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January 21, 2010
on Risks Taken by Banks
President Obama today will
propose giving bank regulators the power to limit the size of the
nation’
lang='RU'>s largest banks and the scope of their risk-taking activities,
the New York Times reported today. For the first time, the
President will throw his weight behind an approach long championed by
Paul A. Volcker, former chairman of the Federal Reserve and an adviser
to the Obama administration. The proposal will put limits on bank size
and prohibit commercial banks from trading for their own accounts. The
chief goal is to prohibit proprietary trading of financial securities,
including mortgage-backed securities, by commercial banks using deposits
in their commercial banking sectors. Big losses in the trading of those
securities precipitated the credit crisis in 2008 and the federal
bailout. The White House intends to work closely with the House and
Senate to include these proposals in whatever bill dealing with
financial regulation finally emerges from Congress.
href='http://www.nytimes.com/2010/01/21/business/21volcker.html?ref=business&pagewanted=print'>Read
more.
Lenders Raise Concerns over
Brundage-Bone's DIP, Reorganization Plan
Brundage-Bone Concrete Pumping Inc. has filed for bankruptcy after
raising a rare junior debtor-in-possession loan, but senior lenders led
by Wells Fargo Bank NA and Wachovia Financial Services Inc. are not
satisfied with the DIP and an accompanying restructuring proposal, the
Deal Pipeline reported yesterday. The lenders have called for a
chapter 11 trustee and examiner just two days into the case.
Bankruptcy Judge A. Bruce Campbell was scheduled to
convene an interim hearing yesterday to approve the financing. Wells
Fargo, however, requested that the hearing be continued to today. Aurora
Resurgence Management Partners LLC affiliate Commercial Finance Services
110 LLC is providing the $20 million junior DIP. Brundage has been
negotiating the terms of a chapter 11 plan with Aurora, under which the
private equity firm would invest additional capital into the company in
exchange for 100 percent of its new equity, court filings show.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005379262'>Read
more. (Subscription required.)
Senate Banking Leaders See Deal on
Financial Regulatory Overhaul Moving Ahead
The leaders of the Senate Banking Committee said yesterday that the
GOP Senate victory in Massachusetts should have no effect over Senate
negotiations to revamp the nation's financial regulatory system,
CongressDaily reported. Senate Banking Committee Chairman
Christopher Dodd (D-Conn.) said that discussions with Banking ranking
member Richard Shelby (R-Ala.) have focused on wrapping the Consumer
Financial Protection Agency (CFPA) into another department, whether a
consolidated bank regulator or the Treasury Department, rather than
setting up a stand-alone agency. Shelby also said that the Massachusetts
election should have no effect on the bipartisan negotiations, but he
underscored he was not budging on the CFPA. Shelby mentioned a spring
timeline for a possible markup, but cautioned, 'we're not there yet.'
Atrium Files Pre-packaged Chapter 11, Cuts Debt
by 50 Percent
size='2'>
Atrium Cos. Inc., a maker
of windows and patio doors, said yesterday that it filed a pre-packaged
chapter 11 bankruptcy after reaching an agreement with lenders on the
reorganization plan, Reuters reported yesterday. Two-thirds of Atrium's
senior secured lenders have agreed on a plan to cut debt by more than
$350 million or over 50 percent and the company expects to complete the
restructuring in three to four months. Under the proposed reorganization
plan, which is subject to bankruptcy court approval, Atrium will receive
a $125 million new equity investment from majority equity owner Kenner
& Co. Inc. and co-investor Golden Gate Capital. The case is
In re Atrium Corp., U.S. Bankruptcy
Court, District of Delaware, No. 10-10150.
href='http://www.reuters.com/article/idUSN2013079020100120'>Read
more.
Icahn Makes Winning Bid for
Bankrupt Fontainebleau Resort
size='2'>
Billionaire investor Carl Icahn has made the winning bi
size='2'>d to purchase the bankrupt, unfinished Fontainebleau Las Vegas
Resort in a bet that the struggling Las Vegas Strip will eventually turn
around, Reuters reported yesterday. According to a court document filed
late on Tuesday, the examiner tasked with running a court-supervised
auction of the Fontainebleau said that the only qualified bid received
for the company was from Icahn Nevada Gaming Acquisition LLC. Icahn
offered $156.5 million to buy the casino in November, topping a previous
offer from Penn National Gaming Inc., which dropped out of the bidding.
Fontainebleau filed for bankruptcy protection in June after lenders cut
off access to nearly $800 million of construction funds. The 3,800-room
casino resort, toward the northern end of the Las Vegas Strip, has
already cost $2 billion.
href='http://www.reuters.com/article/idUSN2015881120100120'>Read
more.
Uno Restaurant Holdings Files for Chapter
11
Uno Restaurant Holdings Corp., the operator of 99 Uno Chicago Grill
casual-dining restaurants, filed for chapter 11, blaming the recession
and a drop in consumer spending for decreased sales, Bloomberg News
reported yesterday. The West Roxbury, Mass.-based company said that it
has reached an
size='2'>“
size='2'>agreement in principle
size='2'>”to exchange
$142 million in debt for equity in a reorganized company. The company is
controlled by New York-based Centre Partners Management LLC, which owns
66 percent of its common stock. The rest of the privately held company
is owned by investors including its founder, Aaron Spencer, members of
his family and former company officers and directors. As of Sept. 27,
Uno said that it had assets of $144.6 million and $171.8 million in
long-term debt. The company had a $22.2 million net loss in fiscal 2009
following a $15.1 million net loss in 2008. The case is
size='2'>In re Uno Restaurant Holdings Corp., 10-10209, U.S.
Bankruptcy Court, Southern District New York (Manhattan).
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a_dckYwZ0EbQ'>Read
more.
Judge Rules that Dura
Buyer Cannot End Contract with Supplier
U.S. District Judge Sue L. Robinson on Tuesday
affirmed a bankruptcy court's decision that a private equity firm that
bought a unit of then-bankrupt Dura Automotive Systems Inc. did not have
the right to then reject a contract with the company that provided Dura
with motors for heating, ventilation and air conditioning systems in
SUVs, Bankruptcy Law360 reported yesterday. Judge Robinson found
that the bankruptcy court's interpretation of the sale order and asset
purchase agreement was not clearly erroneous, and that the bankruptcy
court therefore did not err in assigning the contract to Atwood Mobile
Products LLC, an affiliate of Texas private equity firm Insight Equity
Holdings Inc. Atwood reasonably argued that it had the right to reject
any of Dura's assumed contracts prior to the closing of the asset
purchase agreement, Judge Robinson said. However, Michigan-based Dura
and its HVAC motor supplier, Allied Motion-Motor Products Inc.,
presented an alternative reasonable interpretation, saying Atwood should
be assigned all contracts that Dura had previously assumed prior to
closing, according to the judge.
href='http://bankruptcy.law360.com/articles/144414'>Read more.
(Subscription required.)
Champion Reaches $130
Million Asset Sale Deal
Bankrupt homebuilder Champion Enterprises Inc. has
agreed to sell all its assets to Credit Suisse AG and its other
debtor-in-possession financiers, which are making an $80 million credit
bid, and to an investor group that has promised to funnel $50 million
into the company, Bankruptcy Law360 reported yesterday. Champion
and the investor group —
lang='RU'>which includes Centerbridge Partners LP, MAK Capital Fund LP
and Sankaty Advisors LLC —
lang='RU'>filed a motion to approve the sale on Friday in the U.S.
Bankruptcy Court for the District of Delaware. The three private equity
firms will receive 60 percent of the reorganized Champion's stock in
exchange for their $50 million investment. Champion's lenders, which are
led by administrative and collateral agent Credit Suisse, have
“credit
bid”
size='2'>$80 million loans handed to Champion when it filed for chapter
11 protection in November, the sale motion said. In exchange, the
lenders will receive the remaining 40 percent of the reorganized
company's equity as well as a new $40 million term loan.
href='http://bankruptcy.law360.com/print_article/144410'>Read
more. (Subscription required.)
Banks’
lang='RU'>Derivatives Activity Falls
Under IRS Scrutiny
Federal authorities are scrutinizing certain financial derivatives
that may enable Wall Street banks to avoid collecting billions of
dollars in withholding taxes on stock dividends, the New York
Times reported today. The instruments, known as equity swaps, mimic
ordinary shares and give investors like hedge funds the benefits of
stock ownership, including payments similar to dividends, without
actually owning the shares. Big banks also benefit from the swaps
because, under federal tax rules, the banks may avoid paying a 30
percent tax that is normally levied on stock trades. The Internal
Revenue Service is examining whether banks are using the swaps to mask
who really owns the shares underlying the instruments, thereby avoiding
collecting dividend withholding taxes.
href='http://www.nytimes.com/2010/01/21/business/21tax.html?ref=business&pagewanted=print'>Read
more.
In related news, the House Financial Services Subcommittee on
Financial Institutions and Consumer Credit will hold a hearing at
10 a.m. ET today titled 'The Condition of Financial Institutions:
Examining the Failure and Seizure of an American Bank.'
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/FIhr_01212010.shtml'>Click
here for the witness list and a link to the live Webcast of the
hearing.
The loan troubles of many U.S. consumers weighed down fourth-quarter
results at Bank of America Corp., Wells Fargo & Co. and U.S.
Bancorp, but bank executives predicted that loan losses are near a peak,
the Wall Street Journal reported today. The three banks hold a
combined 24 percent of all U.S. deposits and operate more than 15,000
retail branches, making them important barometers of consumer sentiment
and the health of the U.S. banking industry. Bank of America reported a
net loss of $194 million, which excluded costs tied to the Charlotte,
N.C., company's repayment of $45 billion in U.S. bailout funds. Wells
Fargo, based in San Francisco, swung to a profit of $2.8 billion from a
year-earlier loss, while U.S. Bancorp, of Minneapolis, saw its earnings
nearly double to $602 million. The consumer-loan bruises were similar to
those already reported for the fourth quarter by J.P. Morgan Chase &
Co. and Citigroup Inc., as many large and small banks struggle to
generate revenue and profit growth amid stubbornly high unemployment and
href='http://online.wsj.com/article/SB10001424052748704320104575014631810366148.html?mod=WSJ_hps_sections_business'>Read
more. (Subscription required.)
General Re settles federal charges
in AIG case
General Re, a reinsurer owned by Berkshire Hathaway, agreed yesterday
to pay $92 million to settle federal charges that it helped American
International Group orchestrate a massive fraud, the Washington
Post reported today. AIG was charged in 2006 with arranging one of
the largest financial frauds in U.S. history and was ordered to pay over
$1 billion in fines and penalties. The scandal broke years before the
company's risky financial bets led to its decline and eventual rescue by
the federal government. In its settlement, Gen Re admitted that between
2000 and 2004 top executives engaged in fake reinsurance deals to
artificially inflate AIG's loss reserves, which investors and insurance
industry analysts use to judge financial health. A federal court
previously concluded that the fraud cost AIG's shareholders up to $600
million.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/20/AR2010012004826_pf.html'>Read
more.
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