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September 29,
2009
about Restructuring Plan
FairPoint Communications Inc. said that it is in talks
with lenders for a restructuring plan, which could require the rural
telecom services provider to file for chapter 11 protection, Reuters
reported yesterday. The company also said that it might fail to comply
with certain covenants contained in its credit facility, for the period
ending Sept. 30. The company may forgo principal and interest payments
as well as payments under its interest rate swap agreements, amounting
to about $42 million, due on Sept. 30. FairPoint has signed a
forbearance agreement with its lenders that collectively hold more than
50 percent of the loans and commitments outstanding under the credit
facility. Under the agreement, the lenders have agreed to not exercise
any actions such as accelerate the maturity of the loans until Oct.
30.
href='http://www.reuters.com/article/rbssTechMediaTelecomNews/idUSBNG37178720090928'>Read
more.
Condemn Tax Group's Chapter 11 Plan
Accused of aiding the 1031 Tax Group LLC’s $126
million Ponzi scheme, Bank of America NA and Countrywide Bank FSB have
objected to the bankrupt exchange fund firm’s latest chapter 11
plan,
size='3'>Bankruptcy Law360 reported yesterday.
On Sept. 25 the banks urged Bankruptcy Judge
face='Times New Roman'>Martin
Glenn to deny confirmation of 1031 Tax
Group’s second amended reorganization plan, contending that the
plan improperly frees the debtor from having to indemnify the banks now
facing litigation in connection with the massive fraud. Bank of America
and Countrywide held accounts used by 1031 Tax Group to deposit funds
for the company’s clients: real estate exchangers looking to defer
taxes until the exchange transactions closed. However, the accounts were
plundered by the debtor's founder, Edward H. Okun, and the banks are now
on the hook for allegedly facilitating the fraud, according to the
motion. The debtor signed numerous indemnification agreements with the
banks when opening the accounts and cannot evade those obligations in
restructuring, according to the motion, especially as the banks now face
a class action by Okun’s victims.
href='http://bankruptcy.law360.com/print_article/124853'>Read
more. (Subscription required.)
FDIC Prepayment Likely for
Banks
The Federal Deposit Insurance Corp. is expected to
propose today that the bulk of the banking industry prepay three years'
worth of fees to replenish the fund that insures trillions of dollars of
customers' deposits, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Having banks pay up-front for 2010, 2011 and
2012 could bring between $36 billion and $54 billion to the government
agency, which insures deposits at more than 8,000 banks. It was not
clear when the assessments would have to be prepaid. The move is
expected to garner complaints from the banking industry because of the
amount of money that would have to be paid up-front. Still, some might
see prepaid assessments as preferable to another option, a one-time
charge that wouldn't offset any future obligations to pay into the
depleted fund.
href='http://online.wsj.com/article/SB125417165749247325.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
U.S. Trustee Balks at Fees
for Philly Newspapers’ Lead Bidder
U.S. Trustee
face='Times New Roman' size='3'>Roberta A. DeAngelis
size='3'>is objecting to fees Philadelphia Newspapers LLC is seeking to
pay the lead bidder for its assets should the proposed buyer be out-bid
at an auction, Dow Jones Daily Bankruptcy Review
size='3'>reported today. DeAngelis said that the fees and expense
reimbursement, up to $1.5 million in total, that the newspaper publisher
wants to pay the bidder if it fails to acquire the company is both
excessive and unnecessary because the entity that’s serving as the
lead bidder is largely comprised of Philadelphia Newspapers’
executives and current owners. The publisher of the
face='Times New


Roman'>
face='Times



New
Roman' size='3'>Philadelphia Inquirer will
seek court permission on Thursday to auction off its assets, with a
group led by Bruce Toll of homebuilder Toll Brothers Inc. serving as the
stalking-horse bidder. Toll was one of several investors involved in
Philadelphia Newspapers’ 2006 leveraged buyout. He now serves as
chairman of the publisher’s parent company.
SEC Weighs New Rules for
Securities Lending
Securities regulators are exploring new regulations
for the multitrillion-dollar securities-lending market, the first major
step regulators have taken in the area in decades, the
face='Times New Roman'>Wall
Street Journal reported today. The Securities
and Exchange Commission Chairman is holding a public roundtable Tuesday
to explore several issues around securities lending, which has expanded
into a big moneymaker for Wall Street firms and pension funds. The
opacity of the securities-lending market worries regulators on several
counts. The lack of transparency in the market has some people concerned
that certain market participants could take on big risks that could
threaten the financial system. Another issue is how securities lenders
invest the cash collateral put up by borrowers. Last year's credit
crunch exposed cases in which investors' agents placed collateral into
risky pools of securities that had big losses. The California Public
Employees' Retirement System reported last month a loss of $634 million
for its securities-lending program in the year ended in March.
href='http://online.wsj.com/article/SB125415836962146789.html#mod=article-outset-box'>Read
more. (Subscription required.)
Metromedia Objects to
Creditors' Calls for Chapter 11 Trustee
Bankrupt telecommunications holding company Metromedia
International Group Inc. fired back at creditors pushing for the
appointment of a chapter 11 trustee and the termination of its
exclusivity period, denying allegations that it filed for bankruptcy in
bad faith,
size='3'>Bankruptcy Law360 reported yesterday.
The Charlotte, N.C.-based company filed for chapter 11 protection in
June, blaming what it said was a “debilitating” $188 million
judgment entered against it stemming from a post-merger appraisal
dispute. A court ruled that a merger in August 2007 in which Salford
Capital Interest Inc. gained controlling ownership of the company
triggered an automatic obligation to pay about $188 million in
outstanding quarterly dividends to preferred stockholders. In a motion
filed in July, the unsecured creditors’ committee voiced vehement
concern that the debtors were using bankruptcy protection as an
opportunity to put off paying the penalty, and asked the court to
appoint an independent trustee to oversee proceedings.
href='http://bankruptcy.law360.com/print_article/124739'>Read more.
(Subscription required.)
Underwriters Seek Dismissal
of Colonial Case
A group of defendants, including Charles Schwab &
Co. Inc., Credit Suisse Securities LLC and H&R Block Financial
Advisors, has asked a judge to dismiss it from a consolidated proposed
securities class action alleging that bankrupt Colonial BancGroup Inc.
misled investors about its subprime lending practices,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The underwriter defendants claim that they did not make any false or
misleading statements and asserted that Colonial’s losses were
based on its exposure to risk in the Florida real estate market and
mortgage crisis, which they were warned about in financial filings. The
other underwriter defendants are Citigroup Global Markets Inc., Deutsche
Bank Securities Inc., Mesirow Financial Inc., Morgan Stanley & Co.
Inc., Oppenheimer & Co. Inc., Robert W. Baird & Co. Inc., UBS
Securities LLC and Wachovia Capital Markets LLC.
href='http://bankruptcy.law360.com/print_article/124799'>Read more.
(Subscription required.)
Ohio Attorney General Takes
Lead Role in Bank of America Lawsuit
Bank of America Corp. executives improperly concealed
billions of dollars in losses and billions in bonuses paid by Merrill
Lynch before a shareholder vote on their proposed merger, Ohio Attorney
General Richard Cordray argued in a class-action securities lawsuit
filed Friday, according to an Associated Press report yesterday. Ohio
was awarded the lead role in a lawsuit against Bank of America that
includes the state's two largest public employee pension funds and the
Teacher Retirement System of Texas. The lawsuit alleges that Bank of
America agreed to allow Merrill Lynch to pay as much as $5.8 billion in
year-end discretionary bonuses to executives and employees but failed to
disclose the bonuses before the merger vote. It also alleges that Bank
of America and Merrill Lynch executives were aware of billions of
dollars in losses suffered by Merrill Lynch in the two months before the
merger vote but failed to disclose them.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/28/AR2009092801781.html'>Read
more.
Chapter 11
Holley Performance, a supplier of high-performance
products to professional racers and street car enthusiasts, has filed
again for chapter 11 protection, the Associated Press reported
yesterday. The Bowling Green, Ky.-basedcompany said in a court filing
yesterday that it has been unable to reach an agreement with lenders who
say Holley has defaulted on the debt terms of its 2008 bankruptcy
reorganization and are threatening foreclosure.The company's business
plan after emerging from bankruptcy last year included growing its
original equipment business, which it is now trying to sell after a deal
with Caterpillar for diesel truck engines fell through.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/28/AR2009092801589_pf.html'>Read
more.
Opponents Take on
SEC’s “Uptick” Rule
Big Wall Street firms from Vanguard Group Inc. to
Goldman Sachs Group Inc. are lining up against new rules to restrict
short-selling under consideration by the Securities and Exchange
Commission, the
size='3'>Wall Street Journal reported today.
The latest round of objections came after a request for comments on a
proposal for reinstatement of a short-selling restriction known as the
'uptick' rule, in which investors can only short a stock after it rose
or ticked higher. Under pressure from politicians as well as angry
investors on Main Street, the SEC proposed several new rules to curb
short-selling activities earlier this year. More recently, the agency
requested comments on a modified uptick rule. The new uptick rule would
allow traders to sell a stock short only at a price higher than the
lowest price at which investors are willing to buy a stock. Essentially,
stock would need to rise before it could be sold short.
href='http://online.wsj.com/article/SB125417372365647425.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Gets Sentence of 16 Months
Joseph Hirko, the former chief executive of the failed
Internet division of Enron, was sentenced yesterday to 16 months in
prison for lying about the capabilities of the company’s broadband
network to help pump up the share price, the Associated Press reported
yesterday.Hirko agreed to pay $8.7 million in restitution. He had
previously pleaded guilty to one count of wire fraud as part of a plea
deal.
href='http://www.nytimes.com/2009/09/29/business/29enron.html?_r=1&ref=business&pagewanted=print'>Read
more.
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