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June 11, 2008
name='1'>Analysis: Dodd-Shelby Bill Would Help 400,000
Homeowners
The Congressional Budget Office (CBO) estimates that a Senate bill
allowing the Federal Housing Administration to insure up to $300 billion
in new subprime mortgages would help about 400,000 struggling homeowners
out of the 2.2 million borrowers who are expected to face foreclosure
proceedings in the next few years, CongressDaily reported
yesterday. The agency also said that the measure, sponsored by Senate
Banking Chairman Christopher Dodd (D-Conn.) and ranking member Richard
Shelby (R-Ala.), could ultimately cost the Federal Housing
Administration (FHA) $729 million over a 10-year period to help
guarantee new mortgages for those at risk of default. While the bill's
ceiling is $300 billion in new guarantees, CBO estimated that FHA would
actually provide $68 billion in new loan commitments. The Senate bill
has a narrower eligibility than a House version, sponsored by Financial
Services Chairman Barney Frank (D-Mass.), which would cost $1.7 billion
and help an estimated 500,000 borrowers.
Oregon
Home Builder Declares Bankruptcy
Legend Homes, one of Oregon's largest home builders, filed for chapter
11 protection yesterday after its parent company made three ill-timed
land investments in once-hot housing markets, the Oregonian
reported today. Legend's CEO David Oringdulph said that land purchases
made in Vancouver, Riverside, Calif., and Bend, Ore., prompted the
bankruptcy. The company sought land to expand its homebuilding during
the recent boom. Legend reported assets and liabilities between $100
million and $500 million.
href='http://blog.oregonlive.com/breakingnews/2008/06/major_home_builder_declares_ba.html'>Read
more.
Aloha
Airlines Executive Payout Plan Draws Criticism from Pilots
/>
The Air Line Pilots Association has joined the U.S. Trustee in opposing
proposals to grant additional incentives to the Aloha Airlines Inc.'s
top two former executives while the operation winds down, Bankruptcy
Law360 reported yesterday. The pilots union filed an objection
Monday in the U.S. Bankruptcy Court for the District of Hawaii to the
chapter 7 trustee's motion for a recovery incentive carve-out plan that
includes the incentives for Aloha CEO David Banmiller and Senior Vice
President for Finance Jeffrey Kessler. According to court
documents, the estate's senior secured creditor, GMAC Commercial Finance
LLC, has agreed to pay the employees' salaries and incentives from funds
it recovers through the asset sales for which the employees would be
retained. A hearing on the motion is scheduled for June 16.
href='http://bankruptcy.law360.com/secure/printview.aspx?id=58771'>Read
more. (Registration required.)
Report: Some Bond Insurers at Risk of
Insolvency
An analyst report said that bond insurers CIFG Guaranty, Financial
Guaranty Insurance Co and XL Capital Assurance may breach capital
requirements in this quarter, triggering a chain of events that could
push them into insolvency, Reuters reported yesterday. The bond insurers
could be taken over by regulators if capital levels fall below the
required minimum and they are unable to raise more money. That would
force the insurers to make massive payouts on derivative contracts,
which would likely wipe out all of their resources, according to a
CreditSights report published on Sunday. The industry regulator, the New
York State Insurance Department, requires bond insurers to maintain a
minimum surplus capital of $65 million and gives companies 90 days to
remedy the situation if capital falls below that level.
href='http://www.reuters.com/articlePrint?articleId=USN0961882620080609'>Read
more.
name='5'>Immunicon Files for Chapter 11
Immunicon Corp., which makes products for cell analysis and
molecular research, filed for chapter 11 protection today, two months
after announcing it was exploring options including a possible sale,
Reuters reported. The Huntingdon Valley, Pa.-based company said that it
has $9.2 million of assets and $24.3 million of debts, according to the
filing. In March, Immunicon said that it would cut 40 percent of its
full-time staff after it lost an arbitration with a Johnson &
Johnson unit to end a marketing agreement for its cancer diagnostic
products.
href='http://www.reuters.com/article/bondsNews/idUSWEN618520080611'>Read
more.
Search for Ways to Save on Fuel Costs
The nation's airlines are scrutinizing every step of their
operations, searching for new ways to cut their soaring fuel bills,
the New York Times reported today. They are power-washing jet
engines more often to get rid of grime, carrying less water for the
bathroom faucets and toilets and replacing passenger seats with lighter
models. The financial pain of higher fuel prices is particularly acute
for airlines because it is their single biggest expense. Eight years
ago, 15 percent of the price of an airplane ticket went to pay for jet
fuel; now, it is 40 percent, according to the Air Transport Association,
href='http://www.nytimes.com/2008/06/11/business/11air.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='7'>Metabolife CEO Gets 6 Months for Misleading FDA
/>
Michael Ellis, co-founder and former CEO of now-defunct Metabolife
International Inc., has been sentenced to six months in prison for
allegedly making false statements to the U.S. Food and Drug
Administration in an effort to obstruct regulation of his company's
top-selling ephedra-containing drug, Bankruptcy Law360 reported
yesterday. Ellis and Metabolife were indicted in 2003 under eight counts
of making false statements and obstructing FDA proceedings. Metabolife
filed for chapter 11 in June 2005 after buckling under the weight of
multiple ephedra-related lawsuits.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=58799'>Read
more. (Registration required.)
Manhunt
Launched for Missing Trader Sentenced to Prison for Fraud
New York State Police are investigating the possible suicide of Samuel
Israel III, the former CEO of defunct hedge-fund firm Bayou Management
LLC who was supposed to begin serving a 20-year prison term on Monday,
the Wall Street Journal reported today. A vehicle belonging to
Israel -- the architect of one of Wall Street's highest-profile scams of
recent years -- was found abandoned near the towering Bear Mountain
Bridge over the Hudson River in New York state. It is the latest
development in a scandal that rocked the investing world in 2005 and
cost investors in the fund more than $400 million. Israel pleaded guilty
in September 2005 in a New York federal court to conspiracy,
investment-adviser fraud and mail-fraud charges and had been released on
href='http://online.wsj.com/article/SB121310632444160587.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Grupo
Mexico Chief Takes Stand, Denies Looting Asarco
German Larrea, head of Mexico's largest copper-mining company, took the
stand in U.S. District Court yesterday, denying charges that he looted
U.S. miner Asarco in order to leave the historic company too indebted to
pay for environmental cleanup work across the United States, the
Wall Street Journal reported today. Larrea, chairman of Grupo
Mexico SA, said that the decision to put Asarco in bankruptcy in 2005
was a 'low-cost solution' aimed at cleaning up Asarco's outstanding
liabilities. If found guilty, Grupo Mexico could pay penalties exceeding
$10 billion, including punitive damages.
href='http://online.wsj.com/article_print/SB121314631269962993.html'>Read
more. (Registration required.)
International
EU Launches Probe of Alitalia
Loan
The European Commission today opened an in-depth probe into the Italian
government's €300 million ($463.5 million) emergency loan to
Alitalia SpA, on suspicion that it could constitute illegal state aid,
the Wall Street Journal reported today. Alitalia was given the
€300 million bridge loan by the government to prevent it from
filing for bankruptcy, as the airline was quickly running out of cash.
Italy's government owns 49.9 percent of the Rome-based carrier. The
Italian government is still looking for buyers for the ailing airline,
with Italian bank Intesa Sanpaolo helping the government in the task,
but so far no buyers have emerged.
href='http://online.wsj.com/article_print/SB121317941782863887.html'>Read
more. (Registration required.)