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June 24, 2008
House Passes Bill to Allow Limited
Means Test Exemption for Military Personnel
H.R. 4044, a bill that would exempt military reservists called to active
duty and certain others from application of the means test in chapter 7,
passed the House of Representatives yesterday passed by a voice vote,
the Assoicated Press reported. The legislation exempts Guard members and
reservists who have served at least 90 days on active duty from the
means test established by BAPCPA. According to the House Judiciary
Committee, between Sept. 11, 2001, and Nov. 30, 2007, some 450,000 Guard
members and reservists have been deployed to Iraq and Afghanistan. It
cited estimates that up to one-quarter of deployed Guard members may
suffer from money problems because of a fall in income levels while they
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Government-Backed Mortgage Program
Receiving Criticism
While mortgages that allow consumers to put little, if any, money down
when buying a home have largely disappeared as a financing option
available from private lenders, they are still available -- and growing
more popular -- through a government-backed program, the Wall Street
Journal reported today. That's raising concerns among critics who
blame no-money-down mortgages for many of today's housing market woes.
While federal housing officials are moving to end the practice, home
builders are currently promoting the programs to move unsold inventory.
The offers -- including '100 percent financing' -- are made possible due
to down-payment assistance programs run by nonprofit organizations.
These programs are funded largely by home builders and also by private
homeowners desperate to sell. The seller-funded groups provide enough
down-payment money to buyers that they can qualify for a mortgage backed
by the Federal Housing Administration, which requires at least a 3
percent down payment.
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Boston 'Big Dig' Contractor Seeks
Bankruptcy Protection
Modern Continental Construction Co., the largest contractor in Boston's
$15 billion 'Big Dig' road and tunnel construction project, filed for
bankruptcy protection yesterday, one business day after it was charged
with liability in the project's 2006 collapse, Reuters reported. Modern
Continental said that it faced debts of $500 million to $1 billion with
an estimated 200 to 999 creditors. Its assets totaled $100 million to
$500 million. The U.S. Attorney's office on Friday charged Modern
Continental in federal court with knowingly using the wrong epoxy to
suspend concrete anchors that failed in the 2006 tunnel ceiling collapse
that a crushed a car and killed a woman passenge. If convicted, the
Cambridge, Mass.-based company faces criminal fines of up to $500,000
for each of 49 counts, or a total of $24.5 million.
href='http://news.yahoo.com/s/nm/20080623/us_nm/massachusetts_bigdig_dc_1'>Read
more.
U.S. Supreme Court Refuses W.R. Grace
Asbestos Appeal
The Supreme Court yesterday declined to hear an appeal by W.R. Grace in
a criminal case brought by the government over the company's alleged
release of asbestos from a Montana mine, the Associated Press reported.
Federal prosecutors charged the company and six executives in February
2005 with violating the Clean Air Act by releasing asbestos from a
vermiculite mine in Libby, Mont., even though they allegedly were aware
of its dangers. The justices' decision, without comment, allows the
government's case to go to trial. W.R. Grace, of Columbia, argues that
the Environmental Protection Agency's definition of asbestos doesn't
cover most of the substances taken from the mine. U.S. District Judge
Donald Molloy of Missoula, Mont., agreed with the company, but the U.S.
Court of Appeals for the Ninth Circuit overturned that ruling. The
company agreed to a $3 billion settlement in April that would allow it
to emerge from bankruptcy without further asbestos liability. The
settlement sets up a trust fund to pay claims against the company, which
hasn't yet emerged from bankruptcy protection.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/23/AR2008062301977_pf.html'>Read
more.
Whitehall Jewelers Files for Chapter
11
Whitehall Jewelers Holdings Inc. filed for bankruptcy yesterday,
becoming the latest jewelry retailer to seek court protection as the
sagging U.S. economy cuts into consumers' discretionary spending,
Reuters reported. The company, which operates stores under such names as
Whitehall and Lundstrom, is seeking to sell itself by July 18, according
to an affidavit from its CFO. Whitehall said that it operates 373 retail
stores in 39 U.S. states, and employs 2,852 people. The company said
that its store base includes 78 locations it bought in April from
Friedman's Inc, a jewelry retailer that sought bankruptcy protection
earlier this year, and which later began liquidating.
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more.
American LaFrance Sues Daimler
Trucks
Bankrupt fire truck maker American LaFrance LLC (AFL) has sued its
former owner, Daimler Trucks North America LLC, alleging that Daimler
breached agreements it entered into when it sold off American LaFrance's
assets, Bankruptcy Law360 reported yesterday. ALF's complaint,
filed June 19 in the U.S. Bankruptcy Court for the District of Delaware,
also asks the court to disallow a claim of about $12 million filed by
Daimler Trucks, formerly known as Freightliner LLC. Freightliner owned
AFL from 1995 to 2005. According to the complaint, when Freightliner
sold its ALF assets so that ALF could operate independently, it entered
into two agreements: an asset purchase agreement and a transition
services agreement in which it pledged to help ALF with the transition.
During the transition, Freightliner attempted to undermine ALF by
failing to disclose necessary information, interfering with ALF's
customer relationships and overcharging ALF for services, according to
the complaint.
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more. (Registration required.)
Nellson Nutraceutical Files Chapter 11
Liquidation Plan
Nellson Nutraceutical Inc. has filed a disclosure statement and chapter
11 liquidation plan outlining its procedure, endorsed by the creditors'
committee and first-lien lenders' committee agent UBS AG, for paying
back $255 million in outstanding debt the diet bar maker owes first-lien
lenders, Bankruptcy Law360 reported yesterday. Other than the
debt owed first-lien lenders, Nellson has principal obligations under an
agreement with second-lien lenders totaling about $75 million. It also
owes another $5 million to $7 million in unsecured debt, according to
court documents.
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SEC Aims to Rein In Role of Credit
Ratings
The Securities and Exchange Commission (SEC) plans to propose rules that
may diminish the longstanding importance of credit ratings across
various markets, including the $3.4 trillion money-market industry, in
the latest blow to the rating business stemming from the credit crunch,
the Wall Street Journal reported today. The most significant
portion of the rules, to be proposed tomorrow, would make it possible
for U.S. money-market funds to invest in short-term debt without regard
to ratings put on those securities by firms such as Moody's Investors
Service and Standard & Poor's. Currently, SEC rules generally
require that money-market funds purchase only short-term debt with high
investment-grade ratings. The new rule would put more discretion in the
hands of money managers to determine whether the debt is investment
grade.
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GM Looks to Offer Sweeping Rebates to
Blunt Sales Declines
General Motors Corp. announced further production cuts yesterday as well
as sweeping new incentives on many 2008 models -- a reversal of recent
strategy and a fresh sign of how badly rising gasoline prices are
hurting auto makers, the Wall Street Journal reported today.
GM, Ford Motor Co. and Chrysler LLC have been trying for over two years
to back away from heavy incentives, which eat into profit margins and
tarnish brands in the eyes of some consumers. But a worsening of the
slump in car and light-truck sales this month is forcing the Detroit
companies to take difficult steps to halt sales declines. Through the
first half of June, normally a strong period, U.S. auto sales were
running at an annualized rate of about 12.5 million vehicles, according
to J.D. Power & Associates. It was the lowest level for June in
decades and a huge drop from the year-ago rate of 16.3 million
vehicles.
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United will Furlough about 950
Pilots
United Airlines' 6,500 pilots were notified yesterday that the airline
intends to furlough about 950 of them by the end of 2009 as a result of
plans to reduce the fleet by 100 aircraft to cope with surging oil
prices, the Wall Street Journal reported today. Keith Rimer,
the airline's system chief pilot, said that because of the number of
pilots on military and personal leaves, furlough notices will be sent to
more than 1,400 of the airline's least-senior pilots in order to cut the
active roster by 950. The Air Line Pilots Association union is working
with the company on ways to mitigate the number of involuntary
furloughs.
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