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January 17, 2007
name='1'>Supreme Court Considers Overturning Bankruptcy
Rule
During oral arguments
yesterday in its consideration of
size='3'>Travelers v. Pacific Gas & Electric
size='3'>, 05-1429, several Supreme Court justices signaled that the
court could overturn a longstanding lower court ruling to make it easier
for creditors to recover attorneys' fees in bankruptcy disputes, the
Associated Press reported yesterday. At issue in the case is whether a
creditor can recover attorneys' fees incurred while litigating federal
bankruptcy issues. The Ninth Circuit U.S. Court of Appeals ruled in a
1991 case that attorneys' fees could not be recovered because federal
law does not authorize it. On Tuesday,
size='3'>G. Eric Brunstad, a lawyer
representing Travelers, argued before the justices that the rule
established in Fobian v.
Western Farm Credit Bureau should be
overturned because it has no basis in federal law and 'exists outside
the structure of the Bankruptcy Code.'
size='3'>PG&E's attorneys, meanwhile, argued in court filings that
to allow the recovery of fees would encourage frivolous claims and
overwhelm bankruptcy courts. Justice Stephen Breyer admitted at one
point to being 'totally puzzled' by an arcane aspect of bankruptcy law,
while Justices Anthony Kennedy and Ruth Bader Ginsburg signaled a
willingness to overturn the Fobian rule.
href='http://biz.yahoo.com/ap/070116/travelers_scotus.html?.v=2&printer=1'>Read
more.
USEB
Reaches Agreement on Loan
U.S. Energy Biogas Corp., which
filed for chapter 11 protection in November
size='3'>2006 citing an onerous loan agreement, has predicted a speedy
emergence from bankruptcy after reaching an agreement in principle with
Countryside Power Income Fund,
size='3'>Bankruptcy Law360 reported yesterday.
As a result of the agreement with Countryside, which is now pending
court approval, U.S. Energy Biogas Corp. will be able to quickly pay off
its creditors and exit bankruptcy. Pursuant to the agreement in
principle, a Canadian subsidiary of Countryside would get a $99 million
secured claim, which would be Countryside’s only allowed claim in
the case. Under the proposed agreement, USEB will pay Countryside $3
million by Jan. 31, $30 million on or before March 31, and the remainder
of the claim on or before maturity at May 31.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16463'>Read
more. (Registration required.)
name='3'>GM CEO Sees Deal Soon between Delphi and
w:st='on'>
size='3'>Union
General Motors Corp. CEO
Rick Wagoner said that a deal with bankrupt former subsidiary Delphi
Corp. and its union to cut wages and benefits was possible in the
“near term.'' GM, which spun off
face='Times New Roman' size='3'>Delphi
size='3'>in 1999, has been in negotiations with the parts supplier and
its major union to allow the supplier to emerge from bankruptcy with
lower costs. GM has made resolving its remaining labor-related issues
with
size='3'>Delphi
avoid a potential strike that would shut down its North American
operations.
size='3'>The automaker has said it expected its total exposure to
size='3'>Delphi
billion to $7.5 billion.
href='http://www.nytimes.com/reuters/business/business-gm-wagoner-delphi.html?pagewanted=print'>Read
more.
size='3'>Malden
face='Times New Roman' size='3'> Mills Loses Bid to Keep Chapter 11
Proceedings in
w:st='on'>Delaware
Bankruptcy judges have
signed off on the transfer of Malden Mills Industries Inc.’s
chapter 11 proceedings from
face='Times New Roman' size='3'>Delaware
size='3'>to
face='Times New Roman'
size='3'>Massachusetts
size='3'>,Bankruptcy
Law360 reported yesterday. Massachusetts
Bankruptcy Judge Joel B.
Rosenthal on Friday granted a motion by Malden
Mills' creditors to vacate an earlier order that had closed proceedings
in the state, which began when the company filed its first bankruptcy in
November 2001.
At the same time, in an order transferring the new bankruptcy to
size='3'>Massachusetts
Delaware Judge Kevin
Gross said he granted the request from Malden
Mills’ creditors trust because it was in the best interest of all
parties. The company filed the
face='Times New Roman' size='3'>Delaware
size='3'>bankruptcy less than a day after its earlier bankruptcy
in
size='3'>Massachusetts was
closed in order to pave the way for a stalking horse bidder to buy
Malden Mills’ assets.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16508'>Read
more. (Registration required.)
name='5'>Global Home Receives Extension to File Chapter 11
Plan
Judge
face='Times New Roman' size='3'>Kevin Gross of
the U.S. Bankruptcy Court for the District of Delaware on Friday signed
off on Global Home's request to have the exclusive right to develop a
chapter 11 plan until April 5 and through June 6 to obtain creditors'
support for it, the Associated Press reported yesterday. Global Home
requested the extension after devoting a significant amount of time
toward assessing whether it should sell its remaining business division,
Anchor Hocking, or reorganize it. Since its chapter 11 filing last
April, Global Home has sold two of its three primary business divisions,
the Burnes Group picture-frame division and bakeware company
WearEver.
href='http://www.examiner.com/a-511484~Global_Home_wins_extension_to_April_to_file_Chapter_11_plan.html'>Read
more.
Extends Sea Containers Filing Deadline
Judge
face='Times New Roman' size='3'>Kevin J. Carey
size='3'>of the U.S. Bankruptcy Court for the District of Delaware
approved a 120-day extension togive
size='3'>Sea Containers Ltd. the exclusive right to propose chapter 11
plan until June 12,
size='3'>Bankruptcy Law360 reported
yesterday.
size='3'>The company now has until Aug. 11 to solicit creditors for a
plan and until May 13 to assume or reject its real property leases. Sea
Containers and two subsidiaries, Sea Containers Services Ltd. and Sea
Containers Caribbean Inc., filed for chapter 11 on Oct. 15 after missing
a deadline for a $115 million bond payment.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16511'>Read
more. (Registration required.)
name='7'>Mortgage Bankers Cool to Predatory Lending
Provisions
House Financial Services
Chairman Barney Frank (D-Mass.) has promised to find consensus on the
issue that has mortgage brokers, bankers and consumer activists jostling
for leverage as lawmakers attempt to set a national standard to curb
abusive home lending practices,
size='3'>CongressDaily reported today. The
Center for Responsible Lending has estimated that predatory mortgage
lending costs Americans more than $9.1 billion annually. The Mortgage
Bankers Association contends that such a mandate would have a negative
effect by forcing more subjectivity into the loan-making process and
would ultimately result in fewer options for disadvantaged borrowers.
The Washington, D.C.-based trade association is also concerned about
efforts by federal regulators to expand guidelines on risky mortgages
issued in September to include so-called hybrid adjustable rate
mortgages.
name='8'>Bankruptcy Judge Approves
w:st='on'>
size='3'>Kara
face='Times New Roman' size='3'>Homes
’ Loan
Bankruptcy Judge
Michael B. Kaplan
allowed
size='3'>Kara
face='Times New Roman' size='3'>Homes
size='3'>to draw down $2.6 million of a proposed $5 million line of
credit from Plainfield Special Situations Master Fund Ltd., a hedge fund
based in
face='Times New Roman' size='3'>Greenwich
size='3'>,
size='3'>Conn.
Asbury Park Press
reported today. The remaining $2.4 million will be the
subject of a hearing on Jan. 29. The loan is enough to pay back
investment bank Bear Stearns, the source of an earlier $2.6 million
credit line approved by Kaplan in December to keep
w:st='on'>
size='3'>Kara
face='Times New Roman' size='3'>Homes
afloat. Of the $2.6 million, Kara has already spent $1.85
million. In addition to paying off Bear Stearns, the money from
size='3'>Plainfield
used to fund the company's operations for the rest of the month.
href='http://www.app.com/apps/pbcs.dll/article?AID=/20070117/NEWS/701170325'>Read
more.
name='9'>Supreme Court Lets IBM Pension Plan Stand
The U.S. Supreme Court
let stand a lower court ruling that said International Business Machines
Corp.'s (IBM) switch to a cash-balance pension plan didn't discriminate
against older workers, ending a lawsuit that could have cost the company
$1.4 billion, the Wall
Street Journal reported today. The Supreme
Court's decision adds additional certainty to the legality of corporate
shifts from defined-benefit pensions to so-called cash-balance
retirement plans. Congress last year also clarified the legality of the
plans with the passage of a new pension law, but the IBM case could have
bearing on a number of corporate retirement plans altered prior to the
June 29, 2005 effective date in the legislation. The class-action
lawsuit against IBM was filed by older employees who claimed that the
company's 1999 retirement benefit changes amounted to illegal age
discrimination under federal pension laws.
href='http://online.wsj.com/article/SB116896070257777717.html?mod=us_business_whats_news'>Read
more. (Registration required.)
name='10'>Senators Target Executive Benefits
The Senate Finance
Committee is considering a proposal to sharply limit the earnings
corporate executives and other highly paid employees can place tax-free
into deferred compensation plans, one of the most popular executive
benefits in corporate
w:st='on'>
size='3'>America
the Washington
Post reported today. Under the proposal,
expected to be discussed today by committee members, an individual
taxpayer could defer no more than $1 million annually in compensation,
beginning this year. The shift in tax policy would be likely to affect
top executives at hundreds of corporations and would raise taxes on some
of the nation's wealthiest workers by an estimated $806 million over 10
years. The proposal is among more than a dozen provisions aimed at
shrinking corporate tax shelters and closing tax loopholes that Chairman
Max Baucus (D-Mont.) is expected to propose when the committee meets
today.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/01/16/AR2007011601577_pf.html'>Read
more.
name='11'>Ex-Owner at Refco Charged in Fraud Case
A former owner of Refco, the
commodities brokerage firm, was charged yesterday in a fraud that cost
investors more than $1 billion in losses as prosecutors said that they
also added charges against the former chief executive and chief
financial officers of the firm, the Associated Press reported today.
Tone N. Grant, a former owner of Refco, was charged with bank fraud and
money laundering along with the former chief executive, Phillip R.
Bennett and former finance chief Robert C. Trosten. Bennett and Trosten
had been charged previously with conspiracy to commit securities fraud,
false filings and wire fraud, with authorities saying they tried to hide
hundreds of millions of dollars of debt owed to Refco by a company
controlled by Bennett. In a rewritten indictment brought in U.S.
District Court in Manhattan, prosecutors described how in the 1990s
Refco, then privately owned, sustained hundreds of millions of dollars
of losses through losing trades while the company was partly controlled
by Bennett and Grant.
name='12'>Weak Forecasts Mount in Housing Industry
Mortgage lender IndyMac
Bancorp Inc. slashed its forecast for fourth-quarter earnings, and home
builder Centex Corp. projected a loss from continuing operations for its
latest quarter, as the
w:st='on'>
size='3'>U.S.
size='3'>housing industry struggles with slow sales and rising loan
defaults, the Wall
Street Journal reported today. Residential
Capital LLC, a real estate financing company owned by GMAC Financial
Services, said it will eliminate 1,000 positions by October to reduce
costs as the mortgage lender grapples with 'the continued deterioration'
in the subprime mortgage sector. IndyMac blamed higher provisions for
loan losses, repurchases of soured loans earlier sold to investors and
declines in the value of loans and mortgage securities retained by the
company. Centex is the latest in a series of home builders to write down
the value of land and options to buy land, saying it is dealing with
'one of the most challenging housing environments in the past 25
years.'
href='http://online.wsj.com/article/SB116894736306777548.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='13'>White House Opposes Student Loan Rate-Cutting
Measure
The Bush administration
declared its opposition to the House Democrats' proposed cutting of
student loan interest rates, criticizing their legislation for helping
borrowers after they graduate from college instead of while they are
enrolled in school,
size='3'>CongressDaily reported today. A
Statement of Administration Policy (SAP) release by OMB noted that
college graduates 'have higher lifetime earnings and can already take
advantage of flexible repayment options available under current law and
reduce the effective interest rate they pay through the existing tax
deduction for student loan interest.' Under a federal tax break renewed
in December, families paying college tuition can deduct up to $4,000
annually. Echoing the argument of House Republicans, the SAP also said
the administration 'would support efforts to direct savings to [provide]
additional grant support for low-income
students.'
name='14'>TROUBLED COMPANIES IN THE NEWS
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quarter.
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size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
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Financial Publications.
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size='3'>iomet Inc., a Warsaw, Ind maker of
medical orthopedic devices, was warned that it may be delisted from
Nasdaq Global Select Market as a result of missing a deadline for filing
certain financial reports. Biomet said that it will
appeal.
size='3'>Dynaq Healthcare Inc., a
size='3'>Houston
w:st='on'>
size='3'>Texas
acute-care hospitals, reported a fiscal net loss of $5.9 million.
Revenue declined 14%--to $36 million.
size='3'>Ford Motor Co.'s CEO, Alan Mulally,
commented that the
size='3'>Dearborn,
w:st='on'>Mich.
carmaker is making faster progress than had been expected
in reducing its capacity in the
w:st='on'>
size='3'>U.S.
that it can better align its operations to market demand. The Dearborn,
Mi. manufacturer is in the middle of an overhaul that calls for shutting
seven assembly plants and slashing some 30,000 jobs. Ford lost $7
billion in 2006's first nine months.
size='3'>Lazare Kaplan International Inc., a
Manhattan, N.Y. company that processes raw diamonds and sells them to
wholesalers and retailers, reported a second quarter net loss of $1.4
million on a 2% revenue decline--to $94.4 million.
size='3'>Mills Corp., the troubled Chevy
Chase, Md.-based real-estate developer, received a proposal from
Farallon Partners, a hedge fund that wants to buy $499 million in
Mills's stock. That would give Farallon a more than one-third interest
in the troubled real-estate company. Mills has said that if it
can't restructure its finances arrangement it may have to file for
bankruptcy protection.
size='3'>Pfizer Inc.'s strategy is becoming a
bit clearer, with CEO Jeffrey Kindler now considered likely to undertake
a path that could call for sharp workforce cutbacks. Analysts
believe that thousands of positions could be slashed as the big
size='3'>Manhattan
w:st='on'>
size='3'>N.Y.
seeks to cut costs beyond an earlier announced plan to reduce expenses
by $4 billion. Mr. Kindler's realignment plan could be made public
next week.
size='3'>Spectrum Brands Inc., an
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
products company, is reorganizing by collapsing its four main operating
groups into three units: Global Batteries & Personal Care, Home
& Garden and Global Pet Supplies. As part of the realignment,
Spectrum will trim its payroll by 100 jobs in order to boost efficiency
and competitiveness. In fiscal 2006, Spectrum lost $434 million on sales
of $2.6 billion.