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February 3, 2010
As Values
Drop, More Homeowners Walk Away
New research suggests that when a
home’s value falls
below 75 percent of the amount owed on the mortgage, the owner starts to
think hard about walking away, even if he or she has the money to keep
paying, the New York Times reported today. The number of
Americans who owed more than their homes were worth was virtually nil
when the real estate collapse began in mid-2006, but by the third
quarter of 2009, an estimated 4.5 million homeowners had reached the
critical threshold, with their home
lang='EN'>’s value dropping below 75
percent of the mortgage balance. With figures released last week showing
that the real estate market was stalling again, their numbers are now
projected to climb to a peak of 5.1 million by June
lang='EN'>— about 10 percent of all
Americans with mortgages, according to First American CoreLogic.
href='http://www.nytimes.com/2010/02/03/business/03walk.html?ref=business&pagewanted=print'>Read
more.
TXCO's Reorganization Plan Receives Court
Confirmation
TXCO Resources Inc. will emerge from bankruptcy by mid-February under
the ownership of both Newfield Exploration Co. and former rival suitor
Anadarko Petroleum Corp. after the oil and gas explorer and producer won
confirmation of a reorganization plan outlining its sale for roughly
$310 million, the Deal Pipeline reported yesterday. Bankruptcy
Judge Ronald B. King of the U.S. Bankruptcy Court for the Western
District of Texas in San Antonio confirmed the company's disclosure
statement on Jan. 27. The sale offer, which was approved through the
plan's confirmation, will give Anadarko more than 80,000 net acres of
TXCO's assets in the Maverick Basin of Southwest Texas for roughly $93
million. Newfield will acquire TXCO's remaining assets in that region,
or more than 350,000 gross acres, for $217 million, according to a
filing TXCO made with the Securities and Exchange Commission on Jan.
12.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005385057'>Read
more. (Subscription required.
Bank
Of New York to Appeal CDO Ruling in Lehman Chapter 11
Bank of New York Mellon Corp. will appeal the recent bankruptcy court
ruling on a structured debt program called Dante, to which collapsed
U.S. bank Lehman Brothers Holdings Inc. was a counterparty, Dow Jones
Daily Bankruptcy Review reported today. Bankruptcy Judge
James Peck granted summary judgment to Lehman on Jan.
25, ruling that a key provision, which allows investors in bonds issued
under the Dante program to move ahead of Lehman and its creditors in
claiming assets backing the bonds, violates U.S. bankruptcy law. The
letter, dated Feb. 1 and sent from lawyers for Bank of New York Mellon
to Lehman's legal advisers, said that BNY Mellon, in its role as
trustee, 'fully expects that it will appeal the Court's declaratory
judgment.' A unit of Lehman, called Lehman Brothers Special Financing
Inc., or LBSF, was a swap counterparty to the special-purpose vehicles
that issued bonds under the Dante program.
Volcker Faces Skepticism, Irritation from
Senate Banking Committee
Facing some skeptical GOP senators, former Federal Reserve Chairman
Paul Volcker told the Senate Banking Committee yesterday that it must
write into law restrictions against commercial banks from making
proprietary trades, even if such transactions did not cause the
financial crisis, CongressDaily reported today. Volcker defended
his plan to prohibit the nation's biggest banks from trading for their
own benefit, rather than a client, because they have an unfair 'safety
net' with their status that allows them to make such risky trades with
benefits from the federal government. Such commercial banks have
advantages such as FDIC-insured deposits and access to the Federal
Reserve's lending window. However, Volcker was repeatedly challenged by
Republicans who noted that failed investment banks Lehman Brothers and
Bear Stearns never had commercial status. In addition, the small thrift
that insurance conglomerate American International Group operated did
not play a significant part in the carrier's downfall.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=54b42cc0-7ecd-4c0d-88c0-65f7d2002061'>Click
here to read Volcker's prepared testimony.
Judge to Rule on Madoff Victims'
Cuts
Investors in Bernard Madoff's fraud who currently aren't eligible to
share in recoveries from the Ponzi scheme yesterday put forth their
clearest articulation yet of why they should be, the Wall Street
Journal reported today. In a hearing yesterday in the U.S.
Bankruptcy Court for the Southern District of New York, lawyers whose
clients withdrew more from their Madoff accounts than they put in
lang='EN'>— known as 'net winners'
— argued that laws
governing liquidation of brokerages meant their clients deserved to be
compensated in line with other Madoff investors. Trustee Irving
Picard has maintained that the most equitable way to treat
victim is to reimburse only investors who suffered net losses from the
fraud—investors who
deposited more into their accounts than they took out.
href='http://online.wsj.com/article/SB10001424052748704022804575040840617940122.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Ambac Said to Hire Blackstone for
Restructuring
Troubled U.S. bond insurer Ambac Financial Group Inc. has allegedly
hired Blackstone Group to help it restructure, Reuters reported
yesterday. Ambac has said in public filings that it is working on a
strategy to address liquidity concerns. The company, like its larger
rival MBIA Inc., has struggled to write new business since losing its
top-notch AAA credit rating in 2008. Ambac warned in November that it
might be forced to seek bankruptcy protection. At the time, Ambac said
that it might pursue strategies including 'a negotiated restructuring of
its debt through a prepackaged bankruptcy proceeding' as it tries to
deal with its liquidity issues. It expects that it could run out of cash
in the second quarter of 2011, or possibly sooner. Ambac, the world's
second biggest bond insurer, has struggled with a cash crunch after
writing down repackaged consumer debt hit by the subprime mortgage
crisis. Ambac's liquidity is largely dependent on its Ambac Assurance
unit's ability to pay dividends, which it is not able to do and is not
expected to do in 2010, either.
href='http://www.reuters.com/article/idUSN0220190820100202'>Read
more.
Tribune Seeks Extension to File Its
Bankruptcy-Exit Plan
Tribune Co. asked the bankruptcy judge overseeing its chapter 11
case for another extension to file its reorganization plan just as the
newspaper publisher's creditors are ready to sue the banks that financed
its 2007 leveraged buyout, according to Dow Jones Daily
Bankruptcy Review today. Tribune said in court papers that it's
working to finish its restructuring plan by the end of the month, but
the company is asking Bankruptcy Judge Kevin Carey to
extend the deadline to June. Judge Carey previously set the existing
Feb. 28 deadline for a plan after Tribune went to court for a longer
extension. At the time, a group of investment funds that own more than
$4 billion in senior Tribune debt, opposed the move, saying they wanted
to propose a plan to restructure Tribune subsidiaries that operate its
core businesses. Bruce Bennett, a lawyer for the lenders,
declined to comment Tuesday about whether they would oppose the latest
request for an extension.
Bankrupt Cooper-Standard Files
Reorganization Plan
Bankrupt auto parts maker Cooper-Standard Holdings Inc. said
yesterday that it had filed a reorganization plan that would transfer
ownership of the company to its creditors and cut debt by more than 60
percent, Reuters reported yesterday. The plan includes a rights offering
in which some senior debtholders have agreed to buy 15 percent of the
company's new common stock and have committed to buying as much as $245
million more if the shares are not purchased by others investors. The
company will use the cash raised in the rights offering to pay holders
of pre-petition credit facility claims. The company said that the
unsecured creditors' committee supports the reorganization plan and the
rights offering. The case is In re Cooper-Standard Holdings Inc.,
U.S. Bankruptcy Court, District of Delaware, No. 09-12743.
href='http://www.reuters.com/article/idUSN0222762920100202'>Read
more.
Bankruptcy Complicates Deal for Roosevelt
Papers
When President Obama signed a law on Monday to clear the way for the
largest privately held archive of papers relating to President Franklin
D. Roosevelt to be donated to Roosevelt
lang='EN'>’s presidential library, it was
to be the culmination of a five-year effort to finally make the
documents available to the public, the New York Times reported
today. However, the bankruptcy proceeding of Hollinger International has
thrown this carefully negotiated settlement into doubt. The documents,
which belonged to Roosevelt’
lang='RU'>s last personal secretary, Grace Tully, have been in legal
limbo for years because of an ownership dispute involving the National
Archives, which runs the library, and Hollinger International, a
now-bankrupt company formerly controlled by the Canadian press baron
Conrad M. Black, who is serving a federal prison sentence in Florida on
fraud charges. In an odd twist, the new law removes the government claim
on the condition that the collection is donated to the government.
For officials of the National Archives, which had worked with Sen.
Charles E. Schumer (D-N.Y.) to get hold of the papers since Hollinger
tried to sell them at Sotheby’
lang='RU'>s in 2005, the prospect of the papers
lang='EN'>’ being held hostage, or even
sold off, as a result of bankruptcy proceedings has prompted
dismay.
href='http://www.nytimes.com/2010/02/03/books/03papers.html?pagewanted=print'>Read
more.
Walking Co. Envisions Bankruptcy Exit by
Spring
U.S. shoe retailer the Walking Company Holdings Inc. said that it
filed its reorganization plan and that it was well positioned to emerge
from chapter 11 protection 'sometime this spring,' Reuters reported
yesterday. The company on Monday said that it had negotiated new lease
agreements with landlords of about 90 of its 210 stores and that the
move will generate annual cost savings of about $3 million. The retailer
filed for bankruptcy protection in December with a plan to close almost
half of its stores. The company said that it will be well positioned to
continue operations with substantially all of its current stores in
place if the economy improves over the next 18 months. The case is In
re The Walking Company, U.S. Bankruptcy Court, Central District of
California, No. 09-15138.
href='http://www.reuters.com/article/idUSSGE6110JQ20100202'>Read
more.
Bankruptcy Judge Approves Spansion, SJL
Settlement
Bankrupt flash memory maker Spansion Inc. has won approval of a $62.5
million settlement with one-time subsidiary Spansion Japan Ltd., a step
the company hopes will smooth the way to its quick emergence from
chapter 11, Bankruptcy Law360 reported yesterday. Bankruptcy
Judge Kevin Carey on Friday approved the settlement, which
settles a potential half-billion-dollar administrative expense claim
from SJL and removes what had been a major stumbling block to chapter 11
plan approval. The two companies intend to proceed as separately
controlled entities with contractual agreements in place.
href='http://bankruptcy.law360.com/articles/146754'>Read more.
(Subscription required.)
Despite Critics, AIG Sets Bonuses
American International Group Inc. is moving forward with a plan to
accelerate bonuses to employees of its financial products division after
they agreed to a $20 million reduction in $195 million of previously
promised awards, the Wall Street Journal reported today. The $20
million AIG secured from former and current employees at AIG Financial
Products will go toward a commitment it made to recoup $45 million of
bonus payouts last year to employees of the division. Bonuses then
caused an uproar because the unit had been responsible for the soured
trades that precipitated the government rescue of the company. U.S. pay
czar Kenneth Feinberg has insisted that AIG get back the $45
million.
href='http://online.wsj.com/article/SB10001424052748704022804575041300793298866.html?mod=WSJ_hps_LEFTWhatsNews#printMode'>Read
more. (Subscription required.)
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