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September 11,
2009
Thornburg Execs Come under
U.S. Trustee Scrutiny
U.S. Trustee
face='Times
New
Roman' size='3'>W. Clarkson McDow Jr., who is
overseeing the bankruptcy of real estate investment firm TMST Inc.,
formerly known as Thornburg Mortgage Inc., is pushing to examine three
of the company's top executives, Bankruptcy Law360 reported
yesterday. McDow filed a motion for a Rule 2004 examination on Wednesday
in the U.S. Bankruptcy Court for the District of Maryland, seeking to
question CEO Larry Goldstone, Chief Financial Officer Clarence Simmons
III and Vice President of Corporate Communications Amy Pell. Although
the move is still subject to court approval, McDow said he had
“received information indicating a potential misappropriation of
estate assets” and believed the executives had “information
regarding this issue.”
href='http://bankruptcy.law360.com/print_article/121365'>Read
more. (Subscription required.)
Frontier Airlines Wins
Approval of Bankruptcy Plan
A bankruptcy judge has confirmed Frontier
Airlines’ reorganization plan, moving the Denver-based carrier a
step closer to emerging from chapter 11 protection, the Associated Press
reported yesterday. Frontier, which filed for bankruptcy in April 2008,
said that it resolved the few objections to its reorganization plan
before winning approval of the plan yesterday. The plan calls for
Frontier to emerge from bankruptcy as a unit of regional jet operator
Republic Airways Holdings Inc. around Oct. 1. The old Frontier shares
will be canceled.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/10/AR2009091001854_pf.html'>Read
more.
Treasury Secretary Says
Bailout Programs Are Shrinking
One year after the federal government began the
biggest financial bailout in history, President Obama’s top
economic advisers say that the banking system has regained enough health
to begin removing the government’s backstops, the
face='Times New Roman'>New York
Times reported today. “We must begin
winding down some of the extraordinary support we put in place for the
financial system,” Treasury Secretary Timothy F. Geithner told the
congressional panel that oversees the $700 billion rescue program.
Citing a steady revival in financial markets and in the economy,
Geithner said that banks and corporations were increasingly able to
raise capital from private investors and were relying less heavily on
the government’s special loan and guarantee programs. Treasury
officials said that they expected banks and other financial institutions
to repay an additional $50 billion that they borrowed from the
government, on top of $70 billion already repaid, over the next 12 to 18
href='http://www.nytimes.com/2009/09/11/business/11bailout.html?_r=1&ref=business&pagewanted=print'>Read
more.
SEC Vows to Reorganize
Enforcement Division
Top officials at the Securities and Exchange
Commission pledged at a Senate hearing yesterday to fix the problems
that led to the agency’s failure to detect the multibillion-dollar
fraud conducted for more than a decade by Bernard L. Madoff, the
Associated Press reported today. Robert Khuzami, the head of the
SEC’s enforcement division, who joined the agency in March, said
he has started the most extensive reorganization of his division in at
least 30 years. H. David Kotz, the SEC inspector general, released a
report last week detailing how the agency had bungled five
investigations of Mr. Madoff’s business from June 1992 to last
December. He has recommended “employee by employee” action
to ensure the failures are not repeated.
href='http://www.nytimes.com/2009/09/11/business/11madoff.html?ref=business&pagewanted=print'>Read
more.
Report: Stimulus Making Big
Impact on GDP with 1 Million Jobs Created or Saved
The economic stimulus package President Obama rushed
through Congress during his first days in office is rapidly pumping
energy into the nation's once-moribund economy and has already created
or preserved more than 1 million jobs, the Washington Post reported
today. In her first official assessment of the $787 billion stimulus,
Christina Romer, chairman of the president's Council of Economic
Advisers, concluded that the package of tax cuts and government spending
-- the largest dose of economic medicine in U.S. history -- has poured
about $150 billion into the economy since its passage in February,
boosting overall economic output by about 2.3 percentage points during
the quarter that ended in June. While the economy remains in recession
and has shed more than 3 million jobs since the stimulus money began
flowing, the downturn would have been more severe and the number of jobs
lost far greater if the stimulus had not been enacted, Romer said. As
spending continues to ramp up throughout 2010, the power of the package
should grow stronger, she said, though she declined to rule out the
possibility that additional government action may be needed to lift the
nation out of its worst economic slump in a generation.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/10/AR2009091004301_pf.html'>Read
more.
LandAmerica Files
Reorganization Plan
LandAmerica Financial Group's reorganization filed on
Wednesday says most investors who put millions of dollars into its 1031
exchange accounts will be paid after a relative few who arranged special
security for their funds, the
face='Times
New
Roman' size='3'>Richmond (Va.) Times-Dispatch
size='3'>reported today. The investors who arranged special deals will
receive 97 cents for every dollar they invested, the plan says. Another
group will split at least $50 million. The rest, amounting to 400 of the
450 people who had parked money in 1031 exchange tax shelters at
LandAmerica, will share what's left -- and a
face='Times New Roman'>
size='3'>pro rata share of any payments
LandAmerica trustees get from the banks and brokers who sold its
auction-rate securities. By the time LandAmerica filed for bankruptcy
last November, 450 exchange customers had more than $419 million in the
company's 1031 exchange accounts. The Henrico County, Va.-based insurer
LandAmerica had used the 1031 investors' money to buy about $200 million
of auction-rate securities. The company has blamed the collapse of the
market for auction-rate securities for its bankruptcy.
href='http://www2.timesdispatch.com/rtd/business/banking/bankruptcies/article/B-LAND11_20090910-214608/291998/'>Read
more.
to Stay on Hold in State Court
Bankruptcy Judge
face='Times
New
Roman' size='3'>Kevin J. Carey ruled that a
contract dispute between AbitibiBowater Inc. and The Levin Group, an
advisory firm that accused the bankrupt newsprint producer of
withholding $88 million in consulting fees, will remain on hold in state
court,
size='3'>Bankruptcy Law360 reported yesterday.
The order does not prevent AbitibiBowater from responding to the firm's
objections in the chapter 11 proceedings. AbitibiBowater had argued that
going forward with the South Carolina state court action would tie up
its personnel and drain its financial resources, all for a claim with
little merit. According to TLG, however, lifting the stay would be the
“most expeditious and cost-effective means of resolving this
dispute,” and the debtor would have to divert “very
few” resources from restructuring to litigate the claim.
href='http://bankruptcy.law360.com/print_article/121406'>Read more.
(Subscription required.)
U.S. Trustee Alleges
Malpractice in
size='3'>Le-Nature Case
U.S. Trustee
face='Times
New
Roman' size='3'>Marc S. Kirschner, who is
overseeing the liquidation of Le-Nature Inc., has accused K&L Gates
LLP of malpractice for failing to discover evidence of a $500 million
fraud while conducting an internal investigation of the collapsed
beverage company,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Kirschner filed suit on Wednesday in the
Court of Common Pleas of Allegheny County, Pa., claiming that K&L
Gates and accounting firm Pascarella&Wiker LLP are liable for
malpractice, negligence, breach of contract, breach of fiduciary duty
and negligent misrepresentation for allegedly botching the 2003
investigation.The firms are responsible for giving Le-Nature a clean
bill of health despite numerous red flags, including details from three
former senior executives at the company who warned about CEO Greg
Podlucky’s dubious bookkeeping and rampant misrepresentations,
according to the lawsuit.
href='http://bankruptcy.law360.com/print_article/121604'>Read
more. (Subscription required.)
Philadelphia Newspapers' Ads
Chief Bankruptcy Judge Stephen Raslavich refused to
hear from creditors that claim Philadelphia Newspapers LLC is using
'scare tactics' to chill bidding for its assets, instead sending the
publisher and the committee back to court-supervised mediation, Dow
Jones
size='3'>Daily Bankruptcy Review reported
yesterday. Judge Raslavich was scheduled to hear from witnesses
Wednesday as the company behind Philadelphia's daily newspapers went
head-to-head with creditors seeking to halt a publicity campaign that
has become a lightning rod in the case. However, Judge Raslavich said
that he was concerned about the fervor the dispute had generated and
thought it might signal a backslide in the progress of negotiations
between the two groups. Since Aug. 20, Philadelphia Newspapers has
emblazoned its newspapers, trucks, Web site and staff with the catch
phrase 'Keep it Local,' urging readers and area residents to support a
sale to a group of local investors.
Muzak Reorganization Plan
Seeks to Slash Debt to $230 Million
Bankrupt Muzak Holdings LLC filed its chapter 11
reorganization plan and accompanying disclosure statement on Wednesday
with the support of its creditors, which would reduce the company's
outstanding debt by more than half to $230 million,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Under the plan, the holders of secured bank debt claims will either
receive payment in full in cash with the proceeds of an exit facility,
subject to availability, or their
face='Times
New
Roman' size='3'>pro rata share of a new term
loan, Muzak said. The holders of $220 million in 10 percent senior
unsecured notes will receive new senior unsecured notes at a $135
million face amount with 8 percent cash and a 7 percent payment-in-kind
coupon, as well as $85 million of payment-in-kind preferred stock,
according to the plan. The holders of $115 million in 9.875 percent
senior subordinated unsecured notes will receive 100 percent of the new
common stock of the reorganized company, subject to dilution for a
management incentive plan and the warrants issued to holders of discount
note claims, Muzak said. A hearing to consider approval of the
disclosure statement is scheduled for Oct. 27.
href='http://bankruptcy.law360.com/print_article/121428'>Read more.
(Subscription required.)
the Green Files for Bankruptcy
Tavern on the Green LP, operator of the 75-year-old
restaurant in New York’s Central Park, sought bankruptcy
protection after losing its lease on the city property to a higher
bidder a month ago, Bloomberg News reported yesterday. The
restaurant’s name, valued at $19 million and in place since its
founding by Parks Commissioner Robert Moses in 1934, now will be sold to
the highest bidder in bankruptcy court. The lease for Tavern on the
Green, the second-highest-grossing restaurant in the U.S. last year, had
been held since 1974 by the family of Warner LeRoy, which owns the
Tavern on the Green name. The city last month awarded the lease for 20
years starting at the end of Dec. 31 to restaurateur Dean Poll, who runs
the Central Park Boathouse Restaurant. The bankrupt partnership listed
assets and debts of as much as $50 million each in its filing.
href='http://www.bloomberg.com/apps/news?pid=20601082&sid=agTMvcbnjuJc'>Read
more.
Analysis: UBS Case
Uncovers CDO Worries
In the summer and fall of 2007, as the credit crunch
deepened, some U.S. employees at UBS AG became increasingly concerned
about billions of dollars of debt securities inventoried on the bank's
books and wanted to find a way to unload them, according to emails in a
court case, the
size='3'>Wall Street Journal reported today.
Documents filed in the Connecticut court case provide one of the more
complete windows into how UBS allegedly scrambled internally to find
ways to alleviate the financial pain that worsened throughout 2007
thanks to the deteriorating mortgage market. This week, Connecticut
Superior Court Judge John F. Blawie issued a decision that said there
was evidence to show that UBS ultimately had an 'awareness that ...
high-grade securities on its hands would soon turn into financial toxic
waste' as it tried to persuade Pursuit Partners LLC to buy debt
securities known as collateralized debt obligations (CDOs). The hedge
fund says it invested in three CDOs and had losses of $35.5 million.
Pursuit has alleged that it sought steady cash flow and required that it
be sold only investment-grade securities, or ones that provide
relatively low risk of default. UBS did sell Pursuit investment-grade
securities but knew that the securities were about to be downgraded,
Pursuit alleges.
href='http://online.wsj.com/article/SB125262701573801493.html#mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Autos
In its first major marketing campaign since emerging
from bankruptcy, GM is putting its new chairman, Edward E. Whitacre Jr.,
in the spotlight as the spokesman for its offer to give customers a full
refund within 60 days on any GM car or truck if they are unsatisfied
with their vehicles, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The campaign, called “May the Best Car
Win,” is part of GM’s effort to change its lingering image
as a financially struggling company with substandard products. Other
automakers, such as Hyundai, have offered to take cars back if buyers
lose their jobs, or to replace a lemon with a new vehicle. However, the
GM program, which goes into effect Monday, simply guarantees product
satisfaction or your money back.
href='http://www.nytimes.com/2009/09/11/business/11gm.html?ref=business&pagewanted=print'>Read
more.
Chrysler Seeks Return
to Leasing
Chrysler Group LLC is preparing to resume auto leasing
more than a year after the auto maker was forced out of the business and
three months after it emerged from bankruptcy, the
face='Times New Roman'>Wall
Street Journal reported today. The company
plans to make a decision next week on the timing of the return, though
new leases may not be offered until later in the month. Chrysler, which
merged most of its assets with Italian auto maker Fiat SpA in June, is
seeking to revive its business after going through a federally funded
bankruptcy process that ended in June. Chrysler now relies on GMAC Inc.
for its dealer financing. GMAC recently resumed offering a consumer
leasing product for select GM vehicles. The company said it is working
with automakers to evaluate options for adding a leasing option for
other makes and models, including certain Chrysler vehicles.
href='http://online.wsj.com/article/SB125262485350001363.html'>Read
more. (Subscription required.)
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