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July 17, 2009
Autos
House Votes to Prevent
Closing of Auto Dealers
The House approved a spending bill yesterday that
would impede efforts by General Motors and Chrysler to close thousands
of their dealerships, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The appropriations bill, which will finance the
Treasury Department and other parts of the government, passed 219 to
208. It includes a provision that would force Chrysler and GM, both of
which are partly owned by the government, to restore franchise
agreements for dealers facing closure. The White House opposes the
provision, saying that the companies’ decision to trim their
dealer networks “was a critical part of their overall
restructuring” and that the “overwhelming majority of GM and
Chrysler dealers will continue operating with the new companies.”
Senate Majority Leader Harry Reid (D-Nevada) said this week that helping
dealers was not at “the top of the agenda in the Senate at this
time.”
href='http://www.nytimes.com/2009/07/17/business/17autos.html?ref=business&pagewanted=print'>Read
more.
Lenders Plan to Bid for
Delphi
Delphi Corp.'s lenders said that they will bid for the
auto parts supplier in an effort to defeat a government-orchestrated
sale of the company to General Motors Co. and a private-equity firm,
the
size='3'>Wall Street Journal reported today.
Several investment funds that own parts of the $3.5 billion loan Delphi
is using to fund its operations while in bankruptcy said they intend to
bid by forgiving debt they are owed, a process known as credit bidding.
The lenders will be competing against private-equity firm Platinum
Equity and GM, Delphi's former parent, which are teaming up to buy the
auto supplier's assets and take them out of bankruptcy. Platinum would
get control of the bulk of Delphi's assets in a $3.6 billion deal
largely financed by GM, which is backed by billions of dollars in
government funds. GM would take on four money-losing Delphi plants and
its steering unit. Under that plan, lenders holding the largest piece of
the Delphi DIP loan would be paid off at 20 cents on the dollar. The
lenders, which include Elliott and Silver Point Finance LLC, say that
the payoff would be unfairly low, as DIP lenders typically get paid back
in full. The lenders have complained that the deal treads on their
rights as creditors.
href='http://online.wsj.com/article/SB124779441811255481.html'>Read
more. (Subscription required.)
Credit Crunch for Borrowers
Nearly one million CIT Group Inc. customers -- many of
them small and medium-sized business owners -- will likely see their
access to credit slashed should their lender tumble into bankruptcy,
experts said in a MarketWatch.com report yesterday. Current CIT
customers may find their lines of credit severely restricted or entirely
cut, experts said. CIT customers with term loans likely will face fewer
changes, but will find it harder, if not impossible, to negotiate new
loan terms or extensions, said
face='Times
New
Roman' size='3'>John Penn of Haynes and Boone
LLP. '[If] they have a constrained cash position, then they will look
more toward bringing cash in, collecting on debts, reducing lines of
credit and that will have a substantial impact on their customers,' Penn
said. Some customers are already taking action. Since the possibility of
bankruptcy emerged earlier this week, CIT's corporate customers have
drawn down as much as $775 million from their credit lines.
href='http://www.marketwatch.com/story/story/print?guid=BF2D1BA0-F1BC-4658-9D1C-63A8BBDE94C1'>Read
more.
Federal Reserve’s
Pitch to Retain Consumer Duties Rebuked by Lawmakers
Federal Reserve Governor Elizabeth Duke found few
takers in her pitch to Congress yesterday that the central bank should
retain its consumer protection division rather than spinning it off into
a planned Consumer Financial Protection Agency, as proposed by the Obama
administration and congressional Democrats,
face='Times
New
Roman' size='3'>CongressDaily reported today.
Duke told the House Financial Services Domestic Monetary Policy
Subcommittee that the Fed should retain its consumer division even
though critics have said the central bank has been a toothless watchdog
until lately, allowing abuses in the credit card and home mortgage
market to fester until Fed Chairman Bernanke recently took action. A
prime example cited by lawmakers such as Senate Banking Chairman
Christopher Dodd (D-Conn.) is that the Fed did not act until last year
to implement rules from the 1994 Home Ownership and Equity Protection
Act to rein in predatory lending practices in the home mortgage market.
'For far too long consumer protection has been an afterthought,' said
Domestic Monetary Policy Subcommittee Chairman Melvin Watt (D-N.C.).
Read the
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_071609.shtml'>prepared
testimony from the hearing.
In related news, the House Financial Services
Committee will be holding a hearing today at 11 a.m. ET titled
“Industry Perspectives on the Obama Administration’s
Financial Regulatory Reform Proposals.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_071709.shtml'>Click
here to view the witness list and to watch a live Webcast of
the hearing.
WL Homes Bondholders Object
to Asset Sale
Two insurers have objected to a sale agreement
proposed by the trustee in WL Homes LLC’s chapter 7 proceedings,
arguing that the plan does not give enough information about how bonds
will be treated in a sale to parent company Emaar America Corp.,
size='3'>Bankruptcy Law360 reported yesterday.
Bond Safeguard Insurance Co. and Lexon Insurance Co. are listed as
sureties on a number of performance, labor and material, payment,
maintenance, grading, subdivision, and other types of bonds in which the
debtors are the principals, the motion states. At issue for the insurers
is a clause in the proposed asset purchase agreement that holds that the
purchaser will assume certain liabilities, including some development
obligations, according to the objection. However, the agreement does not
require the purchaser to post new bonds that the insurers say are
necessary to comply with the development obligations, the filing
claims.
href='http://bankruptcy.law360.com/print_article/111639'>Read
more. (Subscription required.)
AbitibiBowater Seeks to
Settle CAA Violation Claims
AbitibiBowater Inc. has asked for bankruptcy court
approval of a settlement to resolve the federal government's allegations
of Clean Air Act violations at the bankrupt newsprint producer's
facilities in Calhoun, Tenn.,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. The debtor filed a motion Wednesday in the U.S. Bankruptcy
Court for the District of Delaware seeking finalize a deal with the
government, on behalf of the U.S. Environmental Protection Agency,
requiring the company to pay $30,000 in civil penalties and undertake
more stringent activities to keep emissions in check. Under the consent
decree, Bowater Inc., a subsidiary of the debtor, would be required to
install “continuous emissions monitors” on some of its
boilers at the Calhoun facility; face stricter monitoring, reporting and
testing obligations; and submit revisions to its operating permit to the
Tennessee Department of Environment and Conservation. If Bowater
violates the decree, it could be responsible for penalties of up to
$1,000 per day, according to the motion.
href='http://bankruptcy.law360.com/print_article/111633'>Read
more. (Subscription required.)
Accredited Settles Investor
Securities Suit for $22 Million
Plaintiffs reached a $22 million cash settlement in
their proposed class action against bankrupt subprime lender Accredited
Home Lenders Holding Co. and its directors and officers,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Shareholders launched several securities class actions against
Accredited in March 2007, according to the motion. Later consolidated,
the cases accused Accredited and its directors of lending
indiscriminately to increase their reported revenues, while billing
themselves as a conservative subprime lender. Insurers National Union
Fire Insurance Co., Allied World Assurance Co. and RSUI Indemnity Co.
will be asked to cover the settlement under the defendants' directors
and officers liability insurance policies, the parties said in their
stipulation of settlement.
href='http://bankruptcy.law360.com/print_article/111690'>Read more.
(Subscription required.)
Insurers Object to
LandSource’s Chapter 11 Plan
Westchester Fire Insurance Co. and ACE USA have
objected to LandSource Communities LLC's chapter 11 plan, expressing
concerns that the reorganized company will look to avoid the
indemnification it owes them for loans to four of the debtor
companies,
size='3'>Bankruptcy Law360 reported yesterday.
The companies filed their objection on Wednesday in the U.S. Bankruptcy
Court for the District of Delaware, saying that they currently are the
surety for four bonds totaling $795,500 and naming debtors Valencia
Corp., Newhall Land and Farming Co., and Lennar Mare Island LLC as
principals. Lennar Corp., Lennar Homes Inc., U.S. Homes Corp. and
Greystone Homes Inc. agreed in 2006 to pay the premiums and indemnify
Westchester and ACE for any loss it suffered on account of bonds issued
to the indemnitors' present or future subsidiaries or associates, the
motion said. Lennar, a nondebtor, is the corporate parent or affiliate
of the debtors. Pursuant to the reorganization plan, it will own 15
percent of the interest in Holdco, which is being created to hold the
equity interest in Reorganized LandSource Communities, the motion
said.
href='http://bankruptcy.law360.com/print_article/111668'>Read
more. (Subscription required.)
Struggling biotechnology company Biopure Corp. filed
for chapter 11, listing total assets of $5.06 million and total debts of
$2.72 million, the
face='Times New Roman' size='3'>Boston Business Journal
size='3'>reported today. Biopure, which develops blood-replacement
technologies, entered into an agreement with OPK Biotech LLC for the
sale of all of its assets, pending approval by the bankruptcy court.
Biopure’s injectable blood-replacement technology, designed to
support tissues affected by trauma, has failed to gain traction in
recent years amid numerous regulatory setbacks. As of April 30, the
company had $245,000 in cash and cash equivalents. As of Dec. 31,
Biopure had cut all but four of its full-time workers. A year earlier,
Biopure employed 86 people on a full-time basis.
href='http://www.bizjournals.com/boston/stories/2009/07/13/daily42.html?t=printable'>Read
more.
Citigroup Battle Credit Losses
Bank of America Corp.'s second-quarter income fell 5.5
percent on higher merger charges and continued credit woes, while
Citigroup Inc. swung to a profit, but only because of a gain from
splitting off Smith Barney into a joint venture, the
face='Times New Roman'>Wall
Street Journal reported today. Both U.S. banks
are still trying to find their footing amid the lingering fallout of the
financial meltdown and the global economic downturn that followed.
Citigroup, which will soon be 34 percent owned by the U.S. government,
ceded control of Smith Barney to Morgan Stanley to shore up its capital
base, while Bank of America rescued Merrill Lynch, inheriting its
problems. Bank of America is considered particularly vulnerable to
unemployment, and the condition of its mammoth portfolio of credit-card
loans could be a bellwether for the rest of the industry. Net
charge-offs on credit cards rose 28 percent to $2.06 billion. Citicorp,
the retail banking and commercial and investment banking units of
Citigroup, saw revenue fall 11 percent to $14.96 billion and posted an
11 percent drop in profit to $3.06 billion. The company said results
were hurt by the impact of foreign-currency translation and greater
credit losses in North America.
href='http://online.wsj.com/article/SB124782317374657261.html#mod=testMod'>Read
more. (Subscription required.)
U.S. Calendar Supplier
Files for Chapter 11
U.S. calendar and stationery products supplier Lang
Holdings Inc. filed for chapter 11 bankruptcy protection yesterday,
Reuters reported today. In a filing with the U.S. Bankruptcy Court for
the District of Delaware, Lang said it would like to pursue a
§ 363 asset sale.
Geithner Sees Evidence of
a Financial Recovery
Treasury Secretary Timothy F. Geithner said yesterday
that financial markets were sending “important signs of
recovery,” as he also sought to play down concerns about a new
wave of bonuses on Wall Street, the
face='Times
New
Roman' size='3'>New York Times reported today.
The comments were in part a reaction to the quick resurgence in earnings
at two of the largest U.S. investment banks this week. “The best
signs of this are in the amount of new capital that has come into the
U.S. financial system, the improvement in risk premia and credit
spreads, and the beginnings of improvement in consumer and business
confidence,” Geithner said. At the same time, he said, the Obama
administration will work with Congress to put in place comprehensive
reform of the financial system. “Part of this will require changes
to compensation practices to make them better aligned with risk,”
he said. “We don’t want to see a return to the pattern of
practices that helped cause this crisis.”
href='http://www.nytimes.com/2009/07/17/business/economy/17geithner.html?_r=1&ref=business&pagewanted=print'>Read
more.
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