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March 18, 2009
Senate Democrat Says 60 Votes Not Likely on Cramdown Provision
A key Senate Democrat said yesterday that it was unlikely the chamber would consider a bill to allow bankruptcy judges to modify terms of a primary mortgage until after the spring recess, CongressDaily reported today. Sen. Evan Bayh (D-Ind.) said there is not enough support to prevent a filibuster of the bill that would allow mortgages to be restructured through a chapter 13 filing. 'I think this is going to be probably not taken up until after the upcoming recess. But right now I think there is going be some difficulty in getting to the 60 votes,' said Bayh. Senate Majority Leader Reid said that timeframe was about right. 'I would expect very soon after we get back after April recess that we'll be working on what they [Banking Committee] report out,' he said. He is working with Judiciary ranking member Arlen Specter to narrow the eligibility for borrowers who could cram down the principal of their mortgages. Senate staffers met yesterday afternoon in an effort to work on a compromise. The House-passed version allows bankruptcy judges to consider whether homeowners were offered a 'qualified' loan workout similar to a plan the Obama administration has announced to help lower the interest rate for up to 9 million families. But the House measure did not mandate that the borrower had to take such an offer if he were eligible, in lieu of cramdown - a provision advocated by the lending industry. Senate moderates are pushing for such a requirement. Bayh said he is looking to impose a sunset period for the cramdown provisions.
name='2'>Hearings Today on Capitol Hill
The House Financial Services Committee's Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Hearing will hold a hearing today on 'American International Group's Impact on the Global Economy: Before, During, and After Federal Intervention,' at 10:00 a.m. ET in Room 2128 in the Rayburn House Office Building. Click here for the witness list.
The Senate Committee on Banking, Housing and Urban Affairs will hold a hearing today on 'Lessons Learned in Risk Management Oversight at Federal Financial Regulators Securities, Insurance, and Investment,' at 2:30 p.m. ET in Room 538 in the Dirksen Senate Office Building. Click here for the witness list.
name='3'>Judicial Conference Seeks New Judgeships, Adopts New Ethics Code
The Judicial Conference has adopted revisions to the federal judiciary's code of conduct aimed at broadening and clarifying how judges should handle conflicts of interest and the 'appearance of impropriety,' according to a report on Law.com today. The conference also agreed to ask Congress to create 63 new judgeships - 12 appeals court judges and 51 at the district court level. The conference met behind closed doors at the Supreme Court, with Chief Justice John Roberts Jr. presiding. The revised code, which takes effect July 1, defines for the first time the term 'appearance of impropriety,' which judges are commanded to avoid as much as actual impropriety. It is defined as: 'An appearance of impropriety occurs when reasonable minds, with knowledge of all the relevant circumstances disclosed by a reasonable inquiry, would conclude that the judge's honesty, integrity, impartiality, temperament, or fitness to serve as a judge is impaired.' Read more.
name='4'>N.J. Sues Lehman Officials, Alleging Deceptions
New Jersey has sued top executives and board members at Lehman Brothers yesterday, charging that they misled officials into buying company stock that eventually lost the state pension system $118 million when the financial services firm went bankrupt last year, according to a report on NewJersey.com today. The suit says that as a result of Lehman Brothers' misrepresentation, the state Treasury Department's money managers purchased $182 million in company stock. New Jersey, which has been considering legal action since late last year, is the first state to file an individual lawsuit against Lehman officials. The eight-count suit, filed in state Superior Court in Mercer County, alleges violations of state and national securities laws, negligent misrepresentation, breach of fiduciary duty, fraud and aiding and abetting. With suits against Lehman on hold because the firm is in bankruptcy, New Jersey is targeting the company's current and former leaders. The suit names nine executives, including former CEO Richard Fuld Jr. and nine members of the company's board. The state also sued the firm of Ernst & Young, which performed accounting duties for Lehman. Read more.
name='5'>MGM Mirage Gets Relief from Lenders
Lenders gave MGM Mirage some much needed financial relief through the middle of May, according to today's Las Vegas Review-Journal. The casino operator, in danger of defaulting on $7 billion of its long-term debt, announced yesterday that its lenders had waived requirements that the company be in compliance of its senior credit facility covenants until May 15. However, the company said in a filing with the Securities and Exchange Commission that auditors have raised 'substantial doubt' about MGM Mirage's ability to continue, increasing the likelihood that the gaming company will need to file for bankruptcy. In its SEC filing, MGM Mirage, which operates 10 hotel-casinos and is building the $9.1 billion CityCenter, said it wouldn't have been in compliance with covenants for its $7 billion bank loan facility on March 31. The company also reported its fourth-quarter and year-end earnings, with a net loss of $1.15 billion in the three-month period ended Dec. 31. MGM Mirage said a $1.2 billion noncash impairment charge also affected quarterly results. Quarterly revenue fell 14.7 percent to $1.8 billion from $2.11 billion. For all of 2008, MGM Mirage had a net loss of $855.3 million or $3.06 per share. Net revenues decreased 6 percent to $7.2 billion. Read more.
name='6'>Station Casinos to Seek Bankruptcy Protection by April 15
Station Casinos Inc. revealed in court papers that it expects to file for bankruptcy protection on or before April 15, the date a debt forbearance agreement expires and five days after the deadline for bondholders to vote on Station's current debt-exchange offer, the Las Vegas Sun reported today. Station had its attorneys file court papers Monday opposing a motion for a court injunction sought by a bondholder who is seeking to block the debt-exchange, a key part of Station's plan to file a prepackaged bankruptcy petition that would keep its business operating and includes a cash infusion of $244 million by Station owners the Fertitta family and Colony Capital. Boyd Gaming Corp., in the meantime, has been taking its case to buy all or part of Station directly to bondholders after it was rebuffed by Station. Station has proposed the prepackaged chapter 11 bankruptcy reorganization because of its inability to keep up with debt payments. In all, it is trying to restructure more than $5 billion of debt. Station said the debt-exchange and reorganization plan should move forward for the good of the Las Vegas community, where Station is the dominant locals gaming company with properties such as Red Rock Resort, Green Valley Ranch Resort, two Fiestas and the Sunset, Boulder, Palace, Santa Fe, Texas and Aliante Station properties. Read more.
name='7'>Morgan & Finnegan Files for Bankruptcy
Morgan & Finnegan, the New York IP boutique that dissolved in February after a raft of partner departures, has filed for bankruptcy, according to a Law.com report today. The chapter 7 filing, first reported on the blog Above the Law, came six days after a New York state judge placed the firm into receivership in response to a lawsuit by lender JPMorgan Chase. The boutique, whose revenue declined 38 percent last year, listed $6.37 million in assets and $10 million in liabilities. In 2007, Morgan & Finnegan grossed $60.63 million, and revenue dropped to $36.99 million in 2008, according to filings. The firm's partners were in merger discussions with Locke Lord Bissell & Liddell by December 2008. Locke Lord ultimately agreed in February to hire 30 lawyers, including 13 partners, with an expectation they could bill $28 million in 2009, according to leaked offer letters. Locke Lord took over Morgan & Finnegan's space at World Financial Center. JPMorgan is now suing for $4.1 million from the firm because the landlord tapped a letter of credit, and the firm has allegedly not repaid the bank. Morgan & Finnegan lists JPMorgan's claim as a little less at $3.82 million. Read more.
name='8'>Thornburg Mortgage May File for Chapter 11
Thornburg Mortgage Inc., a large and troubled provider of 'jumbo' mortgage loans, said it may file for chapter 11 bankruptcy protection, according to a Reuters report yesterday. The Santa Fe, N.M.-based company has struggled with liquidity problems since the summer of 2007, when the value of mortgages on its balance sheet began to tumble. Thornburg later suffered a series of margin calls from its own creditors. A bankruptcy filing would make Thornburg one of the largest U.S. mortgage providers to seek protection from creditors since the housing slump began, joining rivals such as Washington Mutual Inc. and IndyMac Bancorp Inc. Last March, Thornburg arranged a $1.35 billion bailout from the distressed debt investor MatlinPatterson Global Advisors LLC and other investors to stay out of bankruptcy. According to a regulatory filing, MatlinPatterson surrendered all of its Thornburg common stock - 120.8 million shares - on March 12 and 16 without any compensation. In a November regulatory filing, Thornburg said it lost $2.75 billion, or $85.71 per share, in the first nine months of 2008. It ended September with $25.4 billion of adjustable-rate mortgage assets on its balance sheet, and liabilities that included $20.4 billion of collateralized mortgage debt. Read more.
Asarco Revises Reorganization Plan
Having recently struck a new purchase agreement and a billion-dollar settlement of environmental claims, bankrupt copper smelting and mining company Asarco LLC has cast a revised reorganization plan, TheDeal.com reported yesterday. Judge Richard Schmidt of the U.S. Bankruptcy Court in Corpus Christi, Texas, is set to consider approval of the disclosure statement for the plan on April 28. Under the third amended plan, which Asarco filed late on March 16, administrative claims of $423 million to $732 million would be paid in full in cash. Holders of priority tax claims, owed $4 million; secured claims, owed $28 million to $33 million; convenience claims; and de minimis priority nontax claims would also receive payment in full in cash. Unsecured creditors, owed $2.1 billion to $2.4 billion, would recover 60-75 percent through a pro-rata share of any cash left over after all other claims were paid as well as interests in a litigation trust. The group had been set to receive a full recovery under the previous plan. Asarco has lined up a $1.7 billion sale to Sterlite Inc., guaranteed by the prospective buyer's parent, Sterlite Industries Ltd., to fund its plan. When Tucson, Ariz.-based Asarco filed for chapter 11 on Aug. 9, 2005, and the third-largest U.S. copper producer, has argued that the sale was designed to force it into bankruptcy. Read more.
name='10'>GM CEO: Bankruptcy Would Cause Liquidation
If General Motors Corp. were forced into chapter 11 bankruptcy protection, the company would end up being liquidated because a long bankruptcy would scare customers away, Chief Executive Rick Wagoner said, the Associated Press reported yesterday. Wagoner indicated that restructuring the company out of court would accomplish 99 percent of what could be achieved in bankruptcy, but without the risk of losing customers or the huge expense of chapter 11. Wagoner's statements came as members of President Barack Obama's auto task force told Michigan lawmakers they would signal next week what direction they plan to take to restructure GM and Chrysler LLC. Sen. Carl Levin (D-Mich.), who met with members of the panel on Capitol Hill, said they would make 'a significant statement' by the end of next week on the restructuring. Levin said it would not be definitive but would show 'the direction that it needs to go.' Wagoner said that a 30- or 60-day prepackaged bankruptcy might not work. Parts-making companies, especially those tied to the Detroit Three, have suffered as automakers have cut production to match weaker sales, and many are on the brink of bankruptcy. GM has proposed that the government create a credit insurance program that would guarantee payments from automakers to parts makers, making it easier for suppliers to borrow against the expected payments. Read more.
name='11'>NAS Medical Files Bankruptcy, Stock Delisted
Medical products manufacturer North American Scientific filed for bankruptcy on March 11, according to yesterday's San Fernando Valley (Calif.) Business Journal. In February, the Chatsworth, Calif.-based company announced it was selling its prostate brachytherapy product line to Best Theratronics for $5 million, but last week the company announced the final sale price was actually $2.5 million. In its bankruptcy filing, NAS also cited a reduction a reduced credit line as a contributing factor. The Nasdaq announced that will be delisting the company's stock as of March 23. North American said it hopes to have its stock trade on either the OTC or Pink Sheets in the future. The company said that it will be focusing exclusively on its ClearPath product line for breast cancer treatment. Read more.
name='12'>Ohio Hospital Owner Files for Chapter 11
Forum Health has turned to bankruptcy protection for some emergency care, TheDeal.com reported yesterday. The owner of three Ohio hospitals filed for chapter 11 with 17 affiliates Monday in the U.S. Bankruptcy Court in Youngstown, Ohio. Forum asserted that it has experienced serious financial difficulties since 2005, largely a result of a decline in population in its primary service area and, consequently, lower hospital admissions. Forum has been out of compliance with certain financial covenants in its debt agreements since 2005 and has also posted recurring operating losses. The Youngstown-based debtor has hired a series of advisers since then to try to help address the defaults. The company either sold or closed a series of facilities in 2007 and 2008. Despite the restructuring moves, asset sales and closures, Forum suffered a $22 million operating loss in 2008. Forum pinned the losses on a variety of factors, such as increased competition, high labor costs, increases in charity care and Medicare- and Medicaid-related revenue shortfalls. Forum plans to finance its operations in bankruptcy through cash collateral secured by a group of bondholders owed roughly $139.2 million through four different indentures. The company listed between $100 million and $500 million in both assets and debts in its petition. Read more.
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