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September 28,
2006
name='1'>Credit Rating Industry Overhaul Clears
Congress
Legislation placing credit
rating agencies under greater oversight was passed by the U.S. Congress
on Wednesday, a response to criticism that the industry failed to flag
problems soon enough at troubled firms such as Enron Corp. and WorldCom,
Reuters reported yesterday. Final action came when the House of
Representatives approved a measure on a voice vote that passed the
Senate last week. The legislation now goes to President George W. Bush
to sign into law. The legislation means the U.S. Securities and Exchange
Commission now has clear jurisdiction over credit rating agencies and
can issue rules to prevent conflicts of interest and misuse of nonpublic
information. It also spells out how credit rating agencies can register
with the SEC and be designated as 'nationally recognized.''
href='http://www.nytimes.com/reuters/washington/politics-financial-creditrati…'>Read
more.
name='2'>Large-Scale Mortgage Fraud Being Investigated in
w:st='on'>
w:st='on'>Virginia
Beulah and Sharon Penn,
along with one of their relatives in
face='Times New Roman' size='3'>Indianapolis
size='3'>are accused of perpetrating one of the largest mortgage frauds
in American history that victimized dozens of
w:st='on'>
size='3'>Martinsville
size='3'>Va.
and at least $40 million in fraudulent loans, according to a recent
lawsuit, the New York
Times reported today. The civil lawsuit, filed
in June by one of the nation’s largest mortgage lenders, describes
an elaborate scheme in which
face='Times



New
Roman' size='3'>Martinsville
with good credit ratings were enlisted last year to join what they
believed was a risk-free investment in
w:st='on'>
size='3'>Indiana
estate. Instead, they found themselves responsible for hundreds of
thousands of dollars in unpaid mortgages.
face='Times New Roman'>While no criminal charges have
been filed, federal grand jury subpoenas are being prepared in
size='3'>Indiana
further civil action at the federal level is expected to be filed
against the Penn's soon.
href='http://www.nytimes.com/2006/09/28/us/28martinsville.html?pagewanted=pri…'>Read
more.
w:st='on'>
name='3'>U.S.
face='Times New Roman' size='3'> Trustee Opposes Winn-Dixie
Plan
Winn-Dixie Stores Inc. is
facing a lot of opposition to ithe reorganization plan it filed early
last month, including from the federal government and the U.S. Trustee
overseeing the case,
size='3'>Portfolio Media reported yesterday.
The grocery store chain is hoping to end its 19-month chapter 11 case on
Oct. 31. The U.S. Trustee in the case,
size='3'>Felicia Turner , objected to
Winn-Dixie’s reorganization plan because it would allow the
Southern supermarket giant to pay certain creditors without court
approval. Turner also accused the plan of granting liability releases to
Winn-Dixie directors, officers and other employees. In a brief filed by
the Tax Division at the U.S. Department of Justice, the
size='3'>United States
size='3'>objected to Winn-Dixie’s plan because it fails to hold
the
face='Times New Roman'
size='3'>U.S.
size='3'>’s right to setoff. The Tax Division also argues that the
debtor cannot force creditors to give up their setoff
rights.
name='4'>Calpine Looks to Make $158 Million in Energy Plant
Auction
Calpine Corp. asked a
bankruptcy court for permission to auction off a power plant built as
part of a joint venture with utility company Aquila Inc., in a move that
could garner $158.5 million for the bankrupt energy provider,
Portfolio Media
reported yesterday.
face='Times New Roman' size='3'>Aquila
size='3'>will serve as the lead bidder in the auction, and has demanded
a $3.17 million breakup fee if another company bests its offer. The
Federal Energy Regulatory Commission must also sign off on the auction.
Calpine built the plant, which was constructed under a stalking-horse
agreement with
size='3'>Aquila
1999. In an
attempt to scale down expenses, the energy company has targeted the
plant for sale, along with about 20 others. The case is
face='Times New Roman' size='3'>In re Calpine Corporation et
al., case number 05-60200, in the U.S.
Bankruptcy Court for the Southern District of New
York.
Judge
Blocks WorldCom Stockholder Derivative Suit
A stockholder’s
attempts to target bankrupt WorldCom Inc. in a derivative lawsuit ran
into a roadblock on Tuesday when a federal bankruptcy judge refused to
allow the action to proceed, ruling that the fallen company’s
reorganization plan precludes the claims, Portfolio Media reported
yesterday. Bankruptcy Judge
size='3'>Arthur J. Gonzalez of the U.S.
Bankruptcy Court for the Southern District of New York on Tuesday denied
a motion by Frank David Seinfeld seeking permission to prosecute a
stockholder’s derivative action in district court and in the U.S.
Court of Appeals for the Second Circuit. Seinfeld had filed the bid on
the heels of the Second Circuit’s decision earlier this year,
holding that he was precluded from asserting a derivative action without
first bringing a proceeding in the bankruptcy court where
WorldCom’s chapter 11 proceedings were underway. That decision
affirmed an earlier dismissal of Seinfeld's derivative action by the
U.S. District Court for the Southern District of New York in
2005.
name='6'>Ford's North American Unit Not Seen Improving Until Second
Half of 2007
Ford Motor Co. Chief Financial
Officer Don Leclair said Wednesday that the financial performance of the
company's North American business won't show an improvement until cost
cuts kick in and production levels start rising during the second half
of 2007, the Wall Street Journal reported today. Leclair said
that the impact of the cost cuts won't be felt immediately owing to
lower production volumes in the first half of 2007 versus the previous
year and a market-share loss that's expected to persist until 2008. The
Ford executive also said the company is committed to fixing
long-standing problems in its North American operations that lost $1.3
billion in the second quarter and is not actively seeking a
large-scale alliance partner to help remedy its operation.
href='http://online.wsj.com/article/SB115938824621075832.html?mod=us_business…'>Read
more. (Registration required.)
name='7'>Bondholders Seek $21.5 Million in Damages from BearingPoint
Default
Plaintiffs who won a bond
default ruling against BearingPoint Inc. last week said that they aren't
trying to ruin the company and that they don't think the $21.5 million
in damages they have requested will hurt the
w:st='on'>
size='3'>McLean
business, the
size='3'>Washington Post reported today. A
group of bondholders sued BearingPoint for failing to file up-to-date
financial reports, which is a violation of the bond agreement that
has become a common tool used by creditors and most typically hedge
funds to extract concessions. A
w:st='on'>
size='3'>New York
last week agreed that the firm was in default on about $200 million in
corporate debt. Hareesh Paranjape, portfolio manager at New York-based
Fore Advisors L.P. and one of three hedge fund managers who instigated
the lawsuit, said he's only trying to make the company meet its
obligations. 'The company is not in financial distress,' Paranjape said.
'I think it's ludicrous that a $1.7 billion market-cap company thinks
that a relatively small damage claim would put them in financial
distress.'
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/09/27/AR20060…'>Read
more.
w:st='on'>
name='8'>Pennsylvania
face='Times New Roman' size='3'> Pension Funds in Peril, According
to Auditor
Pennsylvania Auditor
General Jack Wagner yesterday warned of an impending financial crisis
involving the state's two public pension systems and urged the state to
take quick action to resolve its problems, the
face='Times New Roman' size='3'>Harrisburg Patriot-News
size='3'>reported today. Wagner put the
blame for the crisis on the stock market slump that followed the Sept.
11 terrorist attacks and on a 2001 law that enhanced pension benefits.
Huge payments will be required to cover the costs of those enhancements.
To help ease that burden, Wagner recommended imposing an immediate
moratorium on pension benefit enhancements, returning the vesting period
to 10 years and identifying revenue to fund the pension plan
costs.
href='http://www.pennlive.com/news/patriotnews/index.ssf?/base/news/115933200…'>Read
more.
International
name='9'>Court Approves Stay in Daewoo Chapter 15
Case
Former South Korean
construction and trading conglomerate Daewoo Corp. has won a stay in
order to block creditors from seizing its
w:st='on'>
size='3'>U.S.
size='3'>assets while the company handles its bankruptcy proceedings
abroad, Portfolio
Media reported yesterday. Judge
Robert Gerber
size='3'>granted the stay under the company’s chapter 15 petition
Tuesday in the U.S. Bankruptcy Court for the Southern District of New
York. Gerber scheduled an Oct. 4 hearing on the company’s petition
for a preliminary injunction. Daewoo is finishing a plan to seek
recognition for its Korean bankruptcy filing as its main
proceeding.