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November 26,
2008
name='1'>Credit Crisis Squeezes Assisted Living
Operators
The credit crisis is battering the two largest publicly traded operators
of housing for the elderly, the New York Times reported today.
Sunrise Senior Living is trying to stave off bankruptcy, while Brookdale
Senior Living is considered likely to resolve its short-term problems,
but faces a mountain of debt in the next few years. Both companies say
that they are taking steps to reduce costs, but have pledged to refrain
from cuts that could impinge on the care they offer their residents.
Brookdale manages 51,847 units of retirement and assisted-living
housing, and Sunrise has 50,235 units. Once the bellwether of the
assisted-living industry, Sunrise Senior Living, based in McLean, Va.,
has violated certain covenants imposed by its lenders on leverage ratios
and has a deadline of Jan. 31 to restructure its line of credit. One
analyst said that Sunrise might need to raise as much as $300
million next year.
href='http://www.nytimes.com/2008/11/26/business/26senior.html?ref=business&pagewanted=print'>Read
more.
name='2'>GAO's Audit Likely to be Critical of Bailout
Plan
The first operational audit of the $700 billion financial rescue plan,
to be delivered to Congress on Tuesday, is expected to be critical of
the Treasury Department's failure to set up ways to track how its
bailout money is being used in the marketplace, the New York
Times reported today. The Government Accountability Office audit is
also likely to call for tighter controls over the conflicts of interest
that are arising as financial specialists, institutions and law firms
are hired for Treasury work that could later aid their private-sector
clients. Within days of the plan's enactment on Oct. 3, the GAO had
assembled a 20-member team of lawyers, accountants, contracting experts,
ethics monitors and market regulation specialists to start tracking the
Treasury Department's work.
href='http://www.nytimes.com/2008/11/26/business/economy/26tarp.html?ref=business&pagewanted=print'>Read
more.
name='3'>Study: Bankrupt Companies Likely to Be Target of Fraud
Probes
A study released Monday by Deloitte Forensic Center said that companies
under bankruptcy protection are more than three times as likely as
nonbankrupt companies to be the target of U.S. Securities and Exchange
Commission enforcement actions for alleged fraud, Bankruptcy
Law360 reported yesterday. Deloitte's analysts reviewed more than
500 corporate bankruptcy filings between 2000 and 2005 and thousands of
SEC enforcement actions issued between 2000 and 2007. The Deloitte
analysts found that companies accused of financial statement fraud by
the SEC were more than twice as likely to file for bankruptcy protection
as companies that where not accused of fraud. The study found that about
9 percent of bankrupt companies with more than $100 million in assets
were issued SEC accounting and auditing enforcement releases between
2000 and 2005. Meanwhile, a total of 3 percent of nonbankrupt companies
with more than $100 million in assets were issued accounting and
auditing enforcement releases during that time, the report said.
href='http://bankruptcy.law360.com/articles/78002'>Read more.
(Subscription required.)
size='3'>Housing
name='4'>Fed Aid Sets Off a Rush to Refinance
The Federal Reserve's attempt to stabilize the housing market set off a
chain reaction across the United States yesterday, dropping interest
rates and quickly spurring a burst of refinancing activity by borrowers
eager to lower their mortgage costs, the Wall Street Journal
reported today. Some brokers said that it was the most activity
they've seen in at least one year, although there was no way to
determine the volume of refinancing. Call volume was roughly twice what
was expected at call centers and via the Internet, Bank of America Corp.
reported. Rates on 30-year, fixed-rate mortgages dropped by roughly half
a percentage point to about 5.5 percent for borrowers with good credit
scores and substantial equity in their homes say mortgage brokers and
lenders. Tuesday's lower rates will, for now, only benefit borrowers who
have the cash and credit rating to qualify for mortgages under current
lending standards. The Fed's actions won't make mortgages any easier to
get for homeowners or buyers who haven't been able to qualify in recent
weeks. Lower rates also won't help the roughly 11.8 million borrowers
who are unable to refinance because they owe more than their home is
worth, said Mark Zandi, chief economist of Moody's Economy.com.
href='http://online.wsj.com/article/SB122765938507058417.html'>Read
more. (Subscription required.)
name='5'>Home Builders Critical of FDIC's Handling of Bank
Takeovers
Home builders from Florida to Texas are railing against the Federal
Deposit Insurance Corp., saying that the agency is cutting off
construction financing from seized banks and demanding early repayment
of current loans, the Wall Street Journal reported today. The
FDIC, which has become a leading advocate for modifying mortgages of
financially strapped homeowners, isn't extending that same tolerance to
the housing industry, the builders said. The FDIC and state regulators
have been sorting through the wreckage of souring construction loans
that have been weighing on the balance sheets of the nation's small- and
medium-sized banks. In the third quarter, 15.2 percent of single-family
home construction loans were delinquent, up from 12.5 percent in the
previous quarter - according to Foresight Analytics, an Oakland, Calif.,
research firm. About 20.5 percent of condo construction loans were
delinquent, up from 16.5 percent last year.
href='http://online.wsj.com/article/SB122765327405657891.html'>Read
more. (Subscription required.)
name='6'>Losses at Home Builder Widen on Write-downs
The home builder D. R. Horton said yesterday that its
fourth-quarter loss widened as it took more than $1 billion in
write-downs tied to declining land values and as sales fell by almost
half, the Associated Press reported. D. R. Horton lost $799.9 million in
the quarter that ended Sept. 30, compared with a loss of $50.1 million
in the same quarter last year. Sales fell to $1.75 billion in the
quarter, from $3.12 billion a year ago. The decline in revenue was
attributable to a sharp decline in home sales. Total during the quarter
tumbled to 6,961 homes, from 11,733 in the period a year ago. The
backlog of homes under contract to be sold as of Sept. 30 also fell. D.
R. Horton had 5,297 homes worth $1.2 billion under contract at the end
of the quarter. It had 10,442 homes valued at $2.7 billion under
contract on the same day last year.
href='http://www.nytimes.com/2008/11/26/business/economy/26home.html?ref=business&pagewanted=print'>Read
more.
name='7'>Downey Savings Prepares Chapter 7 Filing
Downey Savings and Loan Association FA said that it is preparing to file
for bankruptcy today after being shut down by the U.S. Office of Thrift
Supervision, Bankruptcy Law360 reported yesterday. As of Sept.
30, Downey Savings had total assets of $12.8 billion and total deposits
of $9.7 billion, according to the Federal Deposit Insurance Corp. The
FDIC said that the company had 175 branches in California and Arizona.
Minneapolis-based U.S. Bank on Friday acquired the banking operations,
including deposits, of Downey Savings, according to the FDIC, which
facilitated the transaction.
href='http://bankruptcy.law360.com/articles/78041'>Read
more. (Subscription required.)
name='8'>Court Approves Sea Containers Reorganization
Plan
Bankruptcy Judge Kevin J. Carey on Monday approved Sea
Containers Ltd.'s latest reorganization plan, which resolved earlier
objections by the U.S. trustee overseeing the case, Bankruptcy
Law360 reported yesterday. The debtors filed their third
reorganization plan last Thursday, asking the court to approve a new
plan that resolved nearly all of U.S. Trustee Roberta A. DeAngelis'
objections. The plan calls for SCL's reorganization and the transfer of
the company's operating assets and container interests to SeaCo Finance.
The debtors will liquidate their remaining noncore businesses and
assets. Read
more. (Subscription required.)
name='9'>Auto Industry Caravan to Travel to Congress
to Ask for Assistance
Car dealers, parts makers, union leaders and others hoping to convince
lawmakers that the industry is an indispensable piece of the economy are
planning a caravan to Washington, D.C., in early December, the New
York Times reported today. The 525-mile drive will occur as auto
executives make a second plea for federal assistance. The caravan
participants are not asking for money directly, but are among those who
would suffer if the industry collapsed. As of now, the three executives
- Rick Wagoner of General Motors, Alan R. Mulally of Ford Motor and
Robert L. Nardelli of Chrysler - are not planning to join the carpool,
though they are trying to burnish their image on Capitol Hill. The three
executives were chastised for traveling to Washington, D.C., last week
by corporate jets.
href='http://www.nytimes.com/2008/11/26/business/economy/26auto.html?_r=1&ref=business'>Read
more.
name='10'>Small Jet Maker Files for Bankruptcy
Eclipse Aviation Corp, which pioneered the market for very light jets,
filed for bankruptcy protection yesterday as it ran out of financing to
stay afloat, Reuters reported. The Albuquerque, N.M.-based company,
founded in 1998 by former Microsoft Corp employee Vern Raburn, cut back
production of its Eclipse 500 jet earlier this year as costs outstripped
sales. Several of Eclipse's customers have sued the company for a refund
of deposits they paid on jets that have not been delivered.
href='http://news.yahoo.com/s/nm/20081125/bs_nm/us_eclipse_1/print;_ylt=Ah7.2rKocit8iYY2evKceeib.HQA'>Read
more.
name='11'>Copper Producer Faces Bankruptcy
Terra Nostra Resources Corp. creditors, who said that they are
owed about $18.8 million, filed a petition to force the copper producer
into bankruptcy, Bloomberg News reported yesterday. The involuntary
petition was filed today in U.S. Bankruptcy Court in New York by 11
creditors including Photon Global Ltd., Cheyne Capital Management (UK)
LLP, Sound Energy Partners Inc., Holland Park Emerging Markets Fund and
Sofaer Capital Inc. The case is In re Terra Nostra Resources
Corp., 08-14708, U.S. Bankruptcy Court, Southern District of New
York (Manhattan).
href='http://www.bloomberg.com/apps/news?pid=20601127&sid=aoH1LYV.FHCo'>Read
more.
name='12'>Asbestos, Agent Orange Lawsuits Send Company into Chapter
11
Faced with a deluge of asbestos-related litigation, several dozen Agent
Orange-related lawsuits stemming from the Vietnam War and environmental
cleanup costs, T.H. Agriculture & Nutrition LLC has submitted a
prepackaged chapter 11 filing, Bankruptcy Law360 reported. As
of Aug. 31, the company had assets of $77.9 million and liabilities of
$576.7 million, according to papers filed Monday in the U.S. Bankruptcy
Court for the Southern District of New York. Although the company ceased
distributing asbestos fiber in 1980 and exited the chemicals business
entirely in 1984, it was not until 2002 that a significant number of
asbestos-related personal injury or wrongful death claims based on its
historical operations began to be filed. Along with the bankruptcy
petition, the company also filed complaint seeking declaratory and
injunctive relief a staying the commencement or continuation of any and
all actions or other proceedings that allege personal injury or wrongful
death based on purported exposure to asbestos. According to the
company's complaint, as of Nov. 19, T.H. Agriculture & Nutrition was
a defendant in 5,695 active cases filed by 9,917 plaintiffs asserting
asbestos-related personal injury claims.
href='http://bankruptcy.law360.com/articles/78154'>Read more.
(Subscription required.)
name='13'>LandAmerica Files for Chapter 11 Protection
Title insurer LandAmerica Financial Group Inc. said that it has filed
for bankruptcy protection and its bigger rival Fidelity National
Financial Inc., will buy two of its underwriting units, Reuters reported
today. The recent termination of a merger agreement with Fidelity
National Financial and the closure of its 1031 Exchange Company's
business caused it to accelerate these actions, LandAmerica said. On
Friday, Fidelity National Financial withdrew its $126 million stock
offer for LandAmerica.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/11/26/AR2008112600187_pf.html'>Read
more.
name='14'>Downturn Hammers Banks' Earnings in Third
Quarter
The Federal Deposit Insurance Corp. reported yesterday that U.S. banks
posted net earnings of $1.7 billion in the third quarter of 2008, the
industry's second lowest since 1990, the Wall Street Journal
reported today. Mounting expenses for credit losses and soured
investments dented bank profits during the quarter, pushing nearly one
in four banks into a loss. All told, nine banks failed during the
quarter, the most since the third quarter of 1993, when 16 institutions
collapsed. Third quarter net income of $1.7 billion marks a decline of
94 percent from the $28.7 billion banks earned in the third quarter of
2007. Net charge-offs rose sharply to $27.9 billion during the quarter,
up from $17.0 billion from the third quarter of 2007.
href='http://online.wsj.com/article/SB122765230801457805.html'>Read
more. (Subscription required.)
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