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May 21
House Easily Passes Credit
Card Reform Bill
The House overwhelmingly passed (361-64) legislation
to tighten regulations on the credit card industry yesterday
afternoon,
size='3'>CongressDaily reported yesterday. The
Senate approved the bill Tuesday by a 90-5 vote, so House approval sends
it to President Obama by the Memorial Day deadline he set. The bill
would limit credit card interest rate increases, preventing retroactive
increases on existing balances and generally requiring 45 days’
notice for raising rates. It would also mandate how long gift cards
would be valid.
New opposition to Chrysler LLC's restructuring plan
emerged as Indiana pension funds holding Chrysler senior debt filed
objections to the plan, saying the U.S. government's involvement had
'infected' the company's bankruptcy, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. The opposition was led by the Indiana State Teachers Retirement
Fund, the Indiana State Police Pension Trust and the Indiana Major Moves
Construction Fund, which together own about $42.5 million of Chrysler's
$6.9 billion in secured debt, according to the funds' lawyer. The funds
are unhappy that the government put together a restructuring plan that
will give secured creditors only 29 cents on the dollar. Bankruptcy
Judge Arthur J. Gonzalez
size='3'>yesterday denied lenders' requests to delay the coming sale of
Chrysler assets to a new company backed by the government, but the funds
did secure a separate hearing in U.S. District Court in Manhattan next
week, where they plan to challenge the constitutionality and legality of
government involvement in Chrysler.
href='http://online.wsj.com/article/SB124286866222141773.html#mod=testMod'>Read
more. (Subscription required.)
In related news, Bankruptcy Judge
face='Times New Roman'>Arthur
Gonzalez signed off on a $4.96 billion
debtor-in-possession credit facility for Chrysler,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The DIP financing is largely being provided by the U.S. Department of
the Treasury. The $4.96 billion in government loans approved yesterday
is an increase from the initial promise of $4.1 billion. Funding for
GMAC LLC has been added to the total in large part so that Chrysler
could extend credit to customers and dealerships. Judge Gonzalez also
allowed Chrysler to pay essential supplier claims to the extent that
those payments are consistent with the DIP financing.
href='http://bankruptcy.law360.com/articles/102524'>Read
more. (Subscription required.)
Additionally, Chrysler said that Robert Kidder will
become chairman after most of the automaker’s assets are sold to a
new company controlled by Italy’s Fiat SpA, Bloomberg News
reported yesterday. Kidder, the former chairman and CEO of Borden
Chemical Inc. and Duracell International Inc., will be chairman of the
renamed Chrysler Group LLC. He will succeed current Chrysler chairman
and CEO Robert Nardelli.
GMAC Bailout
The Treasury Department has decided to bail out GMAC,
the former financing arm of General Motors, with $7.5 billion, which
would bring its total federal assistance to GMAC to more than $12
billion, the New York Times reported today.
The deal is expected to close today and comes two weeks after federal
regulators concluded from a stress test on GMAC that it needed an
additional $11.5 billion in capital to weather a severe downturn in the
economy. GMAC continues to provide crucial financing for car sales by
General Motors, and Treasury officials recognized that its survival was
essential to the government’s broader attempt to rescue and
restructure the automobile giant.
href='http://www.nytimes.com/2009/05/21/business/21gmac.html?_r=1&ref=business&pagewanted=print'>Read
more.
Judge Orders NHL, Coyotes
into Mediation
Bankruptcy Judge
face='Times
New
Roman' size='3'>Redfield Baum ordered the NHL
and Phoenix Coyotes owner Jerry Moyes to mediation on Tuesday in an
attempt to resolve their fight over who is in control of a franchise
that both sides agree is insolvent, the Associated Press reported
yesterday. Judge Baum made the ruling after hearing arguments over the
NHL's contention that Moyes had no authority to file for chapter 11
protection earlier this month. Under Moyes' bankruptcy plan, the team
would be sold to Jim Balsillie, whose
company makes the Blackberry, for $212.5 million and would move to
Hamilton, Ontario. The NHL -- with support from the NFL, Major League
Baseball and the NBA -- has asked the judge to uphold that the league
has a right to determine who owns a team and where it plays. The league
and Moyes are to report their progress at a status hearing May 27. The
question of whether the team could relocate needs to be decided before
the franchise is sold, Judge Baum said.
href='http://www.kpho.com/sports/19518043/detail.html'>Read
more.
Head Says Benefits Assured
Though the Pension Benefit Guaranty Corp. (PBGC) faces
a $33 billion deficit that could double if the nation's struggling
automakers cannot recover, PBGC Acting Director Vincent Snowbarger
insisted yesterday that retirees need not worry that their benefits are
about to disappear,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported today. The PBGC 'is able to meet its benefit payment
obligations and will be for many years to come,' Snowbarger told the
Senate's Aging Committee. Snowbarger said that because benefits paid by
the agency are spread over the lifetimes of pensioners, the deficit
poses no immediate danger. The PBGC had assets worth $63 billion at the
end of 2008, and firms with pension plans continue to pay premiums into
the fund, he said.
Judge Hears Arguments in
Washington Mutual Bankruptcy
Bankruptcy Judge
face='Times
New
Roman' size='3'>Mary Walrath declined
yesterday to rule immediately on a request by Washington Mutual Inc. for
authorization to examine records of JPMorgan Chase & Co., which
acquired the Seattle-based thrift's seized assets in September, the
Associated Press reported yesterday. The two companies are battling over
billions of dollars in disputed assets, with both of them claiming
ownership. Washington Mutual wants to conduct the examination to
investigate potential claims based on alleged misconduct by JPMorgan
that led to a federal lawsuit in Texas. JPMorgan argued that Washington
Mutual's examination request is barred by bankruptcy rules because of
the pending FDIC litigation and adversary proceedings filed by WaMU and
JPMorgan against each other in the bankruptcy case.
href='http://www.forbes.com/feeds/ap/2009/05/20/ap6447897.html'>Read
more.
BearingPoint Creditors
Object to Employee Incentives
Unsecured creditors in BearingPoint Inc.'s chapter 11
case are objecting to the technology consulting firm's incentive plan
for key employees, saying that it includes retention payments to
insiders that are prohibited under the Bankruptcy Code,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The revised incentive plan calls for $1.8 million in incentive payments
for executives involved in selling the company's assets and $5 million
in retention payments for about 200 employees who are considered vital
to the company's wind-down process, court documents say. The plan also
shares with employees 10 percent of all recoveries made in the
bankruptcy in excess of $325 million. The case is
face='Times New Roman'>In re
BearingPoint Inc. et al., case number
09-10691, in the U.S. Bankruptcy Court for the Southern District of New
York. Read
more. (Subscription required.)
SEC Leader Objects to Idea
for New Financial Watchdog
The head of the SEC yesterday strongly objected to an
Obama administration suggestion that a new financial watchdog for
consumers should assume oversight of mutual funds,
face='Times New Roman'>
size='3'>CongressDaily reported
today. 'I would question pretty profoundly
any model that would try to move investor protection functions out of
the Securities and Exchange Commission,' said SEC Chairwoman Mary
Schapiro. 'Investor protection is woven through everything that happens
in this organization.' The plan the administration
is weighing would centralize enforcement of laws that protect consumers
of financial products, such as credit cards, mortgages and mutual funds.
That mission is currently spread across a patchwork of federal and state
agencies, including the SEC, the Federal Reserve and FTC.
U.S. Trustee Objects to
Source Interlink's Financial Team
Acting U.S. Trustee
face='Times
New
Roman' size='3'>Roberta A. DeAngelis objected
to Source Interlink Cos. Inc.’s request to employ a financial
adviser, arguing that the debtors have failed to explain why their
proposed compensation to Moelis & Co. LLC is
reasonable,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. DeAngelis said that the debtors' application to employ Moelis
did not provide adequate details about why the firm should receive
millions of dollars for its services, and that Moelis had not conducted
an acceptable conflicts-of-interest check. Source Interlink filed its
application to employ and retain Moelis
face='Times New Roman' size='3'>nunc pro tunc
size='3'>to its petition date of April 27, when the company also filed
its prepackaged reorganization plan and motion for approval of a $385
million post-petition financing package. The debtors proposed to pay
Moelis $250,000 per month, a $4 million restructuring fee if the
prepackaged plan is confirmed and an additional $1 million if the
Yucaipa Companies LLC files a pleading in opposition to the prepackaged
deal. In her objection, DeAngelis argued that the debtors have failed to
address why they will pay Moelis an additional $1 million if Yucaipa
objects to the prepackaged plan.
href='http://bankruptcy.law360.com/articles/102406'>Read
more. (Subscription required.)
Treasury Secretary Says
Banks Raised Billions Since “Stress Tests”
Treasury Secretary Timothy F. Geithner testified
yesterday that the country’s biggest banks have made moves to
bolster their balance sheets by about $56 billion since the government
disclosed the results of its financial “stress tests” two
weeks ago, the New York Times reported today.
Testifying before the Senate Banking Committee, Geithner said that the
financial system had begun to “heal,” and that the Treasury
would soon be introducing the next phase of its financial rescue effort
— the plan to team up with private investors to buy billions of
dollars in toxic assets from banks. However, lawmakers from both parties
complained that the $700 billion Troubled Asset Relief Program (TARP)
had yet to revive bank lending in many parts of the country.
href='http://www.nytimes.com/2009/05/21/business/economy/21geithner.html?ref=business&pagewanted=print'>Read
more.
Extension to File Reorganization Plan
A bankruptcy court approved Frontier Airlines’
request for an extension propose its own plan for emerging from chapter
11, the Associated Press reported yesterday. The Denver-based airline
now has until Oct. 9 to propose a plan before creditors would be allowed
to propose their own. The previous deadline was June 4. Frontier filed
for bankruptcy protection in New York in April 2008, and while it has
finished much of its reorganization, it is still looking for exit
financing.
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