June 112009

 

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size='3'>Judge Orders Auction in a Rebuke to
Delphi Plan

Bankruptcy Judge

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Roman'

size='3'>Robert Drain yesterday ordered Delphi

to hold an auction and allow bids to challenge the government-brokered
sale to Platinum Equity, the

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size='3'>Wall Street Journal reported today.
The lenders argued that Platinum was a puppet of General Motors and

the government, which needs Delphi to emerge from bankruptcy for its GM
bailout to succeed. On June 1, the same day GM filed for bankruptcy,
Delphi announced a plan to emerge from its own 43-month-old bankruptcy
case. The plan called for Delphi to sell to GM four U.S. auto-parts
plants and its steering business – operations critical to GM,
which is Delphi's former parent and largest customer. Virtually all of
the remainder of Delphi's assets
size='3'>  was to be sold to Platinum Equity,

a Beverly Hills, Calif.-based private-equity firm specializing in
distressed companies. Platinum is putting in $250 million of equity and
$250 million in financing to fund the deal, with more than $2.5 billion
of equity and debt being provided by GM. 
href='http://online.wsj.com/article/SB124466769259803489.html'>Read
more. (Subscription required.)

Fiat Closes Deal with
Chrysler

Chrysler Group LLC completed its alliance with Fiat
SpA yesterday, with executives promising leaner management and
overhauled manufacturing as the car maker tries to regain consumer
confidence with new models and higher quality, the
face='Times New Roman'>Wall
Street Journal reported today. The deal
essentially ends Chrysler's stay in bankruptcy, though some of the
company's operations, unwanted by the new management, remain in
bankruptcy court. The U.S. government has loaned Chrysler $9 billion and

in exchange owns 8 percent of the revamped company. A United Auto
Workers union retiree health-care trust fund has a 55 percent stake and
yesterday named former Michigan Gov. James J. Blanchard as a Chrysler
director. Fiat, which is providing Chrysler with small-car designs and
engines it can build and sell in the United States, has a 20 percent
share and the potential to raise that to 51 percent once the U.S. loans
are repaid. 
href='http://online.wsj.com/article/SB124464199451702137.html'>Read
more. (Subscription required.)

In related news, a member of President Obama's auto
task force stressed to Senate Banking Committee members yesterday that
sacrifices had been made by all sectors affected by the bankruptcies of
Chrysler LLC and General Motors Corp., but the companies would emerge in

better shape without requiring additional federal dollars,
face='Times New Roman'>
size='3'>CongressDaily reported today. Ron
Bloom said although he was by no means 'highly confident,' he sees
'reasonable scenarios' in which a substantial portion of the $85 billion

in federal funds that has been poured into the two companies can be
recouped. Bloom defended the decision by the Bush and Obama
administrations to bail out the companies, and said he 'strongly'
believed GM will not require any more money beyond what has been
promised by the administration. 

href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=e4434686-9de0-4d73-99eb-b49b0ac31ee5'>Click

here to read the prepared testimony.

Court Will Not Expedite
Hearing for GM Bondholders

Bankruptcy Judge

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size='3'>Robert E. Gerber refused to hold an
expedited hearing on a motion by individual General Motors Corp.
bondholders asking that the court to appoint an official committee
representing family and other noninstitutional
bondholders,

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size='3'>Bankruptcy Law360 reported yesterday.

The bondholders claimed in a filing on Tuesday that they wanted the
court to consider the committee recognition motion at least three days
before a June 19 deadline for filing objections to proposed asset
transfers to the new GM, so that if they gain recognition, they could
make a “meaningful effort” to file objections to the
transactions. However, Judge Gerber noted that the bondholders may file
such papers whether or not they have been designated as an official
committee. 
href='http://bankruptcy.law360.com/print_article/105660'>Read
more. (Subscription required.)

Former Lehman Clients Seek
$190 Million in Lawsuit over Securities

Western Digital Corp. and Ceradyne Inc. filed lawsuits

against Lehman Brothers Holdings Inc. on Tuesday totaling $191 million
for allegedly misleading investors into buying into an auction rate
securities (ARS) market  that they allege Lehman knew was on the
verge of collapse,
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Roman'

size='3'>Bankruptcy Law360 reported yesterday.

Digital hardware maker Western Digital is asking the bankruptcy court to

force Lehman to fork over $26 million in damages, to compensate for the
amount it says it currently holds in illiquid ARS purchased from Lehman.

Advanced technical ceramic manufacturer Ceradyne is looking to recoup
the $35 million it has in illiquid ARS, on which it claims to have
already lost $6 million. Each company is seeking at least $65 million in

punitive damages. The adversary cases are Western
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Roman'

size='3'>Digital Corp. v. LBHI, case number
09-01269, and

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Roman'

size='3'>Ceradyne Inc. v. LBHI, case number
09-01270, in the U.S. Bankruptcy Court for the Southern District of New
York. 
href='http://bankruptcy.law360.com/print_article/105809'>Read
more. (Subscription required.)

Developer Crescent Resources

Files for Chapter 11

Real estate developer Crescent Resources yesterday
said that it filed for chapter 11 protection to allow it to reduce debt
and improve its capital structure, Reuters reported yesterday. The
Charlotte, N.C.-based company said that it had also obtained
debtor-in-possession financing of $110 million from a group of lenders,
which will provide sufficient funds to continue its business activities.

CEO Arthur Fields has resigned, but will work with the company in an
advisory capacity. Andrew Hede was appointed chief restructuring officer

and CEO, effective immediately. Crescent Resources is a joint venture of

Duke Energy and the Morgan Stanley Real Estate Funds. 
href='http://www.forbes.com/feeds/afx/2009/06/10/afx6530443.html'>Read
more.

Aviza Technology Files for
Chapter 11

Aviza Technology, a semiconductor capital equipment
company based in Scotts Valley, Calif., filed for chapter 11 protection
yesterday along with its Aviza Inc. and Trikon Technologies
units,

size='3'>Barron’s reported yesterday.
Aviza said that it was a victim of the severe downturn in demand for
semiconductor equipment that has unfolded since the start of the current

recession. “The company hired Needham & Co. to “to
review and pursue financial and strategic options,” including a
sale or liquidation, but noted that the continuing decline in orders and

shipments an inability to find new sources of liquidity caused it to
seek bankruptcy protection. Aviza said that prior to the chapter 11
filing, it signed a non-binding letter of intent to sell certain assets
to Sumitomo Precision Products, and that it intends to pursue the
transaction through the bankruptcy. 

href='http://blogs.barrons.com/techtraderdaily/2009/06/10/aviza-technology-files-chapter-11/'>Read

more.

Madoff Victims Blast
Trustee's Valuations of Investments

Three Pennsylvania residents filed a lawsuit yesterday

accusing

size='3'>Irving H. Picard, the trustee in the
Madoff proceeding, of favoring the brokerage industry and enriching Wall

Street at the expense of innocent investors, the
face='Times New






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Roman'

size='3'>New York Law Journal reported today.
Picard has created his own definition of 'net equity' and 'intends to
avoid paying [Securities Investor Protection Corporation] insurance to
the thousands of elderly Madoff investors' who depended on these
investments for their 'daily living expenses,' states the complaint
in

size='3'>Peskin v. Picard, 08-01789.The suit
comes on the heels of a class action filed June 5 on behalf of a group
of six elderly investors who had accounts with Bernard L. Madoff
Investment Securities LLC and have filed roughly $9 million in claims to

recoup the 'market value' of their securities. The earlier
lawsuit,

size='3'>Albanese v. Picard, 08-01789, alleges

that Picard's method of evaluating claims by subtracting the amount
withdrawn from an investors' total deposits and failing to credit 'the
value of securities' appearing on the customers' most recent account
statement violates the Securities Investor Protection Act. However, the
recent action goes one step further in that it accuses Picard of
breaching his fiduciary duty to investors by deducting withdrawals they
made within 90 days of the Dec. 15, 2008, liquidation, a strategy they
maintain prevents them from collecting the $500,000 in compensation that

they are entitled to under the Securities Investor Protection
Corp. 

href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202431382435'>Read

more.

Treasury to Set
Executives’ Pay at Seven Ailing Firms

The Obama administration’s sweeping new proposal

to restrict executive pay is likely to be a humbling exercise for seven
of the nation’s largest companies, which have received billions of

dollars in federal assistance to survive the economic crisis, according
to a

size='3'>New York Times report today. The
Treasury Department yesterday appointed lawyer Kenneth R. Feinberg to
oversee the compensation of employees at the seven companies — the

American International Group, Citigroup, Bank of America, General
Motors, Chrysler and the financing arms of the two automakers. He will
have broad discretion to set the salaries and bonuses for their five
most senior executives and their 20 most highly paid employees. The new
plan also calls on Congress to adopt legislation that would let
shareholders vote on pay levels and require public companies to
strengthen the independence of board panels that set executive
pay. 

href='http://www.nytimes.com/2009/06/11/business/11pay.html?_r=1&ref=business&pagewanted=print'>Read

more.

In related news, the House Financial Services
Committee will hold a hearing titled “Compensation Structure and
Systemic Risk” today at 10 a.m. ET. To view the witness list and
watch the hearing via live Webcast, please 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_061109.shtml'>click

here.

Lyondell Settles with
Insurers

Bankruptcy Judge

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Roman'

size='3'>Robert E. Gerber on Tuesday signed
off on two settlements between a Lyondell Chemical Co. debtor and two
insurers that are winding down their businesses,
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size='3'>Bankruptcy Law360 reported yesterday.

The settlements are related to the bankrupt chemical manufacturer's
legacy lead and asbestos liabilities. Judge Gerber’s rulings
approved debtor Millennium Petrochemicals Inc.'s release of rights under

eight excess insurance policies related to asbestos liability with City
General Insurance Co. and nine excess insurance policies related to lead

liability with Reliance National Insurance Co. According to court
papers, Millennium Petrochemicals had incurred more than $10.5 million
in defense costs and more than $4 million in payment of settlements or
judgments in the resolution of the claims as of Sept. 30. The case
is

face='Times New Roman' size='3'>In re Lyondell Chemical Co. et
al., case number 09-10023, in the U.S.
Bankruptcy Court for the Southern District of New York. 
href='http://bankruptcy.law360.com/articles/105671'>Read
more. (Subscription required.)

Analysis: Daring Trade by
a Texas Brokerage Firm Has Wall Street Seething

A canny trade by a small brokerage firm in two markets

at the heart of the financial crisis has left some of the biggest
players on Wall Street crying foul, the

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Roman'

size='3'>Wall Street Journal reported today.
At issue is a move by Amherst to boost the price of bonds to avoid
paying out on credit-default swaps it had sold. Banks are questioning
whether Amherst set them up by selling credit-default swaps and then
rendering them worthless. Amherst says it did not do anything improper,
but took advantage of an opportunity when it emerged. Privately-held
Amherst says that it acted in good faith trying to limit losses for
clients, who had sold credit-default swaps on the securities. The burned

banks include JP Morgan Chase & Co., Royal Bank of Scotland Group
PLC and Bank of America Corp. Some banks have reached out to two
industry trade groups about Amherst's actions, and the groups are
reviewing the transaction. 

href='http://online.wsj.com/article/SB124468148614104619.html#mod=testMod'>Read

more. (Subscription required.)

Fed E-mails Bash Bank of
America Chief in Tussle over Merrill Deal

Federal Reserve officials harshly criticized Bank of
America Corp. and its chief executive in e-mails after the bank tried to

pull out of its deal to buy Merrill Lynch according to documents
unearthed by congressional investigators, the

face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. 

size='3'>During the December standoff between the big bank and top
government officials, Federal Reserve Chairman Ben Bernanke dismissed
the pullout threat as a 'bargaining chip.' Fed attorneys called the
bank's arguments 'not credible.' A top examiner said Chief Executive
Kenneth Lewis's own claim that the bank was surprised by Merrill's
mounting losses 'seems somewhat suspect.' The e-mails and other
documents, subpoenaed from the Fed as part of a congressional
investigation led by Rep. Edolphus Towns (D-N.Y.), get inside one of the

most controversial moments of the financial crisis. A Dec. 21 email from

Federal Reserve Bank of Richmond President Jeffrey Lacker to Fed
employees said Bernanke 'intends to make it even more clear' that if
Bank of America kills the Merrill deal, and later needs government
assistance, 'management is gone.' 
href='http://online.wsj.com/article/SB124472321695405977.html'>Read
more. (Subscription required.)

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