href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif'>
November 7, 2008
Firms Say Bailout Plan Lacks Necessary
Clarity
A majority of financial firms say a lack of clarity about important
aspects of the Treasury Department's rescue plan is diminishing their
willingness to participate, the Wall Street Journal reported
today. A survey conducted by the Securities Industry and Financial
Markets Association found that a large percentage of financial firms
would be reluctant to participate without more details about any
potential program. More than nine in 10 said they were less likely to
participate in the Troubled Asset Relief Program because of a 'lack of
clarity.' Nearly the same number expressed reluctance if the Treasury
Department requires firms to issue warrants in return for taking assets
from them. The Treasury is still formulating its plans to purchase
assets and has yet to settle on a comprehensive approach. Treasury
officials still need to determine how to price securities whose
underlying markets are pretty thin according to some experts.
href='http://online.wsj.com/article/SB122601914224707163.html'>Read
more. (Subscription required.)
Report: U.S. Job Losses Reach 240,000
in October
The Labor Department reported that U.S. job losses accelerated the last
two months pushing the unemployment rate to 14-year highs in October,
the Wall Street Journal reported today. Nonfarm payrolls
tumbled a larger-than-expected 240,000 in October, the 10th-straight
decline pushing total job losses for the year to 1.2 million. September
was revised sharply lower to show a job loss of 284,000, the biggest
drop since November 2001. The pullback was broad-based, including
manufacturing, construction and most service industries.
href='http://online.wsj.com/article/SB122606357419508465.html'>Read
more. (Subscription required.)
Democrats Craft $100 Billion Stimulus
Plan
Amidst economic conditions, Democrats are looking to move swiftly on an
economic action plan that could include up to $100 billion in immediate
stimulus spending and new tax cuts for the middle class early next year,
the Washington Post reported today. Democrats are working out
the full details of the $100 billion spending package that could be
considered as early as this month if the Bush administration drops its
opposition and agrees to negotiate a measure the president will sign.
That package will probably include money for public works projects to
create jobs, a 13-week extension of unemployment benefits, additional
funds for food stamps and aid to strapped state governments struggling
to cover the rising cost of heath care for the poor.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/11/06/AR2008110603958_pf.html'>Read
more.
Autos
Auto Makers Would Make Concessions
to Receive Government Aid
The heads of Detroit's three auto makers and the United Auto Workers
union pleaded yesterday with Democratic congressional leaders to rush
more government aid to their foundering companies, offering to accept
conditions such as granting stock warrants to the government in return
for capital, the Wall Street Journal reported today.
President-elect Barack Obama and some other Democrats have expressed
support for proposals to double to $50 billion a previously authorized
government-loan program aimed at helping Detroit's unionized auto makers
retool to build more efficient cars. However, House Speaker Nancy Pelosi
(D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) yesterday made
no explicit promises to the auto industry delegation about approving
additional assistance.
href='http://online.wsj.com/article/SB122599560485005549.html'>Read
more. (Subscription required.)
Ford Plans More Cuts as It Tries
to Save Cash
Ford Motor Co., battered by the weak economy and a shift in consumer
preferences, said today that its automotive business lost $2.9 billion
in the third quarter and announced more cuts to conserve cash, including
another 10 percent reduction in salaried payroll costs and lower capital
spending, according to the New York Times. Ford said that it
burned through $7.7 billion in cash in the third quarter, leaving it
with $18.9 billion at the end of September, as vehicle sales in the
United States plunged amid historically weak levels of consumer
confidence and tight credit markets that have prevented some consumers
from obtaining loans. Overall, Ford said it lost $129 million in the
quarter, helped by a $2 billion gain related to its retiree health care
agreement with the United Automobile Workers union. In the same period a
year ago, Ford lost $380 million.
href='http://www.nytimes.com/2008/11/08/business/08auto.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Judge Won't Reinstate Delphi Fraud
Claim against Appaloosa
Bankruptcy Judge Robert Drain said yesterday that he
would not reinstate Delphi Corp.'s lawsuit against a group of investors
led by Appaloosa Management LP over a failed deal to provide the auto
parts maker with a $2.55 billion injection, Bankruptcy Law360
reported. Judge Drain last month raised the issue of whether or not the
dismissal of the fraudulent omission claim should be revisited sua
sponte, and sought briefing on the issue. Delphi first filed an
adversary proceeding against Appaloosa and the other investors in May
claiming they had breached their contract with Delphi by dropping out of
the deal after it no longer seemed lucrative to them.
href='http://bankruptcy.law360.com/articles/75885'>Read more.
(Subscription required.)
Hospitals See Drop in Paying
Patients
In another sign of the economy's toll on the nation's health care
system, some hospitals say they are seeing fewer paying patients - even
as greater numbers of people are showing up at emergency rooms unable to
pay their bills, the New York Times reported today. Some
patients with insurance seem to be deferring treatments like knee
replacements, hernia repairs and weight-loss surgeries - the kind of
procedures that are among the most lucrative to hospitals. A September
survey of 112 nonprofit hospitals by Citi Investment Research analyst
Gary Taylor found that overall inpatient admissions were down 2 to 3
percent compared with a year earlier. About 62 percent of the hospitals
in the survey reported flat or declining patient admissions. Making
matters worse for some hospitals has been a slowdown in bill payments,
particularly by state Medicaid programs.
href='http://www.nytimes.com/2008/11/07/business/07hospital.html?ref=business&pagewanted=print'>Read
more.
VeraSun Seeks Additional $30 Million
in DIP Financing
Ethanol producer VeraSun Energy Corp. has asked a bankruptcy judge to
approve a new $30 million credit facility for some of its subsidiaries,
part of a projected $250 million the company plans to obtain in
debtor-in-possession financing, Bankruptcy Law360 reported
yesterday. In a motion filed Wednesday in the U.S. Bankruptcy Court for
the Southern District of Florida, VeraSun said that it was still in the
process of negotiating the financing agreement with a group of
prepetition lenders led by WestLB AG. The financing would be used to
fund the operations of VeraSun subsidiary ASA OpCo Holdings LLC and its
affiliates, according to the motion.
href='http://bankruptcy.law360.com/articles/75758'>Read more.
(Subscription required.)
Las Vegas Sands Plunges on Default,
Bankruptcy Risk
Las Vegas Sands Corp., which had $8.8 billion in long-term debt at the
end of June, said in a regulatory filing today that it probably won't
meet the requirements of loans arranged by Citigroup Inc., Goldman Sachs
Group Inc. and Lehman Brothers Holdings Inc., Bloomberg News reported
yesterday. The Las Vegas-based company's dwindling cash flow is
threatening $16 billion worth of developments in Macau, China, and
Singapore, where Las Vegas Sands is building resorts to cater to wealthy
Asian gamblers. Las Vegas Strip casino gambling revenue slid 6.7 percent
this year through August, on track for its biggest annual decline on
record, as airlines cut back capacity and consumers, battling declining
home values, job losses and the worst financial crisis since the Great
Depression, spent less.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aws07wpBjjZI'>Read
more.
Judge Rules Sumitomo Can't Sell
Lehman Assets
Lehman Brothers Holdings Inc. this week fended off a bid by creditor
Sumitomo Mitsui Banking Corp. to seize more than $300 million in Lehman
assets it is holding in the wake of the investment bank's collapse, the
Wall Street Journal reported today. Bankruptcy Judge
James Peck on Wednesday denied an
attempt by Sumitomo Mitsui Banking to sell collateral as part of a $350
million loan it provided to Lehman. Judge Peck chastised the Japanese
bank, part of Sumitomo Mitsui Financial Group Inc., for moving too
quickly to seize the collateral. Part of Sumitomo Mitsui Banking's
argument for selling the collateral, which consists of bonds and
corporate loans, is that the value of the collateral had dropped
precipitously. As of Oct. 14, the collateral was worth $331
million.
href='http://online.wsj.com/article/SB122599989573605819.html'>Read
more. (Subscription required.)
Feds Weigh Options to Ease Strain on
AIG
Federal officials are considering ways to ease the financial pressure on
American International Group Inc., including changing the terms of the
$85 billion loan extended to the insurer, the Wall Street
Journal reported today. Negotiations remain fluid, but one option
under examination is to have the government backstop AIG's
credit-default-swap contracts. It also may reduce the interest rate or
extend the duration of the two-year loan facility. AIG agreed to the
government's terms under duress in mid-September, with the expectation
that it would be a short-term bridge until AIG could sell assets to meet
its obligations. AIG's role in the credit-default-swap market remains a
sensitive issue for the government. AIG counterparties have demanded
billions of dollars in collateral to ensure AIG stands behind its
commitments to make payments in the event of defaults.
href='http://online.wsj.com/article/SB122602637269107697.html'>Read
more. (Subscription required.)
Retailers Report a Sales
Collapse
Sales at the nation's largest retailers decreased considerably in
October, casting fresh doubt on the survival of some chains and
signaling that this will probably be the weakest Christmas shopping
season in decades, the New York Times reported today. Sales at
Neiman Marcus, the luxury department store, dropped nearly 28 percent in
October compared with the same month last year. Sales fell 20 percent at
Abercrombie & Fitch, nearly 17 percent at Saks, 16 percent at Gap
and nearly that much at Nordstrom. Of the more than two dozen major
retailers that reported financial results yesterday, most had sales
declines at stores open at least a year, the majority of the decreases
in double digits.
href='http://www.nytimes.com/2008/11/07/business/07retail.html?ref=business&pagewanted=print'>Read
more.
Top Arkansas Court Rules against
Payday Lenders
The Arkansas Supreme Court ruled yesterday that a 1999 state law
allowing payday lenders to charge high fees for short-term loans
violates the State Constitution, the Associated Press reported. In a 6-0
decision, the court said the fees permitted under the 1999 Check Cashers
Act were really triple-digit interest rates. The State Constitution
limits interest rates on loans to 17 percent. “Because that fee is
in reality an amount owed to the lender in return for the use of
borrowed money, we must conclude that the fees authorized clearly
constitute interest,” Justice Paul E. Danielson wrote.
href='http://www.nytimes.com/2008/11/07/business/07lenders.html?ref=business&pagewanted=print'>Read
more.
Banks Back New Marketplace for
Credit Swaps
A group of large Wall Street dealers are supporting a new electronic
marketplace for credit-default swaps, responding to investor requests
and regulatory pressure to make swap trading more transparent, the
Wall Street Journal reported today. Nine banks, including
Credit Suisse Group, J.P. Morgan Chase & Co. and Goldman Sachs Group
Inc., plan to use an online platform operated by trading company
TradeWeb LLC to trade certain types of credit-default swaps with
investors such as hedge funds, foreign central banks and pension funds.
The banks earlier this year spent about $180 million to purchase
minority stakes in TradeWeb, which moves trades for many types of bonds
and is majority-owned by Thomson Reuters. TradeWeb's swaps platform,
which went live in the United States earlier this week, facilitates
electronic trades on credit-default-swap indexes.
href='http://online.wsj.com/article/SB122601902407007147.html'>Read
more. (Subscription required.)
International
European Banks Reduce Interest
Rates
The top three European central banks cut interest rates yesterday in the
face of increasingly dire evidence that much of Europe was moving into a
serious recession, the New York Times reported today. The Bank
of England cut rates by a startling 1.5 percentage points, as the
International Monetary Fund predicted that developed economies as a
whole would shrink next year for the first time since World War II and
the global economy would grow at a feeble 2.2 percent. Previously the
fund had predicted 3 percent global growth and slight growth in the
developed economies. The European Central Bank reduced its benchmark
rate by a half percentage point, to 3.25 percent. The Swiss National
Bank also cut its rate, decreasing it to 2 percent in part to halt the
rapid appreciation of the Swiss franc.
href='http://www.nytimes.com/2008/11/07/business/07euro.html?ref=business&pagewanted=print'>Read
more.