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May 1, 2009
House Passes
“Credit Cardholders’ Bill of Rights”
The House overwhelmingly (357-70)
passed legislation yesterday to curb certain questionable credit card
practices, placing additional pressure on Senate negotiators to strike a
deal on a measure that resonates with the public,
face='Cambria' size='3'>CongressDaily reported
today. H.R. 627, sponsored by Rep. Carolyn Maloney (D-N.Y.), would
prohibit issuers from raising rates on existing balances retroactively,
require a 45-day notice of any rate increase and ban billing on balances
for days not included in the last billing cycle as a result of a grace
period. It is similar to rules promulgated by the Federal Reserve that
will go into effect in July 2010, but contains some additional consumer
protections. The House vote showed how much the issue has resonated
during the recession as the tally exceeded that of a similar bill passed
last year, 312-112. The vote will put additional pressure on Senate
Banking Chairman Christopher Dodd (D-Conn.) to compromise with ranking
member Sen. Richard Shelby (R-Ala.) as they try to bring a measure to
the floor next week.
Autos
Analysis:
Chrysler Pushed into Fiat's Arms
President Barack Obama pledged to
give Chrysler LLC 'a new lease on life' by ushering the storied
automaker into a bankruptcy reorganization that will empower its union
and put Italy's Fiat SpA in charge, the
size='3'>Wall Street Journal reported today.
Administration officials said the bankruptcy could last a relatively
short two months and lead to a healthier Chrysler. However, the
intervention yesterday to preserve the 84-year-old company is far from
certain and could stall in court, especially if aggrieved parties such
as creditors and dealers mount a legal challenge. The move also could
disrupt the country's already-fragile automotive suppliers and scare
away Chrysler's customers. The administration is determined to protect
UAW jobs and salvage the third-largest domestic automaker, even at the
expense of Chrysler's secured lenders. Critics among the lender group
charged that the deal would upend established bankruptcy practice by
putting junior creditors on par with secured ones.
href='http://online.wsj.com/article/SB124109550079373043.html#mod=article-outset-box'>Read
more. (Subscription required.)
name='3'>Commentary: A Chrysler Bankruptcy Won't Be
Quick
Chrysler’s bankruptcy will
have many moving parts, and with the company unable to make money
selling cars, it just doesn't have enough nongovernment cash to grease
those moving parts to facilitate a smooth bankruptcy, according to a
commentary in today’s Wall
Street Journal.
face='Cambria' size='3'>Any creditor can assert that what it would get
if Chrysler sold its factories quickly would be more than the 32 cents
per dollar that Treasury had guaranteed Chrysler's secured creditors
before the government deal fell apart this week. Valuation proceedings
are notoriously difficult in chapter 11, and although the judge doesn't
actually need to liquidate Chrysler, the judge must determine what it
would have gone for if there were a liquidation. Some creditors appeared
ready to bring that case to the bankruptcy judge. On top of liquidation
value, the whole class of secured creditors is entitled to the 'fair
value' of their claims. Usually fair value is greater than liquidation
value, though Chrysler may be an exception.
href='http://online.wsj.com/article/SB124113528027275219.html'>Click
here to read the full commentary.
Delphi
Seeks Government Protection of Chrysler Receivables
Auto parts supplier Delphi Corp.
has asked a bankruptcy judge for permission to modify its
debtor-in-possession financing so that it can sell its receivables from
Chrysler LLC to a government-sponsored company that would ensure that
the receivables are paid,
size='3'>Bankruptcy Law360 reported yesterday.
In a motion filed Wednesday in the U.S. Bankruptcy Court for the
Southern District of New York, Chrysler asked the court to approve
changes to its DIP agreement that would allow it to take advantage of
the U.S. Treasury's auto supplier support program, part of the
government's aid package for the auto industry. The program allows auto
parts suppliers to sell receivables owing from automakers at a modest
discount to special-purpose vehicles funded by the government, either
for an immediate cash payment or promise of payment as the receivables
become due.
href='http://bankruptcy.law360.com/articles/99272'>Read more.
(Subscription required.)
name='5'>Bondholders Propose an Alternative to GM’s
Plan
General Motors’ bondholders
have proposed an alternative plan to restructure the automaker in which
the bondholders, not the government, would be in control of the company,
the New York Times
reported today. Under the proposal released yesterday,
GM’s bondholders would receive 58 percent of the restructured
company in exchange for tearing up their $27 billion in unsecured GM
bonds. The United Automobile Workers, through an entity known as a VEBA,
which holds workers’ health care obligations, would get about 41
percent to offset the $20 billion GM owes the union. Current
shareholders would receive 1 percent.
href='http://www.nytimes.com/2009/05/01/business/01gm.html?ref=business&pagewanted=print'>Read
more.
Heavy-duty
Truck Supplier Files for Chapter 11
Mark IV Industries Inc., a
supplier of automotive, heavy-duty truck, and other transportation
equipment, said yesterday that it has voluntarily filed for chapter 11
protection, according to a Reuters report. In a filing with the U.S.
Bankruptcy Court for the Southern District of New York, the company,
which is owned by private investment firm Sun Capital Partners Inc.,
listed debt of more than $1 billion and assets of up to $500 million.
Mark IV said that it received commitments for up to $90 million in
debtor-in-possession (DIP) financing from a group of lenders led by
JPMorgan Chase & Co. The case is
size='3'>In re Mark IV Industries Inc., U.S.
Bankruptcy Court, Southern District of New York, No. 09-12795.
href='http://www.reuters.com/article/marketsNews/idUSBNG44104920090501'>Read
more.
name='7'>Newspaper’s Chapter 11 Plan Draws
Objections
The Journal Register Co.'s
amended reorganization plan has won the support of its unsecured
creditors, but still faces objections from the U.S. Trustee overseeing
the case and others claiming that the plan lacks important
details, Bankruptcy
Law360 reported yesterday. Under the amended
plan, the company's secured lenders have agreed to leave a $2 million
pool for distribution to unsecured creditors, with trade claimants
receiving full payment. As in the original plan, the company's equity
interests will be wiped out. U.S. Trustee
size='3'>Diana G. Adams yesterday objected to
the disclosure statement on the grounds that it does not contain
adequate information about the plan. She also objected that certain
provisions in the plan that would release nondebtors from liability
could be overly broad. The Central States, Southeast and Southwest Areas
Pension Fund, a pension fund for the company's employees, also objected
to the disclosure statement, saying that the statement did not provide
enough information and that the plan it presented was
unconfirmable.
href='http://bankruptcy.law360.com/articles/99311'>Read
more. (Subscription required.)
Pension
Adviser Charged as Cuomo Inquiry Grows
An inquiry into corruption at the
New York State pension fund continued to broaden nationwide yesterday
when a top consultant to pension funds around the country was charged
with a fraud-related felony by New York Attorney General Andrew M.
Cuomo, the New York
Times reported today. The consultant, Saul
Meyer of Aldus Equity, a Dallas-based firm, was also charged with
violations of securities laws by the Securities and Exchange Commission
as part of what the agency called “a multimillion-dollar kickback
scheme involving New York’s largest pension fund.” The
commission also charged Aldus Equity with multiple securities
violations.
href='http://www.nytimes.com/2009/05/01/nyregion/01pension.html?ref=business&pagewanted=print'>Read
more.
MBIA Sues
Merrill Lynch over Subprime Mortgage Exposure
The bond insurance unit of MBIA
Inc. sued Merrill Lynch over $5.7 billion in soured derivative
contracts, accusing the investment bank of deliberately offloading its
deteriorating subprime mortgage exposures onto the insurer and
misrepresenting them as high-quality assets back in 2006 and 2007,
the Wall Street
Journal reported today. The lawsuit, filed in
a New York state court yesterday, shines a light into the dealings
between the U.S. investment bank and the nation's largest bond insurer,
which took on sizable risks in exchange for tiny payments. MBIA says it
was paid an average of less than 0.08 percent annually to insure $5.7
billion in collateralized debt obligations backed by mortgage assets, or
less than $4.6 million a year. MBIA said that one of its affiliates,
LaCrosse Financial Products LLC, wrote credit default swaps on CDOs
arranged by Merrill based largely on the bank's representations that the
collateral backing the securities was of good quality. Merrill was the
counterparty on some of the contracts; others were between MBIA and
European banks that bought the CDOs.
href='http://online.wsj.com/article/SB124112607580674555.html'>Read
more. (Subscription required.)
Foundation
Backs Foreclosures Project
The Ford Foundation plans to pump
$50 million into a new nonprofit venture that will help municipalities
buy foreclosed homes from financial institutions in an effort to stem
the property-value declines plaguing many U.S. neighborhoods, the
Wall Street Journal
size='3'>reported today. The money will go to a consortium of
community-based nonprofits that will serve as middlemen between cities
trying to rehabilitate neighborhoods and mortgage servicers looking to
unload seized properties. The consortium, called the National Community
Stabilization Trust, hopes to simplify and accelerate this market, which
can get bogged down when municipalities have trouble negotiating with
financial institutions. It will work with state and local governments
and other groups that have received special grants from the Department
of Housing and Urban Development to buy and redevelop foreclosed
homes.
href='http://online.wsj.com/article/SB124113036635174911.html'>Read
more. (Subscription required.)
Souter
Reportedly Planning to Retire from High Court
Justice David H. Souter, the
Republican-appointed New England jurist who has become a reliable member
of the liberal bloc on the Supreme Court, has told friends that he plans
to retire, the Washington
Post reported today. Souter will likely stay
on until a replacement can be confirmed. Although President Obama's
choice for a replacement on the Court would probably be far different
from Souter, the replacement would almost surely have a similar
ideological outlook. Most
often mentioned as possibilities are two appeals judges, Sonia Sotomayor
of New York and Diane P. Wood of Chicago, along with Obama's new
solicitor general, Elena Kagan. Vice President Biden has been charged
with drawing up a list of possible nominees.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/30/AR2009043004361_pf.html'>Read
more.
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