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April 3, 2009
Legislation Introduced to Roll Back
Business Bankruptcy Code Reforms
As more businesses file for bankruptcy, Rep. Jerrold Nadler ( D-N.Y.)
introduced a bill yesterday that aims to roll back some of the
provisions of BAPCPA that many fear are making reorganization tougher in
the current economy, Bankruptcy
Law360 reported. The Business Reorganization and Consumer Protection
Act of 2009 primarily focuses on giving retailers more ammunition
against landlords to reject or accept leases and seeks to shorten the
time vendors can demand the return of their goods, among other
provisions. BAPCPA shortened the time that debtors had to reorganize
overall and gave landlords more power when it came to pressuring
retailers to assume or reject leases in addition to other measures. This
speedy timeline, combined with dismal market conditions, helped to put
the nail in Circuit City's coffin, according to
size='3'>Harvey
Miller of Weil Gotshal & Manges LLP, who testified at a
House Judiciary Committee hearing last month on the retailer’s
failure. Read
more. (Subscription required).
href='http://www.house.gov/apps/list/press/ny08_nadler/NadlerMovestoSaveRetailersFromForeclosure020409.html'>Click
here to read Nadler’s press release on the legislation.
Mortgage Delinquencies Reached Record Highs
in 2008
A report released today by the Office of the Comptroller of the
Currency and the Office of Thrift Supervision showed that the share of
U.S. home mortgages that were current and performing dipped below 90
percent for the first time in decades at the end of last year, the
face='Times New Roman'>Wall Street Journal reported. The share of
current and performing mortgages dropped from 93.3 percent at the end of
the first quarter of 2008 to 89.95 percent at the end of the year. Steps
by lenders to help borrowers avoid foreclosure, including loan
modifications, rose by more than 11 percent in the fourth quarter. 'This
new data shows that, in the current stressful environment, modification
strategies that result in unchanged or increased mortgage payments run
the risk of unacceptably high re-default rates,' said Comptroller of the
Currency John C. Dugan. The report, released by the Office of the
Comptroller of the Currency and the Office of Thrift Supervision, covers
nine large U.S. banks and four U.S. thrifts. Together, they represent
about two-thirds of all U.S. mortgages. Subprime loans continued to have
the highest concentration of serious delinquencies. They climbed to 16.4
percent at the end of last year from 10.75 percent at the end of the
first quarter. The percentage of Alt-A loans that were seriously
delinquent rose to 9.10 percent from 5.18 percent over that
period.
href='http://online.wsj.com/article/SB123875775797386333.html#mod=testMod'>Read
more. (Subscription required.)
Countrywide Settles Subprime Suit
Countrywide Financial Corp. and the state of New Jersey resolved
allegations that the mortgage lender put borrowers in risky subprime
loans, the Wall Street Journal
reported today. The judgment calls for a no-fee, streamlined
loan-modification program and sets aside $3.67 million for New Jersey
borrowers and for foreclosure-mitigation programs. Under the settlement,
Countrywide agreed to work with borrowers to modify loans and not to
begin foreclosure proceedings until it can be determined whether a
borrower is staying in his home. The lender will also give quarterly
reports to the state on the status of its modification program.
href='http://online.wsj.com/article/SB123870769965184019.html'>Read
more. (Subscription required.)
Autos
GM Willing to Consider
Bankruptcy
General Motors stated in a regulatory filing to the Treasury
Department yesterday that it is prepared to file for bankruptcy
protection if it cannot restructure out of court, the New York
Times reported today. It echoes what GM’s new chief executive,
Fritz Henderson, said this week, but marks the first time GM has
officially disclosed to President Obama’s auto task force that it
was willing to consider such a step. In the progress report included in
the regulatory filing, GM said it continued to “strongly
believe” that an out-of-court restructuring would be the
“highest value outcome” for its customers and the United
States. “However, if the changes needed for long-term
restructuring cannot be obtained out of court, the company is prepared
and would consider in-court options,” the company said. It said
that possibility “would be enhanced” by the Obama
administration’s recent pledge to guarantee warranties on GM
vehicles, and to “provide support for a rapid emergence from any
in-court process.”
href='http://www.nytimes.com/2009/04/03/business/03motors.html?_r=1&ref=business&pagewanted=print'>Read
more.
Obama Auto Team Seeks Delay on GM-Delphi
Deal
Amid a shake-up at General Motors Corp., President Obama's auto task
force has asked the judge overseeing Delphi Corp.'s bankruptcy case to
once again delay a decision regarding the auto parts supplier's bid to
sell its steering business to GM, its former parent company,
face='Times New Roman'>Bankruptcy Law360 reported yesterday. The
task force asked Bankruptcy Judge
face='Times New Roman' size='3'>Robert Drain to postpone a
decision until April 30, marking the second time the group has asked for
a delay in the hearing. In February 2008, Judge Drain approved the $447
million sale of Delphi's global steering and half-shaft business to
Steering Solutions Corp., an affiliate of Platinum Equity LLC, over the
objections of more than 15 Delphi creditors. The parties later mutually
terminated the deal. Under the option exercise agreement for the
steering unit, GM has agreed to increase its commitment to Delphi to
$450 million from $300 million.
href='http://bankruptcy.law360.com/articles/95202'>Read more.
(Subscription required.)
Collapses, Excess Inventory Creates a Backlog
A car supply backlog exists due to some of the same factors that
contributed to the collapse of the housing bubble, namely cheap credit,
easy financing, excessive production and consumers buying more than they
could afford, the Washington Post
reported today. 'There was a car bubble,' Steven Rattner, who President
Obama recruited to head a Treasury Department group charged with finding
solutions to the mountain of problems facing the American auto industry,
said last month. 'We had this artificially high sales rate.' During the
boom years of the early and mid-2000s, automakers were selling more than
16 million cars a year in the United States. They are on pace to sell
fewer than 10 million this year. General Motors posted a 44.5 percent
drop in March compared with the same month a year ago. Ford's sales
tumbled 41.3 percent. Chrysler's fell 39.3 percent. Toyota's sales fell
39 percent, and Honda's dropped 36.3 percent.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/02/AR2009040204184_pf.html'>Read
more.
Ex-Chairman of AIG Says Bailout Has
Failed
American International Group’s former CEO Maurice R. Greenberg
testified yesterday before the House Oversight and Government Reform
Committee that the government’s $170 billion bailout had failed
and that taxpayers would have been better off letting the company go
bankrupt, the New York Times
reported today. “It is clear that the current approach has not
worked and cannot work in today’s environment,” said
Greenberg, who was dismissed in 2005 “AIG, in my judgment, in the
current plan, will not pay the taxpayers back.” Refusing to accept
any personal blame for his former company’s collapse, Greenberg
insisted that AIG’s problems stemmed from mismanagement after he
left and that the Treasury and Federal Reserve had made things worse by
trying to break the business up and sell it off in pieces.
href='http://www.nytimes.com/2009/04/03/business/03aig.html?ref=business&pagewanted=print'>Read
more.
Hurricanes, Oil Prices Force Saratoga into
Chapter 11
A loss in revenue in the wake of hurricanes Ike and Gustav and a
sharp decline in energy prices have prompted oil and gas exploration
company Saratoga Resources Inc. and certain operating subsidiaries to
file for bankruptcy, Bankruptcy
Law360 reported yesterday. The Austin, Texas-based company filed for
chapter 11 protection on Tuesday, listing assets of $169.3 million and
$110.6 million in debt. Saratoga said in a statement that it had cash of
about $4.7 million, which it expects will be enough to operate its
business in the immediate term. It is in discussions with a senior
secured lender for new debtor-in-possession financing to supplement its
working capital.
href='http://bankruptcy.law360.com/articles/95150'>Read
more. (Subscription required.)
Hearst Makes Headway on Cost-Cutting at
Chronicle
Hearst Corp. is making significant headway on cost-cutting measures
at its San Francisco Chronicle
newspaper, a top Hearst executive said yesterday, suggesting that the
company may not follow through on threats to close the daily newspaper,
the Wall Street Journal reported today. Hearst warned in late
February that it would sell or close the money-losing Chronicle
unless it could secure steep cost savings 'within weeks.' Since then,
the Chronicle's largest union has agreed to contract concessions,
including the departure of about 150 staffers. The Chronicle's
workforce numbers about 1,500 people. The paper continues negotiations
with another union.
href='http://online.wsj.com/article/SB123872376782485335.html#mod=testMod'>Read
more. (Subscription required.)
U.S. Office Vacancies Hit 15.2 in First
Quarter
A report released today by Reis Inc., a commercial property tracking
firm, showed that companies, struggling to cut costs, dumped a
near-record 25 million square feet of office space in the first quarter,
driving vacancy up and rents down, according to the Wall Street
Journal. The office vacancy rate nationwide rose to 15.2 percent
from 14.5 percent in the previous quarter, and likely will surpass 19.3
percent over the next year, according to Reis, a New York firm that
tracks commercial property. That would put the vacancy rate above the
level during the real-estate bust of the early 1990s, the worst on
record. Effective rents, which include free rent and other landlord
concessions, fell 2 percent in the first quarter to a national average
of $24.16, the largest drop since the first quarter of 2002, according
to Reis. Sublet space, on average, is going for between 10 percent and
15 percent less than what landlords are charging. Rea
href='http://online.wsj.com/article/SB123871502874584537.html'>d
more. (Subscription required.)
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