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October 2, 2009
Unemployment Rate Rises to
9.8 Percent in September
The U.S. Labor Department reported today that the
American economy lost 263,000 jobs in September and the unemployment
rate rose to 9.8 percent, the
face='Times
New
Roman' size='3'>New York Times reported. More
than 15 million people in the United States are now unemployed, and more
are working part-time jobs for less pay. Nearly 52 percent of unemployed
people have exhausted state jobless benefits, and some are reaching the
end of the makeshift strands of emergency extensions. The House of
Representatives has passed a bill that would provide another 13 weeks of
benefits, but a similar bill has stalled in the Senate over questions of
whether it should only cover people in the hardest-hit states.
href='http://www.nytimes.com/2009/10/03/business/economy/03jobs.html?_r=1&ref=business&pagewanted=print'>Read
more.
Court Examines Potential
Preferences in Lehman Bankruptcy
Anton Valukas, the court-appointed examiner
investigating Lehman Brothers Holdings Inc.'s bankruptcy, has been
exploring whether the Federal Reserve improperly cut in front of other
creditors owed money in the $613 billion bankruptcy case, the
size='3'>Wall Street Journal reported today.
Billing records filed with the court show the examiner is investigating
an issue that has angered many of Lehman's creditors: how the Federal
Reserve and the New York Fed were paid promptly and in full, while tens
of billions of dollars in other debts were left to be sorted out in
court. It remains unclear when and how much Lehman creditors will be
repaid. Overall, the New York Fed lent Lehman $46.2 billion in cash and
Treasury securities for $50.6 billion in collateral, according to
Federal Reserve affidavits filed in bankruptcy court. As a result of
Lehman's sale to Barclays PLC following its bankruptcy, the New York Fed
was later paid back in cash, with the Treasury securities returned.
Lehman's broker-dealer also borrowed tens of billions of dollars from
the Fed in the period from Sept. 11 through Sept. 15 last year.
href='http://online.wsj.com/article/SB125443891097957691.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Approve CIT Restructuring
Struggling CIT Group Inc. said that its restructuring
plan has been approved by its board and by the steering committee of its
bondholders as the company looks to trim at least $5.7 billion from its
balance sheet, the Associated Press reported yesterday. Under terms of
the deal, bondholders would exchange their current notes for a portion
of five series of newly issued secured notes, with maturities ranging
from four to eight years, and/or newly issued preferred shares.The
exchange offers will expire just before midnight Oct. 29. However, for
the out-of-court debt restructuring to be successful, CIT said at least
$5.7 billion worth of debt must be able to be wiped off of its balance
sheet.Therefore, CIT also is asking most bondholders and other holders
of CIT debt to approve a pre-packaged reorganization plan so the company
has the option of filing for and quickly exiting chapter 11 protection
in the event the debt swap doesn't achieve its goals.
href='http://www.google.com/hostednews/ap/article/ALeqM5g-WzbL5cF4S_zd8-KVjmBcsnp-TQD9B2MH500'>Read
more.
Edge Petroleum Files for
Chapter 11
Independent energy company Edge Petroleum Corp. said
today that it filed for chapter 11 protection, the Associated Press
reported. The company said that it has reached an agreement with its
lenders to sell its assets to a third party for $191 million, with its
lenders receiving all of the proceeds. It has filed a reorganization
plan with the bankruptcy court, which is expected to make a ruling on
the matter in early December. At the time of its bankruptcy filing, the
company said that it had more than $12 million cash on hand.
href='http://www.forbes.com/feeds/ap/2009/10/02/business-energy-us-edge-petroleum-bankruptcy_6959578.html'>Read
more.
US Shipping Partners'
Chapter 11 Plan Wins Judge's Approval
Despite initial objections from the unsecured
creditors’ committee and bond investor Seacor Holdings Inc.,
Bankruptcy Judge
face='Times New Roman' size='3'>Robert D. Drain
size='3'>yesterday signed off on a restructuring plan for bankrupt oil
tanker company U.S. Shipping Partners LP,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
U.S. Shipping is looking to wipe away at least $155 million in debt and
emerge wholly under the ownership of its lenders. The plan, which was
negotiated before the bankruptcy filing, provides for the extinguishment
of about $55 million in first-lien debt in exchange for 50 percent of
the stock in the reorganized company, according to the company.
Additionally, about $100 million in second-lien debt would also be
swapped out for the rest of the new equity, the company said.
href='http://bankruptcy.law360.com/print_article/125903'>Read
more. (Subscription required.)
California’s $130
Million WR Grace Asbestos Case Revived
U.S. District Judge Ronald L. Buckwalter has
overturned a ruling by a bankruptcy court that barred the state of
California’s building management department from recovering $130
million in asbestos damages from bankrupt materials company W.R. Grace
& Co.,
size='3'>Bankruptcy Law360 reported
yesterday.The bankruptcy courterred in October 2008, according to Judge
Buckwalter’s ruling, when it found that the claims against W.R.
Grace by the California Department of General Services were essentially
the same as damages sought in a failed 1989 suit and that the claims
were beyond a three-year window the plaintiffs have to file such suits.
In the 1989 suit, 29 states asked the U.S. Supreme Court to hear their
case against Grace, but the court declined to accept it. In his ruling
Monday, Judge Buckwalter concluded that case did not trigger the statute
of limitations because it did not allege that any of the 16 California
buildings at issue were contaminated by asbestos, only that they could
become contaminated in the future.W.R. Grace provided no evidence that
the contamination of the 16 buildings at issue occurred more than three
years before California filed its complaint, the judge noted. He found
that W.R. Grace can still seek to have California's claims dismissed on
the basis of the statute of limitations, but there is still a question
about whether the buildings were contaminated before the statute came
into play.
href='http://bankruptcy.law360.com/print_article/125790'>Read
more. (Subscription required.)
Autos
Analysis: “Old
GM” Peddles an Empire's Remains
As General Motors Co. CEO Frederick 'Fritz' Henderson
and his managers are trying to shape the car maker's future,
Al
Koch and several dozen professional bankruptcy
administrators are trying to dispose of GM's past, the
size='3'>Wall Street Journal reported today.
They are seeking buyers for shuttered car plants saddled with outdated
equipment and former GM sites tainted by toxic waste. Experts have
marveled at GM's rapid 40-day trip through bankruptcy court this summer,
but left behind are the remnants of a grand industrial empire: 200
properties, 5,000 assembly-line robots, 200 miles of conveyor belts and
even a golf complex. In all, an entity some call 'Old GM' but formally
known as Motors Liquidation Co. owns about 50 million square feet of
unwanted factory and office space. It could take years to shed all these
properties, initially valued by Motors Liquidation in court papers at
$2.3 billion but which the company now believes are worth far less.
Whatever Motors Liquidation obtains for GM's detritus will help it repay
a $1.175 billion loan from the Treasury Department, a finite budget set
aside for disposing of GM's remnants.
href='http://www.abiworld.org/scriptcontent/cCustomDirectoryListing.cfm'>Read
more. (Subscription required.)
September Auto Sales
RevealPost-“Clunkers” Slump
After the shopping binge inspired by the government's
'Cash for Clunkers' incentive program ended, U.S. auto sales plunged in
September and the industry sunk back to the depths from which it
started, the Washington Post reported
today. General Motors' sales fell 45 percent compared with a year ago,
and Chrysler's dropped 42 percent. Sales at Ford did comparatively
better, declining just 5 percent. Compared with August, however, Ford's
sales in September plummeted 37 percent, slightly more than the other
two. Overall, the rate of U.S. sales, which had been climbing since
February, returned roughly to their February level for an annualized
rate of 9.2 million vehicles, according to figures from
Edmunds.com.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/01/AR2009100103573_pf.html'>Read
more.
Madoff Trustee Raises Claim
on Investor
Irving Picard, the
court-appointed trustee recovering assets for Bernard Madoff's fraud
victims, increased the amount of money he is seeking from an investor
who allegedly benefited from the Ponzi scheme, the
face='Times New Roman'>Wall
Street Journal reported today. Picard said
Palm Beach, Fla., investor Jeffry Picower made about $7.2 billion in
profits that should be returned because the money belongs to other
investors. That figure is a $2 billion increase from what Picard asked
to receive back in May, when he filed suit against Picower and his wife,
Barbara. Picard has alleged that Picower directed the Madoff firm to
credit specific gains to Picower's accounts, including gains that would
be applied to prior months and years. Picard's filings said these
actions suggest that Picower was complicit in the fraud.
href='http://online.wsj.com/article/SB125440902999956485.html'>Read
more. (Subscription required.)
Pay Package for AIG Chief
to Be Approved
President Obama's compensation czar is poised to give
his formal blessing to a pay package worth up to $10.5 million for the
new chief executive of American International Group, Robert Benmosche,
the
size='3'>Washington Post reported today. The
ruling would mark the first of many pay decisions that Kenneth R.
Feinberg is scheduled to make in the coming weeks. He has the task of
evaluating compensation for top earners at seven companies that have
been among the largest recipients of federal bailout funds. AIG
disclosed in August that Benmosche would receive an annual salary of $7
million -- $3 million in cash and $4 million in fully-vested common
stock. The company said he also would be eligible to receive long-term
incentive awards of up to $3.5 million each year. In its filing with the
Securities and Exchange Commission, AIG wrote that Feinberg had
'expressed approval in principle' regarding Benmosche's pay.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/01/AR2009100104922_pf.html'>Read
more.
Congressional Panel Split
on Need to Probe Countrywide’s VIP Loans
A congressional battle is heating up over whether to
subpoena records of Countrywide Financial Corp.'s controversial VIP
mortgage program, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. House Oversight and Government Reform Committee
(D-N.Y.) Edolphus Towns reiterated in a Sept. 30 letter to panel members
his opposition to Republican calls to subpoena the VIP program's
records. In the letter, Towns, whom public mortgage documents indicate
received two Countrywide VIP loans, likened the program to 'a customer
loyalty' initiative, 'similar to airline frequent flier programs or
supermarket discount cards.' The letter followed a Sept. 29 letter from
the panel's ranking Republican Darrell Issa (Calif.) seeking support
from committee members for subpoenaing the records from Bank of America
Corp., which purchased Countrywide last year. Issa's letter said that
the VIP program 'engaged in a systematic campaign to buy influence' from
public officials, and the subpoena is needed to determine the extent of
that effort. In his letter, Towns noted that the Senate Ethics Committee
had looked into the VIP program in connection with loans obtained by
Democratic Sens. Chris Dodd (D-Conn.) and Kent Conrad (D-N.D.). That
committee determined that the senators, who denied any wrongdoing,
hadn't violated ethics rules.
href='http://online.wsj.com/article/SB125444130726157831.html'>Read
more. (Subscription required.)
Execs Millions Before Bankruptcy
In the 12 months before the publisher of
Reader’s Digest filed for chapter 11 protection, the company was
struggling under the weight of a $2.2 billion debt load, but also paying
out more than $28 million to its executives, directors and other
insiders, Dow Jones
face='Times New Roman' size='3'>Daily Bankruptcy Review
size='3'>reported today. In the year before its Aug. 24 chapter 11
bankruptcy filing, Reader’s Digest Association Inc. paid out a
grand total of $28.5 million to 54 “insiders,” according to
a financial report the company recently filed in bankruptcy court. That
includes $3.3 million in compensation for Mary G. Berner, the
company’s president, director and chief executive. The second
top-earning executive is Suzanne Grimes, who raked in $1.6 million as
president of the unit that publishes food and entertaining-themed
magazines, like ubiquitous Food Network star Rachael Ray’s
magazine. The 54 recipients included 51 individuals and three
asset-management firms. Those firms, which received $4.5 million in
management fees, include Ripplewood Holdings LLC, which bought the
publisher in 2007 for $1.6 billion.
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