March 1, 2010
Senate Renews Effort to Reach Consensus on Financial Regulation
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) met this weekend with Sen. Bob Corker (R-Tenn.) with the hopes of coming up with a 'consensus package' that would have at least some Republican support, the New York Times reported today. While Dodd has indicated a willingness to give ground on several aspects of the consumer financial protection agency proposal, those concessions have not been enough to gain the backing of Sen. Richard C. Shelby (R-Ala.), the senior Republican on the committee. Rather than a stand-alone agency, Dodd proposed creating a Bureau of Financial Protection within the Treasury Department. The bureau would have an independent director, appointed by the president, and a budget financed by fees from large banks and other lenders. Opponents of the consumer agency say that it would interfere with the duty of regulators to ensure the 'safety and soundness' of banks, savings and loan associations, and credit unions. To address those concerns, the Dodd proposal would require the bureau to consult with other regulators before issuing rules, and to make public any objections raised by those regulators, along with an explanation of how the bureau addressed the concerns or why it went ahead anyway. Read more.
Philadelphia Newspapers Concerned about Pace of Appeal
The publisher of the Philadelphia Inquirer and Philadelphia Daily News argued on Friday that the slow-moving appeal of the company's sale is jeopardizing its chapter 11 reorganization, the Deal Pipeline reported on Friday. An auction of the papers is on hold while the U.S. Court of Appeals for the Third Circuit considers a dispute over rules of the sale. Philadelphia Newspapers LLC argued in the letter to the U.S. Bankruptcy Court for the Eastern District of Pennsylvania that 'the passage of time is now a threat to the debtors' ability to reorganize.' The debtor and its pre-bankruptcy lenders have litigated over the banks' right to use their secured claims in a credit bid for the company. Bankruptcy Judge Stephen Raslavich ruled that the banks could submit a credit bid in October, but the District Court overturned the decision in November. The lenders appealed to the Third Circuit, which heard arguments in mid-December but has yet to rule. The debtor requested a bankruptcy court status conference to discuss a schedule that would allow it to exit bankruptcy protection before June.
MediaNews Parent to Seek Approval of Bankruptcy Plan
MediaNews Group Inc.'s parent will seek court approval on Thursday of a restructuring plan that would allow the publisher of the Denver Post, San Jose Mercury News and dozens of other daily papers to exit bankruptcy, Dow Jones Daily Bankruptcy Review reported today. Holding company Affiliated Media Inc. is set to ask Bankruptcy Judge Kevin Carey to sign off on its reorganization plan, paving the way for the company's exit from bankruptcy protection. The company filed for chapter 11 earlier this year after reaching a deal with its lenders on a plan that cuts its debt by about $750 million. Lenders led by Bank of America Corp., owed $590 million, would exchange their debt for a majority stake in the reorganized newspaper publisher and a new $150 million loan.
Commentary: Administration Should Look to Retool Antiforeclosure Program
President Obama's $1.5 billion effort to prevent foreclosures in five states hard-hit by the housing bust -- Nevada, Arizona, California, Florida and Michigan -- must be implemented quickly and possibly serve as a blueprint for the nation, according to a New York Times editorial today. The program for the five states would feed money into programs that would be developed and carried out by the housing agencies in the targeted states. The administration's $75 billion national antiforeclosure program, which subsidizes lenders to rework bad loans, does not work well for jobless and underwater borrowers because it focuses on lowering the monthly payment by reducing the interest rate of the mortgage. Unemployed homeowners often cannot make even reduced payments and underwater borrowers need principal reductions to succeed over the long run, not lower rates, according to the editorial. The administration has resisted calls to revamp its program, citing cost and complexity. Another obstacle is that banks are generally loath to modify loans by reducing principal, which would require them to take big upfront losses that they would prefer to postpone. Read more.
White Birch Wins Court Approvals to Tap $140 Million Bankruptcy Loan
White Birch Paper Co., one of the largest newsprint manufacturers in North America, won court approvals to tap a $140 million loan as it works to restructure in bankruptcy, Dow Jones Daily Bankruptcy Review reported today. The company said that it has access to $104 million of the loan after judges in the U.S. and Canada signed off on the financing at court hearings last week. The loan pays the London interbank offered rate with a floor of 2 percent, plus an additional 10 percent, according to court documents. White Birch said in court papers that without the loan, it would have to 'curtail or even terminate' its operations. Credit Suisse Group, one of White Birch's existing lenders, is the lead lender for the bankruptcy loan, which will be used to support the company's operations while in bankruptcy.
Judge Considers Fraud Charges against Blixseth
The actual size of Yellowstone Club founder Tim Blixseth's fortune could soon come to light as a a judge considers whether the high-flying real estate developer took hundreds of millions of dollars in a fraud scheme that left the exclusive resort broke, the Associated Press reported on Friday. Creditors trying to recoup $286 million from Blixseth are already putting together their own list of Blixseth's assets: estates, land, companies and goods that they say were all funded by fraudulent transfers out of the Yellowstone Club. A full list of those assets was given to the court Friday, and Bankruptcy Judge Ralph Kirscher quickly sealed it from public view. Judge Kirscher, who has already scolded Credit Suisse for 'predatory lending practices' in granting a $375 million loan that buried the club in debt, is now focused on potential fraud charges for Blixseth. Read more.
Catalina Lighting Files for Chapter 11 Protection
Catalina Lighting Inc., a maker of residential lighting products, filed for bankruptcy protection blaming the recession for its demise, Bloomberg News reported on Friday. The company listed assets of as much as $10 million and debt of as much as $50 million in its chapter 11 filing. 'The recession hit Catalina and other companies in the consumer lighting industry particularly hard,' Catalina CEO A. Corydon Meyer said in court papers. 'The slowdown in building and remolding has had a very negative impact on sales.' Catalina, based in Miami, distributes its products to retailers including Wal-Mart, Lowes, OfficeMax, Sears, Staples, Kmart and Bed Bath and Beyond, according to court papers. The case is Catalina Lighting Inc., 10-14786, U.S. Bankruptcy Court, Southern District of Florida (Miami). Read more.
In its biggest move yet to repay a $182.3 billion U.S.-government bailout, American International Group Inc. agreed today to sell its Asian life-insurance business to Prudential PLC for nearly $35.5 billion, the Wall Street Journal reported today. The government-controlled insurer's board approved the sale of American International Assurance Ltd. (AIA). Federal Reserve and Treasury Department officials also signed off on it. AIG's sale of AIA - along with a separate agreement expected in the next week or so to sell another non-U.S. insurer, American Life Insurance Co., to MetLife Inc. - could generate proceeds of about $50 billion. Half of that amount has already been earmarked for the Federal Reserve Bank of New York. These two deals would cover roughly half the $97 billion AIG is trying to repay the U.S. government. Read more. (Subscription required.)
Administration's Small Business Lending Plan Questioned by House Leaders
A White House proposal to direct federal rescue funds to small banks drew criticism at a hearing on Friday from Small Business Chairwoman Nydia Velazquez (D-N.Y.) and House Financial Services Chairman Barney Frank (D-Mass.), CongressDaily reported on Friday. Velazquez said that the proposal to take $30 billion from the Troubled Asset Relief Program and give it to community banks to boost small-business lending is 'not sound policy,' arguing that it would let lenders 'make fewer loans that are bigger.' Velazquez said that a Federal Reserve study found that banks had cut small-business lending by 10.8 percent in the last quarter, while SBA-backed loans are down 30 percent from 2007. She was supported by Frank, who urged the White House 'to work closely' with Velazquez on a proposal to ramp up small business lending. The Obama proposal has already encountered resistance from Republicans, who argue that TARP should be shut down rather than aid other spending projects, no matter if they are other lending programs.
Supreme Court to Hear Appeal by Former Enron CEO
Former Enron Corp. CEO Jeff Skilling's appeal of his criminal convictions is set to be heard today by the U.S. Supreme Court, the Associated Press reported yesterday. Skilling was convicted in 2006 on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors for his role in the downfall of the once-mighty Houston-based energy giant. The company collapsed into bankruptcy in 2001 under the weight of years of illicit business deals and accounting tricks. Skilling is serving a sentence of more than 24 years at a minimum security prison outside Denver. The law at issue is a short addendum to the federal mail and wire fraud statute that makes it illegal for officials, executives and others to scheme to deprive those they serve and possibly others of 'the intangible right to honest services.' Skilling's lawyers say the law is unconstitutionally vague. However, federal prosecutors argued that the law is appropriate for cases involving bribes, kickbacks or conflicts of interest. They argued that Skilling feigned loyalty to Enron and its shareholders and intended to deceive them, hiding the sale of large chunks of company stock. Read more.
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