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February 17,
2009
Administration’s
Housing Plan Likely to Put Pressure on Lenders
President Obama’s plan to reduce home
foreclosures will include a mix of government inducements and new
pressure on lenders to reduce monthly payments for borrowers at risk of
losing their houses, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The plan, to be announced tomorrow, is expected
to include government subsidies for reducing a borrower’s interest
rate, which a lender would have to match with its own money. However,
officials cautioned that subsidies for lower interest rates would not in
themselves help many troubled homeowners, because lenders were still
likely to view many of those borrowers as bad risks and refuse to
restructure their loans. One possibility to pressuring lenders is a
stepped-up effort to enact legislation that would give bankruptcy judges
new power to restructure mortgages and reduce a borrower’s
payments.
href='http://www.nytimes.com/2009/02/17/washington/17housing.html?_r=1&hp=&pagewanted=print'>Read
more.
In related news, JPMorgan Chase announced that it has
initiated a three-week foreclosure moratorium for loans that it services
between now and March 6, according to a House Financial Services
Committee press release. The company’s foreclosure moratorium was
announced in a letter from CEO Jamie Dimon to House Financial Services
Chairman Barney Frank (D-Mass.) following the committee’s hearing
looking into bank lending practices. “We believe three weeks is
adequate time for the Treasury to announce – and for us to
implement – a new plan,” Dimon said.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/press021309.shtml'>Click
here to read the letter.
Bill to Obama’s Goals
As President Obama prepares to announce a program
tomorrow to stem the soaring rate of foreclosures, key Democratic
lawmakers say that they are planning to craft a housing bill that would
include a provision changing the bankruptcy law to allow judges to
modify the mortgages of distressed homeowners, the
face='Times New Roman'>
size='3'>Washington Post reported on Saturday.
While a number of legislative proposals are currently working through
Congress, House Financial Services Chairman Barney Frank (D-Mass.) said
that he is looking to pull them together into a single housing package.
Another provision, Frank said, would provide legal protection to lenders
who reduce interest rates or otherwise modify the terms of troubled
loans for homeowners.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/02/13/AR2009021301692_pf.html'>Read
more.
Union Talks Seen as Key as
GM Makes Case for Funds
With its access to a government lifeline possibly at
risk, General Motors executives were locked in intense negotiations
yesterday with leaders of the United Automobile Workers over ways to cut
its vast bills for retiree health care,
face='Times




New


Roman'
size='3'>the New York Times reported today. GM
today will file what is expected to be the largest restructuring plan of
its 100-year history, a step it must take to justify its use of a $13.4
billion loan package from the federal government. The plan will outline
in considerable detail how GM will further cut its work force, shutter
more factories in North America and reduce its lineup of brands to just
four, from eight. The remaining core brands will be Chevrolet, Cadillac,
GMC and Buick. GM pressed union leaders in a meeting in Detroit for a
deal on financing what was the centerpiece of the 2007 UAW contract
— a perpetual, GM-financed trust to cover health care costs of
hundreds of thousands of retired hourly workers and their surviving
spouses.
href='http://www.nytimes.com/2009/02/17/business/economy/17auto.html?ref=business&pagewanted=print'>Read
more.
In related news, President Obama has dropped the idea
of appointing a single, powerful “car czar” to oversee the
revamping of General Motors and Chrysler and will instead keep the
politically delicate task in the hands of his most senior economic
advisers, the
size='3'>New York Times reported yesterday.
Obama is designating the Treasury secretary Timothy F. Geithner and
Lawrence H. Summers, the chairman of the National Economic Council, to
oversee a presidential panel on the auto industry. Geithner will also
supervise the $17.4 billion in loan agreements already in place with GM
and Chrysler. Administration officials also said that Ron Bloom, a
restructuring expert who has advised the labor unions in the troubled
steel and airline industries, would be named a senior adviser to
Treasury on the auto crisis.
href='http://www.nytimes.com/2009/02/16/business/economy/16auto.html?_r=1&hp=&pagewanted=print'>Read
more.
States and Cities in
Scramble for Stimulus Cash
Well before President Obama’s stimulus package
completed its path through Congress last week, state and local officials
facing multimillion-dollar budget deficits, crumbling infrastructure and
the prospect of massive reductions in services were already jockeying
for the upper hand in deciding how the money should be spent, the
New York Times reported yesterday. When Obama signs the
stimulus bill in Denver today, the influx of federal dollars is expected
to set off a multitude of political battles between governors and
legislatures, state capitols and city halls, and even between
neighboring municipalities. Along with the money, there are complex
rules to the sprawling, $787 billion federal plan that local politicians
from governors to small-town mayors say they are only now beginning to
grasp. While states will have direct say on the use of much of the money
— especially on infrastructure projects like roads and bridges
— many spending decisions will still rest with officials in
Washington, D.C.
href='http://www.nytimes.com/2009/02/16/us/politics/16stimulus.html?ref=business&pagewanted=print'>Read
more.
White House Wants to Revise
Compensation Part of Stimulus
Facing a stricter approach to limiting executive
bonuses than it had favored, the Obama administration wants to revise
that part of the stimulus package even after it becomes law, the
Associated Press reported yesterday. Though President Obama is set to
sign the $787 billion stimulus bill today, the administration will seek
changes in the government’s approach to executive compensation,
said senior Obama adviser David Axelrod. Under the
administration’s proposal, compensation restrictions would apply
only to banks that received “exceptional assistance” from
the government. Top executives could be paid no more than $500,000, with
bonuses or other compensation coming as stock that could be claimed only
after the federal money had been paid back.
href='http://www.nytimes.com/2009/02/16/us/politics/16shows.html?ref=business&pagewanted=print'>Read
more.
Trump Entertainment,
Affiliates File for Bankruptcy
Trump Entertainment Resorts Inc., the casino company
founded by Donald Trump, filed for bankruptcy after annual gambling
revenue in Atlantic City, N.J., plunged the most on record, Bloomberg
News reported today. The company’s chapter 11 petition, filed four
years after its predecessor company failed, listed less than $50 million
in assets and less than $500 million in debt. Nine affiliates including
Trump Plaza Associates, Trump Marina Associates and Trump Taj Mahal
Associates also sought protection. An exhibit attached to the petition
said the companies had consolidated assets of $2.1 billion and debt of
$1.7 billion as of Dec. 31. Trump Entertainment missed a $53 million
interest payment at the start of December, and a creditor-extended grace
period to make the defaulted coupon payment expires today. The case
is
size='3'>In re Trump Entertainment Resorts Inc.
size='3'>, 09- 13655, U.S. Bankruptcy Court, District of New Jersey
(Camden).
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aPdB1t9zUEUA&refer=us'>Read
more.
Peanut Corporation of
America to Liquidate
The peanut company at the center of a salmonella
scandal filed for bankruptcy protection on Friday, saying that the
extensive recalls of its products left it no choice but to close,
the
size='3'>New York Times reported on Saturday.
The Peanut Corporation of America filed for liquidation under chapter 7
of the bankruptcy law in Virginia, where it is headquartered. The
company is the subject of a federal criminal investigation for allegedly
sending out batches of peanut products that it knew to be contaminated
with salmonella. To date, the Centers for Disease Control and Prevention
has tied 637 illnesses to the salmonella outbreak, and it is believed to
have caused nine deaths. More than 2,000 products have been recalled
that contain peanuts, peanut butter or peanut paste from the
company.
href='http://www.nytimes.com/2009/02/14/business/14peanut.html?sq=bankruptcy&st=cse&scp=14&pagewanted=print'>Read
more.
for $75 Million in DIP Funding
Plastic film and packaging manufacturer Pliant Corp.
has won access to $75 million in debtor-in-possession financing along
with approval of 11 other first-day motions in its new bankruptcy
proceedings,
size='3'>Bankruptcy Law360 reported on Friday.
Bankruptcy Judge
face='Times




New


Roman'
size='3'>Mary F. Walrath gave Pliant interim
permission to tap the DIP funds from a group of lenders and fund
managers including DDJ Capital Management LLC, WCP LP and Wayzata
Opportunities Fund II LP.The approval came over the objection of an ad
hoc creditors’ committee holding 11 1/8 percent senior secured
notes. The committee described the DIP facility as “inappropriate,
overreaching” and in violation of an intercreditor agreement
resulting from Pliant’s 2006 bankruptcy proceedings.
href='http://bankruptcy.law360.com/print_article/87345'>Read more.
(Subscription required.)
Liberty Media Close to a
Deal with Sirius XM
John Malone's Liberty Media Corp. was near a deal
yesterday to invest in Sirius XM Radio Inc. in return for just under
half of the company, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Though negotiations continued over the final
details, Malone appeared poised to edge past rival media baron Charles
Ergen for a piece of the troubled satellite-radio operator. A deal would
create a satellite-media juggernaut around Liberty Media's DirecTV Group
Inc., the country's leading satellite-TV provider, and Sirius, the sole
satellite-radio operator in the U.S., though the two wouldn't be
formally combined. Under the proposed agreement, Liberty would invest
several hundred million dollars in Sirius in two stages and eventually
control about half of the company. A deal would allow Sirius to avoid
bankruptcy as the company must pay about $175 million in notes held by
Ergen by the close of business today.
href='http://online.wsj.com/article/SB123481965239594427.html'>Read
more. (Subscription required.)
Regulators Shut Down Four
Small Banks
Regulators shut down small banks Friday in Nebraska,
Florida, Illinois and Oregon as the U.S. recession continues to pound
financial institutions, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported on Saturday. The four seizures represent the most to
go under on a single day so far in 2009. Regulators are bracing for
dozens more to collapse in the coming months, and the rate of failures
is already on pace to exceed 2008, when 25 banks went down. There were
three failures in 2007.
href='http://online.wsj.com/article/SB123456888781486115.html'>Read
more. (Subscription required.)
Brokerages Tighten Hedge
Fund Financing
Brokerage firms are reducing financing and other
services to hundreds of hedge funds, in a move that could accelerate the
shakeout among investors, the
face='Times




New


Roman'
size='3'>Wall Street Journal reported today.
Under financial pressure, securities firms are dividing their hedge-fund
clients into lists of those they consider best able to weather the
financial turmoil and those they're less sure of. The result is that
more funds may have to merge, find other financing at higher cost or
close.Hedge funds' short-term trading has made them a major force in
financial markets, influencing prices of assets from stocks to oil, but
their clout is slipping as some post big losses. Their assets have
fallen to about $1.4 trillion from $2 trillion in mid-2008, according to
the firm Hedge Fund Research. Hedge funds closed at a record pace last
year, with around 1,300 liquidating, the firm says.
href='http://online.wsj.com/article/SB123483417670296081.html'>Read
more. (Subscription required.)
Trustee Subpoenas
Brokerage Firms in Madoff Case
The trustee in charge of liquidating the assets of
Bernard Madoff's investment firm has begun sending subpoenas to
brokerage firms that may have facilitated trades in Madoff's operation,
the
size='3'>Wall Street Journal reported today.
The filings in federal bankruptcy court in New York late Monday night by
trustee Irving Picard included documents showing he had subpoenaed,
among others, Timber Hill LLC, Knight Capital Group Inc. and PEAK6
Investments LP. The firms that were sent subpoenas were likely brokerage
operations through which Madoff sold securities in order to meet
redemption requests from investors, according to legal experts.
href='http://online.wsj.com/article/SB123484642761997313.html'>Read
more. (Subscription required.)
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