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November 3, 2008
JPMorgan Launches Massive Effort to
Save Mortgages
JPMorgan Chase & Co. launched an ambitious plan Friday to modify the
terms of $70 billion in mortgages for borrowers who are behind on their
payments or soon could be, the Wall Street Journal reported
today. The move by the New York bank will cover as many as 400,000
borrowers. They'll be moved into loans carrying lower interest rates,
smaller principal amounts or other more-affordable terms. The changes
will particularly focus on a type of loan structured in such a way that
the borrower's outstanding balance sometimes grows month after month.
JPMorgan inherited $54 billion of such loans with its takeover of the
beleaguered thrift Washington Mutual Inc. in September.
href='http://online.wsj.com/article/SB122549543952589677.html'>Read
more. (Registration required.)
VeraSun Seeks Chapter 11
Protection
VeraSun Energy Corp., the nation's second largest ethanol producer
accounting for about 13 percent of U.S. capacity, said late Friday that
it is seeking chapter 11 protection after skyrocketing corn costs and a
deterioration in capital markets left the company short on cash, the
Associated Press reported on Saturday. VeraSun said it was working with
lenders and expected to reach an agreement on additional financing to
fund normal operations before a court hearing scheduled for today. The
company said it plans to resume operations during the chapter 11
proceedings and doesn't expect to reduce raw material purchases. After
VeraSun locked into prices for its feedstock for the third quarter, corn
went into a sharp decline from almost $8 per bushel to a low of less
than $5 per bushel in mid-August.
href='http://www.aol.in/news/story/2008110112540001082412/1333/'>Read
more.
Housing Slump Sends Jancor Cos. into
Chapter 11
Residental construction product conglomerate Jancor Companies Inc. filed
for bankruptcy on Thursday, citing higher materials costs and a
deteriorating housing market, Bankruptcy Law360 reported on
Friday. Jancor, which includes manufacturers of doors, windows, siding,
fence and deck materials, indicated in its chapter 11 filing that its
businesses have ceased operations and said it will be conducting an
orderly wind-down of the companies. The filing includes about a dozen
separate companies operating under the umbrella of Jancor, including
Vinyl Holdings LLC, Heartland Business Products Inc., Infinite Business
Products Inc., Survivor Technologies Inc., Kensington Windows Inc.,
Outdoor Technologies Inc., Armor Bond Building Products Inc., Master
Shield Building Products Co. LP, Bird Vinyl Products Ltd. and Boone Oak
Enterprises Inc. The combined companies' assets were estimated at
between $50 million to $100 million on the bankruptcy petition document
filed Thursday. The bankruptcy is Jancor Companies Inc., case number
08-12556, in U.S. Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/articles/75044'>Read more.
(Subscription required.)
U.S. Treasury Rejects GM's Request for
Merger Assistance
The Treasury Department has turned down a request by General Motors for
up to $10 billion to help finance the automaker's possible merger with
Chrysler, the New York Times reported today. Instead of
providing new assistance, the Treasury Department told GM on Friday, the
Bush administration will now shift its focus to speeding up the $25
billion loan program for fuel-efficient vehicles approved by Congress in
September and administered by the Energy Department. Treasury officials
were said to be reluctant to broaden the $700 billion financial rescue
program to include industrial companies or to play a part in a
GM-Chrysler merger that could cost tens of thousands of jobs.
href='http://www.nytimes.com/2008/11/03/business/03gm.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Slow Payments Squeeze Small-Business
Owners
Small businesses are getting hit with another aftershock of the credit
crisis as their customers are delaying payment of their bills for weeks
or months, the Wall Street Journal reported today. Late-paying
customers have forced some small companies to fall behind on payments to
their own suppliers. Steve Goldberg, co-owner of TLS International LLC,
a Needham, Mass., hat and winter-cap maker with four employees and
roughly $1 million in annual sales, has about 15 customer accounts that
are more than 100 days late. Many small companies, seeing more payment
problems ahead, are taking steps to reduce their risk. Melody Townsel,
who runs a public-relations agency from her Dallas home, says that four
of her eight clients are behind in their payments, and a local start-up
has been $4,500 in arrears since June. Townsel has begun charging
clients a couple of thousand dollars as a down payment on services, and
later this month she will begin charging a 10 percent penalty on late
balances.
href='http://online.wsj.com/article/SB122540968964686203.html'>Read
more. (Subscription required.)
More Utility Bills Going
Unpaid
Utilities are becoming more aggressive about collecting money from
delinquent customers, leading to a surge in service shutdowns just as
economic woes are pushing up the number of households falling behind on
bills, the Wall Street Journal reported today. The utilities say they
are under pressure to clean out accounts that are weighing down their
books at a time when their stocks are being hammered and earnings growth
has slowed. Meanwhile, the increasing number of homes left without power
-- which could rise as economic pain deepens -- is beginning to worry
some consumer advocates and regulators. In Pennsylvania, PPL Corp.
increased shutoffs by 78 percent in the first three quarters of the year
compared with the same period a year earlier. Shutoffs at electric
utilities throughout the state increased by 20 percent in that period.
In Memphis, Tenn., the city-owned utility that supplies electricity,
natural gas and water to residents cut off 38 percent more people in the
first eight months of the year, or 69,743 electric accounts, versus the
same period in 2007.
href='http://online.wsj.com/article/SB122567355463991711.html'>Read
more. (Subscription required.)
Congress Calls for Quicker Action on
Financial Rescue Plan
Democrats have increased the pressure on the Treasury Department to
better implement provisions in the recently passed $700 billion
financial rescue package, calling on Secretary Paulson to take
additional steps to ensure that banks that have received federal money
start lending the money, CongressDaily reported on Friday.
House Financial Services Chairman Barney Frank (D-Mass.) urged Paulson
to lean on banks to immediately start lending money included in the
rescue package, such as an initial $125 billion that was allocated to
the nation's top nine banks this week. Frank said he was concerned over
reports that the banks could use the funds for bonuses, severance pay
and acquisition for other institutions. Meanwhile, Rep. Steven
LaTourette (R-Ohio) has been critical of the government's $7.7 billion
investment into PNC Bank that he claims made it possible for it to
purchase Cleveland-based National City Bank. The House Financial
Services Committee will hold hearings on the program on Nov. 12 and
18.
JPMorgan, FDIC Battle with Washington
Mutual over Tax Breaks
JPMorgan Chase & Co. and the Federal Deposit Insurance Corp. have
challenged Washington Mutual Inc.'s claim to tax breaks worth billions
of dollars due to losses the holding company incurred this year before
filing for chapter 11 protection in September, Bankruptcy
Law360 reported on Friday. In limited objections filed Thursday,
the FDIC argued that the tax benefits belong to the entity that actually
incurred the losses, and JPMorgan asked the court for assurance that the
tax benefits to the bank it acquired from WaMu would not be affected by
future court orders. According to WaMu, the company incurred
unrecognized losses totaling more than $20 billion in 2008 and wants to
limit trading in its common stock in order to protect the tax breaks it
could receive as a result of those losses under the U.S. Tax Code, which
usually allows companies to carry over their losses and tax credits to
offset future income. The bankrupt company could stand to receive a
percentage of the $20 billion in losses as a tax benefit, WaMu
said. Read
more. (Subscription required.)
FDIC Plays Tough amid Banking Industry
Turmoil
The Federal Deposit Insurance Corp. last month toughened its stance
toward struggling banking companies as it threatened to seize Wachovia
Corp. last month if it didn't find a buyer, passed on an initial
government-assisted takeover by Wells Fargo & Co. and rejected an
11th-hour option that would have allowed Wachovia to remain independent,
the Wall Street Journal reported today. The FDIC also was a
central player in Wells Fargo's surprise re-emergence as the winning
bidder on Oct. 3, edging out Citigroup Inc. This approach, employed in
recent takeovers of Wachovia, Seattle thrift Washington Mutual Inc. and
Cleveland-based National City Corp., has drawn some criticism as the
Treasury moves to shore up certain banks. In agreeing to acquire
National City last month, Pittsburgh-based PNC Financial Services Group
Inc. used a federal pledge of $7.7 billion in new capital and
potentially billions more in tax savings, prompting Ohio politicians to
ask why National City was not offered the same sort of U.S.
assistance.
href='http://online.wsj.com/article/SB122566357785691427.html'>Read
more. (Subscription required.)
Rescue Funds Lure Thousands of
Banks
Treasury and banking regulators say as many as 1,800 publicly held
institutions could apply for government investments in coming weeks, out
of concern that failing to do so could make them losers in a banking
sector reshaped by the Treasury's $700 billion rescue plan, the Wall
Street Journal reported today. Depending on conditions still being
crafted by Treasury, thousands more private banks could apply for
government capital as well. While many healthy banks recently said that
they didn't need taxpayer money under the Troubled Asset Relief Program,
these institutions worry that if they don't try for the money, the
market will judge them as too unhealthy to qualify or lacking the savvy
to deploy cheap government capital on acquisitions and investments.
'There's a perception in the market that the government is actively
picking winners and losers...we wanted it well-known in the market that
we're on the list of survivors,' said Roy Whitehead, chairman, president
and CEO of Washington Federal Inc. in Seattle, one of about 20 regional
banks approved by Treasury for the program last week.
href='http://online.wsj.com/article/SB122567258950691883.html'>Read
more. (Subscription required.)
Mervyn's Creditors Drop Objection to
Sales
Creditors of Mervyn's LLC have dropped their objection to the bankrupt
department store chain's proposed going-out-of-business sales, as part
of a settlement with the liquidating retailer, Bankruptcy
Law360 reported on Friday. The details of the settlement were not
revealed, but the company said that it had won approval from the
Delaware bankruptcy court to wind down its business under chapter 11 and
hold liquidation sales at all of its remaining 149 stores as planned.
The court issued its order authorizing the sales on Thursday, agreeing
that the liquidation plan was in the best interests of the debtors'
estates and other stakeholders.
href='http://bankruptcy.law360.com/articles/75045'>Read
more. (Subscription required.)
International
German Bank Seeks $10.5 Billion in Bailout
Aid
Commerzbank today became the first commercial lender in Germany to
accept government cash, while several other European banks reported poor
earnings, the New York Times reported today. Commerzbank, based
in Frankfurt, said it would avail itself of 8.2 billion euros ($10.5
billion) from Germany's financial markets stabilization fund to
strengthen its capital base. The state's infusion of cash will raise the
bank's core capital ratio to 11.2 percent, Commerzbank said. The bank
will pay no dividend in 2009 or 2010, and will limit its CEO's pay to
500,000 euros a year. In Paris, the French bank, Société
Générale, said that its third-quarter profit slid 84 percent
from a year earlier, to 183 million euros, as revenue fell 5 percent to
5.1 billion euros.
href='http://www.nytimes.com/2008/11/04/business/worldbusiness/04eurobanks.html?ref=business&pagewanted=print'>Read
more.
South Korea Earmarks $10.9
Billion to Aid Growth
As reduced demand from the United States and Europe and the global
financial crisis has left its banks struggling to pay billions of
dollars in short-term loans, South Korea announced a $10.9 billion
stimulus package today, the New York Times reported. South
Korean President Lee Myung-bak said that the package included an
additional 11 trillion won in government spending and 3 trillion in tax
cuts. These are aimed mainly at the real estate and construction
industries. Economists said that the export figures were also likely to
prompt the South Korean central bank to reduce interest rates at its
policy meeting on Friday. This would be the second cut in two weeks,
after last week's surprise cut of three-quarters of a percentage
point.
href='http://www.nytimes.com/2008/11/04/business/worldbusiness/04won.html?ref=business&pagewanted=print'>Read
more.