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December 18,
2009
Autos
Chrysler May Challenge
Dealer Legislation
Chrysler CEO Sergio Marchionne said that the company
might challenge as unconstitutional legislative efforts aimed at
restoring some of the 789 dealers it eliminated earlier this year,
the
size='3'>New York Times reported today.
Marchionne said that the company had
not decided whether to ask the courts to stop Congress from forcing
Chrysler and General Motors into arbitration with former dealers. The
measure was included in a $446 billion spending bill that passed both
houses of Congress this month and signed this week President Obama.
Marchionne said that restoring large numbers of dealerships could
“cause havoc within Chrysler.” GM and Chrysler proposed
their own review processes last week in an effort to keep Congress from
getting involved.
href='http://www.nytimes.com/2009/12/18/business/18auto.html?_r=1&ref=business&pagewanted=print'>Read
more.
Ford over Spinoff
Creditors of bankrupt auto parts supplier Visteon
Corp. are seeking to investigate the company's ties with former parent
Ford Motor Co. for a possible lawsuit, Reuters reported yesterday.
Visteon's unsecured creditors’ committee claimed in a court filing
on Tuesday that the company's spinoff from Ford was structured so that
Visteon would take on underperforming assets and historical liabilities
without commensurate funding from Ford. The creditors, who are seeking
documents from Ford to prove their allegations, said that Ford continued
to siphon value from Visteon even after the spinoff and did not provide
'reasonably equivalent value' for certain assets. Visteon, which was
spun off from Ford in 2000 but still relies on its former parent for
nearly 30 percent of its sales, filed for bankruptcy protection in
May. The case is
face='Times New Roman' size='3'>In re Visteon Corp.,
size='3'>U.S. Bankruptcy Court, District of Delaware, No.
09-11786.
href='http://www.reuters.com/article/idUSN1717870520091217'>Read
more.
Approval on DIP Financing
Bankruptcy Judge
face='Times New Roman' size='3'>A. Jay Cristol
size='3'>on Wednesday gave final approval to
size='3'>Fontainebleau Las Vegas Holdings LLC’s$51.21 million
debtor-in-possession loan, according to the
face='Times New



Roman'
size='3'>Deal Pipeline yesterday.The DIP is a
piece of the roughly $156 million stalking-horse bid Icahn Nevada Gaming
has made for Fontainebleau. The postpetition loan is priced at a fixed
10 percent and carries a 2 percent up-front fee, an unused commitment
fee of 0.5 percent and a 5 percent exit fee, filings show. The DIP will
mature on the earlier of Feb. 9 or the closing date of the sale. The
loan, however, may be extended by up to 60 days under certain
scenarios.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005367968'>Click
here to read the full story. (Subscription
required.)
11 Liquidation Plan Approved
Bankruptcy Judge
face='Times New Roman' size='3'>Robert E. Gerber
size='3'>approved BearingPoint Inc.'s chapter 11 reorganization plan
yesterday despite several objections,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. BearingPoint's plan, filed on Oct. 5, will
liquidate its assets, including its North American commercial
operations, to PricewaterhouseCoopers LLP for $1.76 billion and a major
portion of its public services unit to Deloitte LLP for $350 million.
Judge Gerber signed off on the disclosure statement in early November.
BearingPoint and its affiliated debtors agreed at a hearing yesterday to
resolve an objection by lead shareholder plaintiffs in a securities
class action that the reorganization plan did not provide an adequate
method to preserve documents relevant to that litigation. The case
is
size='3'>In re BearingPoint Inc. et al., case
number 09-10691, in the U.S. Bankruptcy Court for the Southern District
of New York.
href='http://bankruptcy.law360.com/articles/139977'>Read
more. (Subscription required.)
Appeals Court Stays ION
Media’s Chapter 11 Exit Plan
The U.S. Court of Appeals for the Second Circuit has
stayed a bankruptcy court's decision that approved television station
owner ION Media Networks Inc.'s chapter 11 reorganization plan, Reuters
reported yesterday. Bankruptcy Judge
face='Times New Roman' size='3'>James Peck
size='3'>said in November that he would approve ION's reorganization
plan, which shifts control of the company to a different group of
creditors, rejecting Cyrus Capital's last-minute $250 million offer for
control of the company. Judge Peck had rejected arguments from Cyrus
that ION's reorganization plan could not be approved because it was
based on invalid liens to ION's broadcast licenses. Cyrus expects the
court to hear the appeal in January. The case is
face='Times New Roman'>ION Media Holdings Inc., U.S.
Bankruptcy Court, Southern District of New York, No. 09-13168.
href='http://www.reuters.com/article/idUSSGE5BG0H120091217'>Read
more.
House Panel to Investigate
Citigroup Tax Ruling
The House Oversight and Government Reform Domestic
Policy Subcommittee said yesterday that it will investigate the Treasury
Department's decision to change a long-standing law so that Citigroup
could keep billions of dollars in tax breaks, the
face='Times New Roman'>
size='3'>Washington Post reported today. The
Internal Revenue Service, an arm of Treasury, ruled last Friday that
Citigroup could keep $38 billion in tax breaks that otherwise would
decline in value as the government sells its stake in the company.
Federal law lets companies shelter profits from taxes in good years
based on the amount of losses in previous bad years. However, the law
restricts the use of past losses if a company changes hands, to
discourage profitable companies from buying unprofitable firms to avoid
paying taxes. Treasury's plan to sell its $25 billion stake in Citigroup
would have qualified as a change of ownership under the law. The sale
was postponed Wednesday after Citigroup's stock plunged in value, but
Treasury officials said that they still planned to sell the government's
shares over the next year. Treasury officials said the government needed
to grant the tax break in order to sell its shares in Citigroup because
the company could not afford the loss. Rep. Dennis J. Kucinich (D-Ohio)
said that the government was inherently conflicted by its roles as a tax
collector and as a shareholder in the company. Kucinich also said that
he planned to investigate whether the IRS had the legal authority to
issue the ruling that benefited Citigroup.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/12/17/AR2009121704347_pf.html'>Read
more.
Lehman, Aflac End Spat over
$166 Million in CDS
Bankruptcy Judge
face='Times New Roman' size='3'>James M. Peck
size='3'>signed off on a deal ending Lehman Brothers Special Financing
Inc.'s (LBSF) adversary action against Aflac, which accused the insurer
of illegally seeking to deprive LBSF of priority status under credit
default swap agreements worth $165.7 million,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
LBSF filed an adversary complaint against Aflac in June, claiming that
the insurer — as the sole noteholder of certain CDS transactions
— was improperly holding it in default as a result of its chapter
11 filing. LBSF moved to end the adversary action in November, asking
Judge Peck to approve a settlement among itself, Lehman Brothers
Holdings, Aflac and BNY. The deal calls for LBSF to receive an
undisclosed amount of money, either from Aflac directly or from proceeds
from collateral securing the notes at the center of the dispute.
According to the motion to approve, the deal also requires all settling
parties to agree not to sue one another over the disputed transactions.
The agreement also releases affiliates of the settling parties from
future litigation over the transactions.
href='http://bankruptcy.law360.com/print_article/139915'>Read
more. (Subscription required.)
Creditors Seek Trustee in
Aero Inventory Chapter 11
The aircraft parts makers that filed an involuntary
chapter 11 petition last week for U.K.-based aircraft maintenance and
inventory management company Aero Inventory (UK) Ltd. have filed an
emergency motion seeking the appointment of a trustee, saying that the
joint administrators appointed in the company's insolvency proceedings
in England may be conflicted,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. According to the motion, the three joint
administrators are all employees of KPMG LLP, which had previously
advised Aero Inventory on financial matters and provided tax accounting
and audit services to the debtor. KPMG is also a significant prepetition
creditor of Aero Inventory and has previously represented Lloyds TSB
Commercial Finance Ltd., which the creditors say may make it difficult
for the joint administrators to impartially evaluate certain liens and
litigation claims against the debtor. Aero
Inventory had filed a chapter 15 petition in the Central District of
California last month, seeking recognition of insolvency proceedings it
had initiated Nov. 11 in the High Court of Justice, Chancery Division,
of the Companies Court of England and Wales. However, Aero Inventory did
not seek any injunctive relief that would have barred creditors from
taking action against it, and Kirkhill Aircraft Parts, doing business as
Kapco Corp., filed an opposition to that petition last week, arguing
that Aero Inventory's “center of main interest” was not
actually in England.
href='http://bankruptcy.law360.com/print_article/139906'>Read
more. (Subscription required.)
FDIC Fights for Survival in
Regulatory Overhaul
As lawmakers hash out the biggest overhaul of
financial regulations since the Great Depression, the Federal Deposit
Insurance Corp. could wind up a shadow of its former self, the
size='3'>Wall Street Journal reported
today.Senate Banking Committee Chair Christopher Dodd (D-Conn.) has
proposed revoking almost all of FDIC Chair Sheila Bair's powers to
supervise banks, as part of a sweeping financial-regulation bill now
under consideration in the Senate. The proposal would leave Bair in
charge of an agency whose primary role is to clean up banks after they
fail, with little part in monitoring them before problems erupt. Bair
has met with nearly all of the 23 lawmakers on the Senate Banking
Committee to fight for her agency’s survival. There are early
signs that her lobbying may be working as the House version of the
financial regulatory overhaul, which passed last week, is much more
FDIC-friendly. Aides say Dodd is now considering a new proposal that
would allow the FDIC to retain its oversight of smaller, community-owned
banks, while creating a new agency to oversee national banks.
href='http://online.wsj.com/article/SB126091986848592805.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Ernst to Pay the SEC $8.5
Million over Bally Case
Ernst & Young yesterday agreed to pay an $8.5
million fine to the Securities and Exchange Commission for its work
auditing the books of Bally Total Fitness, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. As described by the SEC, Ernst was reacting in
2002 to a growing number of accounting scandals, including Enron, and
decided to get tough with clients who had previously been allowed to
take aggressive accounting positions. The firm forced Bally to stop
recording revenue in an improper manner that allowed it to claim
earnings earlier than was allowed by accounting rules. However, the firm
allowed Bally to not admit to having violated the rules in the past, an
action that would have forced it to restate its accounts and admit that
losses in previous years had been much larger.Bally, the operator of
exercise centers, went bankrupt in 2007 and emerged as a privately owned
company. In 2008, the company settled SEC allegations that it had
committed accounting fraud from 1997 through 2003. The cases filed
yesterday dealt with the period from 2001 to 2003.
href='http://www.nytimes.com/2009/12/18/business/18audit.html?ref=business&pagewanted=print'>Read
more.
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