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November 10, 2008
Circuit City Files for
Bankruptcy
Circuit City Stores Inc. filed for chapter 11 protection today, listing
$3.4 billion in assets and $2.32 billion in liabilities, Bloomberg News
reported. The company said that it is entering court protection owing
Hewlett-Packard Co. $119 million and Samsung Electronics Co. $116
million. The Richmond-based company has lost more than $5 billion in
stock-market value in two years. Circuit City said it plans to stay in
business while it comes up with a reorganization plan, and the company
obtained $1.1 billion in bankruptcy financing, which replaces a $1.3
billion line of credit. On Nov. 3, the company said it would close a
fifth of its U.S. stores and renegotiate leases on some locations to
conserve cash. The closings will leave it with about 566 U.S. stores and
trim about 20 percent of the 43,000-strong workforce. Circuit City also
said today it cut 700 jobs in its regional and district store support
department.
href='http://www.bloomberg.com/apps/news?pid=20601127&sid=aOl7tdCatQU4'>Read
more.
U.S. Government Provides More Aid to
AIG
The federal government announced today that it would overhaul its
bailout of the insurance giant American International Group, saying that
it would purchase $40 billion of the company's stock, after signs that
the initial bailout was putting too much strain on the company, the
New York Times reported. In a joint statement, the Federal
Reserve and the Treasury said the move was necessary “in order to
keep the company strong and facilitate its ability to complete its
restructuring process successfully.” The new measures, they said,
would help the company and promote market stability while protecting the
interests of the federal government and taxpayers. The revised bailout
came as AIG reported a loss today of $24.47 billion after a profit of
$3.09 billion, or $1.19 a share, a year ago. The results included pretax
losses of $18.31 billion from the declining value of AIG's investments.
In the revised bailout, the Treasury Department will use the Troubled
Asset Relief Program, the $700 billion financial system rescue plan, to
buy $40 billion of newly issued AIG preferred shares.
href='http://www.nytimes.com/2008/11/11/business/economy/11aig.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
GM Delivers Grim Financial
Outlook
General Motors Corp. revealed a dire financial outlook on Friday that
has the company teetering on the edge of bankruptcy, the Detroit
Free Press reported on Saturday. Hemorrhaging cash and with sales
dropping to 25-year lows last month, the Detroit automakers announced
financial results that show they each are burning through more than $2
billion a month to maintain operations. GM warned that its cash reserves
could sink below the minimum level it needs to operate by year's end
unless it gets federal aid or can tap other resources. GM Chairman and
Chief Executive Officer Rick Wagoner said the company will take every
step possible to avoid bankruptcy -- which GM continues to insist is not
an option -- as the automaker attempts to survive the squeeze of a
global credit crunch on vehicle sales. GM reported a net loss of $2.5
billion in the third quarter and said it burned through $6.9 billion in
cash to end September with $16.2 billion in cash. That is just barely
above the $11 billion to $14 billion GM said it needs to operate and
doesn't include its cash burn from October.
href='http://www.freep.com/article/20081108/BUSINESS01/811080331'>Read
more.
In related news, GM said that it is eliminating lifetime health care
coverage for its legions of retirees at the end of this year as it looks
to conserve its dwindling cash reserves, the New York Times
reported today. The move was announced in July as part of a package of
broad cutbacks to increase the company's liquidity, including a 20
percent reduction in payroll for salaried workers and suspension of GM's
annual stock dividend of $1 a share. However, even these and other
measures have not been enough to stabilize the company's finances, as
the auto industry suffers from a weakening economy and tight credit that
makes it hard for shoppers to get loans.
href='http://www.nytimes.com/2008/11/10/business/10gm.html?ref=business&pagewanted=print'>Read
more.
Court Grants WaMu's Request for Trade
Restrictions
Overriding objections from JPMorgan Chase & Co. and the Federal
Deposit Insurance Corp., Bankruptcy Judge Mary F.
Walrath approved Washington Mutual Inc.'s request to restrict
equity trading of its stock in order to protect what could amount to
billions of dollars in tax breaks, Bankruptcy Law360 reported
on Friday. WaMu said that it incurred unrecognized losses totaling more
than $20 billion in 2008 and sought to limit trading in its common stock
in order to protect the tax breaks it could receive as a result of those
losses under the U.S. Tax Code, which usually allows companies to carry
over their losses and tax credits to offset future income. The bankrupt
company could stand to receive a percentage of the $20 billion in losses
as a tax benefit, WaMu said in a motion dated Oct. 24.
href='http://bankruptcy.law360.com/articles/76081'>Read more.
(Subscription required.)
Regulators Seize Two More
Banks
Regulators seized a $5.1 billion Houston bank led by
mortgage-bond-pioneer Lewis Ranieri and a small bank in Los Angeles
Friday, raising the number of bank failures this year to 19, the Wall
Street Journal reported today. Prosperity Bank of El Campo, Texas,
agreed to assume the $3.7 billion in deposits held by Franklin Bank of
Houston and purchase $850 million in assets, leaving the Federal Deposit
Insurance Corp. to dispose of the remaining $4.25 billion. The cost to
the FDIC's insurance fund is estimated to be $1.4 billion to $1.6
billion. In the case of Security Pacific Bank of Los Angeles, the $450
million in deposits were assumed by Pacific Western Bank, also of Los
Angeles, and the cost to the insurance fund is estimated at $210
million.
href='http://online.wsj.com/article/SB122610758238410383.html'>Read
more. (Subscription required.)
House Committee Set to Examine Hedge
Funds
The House Committee on Oversight and Government Reform has summoned a
handful of top hedge-fund managers to testify at a hearing on Thursday
to answer questions on topics ranging from their pay to influence on the
markets, the Wall Street Journal reported today. Philip
Falcone, Kenneth Griffin, John Paulson, James Simons and George Soros
are expected to testify before the committee. They will have several
minutes each to make opening remarks, then will field questions from
lawmakers, according to a committee spokeswoman. Industry
representatives say that hedge funds aren't responsible for the failure
of Wall Street institutions and the loose home-lending standards that
helped create the financial crisis. However, momentum is building to
monitor hedge fund activities more closely and curtail some trading
activities through greater regulatory oversight and lower borrowing
limits.
href='http://online.wsj.com/article/SB122627663064812111.html'>Read
more. (Subscription required.)
Sea Containers to Tap $150 Million in
Exit Financing
Bankruptcy Judge Kevin J. Carey on Thursday
approved a request by Sea Containers Ltd. and two subsidiaries to tap
into as much as $150 million in exit financing from Fortis Bank and DVB
Bank SE, Bankruptcy Law360 reported on Friday. After Fortis
Bank agreed to provide exit financing to the company last Monday, the
debtors asked the court to authorize the deal so it could repay its
debtor-in-possession loan of $145 million, fund certain payments under
its reorganization plan and provide working capital for SeaCo Finance
Ltd., the entity to which SCL's container interests will be transferred
in connection with the reorganization plan. The court has slated Nov. 24
as the date for the confirmation hearing of the plan, which calls for
Sea Containers' reorganization and the transfer of the company's
operating assets and container interests to SeaCo Finance.
href='http://bankruptcy.law360.com/articles/75970'>Read more.
(Subscription required.)
MPC Files for Chapter 11 as Gateway
Buy Falters
Small-business computer systems builder MPC Corp. filed for chapter 11
protection on Thursday, just over a year after it acquired the small
business unit of Gateway Inc., Bankruptcy Law360 reported on
Friday. MPC CEO John Yeros cited “unforeseen issues”
surrounding MPC's acquisition of Gateway Inc.'s small-business unit last
year. Gateway sold its small-business unit to MPC for $90 million as
part of a series of transactions that included being bought by Acer Inc.
Yeros also said adapting MPC's manufacturing partner to handle more
customized requests from customers has “proven more challenging
than originally anticipated and have contributed to extensive
losses.” The bankruptcy case is MPC Corp., case number 08-12673,
in the U.S. Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/articles/75931'>Read more.
(Subscription required.)
Harold's Stores Files for
Bankruptcy
Harold's Stores and several of its affiliates companies filed for
chapter 11 protection on Friday, the Associated Press reported. The
Dallas-based company estimated assets and liabilities between $10
million and $50 million in the filings. Harold's has stores in 19
states, mostly in the South, West and Midwest. The clothing store was
originally founded in Norman, Okla., in 1948.
href='http://www.woai.com/news/local/story.aspx?content_id=ba426f21-ab88-47b6-b0a3-563a51504e01=68'>Read
more.
Clothing Chain Files for
Bankruptcy
Dallas-based BTWW Retail, the parent company of Cheyenne, Wyo.-based
Corral West Ranchwear, has filed for chapter 11 protection, the
Associated Press reported on Saturday. BTWW Retail went through chapter
11 reorganization five years ago. The retailer owns and operates more
than 130 stores nationwide under the names Corral West, Boot Town,
Sergeant's Western World, Western Warehouse and Workwear Depot. Corral
West operates 72 stores in 15 states: Washington, Oregon, Idaho,
Montana, Wyoming, North Dakota, South Dakota, Nebraska, Colorado,
Arizona, Nevada, New Mexico, Texas, Oklahoma and Georgia.
href='http://casperstartribune.net/articles/2008/11/08/news/wyoming/56872bb797048361872574fa0000a7f3.prt'>Read
more.
California Developer Files for
Bankrutpcy
After years enduring lawsuits and other conflicts over plans to build
almost 2,000 homes near the Placer County town of Penryn, Calif., SunCal
Bickford Ranch LLC, has filed for chapter 11 protection, according to
the Sacramento Bee on Saturday. The Irvine, Calif.-based land
developer blamed the project's financial collapse on the implosion of
Wall Street investment bank Lehman Brothers. The Sierra foothills
project was designed as a 1,942-acre golf course development, but no
homes had been built at the time of the company's filing. SunCal said
that the bankruptcy filing is only for its Bickford Ranch limited
liabilty firm and does not apply to SunCal itself.
href='http://www.sacbee.com/latest/story/1380119.html'>Read
more.
International
British Bankruptcies Increase
9.5 Percent in the Third Quarter
Individual bankruptcies in Britain jumped 9.5 percent in the third
quarter from last year, while company insolvencies increased 26 percent
as the financial crisis hiked the cost of loans, the Associated Press
reported on Saturday. Britain's Office for National Statistics said
17,341 people declared bankruptcy in the three months through
September-up from 15,842 in the same quarter of 2007. The number of
bankruptcies was 12 percent higher than the previous quarter. British
companies were hit even harder by the economic downturn, the statistics
office said, with 26 percent more businesses-or 4,001-going under in the
third quarter of this year than did last year.
href='http://www.mercurynews.com/business/ci_10924863?nclick_check=1'>Read
more.
China Unveils Economic Stimulus
Plan
China announced a large economic stimulus plan on Sunday aimed at
bolstering its weakening economy, a sweeping move that could also help
fight the effects of the global slowdown, the New York Times
reported today. China said that it would spend an estimated $586 billion
over the next two years - roughly 7 percent of its gross domestic
product each year - to construct new railways, subways and airports and
to rebuild communities devastated by an earthquake in the southwest in
May. The package, announced Sunday evening by the State Council, or
cabinet, is the largest economic stimulus effort ever undertaken by the
Chinese government.
href='http://www.nytimes.com/2008/11/10/world/asia/10china.html?ref=business&pagewanted=print'>Read
more.