September 42008

 

GMAC Mortgage Unit to Dismiss 5,000,
Shut 200

Offices
GMAC LLC and its Residential Capital LLC home loan unit said they plan
to dismiss 5,000

employees, or 60 percent of the unit's staff, and close all 200 GMAC
Mortgage retail offices

because of weak real estate markets, Bloomberg News reported yesterday.
Loans originated by

outside brokers through Minneapolis-based ResCap's Homecomings unit will

cease, business

lending will be curtailed and parts of the company may be sold. GMAC
lost $5.4 billion over the

past year, and ResCap's losses in the last seven quarters total $7.2
billion. GMAC arranged a

$60 billion refinancing in June to keep ResCap from bankruptcy. 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=abppYTSY8r.A&refer=home'>Read

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U.S. Trustee Objects to NetBank
Liquidation Plan

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U.S. Trustee Donald F. Walton objected to NetBank Inc.'s proposed
liquidation plan, saying

that it would clear officers, directors, advisers, attorneys and agents
of NetBank, its

creditors' committee and trustees of all liabilities connected to the
bankruptcy, Bankruptcy

Law360 reported yesterday. The releases go beyond those allowed by
bankruptcy law, and the plan

can therefore not be confirmed in its present form, Walton said.
NetBank's liquidation plan,

filed in May and amended slightly in July, provides that priority
claims, including employee

compensation, are unimpaired. Holders of unsecured claims and trust
preferred claims - which

arise from certain indenture agreements - would receive pro rata shares
of the funds available

from the company's liquidation. The case is In re NetBank Inc.,

case number 07-04295,

in the U.S. Bankruptcy Court for the Middle District of Florida. 

href='http://bankruptcy.law360.com/articles/68055'>Read
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Mervyn's Sues Target, Three Other
Firms over Alleged

Fraud
Department store operator Mervyn's has sued three private equity firms
and Target Corp.,

alleging that the leveraged buyout of the chain from Target was a
fraudulent deal that stripped

Mervyn's of valuable real estate and led it to file for bankruptcy, Dow
Jones News reported

yesterday. The retailer said that the private investors financed the
2004 takeover with $800

million borrowed against Mervyn's real estate, then leased the
properties back to Mervyn's at

'substantially increased rates.' Cerberus Capital Management, Sun
Capital Management and

Lubert-Adler have taken $400 million out of the company since acquiring
it in 2004, leaving it

struggling to pay creditors, Mervyn's said in papers filed Tuesday with
the U.S. Bankruptcy

Court in Wilmington, Del. 

href='http://www.startribune.com/business/27838769.html?elr=KArks7PYDiaK7DUdcOy_nc:DKUiD3aPc:_Y

yc:aUU'>Read more.

Judge Extends Deadlines in Whitehall
Bankruptcy

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Bankruptcy Judge Kevin Gross on Tuesday signed orders
in Whitehall Jewelers

Inc.'s bankruptcy case that will extend the challenge period for the
unsecured creditors'

committee and stretched a debtor-in-possession financing interim order,
Bankruptcy

Law360 reported yesterday. The first order granted a fourth
extension to the DIP interim

financing order that was first filed July 18. Judge Gross extended that
financing order through

Sept. 23 and scheduled a hearing for Sept. 12 to consider entry of the
final order and final

approval of the DIP facility. Judge Gross also agreed to a stipulation
filed by the unsecured

creditors' committee to extend the challenge period to Oct. 23 for the
committee that was set

in the original DIP interim financing order. 

href='http://bankruptcy.law360.com/articles/68063'>Read
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Delphi Faces Counterclaims from
Appaloosa-Led

Group
Hedge fund Appaloosa Management and other investors that pulled out of a

deal to invest $2.55

billion into Delphi Corp. say the auto-parts supplier has to pay them an

$82.5 million fee plus

expenses, the Wall Street Journal reported today. The
Appaloosa-led group said in

court papers that they're entitled to the fee plus the expenses they
incurred because Delphi

violated terms of the investment agreement earlier this year. That
agreement was slated to be

the backbone of Delphi's plan to exit bankruptcy before it fell apart.
Delphi and the investors

are now fighting in court over whether the Appaloosa-led group will have

to follow through with

the equity investment. 

href='http://online.wsj.com/article/SB122048711461497247.html?mod=us_business_whats_news'>Read

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Midwest Air Works to Avoid Bankruptcy
Filing
Midwest Air Group Inc., which has been working on a turnaround plan,
said it has made

'significant progress' in its efforts to avoid filing for bankruptcy
protection, the Wall

Street Journal reported today. The moves include raising $60
million in new capital and

reaching an agreement in principle to trim its fleet and hire an outside

carrier to fly on its

behalf. Midwest said it landed $60 million from TPG, Northwest Airlines
and Republic Airways

Holdings Inc. As part of the deal, Republic entered into an agreement to

operate 12 76-seat

regional jets for Midwest, starting on Oct. 1. Republic said it made a
one-year, secured $15

million loan to Midwest, and will provide an additional $10 million if
certain milestones are

achieved. 
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more.

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Two Former Credit Suisse Brokers
Accused of Securities

Fraud
Former Credit Suisse brokers Eric Butler and Julian Tzolov were indicted

yesterday on

securities fraud and other charges, accused of selling customers some of

collateralized debt

obligations (CDOs) in what federal prosecutors characterize as a $1
billion bait-and-switch,

the New York Times reported today. The U.S. Attorney's
office in Brooklyn said

that the pair, who formerly worked at Credit Suisse Securities, sold
corporate clients

securities backed by CDO's, subprime mortgages and mobile-home
contracts, but told the

investors they were buying investments linked to safe student loans.
Authorities say that the

scheme was designed to reap high commissions. 

href='http://www.nytimes.com/2008/09/04/business/04auction.html?_r=1&oref=slogin&ref=bu

siness&pagewanted=print'>Read more.

Former SEC Chairman Urges Greater
Disclosure in Municipal

Bond Market
Former SEC chairman Arthur Levitt Jr. said yesterday that the U.S.
municipal bond market needs

greater Securities and Exchange Commission oversight to address a
“pretty

outrageous” lack of disclosure, Bloomberg News reported yesterday.

More than half of

long-term municipal bonds issued between 1996 and 2005 were delinquent
in filing continuing

financial disclosure documents for at least one year, based on a study
released yesterday by

Fort Lee, N.J.-based DPC Data. Current SEC Chairman Christopher Cox has
said that improving

municipal market disclosure is a priority. House Financial Services
Committee Chairman Barney

Frank (D-Mass.) also said that the committee would hold hearings on
disclosure this

month. 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ae.EH.V7L5vI&refer=home'>Read

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Consumer-Spending Slowdown Weighs on
Economy
Federal Reserve reports released yesterday show that consumer spending
across the country is

weakening, while price pressures continue to plague a wide swath of
industries, the Wall

Street Journal reported today. The Fed's 'beige book,' a survey of
economic conditions

from the 12 regional Fed banks released every six weeks, shows that
economic activity has

weakened across most of the country since late July. Businesses reported

a notable slowdown in

consumer spending, the largest driver of U.S. economic growth. All the
districts also reported

that loan standards were tightening since the previous report. 

href='http://online.wsj.com/article/SB122046433220095793.html?mod=hpp_us_whats_news'>Read

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International

Creditor Calls on U.K. Debtors
Increase by Nearly 20

Percent
The number of creditors appealing to the U.K. courts to
try and get their money

back from people they believe are on the verge of bankruptcy increased
by 18 percent last

quarter, Accountancy Age reported yesterday. Creditors launched

5,625 bids to have

individuals declared bankrupt between April and the end of June, the
U.K. Ministry of Justice

said. Further breakdowns showed that creditors had issued 2,927 company
winding-up petitions in

the courts, an increase of 11 percent on the petitions in the same
quarter of 2007. There were

officially 24,553 individual insolvencies pushed through in England and
Wales in the second

quarter of 2008 according to the Insolvency Service. 

href='http://www.accountancyage.com/accountancyage/analysis/2225278/bankruptcy-calls-debtors-ro

cket'>Read more.