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September 1,
2009
a Financial Super-Regulator
Proposals for the creation of a single regulator for
all federal- and state-chartered banks would not address the problems
that led to the current economic crisis, according to a commentary by
FDIC Chair Shelia Bair in today’s
face='Times
New
Roman' size='3'>New York Times. The principal
enablers of our current difficulties were institutions that took on
enormous risk by exploiting regulatory gaps between banks and the
nonbank shadow financial system, and by using unregulated
over-the-counter derivative contracts to develop volatile and
potentially dangerous products. Concentrating power in a single
regulator would inevitably benefit the largest banks and punish
community ones, according to Bair. A single regulator’s resources
and attention would be focused on the largest banks, which would
generate more consolidation in the banking industry at a time when we
need to reduce our reliance on large financial institutions and put an
end to the idea that certain banks are too big to fail. We need to shift
the balance back toward community banking, not toward a system that
encourages even more consolidation.
href='http://www.nytimes.com/2009/09/01/opinion/01bair.html?ref=opinion&pagewanted=print'>Read
more.
Ruling Within 60 Days
The government's pay czar triggered a 60-day clock to
rule on pay packages at seven firms receiving significant amounts of
federal rescue funds, but government officials say that he is expected
to decide well ahead of that deadline, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. Kenneth Feinberg, the Treasury Department's special master for
compensation, has determined that the pay packages proposed by the
companies are 'substantially complete,' a determination that requires
him to rule by the end of October. Feinberg's judgment will affect
compensation for the top 25 earners at Citigroup Inc., Bank of America
Corp., American International Group Inc., Chrysler Corp., General Motors
Corp., Chrysler Financial and GMAC Financial Services Inc. Those
companies also have to submit compensation structures for the next 75
highest earners.
href='http://online.wsj.com/article/SB125176572409074541.html'>Read
more. (Subscription required.)
Convicted Ex-lawmaker Files
for Chapter 7
Former U.S. Representative William Jefferson,
convicted of corruption after federal agents found cash in his freezer,
has filed for chapter 7 with his wife, the Associated Press reported
yesterday. The bankruptcy petition filed last week says that the couple
owes between $1 million and $10 million to fewer than 50 creditors. The
filing also lists their estimated assets as ranging between $1 million
and $10 million. Jefferson was convicted on Aug. 5 on 11 of 16 federal
counts for using his influence to broker business deals in Africa. A
jury in Virginia also ruled that Jefferson must forfeit roughly $470,000
href='http://news.yahoo.com/s/ap/20090831/ap_on_re_us/us_jefferson_bankruptcy_1/print'>Click
here to read more.
Mortgages
Credit Suisse Sues
Thornburg over Collateral Rights
Credit Suisse Securities LLC has sued bankrupt
mortgage lender Thornburg Mortgage Inc. in an effort to force Thornburg
to admit that Credit Suisse and several other financial institutions
have liens on the proceeds from certain mortgage servicing rights under
a series of repurchase and swap agreements,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In an adversary complaint filed Friday in
the U.S. Bankruptcy Court for the District of Maryland, Credit Suisse
claims that Thornburg refused to count cash proceeds from the MSRs as
cash collateral for the benefit of Credit Suisse and other
counterparties to the agreements. Thornburg is currently about $2
billion in default under the agreements, according to Credit Suisse. The
other counterparties to the agreements are JPMorgan Chase Funding Inc.,
Citigroup Global Markets Ltd., Greenwich Capital Markets Inc., the Royal
Bank of Scotland PLC, UBS AG and some of their affiliates, according to
the complaint. Credit Suisse acts as collateral agent for all the
counterparties.
href='http://bankruptcy.law360.com/print_article/119633'>Read
more. (Subscription required.)
Taylor Bean Responds to
Criticism over Transfer of Mortgage Portfolio
Taylor Bean & Whitaker Mortgage Corp. responded
yesterday to increasing pressure from financial institutions and federal
agencies seeking to force the bankrupt mortgage lender to turn over
millions of dollars and a host of information related to its $80 billion
mortgage servicing operations,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported.
Taylor Bean claimed that internal upheaval and the actions of the
Federal Deposit Insurance Corp. have prevented the company from fully
transferring its mortgage servicing duties to successors. The FDIC,
Wells Fargo Bank NA, the Federal Home Loan Mortgage Corp., Sovereign
Bank and US Bank NA have all filed motions in recent days seeking to
recover documents, funds and property in an effort to find new servicers
for Taylor Bean's 488,000 mortgages. However, Taylor Bean maintains that
the reason it has not turned over the information is because the FDIC,
as receiver for the collapsed Colonial Bank, has denied the mortgage
giant access to its own bank accounts.
href='http://bankruptcy.law360.com/articles/119729'>Read
more. (Subscription required.)
Tribune Wins Approval for
Cubs Sale Process, Notice
Bankruptcy Judge
face='Times
New
Roman' size='3'>Kevin J. Carey approved the
sale process and notice to interested parties for Tribune Co.'s proposed
$845 million deal to sell off the bulk of the Chicago Cubs baseball
franchise to Ricketts Acquisition LLC, Bankruptcy
Law360 reported yesterday. Judge Carey ruled
that objections to the sale must be received by Sept. 17 and he set a
date of Sept. 24 for final approval of the sale. Tribune announced Aug.
20 that it had signed a definitive agreement with the Ricketts family
— a family of financial entrepreneurs led by Thomas Ricketts, CEO
of Chicago investment bank Incapital LLC, and Ameritrade founder J. Joe
Ricketts — to sell 95 percent of the team for $728 million. Though
Tribune plans to hold on to a 5 percent ownership interest in the team,
the Ricketts family will run the organization and take both the team's
Wrigley Field and Tribune's 25 percent share of Comcast Sportsnet, a
cable network that carries Cubs games, the parties said on Aug.
28. Read
more. (Subscription required.)
Bank of America Seeks to
Repay a Portion of Bailout
Bank of America Corp. is offering to repay part of its
bailout money, and the U.S. is pushing for the bank to pay at least $500
million to shelve a tentative pact that would have had the government
share its losses on certain assets, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. The bank isn't offering to repay all of its $45 billion in aid
from the Troubled Asset Relief Program, as several other banks have
done. Instead, BofA is suggesting it could start with the $20 billion of
additional aid that was supplied in January when the bank was hesitating
to complete its takeover of loss-ridden Merrill Lynch. Repaying this
would mean BofA would no longer be considered an 'exceptional' aid
recipient -- a designation that has put it under a microscope by
Congress and regulators, with its pay packages subject to review by the
federal 'pay czar.'
href='http://online.wsj.com/article/SB125176546582274505.html'>Read
more. (Subscription required.)
CIT Group Inc. said yesterday that it won't be able to
make a Sept. 15 interest payment required on notes due in 2067,
the
size='3'>Wall Street Journal reported today.
In a filing with the Securities and Exchange Commission, CIT said that
it provided a notice of continuance of a trigger period to the notes'
holders. A trigger event, which the company didn't describe in the
filing, has taken place, forcing CIT 'to use commercially reasonable
efforts' to execute an alternative payment mechanism to satisfy the
Sept. 15 interest payment. The company said that it can't execute the
alternative, requiring it 'to mandatorily defer interest on the notes.'
The interest will continue to compound until payment is made. The filing
didn't say how much is due on Sept. 15. CIT, hurt by a liquidity crisis
as its customers drew down credit lines in fear that they might
disappear, has said repeatedly that it may have to file for bankruptcy
protection should its restructuring plans, which could also include
exchanging existing debt for equity or new debt with longer maturities,
fail. The company has almost $10 billion of debt maturing through
2010.
href='http://online.wsj.com/article/SB125180644198575855.html'>Read
more. (Subscription required.)
Huntsman Makes $415 Million
Bid for Tronox Assets
Chemical company Huntsman Inc. has offered to pay
about $415 million for Tronox Inc.'s titanium dioxide and electrolytics
businesses, the Associated Press reported yesterday. Texas-based
Huntsman Inc. said yesterday that it signed a stalking-horse agreement
on Aug. 28 with Oklahoma City-based Tronox Inc., which filed for chapter
11 protection in January. Tronox filed for chapter 11 protection to
address legacy liabilities it incurred when it was spun off from former
parent Kerr-McGee Corp. in 2006. The liabilities, which Tronox said pose
an obstacle to financial stability, include environmental remediation
and litigation costs. In a regulatory filing, Huntsman said that its bid
for Tronox excluded assuming environmental liabilities related to
Tronox's 'past or current operations...properties or facilities.' That
includes any fines imposed by a government agency.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083101229_pf.html'>Read
more.
Bankruptcy Judge Backs
Grupo Mexico Bid for Asarco
Bankruptcy Judge
face='Times
New
Roman' size='3'>Richard Schmidt yesterday
recommended that Grupo Mexico be allowed to regain control over copper
miner Asarco LLC, saying that its $2.2 billion bid is more likely to
fully repay creditors than that of rival suitor Sterlite Industries, the
Associated Press reported today. Judge Schmidt issued the finding late
Monday over objections from Asarco, its employees and some creditors,
who believed India-based Sterlite's $2.1 billion bid was the best way
for the Tucson, Ariz.-based company to emerge from four-year chapter 11
proceedings. Asarco spurned Grupo's advances to reacquire the company
when it accepted Sterlite's initial $2.6 billion buyout offer last year.
However, Sterlite backed out of the deal in October 2008 after copper
prices plunged in the wake of the market meltdown, saying that it
wouldn't close the sale unless Asarco agreed to a price reduction. The
acquisition price dropped to $1.7 billion, but Sterlite steadily
sweetened the deal in an effort to win the battle with Grupo Mexico.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083101899_pf.html'>Read
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083101899_pf.html'>
Oil and Gas Company Files
Prepackaged Chapter 11
Independent oil and natural gas company Baseline Oil
& Gas Corp filed a prepackaged chapter 11 plan on Friday, Reuters
reported yesterday. The company said that it was compelled to seek a
restructuring after it was unable to repay certain senior notes, citing
a decline in commodity prices, disappointing development drilling
results and the broad U.S. economic decline. Baseline's existing
shareholders will be completely wiped out under the plan while its
creditors will receive new secured notes, preferred stock and common
stock. The company said that the prepackaged plan has the support of a
majority of its lenders. The company said that as of June 30 it had
current liabilities of $138.6 million, which far exceeded its current
assets of about $3 million.
href='http://www.reuters.com/article/marketsNews/idUSN3144912620090831'>Read
more.
for Bankruptcy
The owner of The Landmark and The Meridian residential
condominium towers near Denver filed for chapter 11 protection on
Sunday, citing financing issues with the project's senior lender and a
national slowdown in residential home sales, Reuters reported yesterday.
7677 E. Berry Avenue Associates LP said that its lender, Hypo Real
Estate Capital Corp, was unwilling to give a short-term loan extension.
7677 said that it had lined a loan agreement for a debtor-in-possession
(DIP) financing facility of $15 million with Carmel Landmark LLC, an
indirect subsidiary of Carmel Partners Fund III LLC. The company said
that it had assets with a current value of about $165 million and
liabilities totaling $100 million, including $93.8 million in secured
construction debt with Hypo. The case is
face='Times
New
Roman' size='3'>In re 7677 East Berry Avenue Associates
LP, U.S. Bankruptcy Court, District of
Colorado, No. 09-28000.
href='http://www.reuters.com/article/marketsNews/idUSN3144912620090831'>Read
more.
Crunch Fitness to Exit
Bankruptcy after Sale
Crunch Fitness said it plans to exit bankruptcy by
mid-September as it closes its sale to New Evolution Fitness Co.,
proposed in its bankruptcy filing four months ago, Bloomberg News
reported yesterday. The bankrupt gym operator said yesterday that it is
focused on growth in New York, San Francisco, Los Angeles and Miami,
with plans to establish new locations quickly. Crunch filed for
bankruptcy May 6, saying it sought to sell its assets to New Evolution
Fitness, an entity formed by CH Fitness, a joint venture formed by New
York-based fund manager Angelo Gordon & Co. Bankruptcy Judge
size='3'>Robert Gerber approved the sale on
Aug. 10 after Crunch said that CH Fitness, a pre- bankruptcy lender
that’s 92 percent-owned by Angelo Gordon, made the best offer for
its assets, with a $40 million credit bid. The case is
In
re AGT Crunch Acquisition LLC, 09-12889, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a4MeUc_JmjNg'>Read
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a4MeUc_JmjNg'>
in AIG Case Is Upheld
U.S. District Judge Jed S. Rakoff upheld a
jury’s verdict that found that a private company run by Maurice R.
Greenberg had not breached its duty of trust to insurer the American
International Group, Bloomberg News reported today. The jury issued an
advisory ruling on July 7, saying that Greenberg’s firm, Starr
International, had not violated a duty to hold AIG shares after 2005.
During a three-week trial, AIG claimed that an oral trust was created in
1970 solely for the benefit of AIG and its deferred-compensation
program, and that Starr International breached that trust in 2005 to
retaliate for Greenberg’s resignation amid an accounting scandal.
“The law will not recognize such an oral trust unless the evidence
of its creation is unequivocal,” Judge Rakoff ruled.
href='http://www.nytimes.com/2009/09/01/business/01aig.html?ref=business&pagewanted=print'>Read
more.
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