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August 28, 2007
name='1'>Accountant Bills in WR
Grace Bankruptcy Case Probed
Federal bankruptcy
monitors suspect that the
late accountant Loreto Tersigni, who played a leading role advising
asbestos claimants in
the bankruptcy of W.R. Grace & Co. and other mega-billion dollar
chapter 11 cases,
padded his firm's bills for years, the Associated Press reported
yesterday.
U.S. Trustee Kelly Beaudin
Stapleton has asked for an examiner to
investigate the
invoices of Tersigni's firm -- L. Tersigni Consulting P.C., of
w:st='on'>Stamford
size='3'>,
size='3'>Conn.
size='3'>-- presented in the cases of W.R. Grace and G-I Holdings,
in
w:st='on'>
size='3'>New Jersey.
Loreto Tersigni, the sole
owner of the firm, died in late May, about a year into an investigation
by the U.S. Trustee
and the U.S. Attorney for
w:st='on'>New Jersey
size='3'>, according to
court documents filed Friday in W.R. Grace's bankruptcy case. Court
documents also say that
federal law enforcement has had Tersigni's bills to bankrupt companies
under surveillance
href='http://biz.yahoo.com/ap/070827/w_r_grace_bankruptcy.html?.v=1'>Read
more.
Mortgage
Lending
name='2'>Fannie Mae Lets
Troubled Lender Service Its Loans
American Home Mortgage
Investment Corp., the
second-biggest
w:st='on'>U.S.
size='3'>residential
lender in bankruptcy, agreed to continue servicing $5.2 billion worth of
loans owned by
Fannie Mae, Bloomberg News reported yesterday. The lender will keep
collecting payments and
handle escrow accounts on 36,700 loans owned by Fannie Mae under a
proposed agreement filed
Friday. The deal gives American Home until Oct. 31 to sell the company's
servicing unit with
Fannie Mae's loans still in it. American Home, based in
w:st='on'>
size='3'>Melville,
w:st='on'>
face='Times New Roman' size='3'>N.Y.
size='3'>, is one
of at least 16 mortgage lenders that have sought bankruptcy protection
since December. The
company has shut down all operations except for its loan-servicing
business, which it
href='http://www.tennessean.com/apps/pbcs.dll/article?AID=/20070828/BUSINESS01/708280335'>Re
ad more.
name='3'>Commentary: Aid to
Homeowners Debated on Capitol Hill
Faced with a possible
tidal wave of home
foreclosures beginning this fall, Democrats and Republicans are debating
whether the
government should step in and help rescue homeowners mired in housing
debt, the
New
York
Times reported today. Both the Bush
administration and Democratic
leaders in Congress agree that legions of homeowners could be
overwhelmed in the next 18
months, as low teaser rates expire on more than two million
adjustable-rate mortgages.
However, the Bush administration and congressional Democrats are
ideologically divided about
the steps that should be taken to help resolve the situation.
Administration officials are
reluctant to bail out people who bought homes they could not afford or
simply gambled that
easy credit and rising real estate prices would lead to quick profits.
Democrats, though
opposed to a broad bailout, are proposing an array of measures to help
lower-income people
renegotiate their loans and stay in their homes.
href='http://www.nytimes.com/2007/08/28/business/28workout.html?pagewanted=print'>Read
more.
name='4'>Ratings Firms Defend
Assessment of Loan Securities
Credit-rating agencies
that once blessed
securities that backed subprime mortgage loans as safe investments are
now experiencing a
financial downturn, the
size='3'>Washington
Post reported today. The stock of Moody's
Investors Service, one
of the major raters, is down about 40 percent from its 52-week high on
heavy trading.
Members of Congress are calling for hearings and more oversight of the
rating firms and
institutional investors and industry observers have blamed the agencies
for being months
late in downgrading a slew of residential mortgage-backed securities
that soon imploded. The
big three raters have moved in recent weeks to restore confidence in
their work even as they
maintain that they acted appropriately and on time. They have adjusted
how they rate bonds
and other financial instruments, generated a series of new reports about
the market and
staged teleconferences to assuage investors hammered by the
deterioration in subprime
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/27/AR2007082701467_pf.htm
l'>Read more.
Continues to Weigh
Bear Stearns Funds’ Chapter 15 Request
Bankruptcy Judge
Burton Lifland is keeping
two Cayman
Islands-based Bear Stearns &
size='3'>Co. Inc. hedge funds’ assets out of creditors' reach for
another 10 days
while he weighs whether to grant them chapter 15 protection,
Bankruptcy Law360 reported
yesterday.
size='3'>Bear Stearns High-Grade Structured Credit Strategies Master
Fund Ltd. and Bear
Stearns High-Grade Structured Credit Strategies Enhanced Leveraged
Master Fund Ltd. had
requested the protection on July 31, just after filing the necessary
liquidation proceedings
in a Cayman Islands court, in order to protect themselves from creditors
who might try to
seize their
w:st='on'>
size='3'>U.S.
size='3'>assets. Judge Lifland has been uncertain as to whether to
grant the funds
protection under chapter 15; the two Bear Stearns hedge funds are
technically based in
the Cayman Islands, he said, adding that they do hold assets in
the
size='3'>U.S. and appear to
operate out of
size='3'>New
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33444'>Read
more. (Registration required.)
name='6'>Commentary: Fed Waiver of
Bank Lending Cap Aims to Calm Markets
The Federal Reserve's
waiver of the lending
cap on bank loans, even temporarily, is a significant escalation of its
effort to calm the
financial markets, according to a
size='3'>New York
Times editorial today. On Aug. 20, one
business day after cutting
the lending rate, the Fed allowed Bank of America and Citigroup’s
Citibank to breach
the regulatory cap on the size of loans they’re permitted to make
to their brokerage
affiliates. Under normal circumstances, a bank is limited to lending any
one affiliate an
amount equal to 10 percent of the bank’s regulatory capital. Fed
documents released
last Friday disclosed that the banks would be allowed to lend up to $25
billion apiece, or
about 30 percent of their capital. Compromising the cap to that extent
attests to the
Fed’s belief that a bailout is necessary to avert greater harm to
the financial system
href='http://www.nytimes.com/2007/08/28/opinion/28tue2.html?pagewanted=print'>Read
more.
Trusts Sue on
Behalf of Currency Clients
Trusts representing
creditors of the defunct
commodities broker Refco said yesterday that they had sued its legal and
accounting advisers
for more than $500 million on behalf of 75 foreign exchange customers,
Reuters reported
today. The Refco Litigation Trusts said the lawsuit, filed in New York
State Supreme Court,
names the accounting firms Ernst & Young and Grant Thornton, the law
firm of Mayer,
Brown, Rowe & Maw, and Refco insiders. The suit is the third brought
by the trusts,
which filed a similar action in
w:st='on'>
face='Times New Roman' size='3'>Illinois
last
week for $2 billion. It named the same defendants along with
PricewaterhouseCoopers, Banc of
America Securities, Credit Suisse Securities and Deutsche Bank
Securities. Yesterday’s
lawsuit contends that Refco insiders, with the help of advisers, induced
foreign exchange
customers to entrust their funds to the Refco Capital Markets
broker-dealer unit. The trusts
have a deadline of Oct. 16 to bring cases.
href='http://www.nytimes.com/2007/08/28/business/28refco.html?ref=business&pagewanted=pr
int'>Read more.
name='8'>Solutia Seeks Approval
for $500 Million Calpine Deal
Solutia Inc. has asked a
bankruptcy judge to
approve a $500 million agreement with
size='3'>Calpine Central LP to settle one of the biggest unsecured
claims levied against the
company in its chapter 11 case,
size='3'>Bankruptcy
Law360 reported yesterday. The settlement
would bring an end to 18
months of complex litigation and would let the companies avoid an
arbitration hearing set to
begin in two months in Houston, Solutia said in
its motion. The
dispute stems from a series of agreements Solutia and Calpine struck in
1999. Calpine leased
land from Solutia in
w:st='on'>
size='3'>Decatur,
w:st='on'>
face='Times New Roman' size='3'>Ala.
size='3'>, where it
built the Cogen Facility, which holds three combustion turbines, three
heat recovery
generators and one steam turbine. The companies agreed that Solutia
would buy electrical and
steam energy from the Cogen Facility to power the plant where it
manufactured Acrilan, an
acrylic fiber used in textile, and that Calpine would sell the leftover
energy, Solutia
said. The agreement also releases both companies from any claims related
to the contracts at
issue. In addition, it states that Calpine will vote in favor of
Solutia's chapter 11
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33420'>Read
more. (Registration required.)
Approves Breast
Implant Maker's Asset Auction
Bankruptcy Judge
Mary Walrath granted
breast implant maker
MediCor Ltd. approval to sell its assets and the assets of some of its
nondebtor
subsidiaries at an auction next month,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Walrath
granted MediCor’s motion allowing the sale on Friday, setting
bidding procedures and
scheduling the auction sale for Sept. 18. Companies that are interested
in bidding for
MediCor’s assets must submit qualified bids to the company by
Sept. 7. The bids, which
will be for the single lot including MediCor's assets and the assets of
its subsidiaries,
must be at least $50 million and bidders must provide a 10 percent
good-faith deposit, Judge
Walrath said. Only parties that have submitted qualified bids will be
able to take part in
the Sept.18 auction, the order said. A hearing has been scheduled for
Sept. 24 to approve
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33417'>Read
more. (Registration required.)
name='10'>Asarco Looks to Settle
Miners' $3 Million Claims
Bankrupt Asarco LLC
sought court permission
on Friday to settle compensation claims by former employees who lost
their hearing while
working in the company's
w:st='on'>Tennessee
size='3'>mines,
Bankruptcy Law360
size='3'>reported yesterday. The settlement involves 44 miners who have
filed more than $3
million in claims. Asarco said that it had agreed to fund some of the
claims out of an
escrow account set up for the purpose, paying $5,000 to each worker for
future medical
expenses and $1,000 to avoid litigation and allowing the remaining
unpaid liens to be
pursued as general unsecured claims. Asarco closed its three zinc mines
in eastern
size='3'>Tennessee in
October 2001. It sold
the Tennessee Mines Division assets to Glencore Ltd. for $65 million in
May 2006 and placed
a little over $3 million from the sale proceeds into the escrow account.
The company was hit
with the
face='Times
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size='3'>Tennessee miner
compensation claims,
some of which have been adjudicated or settled, before it filed for
bankruptcy.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33407'>Read
more.
(Registration required.)
name='11'>AMS' Chapter 11 Plan
Doesn’t Specify Creditor Recovery
Liquidated book marketer
Advanced Marketing
Services Inc. filed its chapter 11 plan and accompanying disclosure
statement that does not
reveal how much unsecured creditors can expect to recover,
size='3'>Bankruptcy
Law360 reported yesterday. According to court
documents filed
Friday, AMS and its subsidiaries face about $217 million in unpaid
unsecured claims. Though
the company has not yet estimated how much of that will be paid off, it
did say allowed
administrative claims would be paid in full, while the holders of 510(b)
claims and the
holders of interests in AMS would receive nothing.The main secured
creditor in the case,
Wells Fargo Foothill Inc., was paid off after AMS sold its assets to
Baker & Taylor Inc.
in March for about $64 million. The company also said that it netted
about $1 million from
the sale of its interests in certain foreign ventures, and it still has
some assets to
liquidate, including a 25 percent equity interest in Raincoast Book
Distribution
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=33414'>Read
more. (Registration required.)
name='12'>Existing-Home Sales
Fall to 5-Year Low
Sales of previously owned
homes fell to a
five-year low in July and the glut of unsold properties climbed to its
highest since 1991,
Bloomberg News reported yesterday. Purchases declined 0.2 percent, to an
annual rate of 5.75
million, the National Association of Realtors said yesterday. While the
retreat was less
than forecast, inventories of single-family homes rose to the equivalent
of a 9.2
months’ supply. Since last year, overall existing sales were down
9 percent.
The
size='3'>Midwest accounted for the
decline in sales as
they declined 2.2 percent. They were unchanged in the South, increased 1
percent in the
Northeast and 1.8 percent in the West. NAR said that the median price of
an existing home
fell to $228,900, a 0.6 percent drop from July a year ago. The supply of
homes for sale at
the end of the month climbed 5.1 percent, to 4.59 million.
href='http://www.nytimes.com/2007/08/28/business/28econ.html?_r=1&oref=slogin&ref=bu
siness&pagewanted=print'>Read more.
name='13'>TROUBLED COMPANIES IN
THE NEWS
The business news
articles below are taken
from the U.S. Business Journal’s Daily Summary of Troubled &
Fast Growing U.S.
Companies which is published by Bastien Financial Publications.
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size='3'>ABI Members receive a
50% discount off of
our regular subscription rate of $500 when subscribing to the complete
Daily Summary.
To subscribe email
steve@creditnews.com
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Accredited Home Lenders
Holding
Co., a San
Diego, Ca. subprime
mortgage firm, is closing its office in Irvine, Ca., affecting more than
fifty employees, as
part of a streamlining effort. The company has said it will shut
down nearly all of
its retail lending operations.
Altria Group
Inc.
size='3'>,
face='Times New Roman'
size='3'>Manhattan,
w:st='on'>
face='Times New Roman' size='3'>N.Y.
size='3'>, is
considering whether to spin off its international cigarette operations
in an effort to boost
shareholder value. The American side of the business has been a
drag on Altria’s
stock price because of continued worries about smokers’ litigation
and the possibility
that the
size='3'>government
may intervene, not to mention sinking cigarette sales inside
the
face='Times New Roman'>
w:st='on'>
w:st='on'>U.S.
AnnTaylor Stores
Corp.
size='3'>, the
face='Times New Roman'
size='3'>Manhattan
size='3'>. N.Y.-based
women's apparel retailer, reported its second quarter net income fell
27%–to $31.7
million. Sales edged up less than 1%–to $615 million, including a
6.2% drop in
same-store sales. Same-store sales at its AnnTaylor stores fell
3.1% while same-store
sales at its AnnTaylor Loft locations plunged 11%. The firm,
recently announcing a new
marketing chief, has been trying to battle a slump in sales. The company
says it will launch
a new store concept aimed at what it calls the “modern
boomer”.
Bridgeport Foods
LLC
face='Times New Roman'>of Nitro, W.V. reported its third
quarter net income
declined 85%–to $33,000, on a 5% sales decline–to $26.7
million.
Ford Motor
Co.,
Dearborn, Mi., could have a new bidder for its Jaguar and Land Rover
luxury car brands, with
the chairman of India-based Tata Motors Ltd. publicly announcing that
his company is
considering making an offer. If it succeeds in buying the two car
lines, Tata could
spend more than $1 billion as part of a plan that would help it gain
technological know-how
and expand
w:st='on'>
size='3'>India
face='Times New
Roman'>’s auto industry overseas. Some analysts are
doubting that the
units will fetch the price that Ford has been hoping for. The
company purchased Jaguar
in 1989 for $2.5 billion and spent $2.75 billion for Land Rover seven
years ago.
Georgia Gulf
Corp.
size='3'>,
size='3'>Atlanta,
w:st='on'>
face='Times New Roman' size='3'>Ga.,
will shut down its
Canadian Royal Group window-and-door extrusion facility in
face='Times New Roman' size='3'>Winnipeg
size='3'>,
w:st='on'>
size='3'>Manitoba
size='3'>by the end of this year, as part of a consolidation at other
operations in
size='3'>Canada and
the
w:st='on'>
size='3'>U.S.
size='3'> In its second
quarter,
face='Times New Roman'
size='3'>Georgia
face='Times New
Roman' size='3'>Gulf
face='Times
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size='3'>lost $4.2 million
on sales of $852 million.
Krispy Kreme Doughnuts
Inc., the
Winston-Salem, N.C.
chain of donut shops, shuffled around a couple of executive posts and
said that it will
realign its company-owned and franchise operations, in a move to boost
sales and reduce
expenses. Also, the firm hopes the move will provide greater flexibility
so that it can be
more responsive, streamlined and focused. Krispy Kreme has
struggled in recent years
in the aftermath of financial restatements and probes into its
accounting.
Marvell Technology
Group
size='3'>’s stock price fell 12% as investors responded to the
firm’s recent
quarterly net loss, despite higher sales as the firm faced increased
operating costs to pay
for its expansion into consumer-electronic products. The
w:st='on'>
size='3'>Santa
Clara, Ca.
firm company lost $56.5 million in its second quarter although its
revenue surged to $657
million, compared to $574 million a year ago.
Reinhold Ice Cream
Co.
size='3'>, a privately-held
w:st='on'>
face='Times New Roman' size='3'>Pittsburgh
size='3'>,
size='3'>Pa.ice cream manufacturer which has
been in the midst
of a legal dispute with the Teamsters Union over shortfalls in the
company’s pension
plan, may be selling its assets to LaSalle Ice Cream Co. of New York for
an undisclosed
amount. Reinhold, which owes the IRS more than $400,000, has faced
a number of
lawsuits from the Pittsburgh Water & Sewer Authority for unpaid
bills.
SanDisk
Corp.,
a
size='3'>Milpitas
size='3'>, Ca. maker of
data-storage products for cameras and other electronic devices, reversed
an executive pay
cut after five months, following reported improvements at the firm. Some
executives took pay
cuts back in March of as much as 20%. In its second quarter ended
7/1, San
Disk’s net income sank 70%, but CEO Eli Harari said that the
results reflected very
tough market conditions and that there were signs in the second quarter
of a turnaround.
/>
Sun-Times Media Group
Inc.
size='3'>, the publisher of the Chicago Sun-Times newspaper, reported
that it has not been
able to recover some $48 million in commercial paper, which are
short-term financial
instruments, as a result of skittishness in the Canadian credit markets.
The company could
also run into further problems as other investments mature and come due.
Sun-Times
Media added that it still remains hopeful that it can recover all of the
money but conceded
that full recovery is not a certainty.