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September 2,
2009
Industry Seeks Overhaul of
Fannie Mae, Freddie Mac
The Mortgage Bankers Association is calling for
Congress to transform Fannie Mae and Freddie Mac into several smaller
privately held companies that would issue mortgage securities carrying
an explicit government guarantee, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. MBA’s proposed framework would give successor entities to
Fannie and Freddie the authority to create securities backed by certain
types of mortgages. The new companies would guarantee the securities
against defaults on the underlying mortgages. The new companies would
also pay fees into a federal insurance fund, which would guarantee
interest and principal payments to bondholders if the companies were
unable to make them. Such an insurance fund, designed to kick in only if
the companies were to suffer catastrophic losses, would provide explicit
federal backing. That would replace the current system, in which
investors have long assumed that the government would stand behind
Fannie and Freddie.
href='http://online.wsj.com/article/SB125186013970178403.html'>Read
more. (Subscription required.)
Analysis: For Commercial
Real Estate, Hard Times Have Just Begun
Analysts are saying that vacancy declines and rent
increases are mirroring what happened in the downturn of the 1990s, and
until new jobs are created, generating an increase in demand for
commercial space and more retail spending, financial distress in
commercial real estate will continue, the
face='Times
New
Roman' size='3'>New York Times reported today.
Even though industry lobbyists were able to persuade Congress to extend
a loan program aimed at prodding the stalled securitization market back
to life, several analysts said it was unlikely to head off a spate of
defaults, foreclosures and bankruptcies that could surpass the
devastating real estate crash of the early 1990s. Building values have
declined by as much as 50 percent around the country, and as many as 65
percent of commercial mortgages maturing over the next few years are
unlikely to qualify for refinancing because of the drop in values and
new stricter underwriting standards, according to
size='3'>Richard Parkus of Deutsche Bank. Fitch
Ratings recently reported that $36.1 billion in securitized loans
— mortgages pooled, sliced into different categories of risk and
sold to investors — have been transferred so far this year to a
“special servicer,” an agency that handles troubled loans.
Such a transfer is prompted by a bankruptcy, a 60-day delinquency or the
prospect of an imminent default. In all, some 3,100 loans representing
$49.1 billion, or 6.1 percent of the total, are currently in special
servicing, an amount that could grow to nearly $100 billion by the end
of the year, Fitch said.
href='http://www.nytimes.com/2009/09/02/business/economy/02office.html?_r=1&ref=business'>Read
more.
Freedom Communications
Enters Bankruptcy Protection
Freedom Communications Inc., the owner of more than 30
daily newspapers including the
face='Times
New
Roman' size='3'>Orange County Register in
California and 8 television stations, filed for chapter 11 protection
yesterday after print advertising revenue declined, Bloomberg News
reported yesterday. Freedom listed both assets and debts of more than $1
billion. The Irvine, Calif.-based company’s revenue totaled $734
million last year, according to Moody’s Investors Service Inc.The
case is
size='3'>In re Freedom Communications,
09-13046, U.S. Bankruptcy Court, District of Delaware
(Wilmington).
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=ajlVljCsb7QI'>Read
more.
New York Governor Permits
NYC Off-Track Betting to File for Chapter 9
New York Governor David Paterson (D) yesterday signed
an executive order that will enable the troubled New York City Off-Track
Betting (OTB) Corp. to file for chapter 9 bankruptcy as a municipality,
Reuters reported today. The OTB was set up as a public-benefit
corporation in 1970 to raise money from pari-mutuel betting for New York
City, the state and the horse-racing industry. In pari-mutuel betting,
all bets of a specific type are pooled, with the house subtracting its
'take' before paying the winners. Despite taking more than $1 billion in
bets every year, the OTB has been unable to cover its operating costs
and has accrued liabilities of $220 million. Adding to OTB’s
financial distress are unfunded liabilities of more than $500 million,
most of it related to employee retirement, health and other
benefits.
href='http://news.yahoo.com/s/nm/20090901/us_nm/us_newyork_otb_1'>Read
more.
Filing amid Financial Strain
Barneys New York is weighing a debt restructuring or
bankruptcy filing that may wrest control from the Dubai government-owned
firm that loaded it with debt in a 2007 leveraged buyout, Bloomberg News
reported today. Barneys’ debt was cut two grades to three levels
above default in July by Moody’s, which cited its “strained
financial condition” amid declining sales and
“sizeable” debt from the takeover by Istithmar PJSC, a unit
of Dubai World. Barneys has $660 million of loans maturing through 2016,
according to data compiled by Bloomberg. This includes $280 million of
so-called first-lien bank debt and a $180 million unsecured loan that
Perry Capital helped finance, the data show. Hedge fund Perry Capital
LLC, which helped finance the $942.3 million takeover, has been
approached by Holt Renfrew, the Toronto-based department-store chain,
about a joint offer for control of the 86-year-old luxury
retailer.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aRuuadVNpKAs'>Read
more.
Chapter 11
Payments processor Cynergy Data LLC filed for chapter
11 protection yesterday and said it has agreed to sell all its assets to
private investment firm ComVest Group through a court-supervised
auction, Reuters reported yesterday. Cynergy said that it has about
$109.5 million of assets and about $186.2 million of debt. The New
York-based company was founded in 1995 and employs nearly 275 people,
according to the company's website. Cynergy said that it has retained
Charles Moore as its chief restructuring officer. The case is
In
re Cynergy Data LLC, U.S. Bankruptcy Court,
District of Delaware (Wilmington), No. 09-13038.
href='http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSBNG52850120090901'>Read
more.
Bally Total Fitness Emerges
from Bankruptcy
Bally Total Fitness Holding Corp. announced yesterday
that it has emerged from bankruptcy following a new financing deal and
the approval of its chapter 11 plan earlier this month,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge
face='Times New Roman' size='3'>Burton R. Lifland
size='3'>confirmed the company’s reorganization plan on Aug. 20,
signing off on a debt-for-equity swap deal that will provide new
financing for the company and allow it to cut its debt by at least $660
million. The plan calls for secured lenders to receive 94 percent of the
company's equity, while general unsecured claim holders will receive 3
percent of the equity and warrants to purchase up to 5 percent
additional equity, according to motion documents seeking approval of the
plan. The reorganization plan provides for about $90 million in exit
financing, which is sufficient to refinance the prepetition revolver and
prepetition swap, and provides $30 million of liquidity for working
capital and general corporate purposes, according to the
motions.
href='http://bankruptcy.law360.com/print_article/120045'>Read more.
(Subscription required.)
Judge Approves Competing
MagnaChip Chapter 11 Plans
Bankruptcy Judge
face='Times
New
Roman' size='3'>Peter J. Walsh on Monday
approved competing plans in the MagnaChip Semiconductor LLC's chapter 11
case, putting it to stakeholders to decide whether to liquidate or
restructure the ailing electronics manufacturer,
face='Times New



Roman'>
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. The approved plans were put forward bythe first-lien lenders
and the unsecured creditors’ committee, which presented a rival
plan.Eligible creditors must submit their ballots to accept or reject
the competing plans by Sept. 21, and a hearing will be held Sept. 25 to
confirm one of the plans, according to the order.The case
is In re
MagnaChip Semiconductor Finance Co. et al.,
case number 09-12008, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/119948'>Read
more. (Subscription required.)
CIT to Defer Interest
Payment on Debt
CIT Group Inc. said that it was forced to defer a
$22.9 million interest payment due next month after failing to meet some
conditions in the debt agreement, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today.The payment was due Sept. 15, but a clause in the agreement stated
that CIT must issue shares to finance the payment if it can't meet the
conditions, or otherwise defer it. CIT said yesterday it was unable to
sell shares and therefore was forced to delay the payment.The company's
announcement comes amid its efforts to avoid a bankruptcy filing. The
century-old lender has been hurt by a liquidity crisis as its customers
drew down credit lines in fear that they might disappear.
href='http://online.wsj.com/article/SB125180644198575855.html'>Read
more. (Subscription required.)
Fund Defaults
Cerberus Capital Management LP yesterday dismissed
market speculation that some of its hedge funds, which have suffered
losses and heavy redemptions, are in danger of default, Reuters
reported. High-profile investment losses at Cerberus prompted investors
recently to seek the withdrawal of $4.77 billion from two of its hedge
funds. That represents about 60 percent of the $7.9 billion managed by
Cerberus Partners LP and Cerberus International LP, and 19 percent of
Cerberus' total $24.3 billion in assets managed through a dozen funds.
Cerberus last month raised $1 billion to purchase distressed companies
and securities, and it expects to raise two new distressed asset funds
in the fourth quarter.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/01/AR2009090101610_pf.html'>Read
more.
Balsillie Tells NHL to
Pick Its Battle
Jim Balsillie, who is trying to buy the Phoenix
Coyotes out of bankruptcy and move the team to Hamilton, Ont., says the
National Hockey League can’t refuse to approve him as a franchise
owner now that it has made a bid to purchase the team, the
face='Times New Roman'>Wall
Street Journal reported yesterday. The NHL is
trying to stop the Balsillie from taking control of the Coyotes. The NHL
has asked a bankruptcy judge to toss out Balsillie’s $212.5
million offer for the Coyotes because he has failed to gain the
league’s consent to buy or move the team. A hearing today will be
held to determine if Balsillie can compete against the league’s
$140 million offer at an auction scheduled for Sept. 10.
href='http://blogs.wsj.com/bankruptcy/2009/09/01/balsillie-tells-nhl-to-pick-its-battle/tab/print/'>Read
more. (Subscription required.)
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