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September 11,
2008
PBGC Presses Delphi, GM over
Pensions
The Pension Benefit Guaranty Corp. (PBGC), frustrated by missed pension
payments and the lack
of a resolution with bankrupt auto parts maker Delphi Corp., said that
it would go to court
tomorrow to secure a claim on an additional $900 million in Delphi
assets, the Wall Street
Journal reported today. The move comes after Delphi missed payments
of several hundred
million dollars to its pension plan in June and July. The new claims
involve Delphi's foreign
operations, which are believed to be profitable. Delphi filed for
bankruptcy in October 2005
and continues to struggle to emerge from it. The PBGC on Tuesday sent
its second letter in the
past month to GM and Delphi executives urging GM to absorb at least $1.5
billion in Delphi
pension obligations before Sept. 30. That date is important, according
to the PBGC, because
afterward a new pension law takes effect that would make a deal much
more costly.
href='http://online.wsj.com/article/SB122109686543721951.html?mod=hpp_us_whats_news'>Read
more. (Subscription required.)
Student Lenders Agree to Marketing
Code
New York Attorney General Andrew M. Cuomo said yesterday that seven
student loan companies have
agreed to follow a code of conduct for their marketing, resolving an
investigation into whether
they misled consumers, the New York Times reported yesterday.
The companies, which
include Campus Door, EduCap, GMAC Bank, Graduate Loan Associates,
Nelnet, NextStudent and
Xanthus Financial Services, also agreed to put a total of $1.4 million
into a fund to help
educate students and their families about financial aid, Cuomo said. An
eighth lender, My Rich
Uncle, has agreed to the marketing code voluntarily even though the
attorney general's office
did not find fault with its marketing.
href='http://www.nytimes.com/2008/09/10/business/10loan.html?ref=business&pagewanted=print'
>Read more.
Creditor Seeks Examination of Linens
'N Things
A creditor of home products retailer Linens 'N Things Inc. has requested
an examination of the
company, seeking to find out how Linens got a clean audit opinion from
Ernst & Young LLP
just months before going bankrupt, Bankruptcy Law360 reported
yesterday. Creditor
Levine Leichtman Capital Partners Deep Value Fund LP is asking for
presentations to Linens'
board of directors, data on its finances and inventory and documents
connected with its vendor
relationships, investors and audits, among other information. Levine
Leichtman is the
beneficial owner of $43.5 million of Linens' notes, and an active
participant in its senior
noteholders' committee, according to the motion. The firm said that it
needs more information
about the trade support Linens has received in the past, and is likely
to receive in the
future, so that it can evaluate the company's chapter 11 plan.
href='http://bankruptcy.law360.com/articles/68804'>Read more.
(Subscription required.)
Judge Approves 120-Day Probe for
SemGroup
Examiner
Bankruptcy Judge Brendan L. Shannon yesterday granted a
request by acting U.S.
Trustee Roberta A. DeAngelis to appoint an examiner to
look into SemGroup LP's
oil trading strategy, insider transactions, alleged misuse of borrowed
funds and whether any
executives, managers or employees defrauded or mismanaged the bankrupt
energy company's
affairs, Tulsa (Okla.) World reported today. Judge Shannon
granted a 120-day period
for the investigation, although the scope and timeline of the probe can
be expanded if 'other
relevant factors' are discovered. DeAngelis requested the examiner
appointment after SemGroup's
July 22 bankruptcy filings revealed that the company lost $2.4 billion
on failed oil futures
trades. Some creditors alleged that these hedging attempts were actually
risky and
'unauthorized' speculative trades on the direction of oil prices,
according to reports.
href='http://www.tulsaworld.com/common/printerfriendlystory.aspx?articleID=20080911_351_A1_ADep
ar657201'>Read more.
Asarco Adds Settlement Package to
Chapter 11 Plan
/>
Asarco LLC has tacked a range of environmental settlements with various
federal and state
agencies onto its chapter 11 plan as the mining company seeks to emerge
from protection,
Bankruptcy Law360 reported yesterday. Asarco did not admit
guilt in the deal, which
covers contaminated areas including the Tacoma, Wash., site, the Circle
Smelting site in
Illinois and the Terrible Mine site in Colorado. As part of the
settlement, the U.S.
Environmental Protection Agency has pledged not to sue Asarco, according
to court
documents.
href='http://bankruptcy.law360.com/articles/68846'>Read more.
(Subscription required.)
More Banks Replacing Traditional Lines
of Credit to Small
Businesses with Credit Cards
While banks have tightened traditional lines of credit to small
businesses, experts say that
they have been increasing their small business credit card offerings,
the New York
Times reported today. The small business cards often differ from
personal credit cards in
that some offer benefits like product discounts and extended payment
terms, but they are
identical in critical ways: Users are generally liable for revolving
balances that grow as
interest rates rise, and lenders may sometimes raise rates and reduce
credit limits at any time
for any reason. In a survey in February of 500 owners of small and
medium-size businesses, the
National Small Business Association, a lobbying group in Washington,
D.C., found that 28
percent had used bank loans in the previous year, a record low.
Forty-four percent said they
had used cards to meet capital needs in the previous six months.
href='http://www.nytimes.com/2008/09/11/business/smallbusiness/11sbiz.html?ref=business&pag
ewanted=print'>Read more.
Senate Report Accuses Some Banks of
Aiding a Tax
Dodge
A report by the Senate Permanent Subcommittee on Investigations said
that a few Wall Street
investment banks are marketing and selling complex schemes meant to
allow foreign investors,
including offshore hedge funds, to avoid paying billions of dollars in
dividend taxes
illegally, the New York Times reported today. The report is
based on scores of
internal data and documents and singles out Morgan Stanley, Lehman
Brothers, Deutsche Bank,
Merrill Lynch, UBS and Citigroup. The report also names several hedge
funds, including Moore
Capital, Highbridge and Maverick Capital, as using the dividend-dodging
products. The Senate
subcommittee that prepared the report, led by its chairman, Sen. Carl
Levin (D-Mich.), has held
extensive inquiries into tax and offshore abuses and will hold a hearing
today on the report's
href='http://www.nytimes.com/2008/09/11/business/11tax.html?ref=business&pagewanted=print'>
Read more.
Bank of America to Buy Back
Auction-Rate
Securities
The Bank of America Corp. said yesterday that it would buy back about
$4.5 billion in
auction-rate securities held by roughly 5,500 customers nationwide as
part of a settlement
agreement with Massachusetts regulators, the Associated Press reported
today. Under the
agreement with Massachusetts regulators, Bank of America will buy back
securities at the value
at which customers purchased them. The offer applies to individual
investors and trusts
benefiting individuals that purchased auction-rate securities before
Feb. 11, businesses with
account values up to $10 million and charities with account values up to
$25 million. The bank
said that it continued to cooperate fully with investigations by the
Securities and Exchange
Commission and the New York attorney general's office.
href='http://www.nytimes.com/2008/09/11/business/11auction.html?ref=business&pagewanted=pri
nt'>Read more.
Berkshire, in Blow to Banks, Reins In
Its Deposit
Insurer
Warren Buffett's Berkshire Hathaway Inc. has told one of its
subsidiaries to stop insuring bank
deposits above the amount guaranteed by the federal government, dealing
a fresh blow to the
financial services industry as it tries to assuage anxious customers,
the Wall Street
Journal reported today. The subsidiary, Kansas Bankers Surety
Co., is notifying about
1,500 banks in more than 30 states that it will no longer offer a
program called 'bank deposit
guaranty bonds.' Eleven banks have failed this year. Seven have fallen
since July 11, a
concentration not seen since the savings-and-loan crisis of the late
1980s and early
href='http://online.wsj.com/article/SB122101423745118083.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
International
Real Estate Woes Spread to
China
China has joined the United States, Britain, Spain and others on the
list of nations suffering
a real estate decline, the New York Times reported today.
Although the last national
statistics showed single-digit growth from July 2007 to July 2008 in the
average price of
commercial and residential real estate, real estate brokers say prices
are down from peaks
reached earlier this year, while the number of transactions has plunged.
Brokers say that sales
volumes first dropped precipitously here in southeastern China, and then
the decline spread
across the country. Faced with few buyers, sellers started cutting their
prices for residential
href='http://www.nytimes.com/2008/09/11/business/worldbusiness/11yuan.html?_r=1&oref=slogin
&ref=business&pagewanted=print'>Read more.
Alitalia Layoffs Loom if Unions
Shun
Rescue
Alitalia SpA's government-appointed bankruptcy commissioner, Augusto
Fantozzi, warned that the
carrier will start temporary layoffs unless unions agree to changes
related to its rescue plan,
the Wall Street Journal reported today. Alitalia has said it
will annul contracts with
employees that as part of efforts to shore up its finances. Alitalia
said the move was related
to the airline's negotiations with a group of investors, led by Piaggio
SpA Chairman Roberto
Colaninno, who have offered to purchase some assets from Alitalia and
merge them with rival
carrier Air One SpA. Unions are divided on the plan by the investor
group, which has set up a
company called Compagnia Aerea Italiana, or CAI, to attempt to relaunch
Alitalia. The pilot and
flight-attendant unions have rejected proposed cost-cutting and
productivity measures. The
parties have until tomorrow to agree on a solution.
href='http://online.wsj.com/article/SB122108091856720799.html'>Read
more. (Subscription required.)