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April 24, 2007
Subprime
Mortgages
id='1'>Democrats Urge Bernanke to Take Action on Subprime
Loans
Senate Banking Committee
Democrats wrote Monday to Federal Reserve Chairman Ben Bernanke asking
that he take action under a 1994 federal law to rein in abuses that have
contributed to a meltdown in the subprime mortgage market,
CongressDaily
size='3'>reported today. The senators noted that Bernanke, under the
Home Ownership and Equity Protection Act, could issue rules that would
curb problems occurring in the market, where loose underwriting
standards have contributed to a high level of mortgage defaults and have
forced some lenders into bankruptcy, potentially threatening as many as
2 million American families with foreclosure. Banking Chairman Chris
Dodd (D-Conn.) has argued that federal banking regulators could act more
quickly and forcefully than lawmakers in issuing new rules as Congress
scrambles to address the subprime fallout.
size='3'>The Democrats wrote that Bernanke should take steps to require
all mortgage originators to evaluate a borrower's ability to repay
before making a loan, mandate the failure to escrow taxes and insurance
as an unfair and deceptive practice, and restrict the use of low- and
no-documentation loans.
id='2'>Trustee Disputes New Century's Plea for
Extension
U.S. Trustee
Kelly Beaudin
Stapleton objected to New Century Financial
Corp.’s attempt to push back the due date for the information,
which is at the center of a shareholder class action,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. New Century’s announcement that it
would refile its financial statements for the first three quarters of
2006 with the U.S. Securities and Exchange Commission due to possible
errors in its accounting practices raised suspicions as to whether
company executives made false statements in the original ones. The
company asked for the extension, longer than the 30-day period permitted
under bankruptcy laws, on April 5, after shareholders had filed a series
of class actions. However, Stapleton’s motion pointed out that New
Century’s application to hire the O’Melveny & Myers LLP
suggests that the law firm started counseling the company back in
February and that the attorneys should have been prepared for the amount
of work involved in filing the schedules and statements.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23263'>Read
more. (Registration required.)
id='3'>Solutia Seeks 11th Exclusivity Extension
Specialty chemical
company Solutia Inc. filed its eleventh motion Friday to extend its
exclusive period to file a reorganization plan despite opposition from
noteholders, Bankruptcy
Law360 reported yesterday. Solutia said it has
used its exclusive periods to bring its stakeholders together for
“meaningful negotiations,” including a meeting that was
scheduled on Monday. The company’s motion also came in response to
the equity-holders’ committee motion, filed this month, which
sought to end Solutia’s exclusivity period. A hearing on the
motions is scheduled on May 1 before Judge Prudence Carter Beatty of the
U.S. Bankruptcy Court for the Southern District of New York.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23224'>Read
more. (Registration required.)
Autos
id='4'>Dana Trustee Objects to Fee Requests
The U.S. Trustee
overseeing Dana Corp.’s chapter 11 proceedings has asked the judge
to continue holding back 20 percent of the fees requested by
professionals in the case,
size='3'>Bankruptcy Law360 reported yesterday.
In documents filed Friday with the U.S. Bankruptcy Court for the
Southern District of New York, U.S. Trustee Diana G. Adams objected to all
fee applications for the interim period between Nov. 1, 2006 and Feb.
28. Dana is currently divesting product lines, closing plants,
negotiating with suppliers and seeking to improve customer recoveries.
Meanwhile, it continues to incur substantial and continuous operating
losses, according to court documents.
face='Times New Roman' size='3'>Adams
size='3'>added that operations would not be stabilized for at least
several months, thus justifying a fee holdback. For example, Dana is
still battling with one of its main suppliers over various supply
contracts and with its union workers over plans to cut wages and
benefits.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23210'>Read
more. (Registration required.)
id='5'>Dura Auto Details Chapter 11 Exit Plan
Dura Automotive Systems Inc.
said Monday that an equity rights offering for unsecured creditors is
part of the bankrupt parts maker's plan to pay its way out of chapter 11
protection, the Associated Press reported yesterday. The company said
that terms of its chapter 11 plan will be circulated to the creditors
soon and that it will include an equity rights offering, or opportunity
for unsecured creditors to put in more money to help end Dura's stay in
bankruptcy. Dura says its January and February 2007 revenue and earnings
figures were better than it had projected, and that March results should
also exceed the company's internal expectations. The company says it
needs another three to four months to put the finishing touches on the
five-year business plan that is expected to be the core of Dura's
chapter 11 exit strategy.
href='http://www.chron.com/disp/story.mpl/ap/fn/4740484.html'>Read
more.
id='6'>Delta's
w:st='on'>
size='3'>Net
face='Times New Roman' size='3'>Loss
size='3'>Narrows
size='3'>Sharply Ahead of Chapter 11 Emergence
Delta Air Lines Inc.,
pushing to emerge from bankruptcy court protection next week, said its
restructured mix of domestic and international routes is helping it
offset signs of slackening overall demand for
w:st='on'>
size='3'>U.S.
travel, the Wall Street
Journal reported today. The airline expects to
emerge from bankruptcy protection on April 30 and be relisted on the New
York Stock Exchange on May 3. Executives at the
w:st='on'>
size='3'>Atlanta
said that reductions in excess capacity on its domestic network have
enabled it to maintain strong bookings so far this year and forecast
promising demand in the months ahead. Executives say they will focus on
improving the mix between domestic and international routes. Because it
is still reconfiguring its routes and cost structure, Delta
per-passenger revenue, at $10.61 per mile, is currently at 93 percent of
the industry average. But as new routes begin to take hold and generate
greater traffic, executives say, the airline expects to close that gap
and outperform the industry average by the end of 2008.
href='http://online.wsj.com/article/SB117732309691378804.html?mod=us_business_whats_news'>Read
more. (Registration required.)
id='7'>Global Power Objects to Fund's
w:st='on'>
size='3'>Sale
Million Debt
Bankrupt power plant
equipment maker Global Power Equipment Group Inc. has made moves to stop
a hedge fund from selling $12 million of the company’s debt,
claiming the sale could threaten Global Power’s plans to exit
chapter 11, Bankruptcy
Law360 reported yesterday. Global Power filed
an objection Thursday in the U.S. Bankruptcy Court for the Southern
District of New York in an attempt to block Steelhead Investments Ltd.
from selling its $12 million in 4.25 percent convertible senior
subordinated notes to Thales Holding Ltd. in order to protect the
company’s net operating losses (NOLs). Steelhead issued a notice
of its intent to sell, trade or otherwise transfer its claim against
Global Power on April 5. Thales submitted a similar intent to purchase
notice a few days later.
size='3'>In its objection, Global Power claimed that the company’s
ability to utilize its NOLs could be affected by the Steelhead transfer.
The company said it has incurred “significant” NOLs over the
years, and can use them to offset its future aggregate taxable income
for up to 20 years.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23190'>Read
more. (Registration required.)
id='8'>Projections Show Troubles Still Loom for Benefit
Plans
The Bush administration
reported Monday that two forces, rising medical costs and the looming
retirement of the baby boom generation, are set to overwhelm the
Medicare program by 2019, the
size='3'>New York Times reported today. The
Social Security trust fund, which finances the government’s giant
retirement program, is on track to run out of reserves by 2041 —
less dire than the outlook for Medicare, but still not sustainable
without raising taxes or cutting benefits. The new estimates, prepared
by the trustees of the federal government’s main entitlement
programs for the elderly and the disabled, are broadly similar to
projections from last year, but have become significantly more ominous
over the last six years. “Without change, rising costs will drive
government spending to unprecedented levels, consume nearly all
projected federal revenues and threaten
w:st='on'>
size='3'>America
size='3'>’s future prosperity,” said Henry M. Paulson Jr.,
Secretary of the Treasury and a trustee of the Social Security and
Medicare trust funds.
href='http://www.nytimes.com/2007/04/24/washington/24benefit.html?pagewanted=print'>Read
more.
Reached with DeVry, Lender over College Student Loan
Probes
Attorneys general
from
size='3'>New York
size='3'>Illinois
agreements with
w:st='on'>
size='3'>DeVry
face='Times New Roman'
size='3'>University
size='3'>and Career Education Corp. as part of their probes into
questionable financial arrangements between student loan providers and
colleges and universities, the
size='3'>Wall Street Journal reported
yesterday. Illinois Attorney General Lisa Madigan and New York State
Attorney General Andrew Cuomo announced settlements with DeVry and
Career Education in which they will adopt a code of conduct on financial
arrangements with lenders and will return moneys that were paid by
lenders to schools to students. Cuomo has alleged that student loan
providers are improperly paying schools to steer loans their way and put
them on preferred lender lists through revenue-sharing agreements that
Mr. Cuomo says are essentially kickbacks. In recent weeks, Cuomo has
announced agreements with Education Finance Partners Inc., Citigroup
Inc.'s Citibank Student Loan Corp. and SLM Corp., better known as Sallie
Mae, to settle probes into their financial practices with
colleges.
href='http://online.wsj.com/article/SB117734279282879100.html?mod=us_business_whats_news'>Read
more. (Registration required.)
International
id='10'>Rival Offer Could Derail ABN Merger
ABN Amro agreed Monday to
be acquired by Barclays of Britain for 67 billion euros (nearly $91
billion), creating one of the world’s largest banks in a carefully
constructed deal that reduces, but does not eliminate, the chance of
another suitor coming in with a higher bid to buy and break up the
bank, the New York
Times reported today.
size='3'>ABN Amro, the largest Dutch bank, said it had arranged to sell
LaSalle Bank, its attractive American business, to Bank of America for
$21 billion in cash. LaSalle’s appeal had drawn the Royal Bank of
Scotland Group and two other European financial companies to prepare a
counteroffer for ABN Amro. The combination of ABN Amro and Barclays,
which has increased investors’ expectations of other cross-border
mergers, would create one of the world’s largest banks by total
assets, about $3.1 trillion, even after LaSalle is sold, according to
Bloomberg data. It will have operations in a wide geographical area,
including
size='3'>Brazil and
Africa
217,000 employees and 47 million customers.
href='http://www.nytimes.com/2007/04/24/business/24bank.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
TROUBLED COMPANIES IN THE
NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
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each morning, email
face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.com
size='3'>your name, company name, address, phone and fax.
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size='3'>Arch Coal Inc., the
w:st='on'>
Louis
w:st='on'>
size='3'>Mo.
producer, reported its first quarter net income declined 52.7%–to
$28.7 million compared to income of $60.7 million for the same period
one year earlier. Revenue declined 10%–to $571
million.
size='3'>Career Education Corp.,
Estates
Department ended an investigation into alleged false claims and
statements made to the Department of Education. While the Civil Division
of the Justice Department is still looking at certain allegations,
Career Education said that the government will not proceed with a
prosecution against it.
size='3'>Furniture Brands International Inc.,
a
size='3'>St. Louis,
w:st='on'>
size='3'>Mo.
furniture, is putting up some of its property as collateral in order to
win some flexibility with is covenants with bondholders and creditors,
who will loosen certain required debt-to-equity ratios. In March,
Furniture Brands reduced its sales projections for the first
quarter.
size='3'>General Motors Corp.,
size='3'>Detroit
delist its common stock from trading on the London Stock Exchange in an
ongoing effort to eliminate fees needed to remain listed on foreign
trading exchanges. GM has also delisted its shares from trading
in
size='3'>Toronto
w:st='on'>
size='3'>Philadelphia
size='3'>Chicago
in
size='3'>Dusseldorf,
size='3'>Germany
size='3'>.
size='3'>Production Specialties Group LLC, a
maker of automated machining equipment, entered into voluntary
receivership and said it will shutter its factory in
w:st='on'>
size='3'>Germantown
w:st='on'>
size='3'>Wi
shutdown of the plant will result in the loss of about sixty-five jobs.
The company said it needed to close the
w:st='on'>
size='3'>Wisconsin
“unforeseen business circumstances” while it continues
trying to arrange for additional capital.
size='3'>RailAmerica Inc., a
w:st='on'>
Raton, Fl. railroad
operator, is once again restructuring its railroads, this time from
three operating regions into five, with the aim of providing for faster
responses to the needs of each sector. This is a reversal from a
restructuring announced less than a year ago when RailAmerica went from
five regions and two corridors to three regions. That move led to the
elimination of twenty middle-management and upper-management positions.
Since its last restructuring, RailAmerica was purchased by a Fortress
Investment Group LLC affiliate for $1.1 billion.
size='3'>Tandy Brands Accessories Inc.,
the
Tx. maker of leather goods and other apparel accessories, reported a
narrower third quarter net loss of $1.3 million on a 16% sales
decline–to nearly $38 million. The year earlier loss of $5.9
million included charges of nearly $7 million from discontinuing a
product line.
size='3'>Tenet Healthcare Corp., a Dallas, Tx.
hospital operator, is selling two hospitals in
w:st='on'>
size='3'>Philadelphia
size='3'>Warminster
w:st='on'>
size='3'>Pa.
Healthcare LLC, a Philadelphia-based operator of hospitals, as part of
an ongoing sell off of assets connected with its turnaround
plan.