LP, a
face='Times New Roman' size='3'>Moon
size='3'>Township
size='3'>Pa.
size='3'>natural gas services firm and subsidiary of Atlas Pipeline
Partners LP, reported a second quarter net loss of $1.5 million, which
compares to income of $4.5 million for the same period one year earlier.
Revenue declined 13%–to $95.2 million.
Atlas Pipeline Partners
LP, a
face='Times New Roman' size='3'>Moon
size='3'>Township
size='3'>Pa.
size='3'>operator of natural gas gathering systems, reported a second
quarter net loss of $28.7 million. The results compare with income
of $5.3 million for the same period one year earlier. Revenue
declined 13%–to $95.4 million.
Caraustar Industries
Inc., an Austell,
w:st='on'>
size='3'>Ga.
size='3'>paperboard manufacturer, reported a second quarter net loss of
$2.3 million, including charges of $3.7 million related to impairments
and restructuring. The results compare with a loss of $15.8
million for the same period one year earlier, including a gain of $135.2
million from the sale of the firm’s interest in Standard Gypsum
LP. Sales for the most recent quarter declined 10%–to $235.6
million.
Catalina Marketing
Corp.,
w:st='on'>St.
Petersburg
size='3'>, Fl., reported its second quarter net income declined
74%–to $3.7 million. Revenue declined 22%–to $117
million.
EMAK Worldwide
Inc., a
w:st='on'>Los
Angeles
size='3'>, Ca. marketing services firm, reported a second quarter net
loss of $1.8 million. Revenue declined more than 1%–to $39.5
million.
Ford Motor
Co.,
Dearborn, Mi., joined a chorus of North American automakers that are
warning of slower-than-expected sales this year and said that it might
reduce production this year instead of offering low-cost financing or
other incentives. Also, Ford reported second quarter net income of $750
million, including $443 million in pretax gains. Sales increased nearly
6%–to $44.2 billion.
Genesis Energy
LP, a
Houston, Tx. firm which transports crude oil, reported a second quarter
net loss of $1.4 million. The results compare with income of $3.4
million for the same period one year earlier. Revenue declined
14%–to $201 million.
Gray Television
Inc., an
w:st='on'>
size='3'>Atlanta,
w:st='on'>
size='3'>Ga.
size='3'>firm which is the largest CBS-affiliated independent television
station operator, reported a second quarter net loss of $10 million.
The results compare with income of $4.3 million for the same
period one year earlier. Revenue declined 2%–to nearly $80
million.
Industrial Distributing
Group Inc.,
w:st='on'>
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
size='3'>, reported its second quarter net income tumbled 97%–to
$50,000. Revenue declined 3%–to $133 million.
Multi-Fineline Electronix
Inc.,
size='3'>Anaheim
Ca., reported a second quarter net loss of $6.7 million, including a
$7.8 million acquisition-related expense. Revenue declined
20%–to $104 million.
Openwave Systems
Inc., a
w:st='on'>Redwood
City
size='3'>, Ca. wireless-applications protocol technology firm, reported
a second quarter net loss of $91.8 million. The results included $17.5
million in charges related to restructuring and the sale of technology.
Revenue declined 18%–to $68.1 million.
Rogers
Corp., a
w:st='on'>
size='3'>Rogers,
w:st='on'>
size='3'>Ct.
size='3'>firm which manufactures specialty materials, reported a second
quarter net loss of $4.3 million, which included restructuring charges
of $12.9 million. The results compare to income of $4 million for the
same period one year earlier, including impairment charges of $11.3
million. Revenue for the most recent quarter declined more than
5%–to $99 million.
Sun-Times Media Group
Inc., the
w:st='on'>
size='3'>Chicago
w:st='on'>
size='3'>Il
publisher, reached an agreement with crosstown rival
face='Times New Roman' size='3'>Tribune Co.
face='Times New Roman'>, which will take over delivery of
not only the Sun-Times daily but also ten suburban newspapers. Details
were unclear, but Sun-Times Media, minus fees to be paid to Tribune Co.,
could save $5 million a year in delivery costs. Sun-Times recently
reported a second quarter operating loss of more than $80 million, while
overall revenue was down 12%–to $94.3 million.
Toll Brothers
Inc., a
Horsham, Pa.-based builder of luxury homes, warned that it will report a
21% drop in sales, to about $1.2 billion, in the third quarter amid
rising cancellations in the tough housing and mortgage market. The
firm, which declined to provide earnings guidance, will file its
earnings report on 8/22.
Walter Industries
Inc., a
w:st='on'>
size='3'>Tampa
size='3'>, Fl. firm providing mortgages, home building and natural
resources services, reported its second quarter net income declined
72%–to
$18.1 million. Revenue declined 7%–to $297 million.