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August 30, 2007
Mortgage
Lending
w:st='on'>
face='Times New Roman' size='3'>
name='1'>Arizona
face='Times New
Roman' size='3'> Mortgage Lender Files for Chapter
11
Spectrum Financial Group
Inc. filed for
chapter 11 protection on Tuesday in the U.S. Bankruptcy Court for the
District of
Arizona, Bankruptcy Law360
size='3'>reported
yesterday. The Scottsdale, Ariz.-based company focused its business
mainly on residential
loans that it presold to a third party. The company, which claims
to be the largest
private mortgage brokerage in
w:st='on'>
face='Times


&
;#13;
New Roman'
size='3'>Arizona,
listed assets and debts of under $100 million. A meeting of the
company’s creditors
has been scheduled for Oct. 16. The case is
size='3'>Spectrum Financial Group Inc., case
number 07-04265 in
the U.S. Bankruptcy Court for the District of Arizona.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33613'>Read
more.
(Registration required.)
name='2'>Basis Capital's
Yield Alpha Fund Seeks Bankruptcy Protection in
size='3'>
w:st='on'>
w:st='on'>U.S.
Australian hedge-fund
manager Basis Capital
Funds Management Ltd. sought
face='Times New
Roman' size='3'>U.S.
size='3'>bankruptcy protection for
its Yield Alpha Fund after it suffered big losses as a result of the
fallout from the
size='3'>U.S.
size='3'>subprime-mortgage
crisis, the Wall Street Journal
size='3'>reported
today. The fund, based in the Cayman Islands, sought chapter 15
protection in U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Manhattan.
Shareholders of the Yield
Alpha master fund placed the fund in liquidation in the
face='Times New


&
;#13;
Roman' size='3'>Cayman Islands
size='3'>, and U.S.
Bankruptcy Judge Arthur
J.
Gonzalez granted the liquidators' request for
a temporary
restraining order to block creditors from trying to seize remaining
assets. Judge Gonzalez
set a hearing for Sept. 6 on the Cayman liquidators' request for a
preliminary injunction
that would effectively bar investors and other creditors from
interfering in the fund's
liquidation.
href='http://online.wsj.com/article/SB118845499830413193.html'>Read
more. (Registration required.)
name='3'>Fed Chairman Opposes
Lift of Fannie, Freddie Mortgage Caps
Federal Reserve Chairman
Ben S. Bernanke said
that Fannie Mae and Freddie Mac don't need a loosening of regulatory
constraints to help
borrowers threatened with foreclosure, the
size='3'>Washington Post reported today. The
government-sponsored
mortgage funding companies have said that they could help ease the
crunch in the mortgage
markets if they were allowed to buy more mortgages and mortgage-backed
securities and help
borrowers refinance on more manageable terms. Democratic lawmakers have
joined housing
industry groups and Wall Street investment firms in calling for a
relaxation of the limits,
but President Bush and federal regulators have rejected the proposals.
Bernanke joined those
opposed, saying Fannie Mae and Freddie Mac have the ability to provide
relief.
Bernanke suggested instead that
Congress consider
allowing the Federal Housing Administration to play a larger
role.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/29/AR2007082902155.html'>
Read more.
In related news, Freddie
Mac posted a 45
percent drop in second-quarter net income as it took a $320 million loss
on new mortgages,
the Wall Street Journal
size='3'>reported
today. Freddie Mac also predicted that third-quarter results would
reflect
credit-market-related stress for its guarantee-related obligations. The
company's latest
results come in the midst of broader struggles in the mortgage market --
particularly
related to subprime loans. Freddie and rival Fannie Mae don't directly
buy many loans
considered subprime. They do buy securities packaged by others that are
backed by subprime
loans, although they stick to the top-rated securities that are least
vulnerable to losses
from defaults of individual loans.
href='http://online.wsj.com/article/SB118847511275613410.html?mod=us_business_whats_news'>Re
ad more. (Registration required.)
name='4'>H&R Block Posts
Loss on Mortgage Woes
H&R Block Inc. said today
that its
first-quarter loss ballooned as it struggled with its mortgage lending
arm and said that it
is trying to renegotiate the sale of the unit, the Associated Press
reported today. The
company said that if negotiations are successful, it would stop selling
new loans through
Option One Mortgage Corp., have several closing requirements waived and
try to get the
buyer, a subsidiary of Cerberus Capital Management, to close before the
current deadline of
Dec. 31. The company, which makes the bulk of its revenue and profits
during the annual
income tax season, typically loses money during the first and second
quarters. Those losses
have been exacerbated by Option One, which has been caught up in the
collapse of the
subprime mortgage market. The company said that Option One and two small
non-mortgage
businesses that are being dismantled lost $192.8 million during the
quarter.
href='http://www.nytimes.com/aponline/business/AP-Earns-HR-Block.html?_r=1&oref=slogin&a
mp;ref=business&pagewanted=print'>Read more.
w:st='on'>
face='Times New Roman' size='3'>
name='5'>Davenport
face='Times



New
Roman'
size='3'> Diocese Receives Extension to File Reorganization
Plan
A bankruptcy judge has given
the Roman Catholic
Diocese of Davenport an extension to file its reorganization plan by
Oct. 1, the Associated
Press reported yesterday. The original deadline was Aug. 15. The request
to extend the
deadline was submitted by the diocese and the creditors committee, which
includes alleged
victims of abuse by priests. A total of 156 claims from alleged abuse
victims have been
filed in the case, according to court records. The plan must be approved
href='http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20070829/NEWS/70829014/-1/SPOR
TS01'>Read more.
name='6'>Global Power Reaches
Agreement with Creditors
Global Power Equipment
Group Inc. revealed on
Tuesday that it has reached an agreement with its creditors' committee
on the terms of its
chapter 11 plan,
size='3'>Bankruptcy
Law360 reported yesterday. It includes a
rights offering available
to all existing equity holders for an issuance of new common stock in
the reorganized
company that will be backstopped by up to $90 million in cash, a
proposed settlement with
the senior subordinated noteholders for a cash consideration paid out by
a $34 million trust
and a full payment in cash of all allowed creditors' claims. The
agreement also stipulated
that a new secured credit facility would be established to repay the
company's existing
debtor-in-possession financing facility and to meet other funding and
working capital needs
after Global Power has reorganized.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33608'>Read
more. (Registration required.)
name='7'>Court Approves
Delphi Contract with
w:st='on'>Union
Bankruptcy Judge
Robert Drain yesterday
approved a Delphi Corp.
contract with the United Steelworkers union, wrapping up the labor deals
the car parts maker
needs for its reorganization, Reuters reported yesterday. The deal
covers about 900 workers
at two
size='3'>Ohio plants, one of
which
w:st='on'>
size='3'>Delphi
size='3'>plans to close or sell.
face='Times New Roman'
size='3'>Delphi, which filed for
bankruptcy in October
2005, has said it expects to file a plan of reorganization by the end of
September and exit
bankruptcy protection by the end of 2007. Delphi plans to retain only
eight of 29
union
plants after the restructuring, including one in
w:st='on'>
w:st='on'>
size='3'>Vandalia
size='3'>,
size='3'>Ohio, that has
steelworkers union
members. Deals were reached previously with the United Auto Workers, the
International Union
of Electrical Workers - Communications Workers of America and other
unions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/29/AR2007082901691.html'>
Read more.
Orders Hollinger to
Take SunTimes Dispute to
w:st='on'>Canada
Bankruptcy Judge
Peter Walsh ruled on
Tuesday that
size='3'>Canada
size='3'>was the proper venue
for Hollinger Inc. and its bondholders to duke it out over the fallen
media giant's 70
percent stake in the Sun Times Media Group Inc.,
face='Times New Roman'
size='3'>Bankruptcy Law360 reported yesterday.
The move served as
a blow to bondholders, who had previously urged Judge Walsh to set a
trial date in hopes of
settling the dispute over who should run Sun-Times Media in the wake of
Hollinger Inc.
filing for bankruptcy. The Toronto-based holding company initiated
bankruptcy proceedings in
both the United States and
w:st='on'>
size='3'>Canada
size='3'>earlier this month
just after Sun-Times Media Group Inc., its most valuable asset, settled
a spate of
shareholder securities suits. Conrad Black, who served as Hollinger CEO
from 1995 until
2003, allegedly siphoned $60 million from the dismantling of the
company. In the wake of the
scandal, Hollinger International, which was later renamed the Sun-Times
Media Group, was
forced to shutter
size='3'>London’s
face='Times New
Roman' size='3'>Daily Telegraph, the
Jerusalem Post and
hundreds of its Canadian
and
face='Times New


&
;#13;
Roman'
size='3'>U.S.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=33582'>Read
more. (Registration required.)
name='9'>Study: Hedge
Funds Responsible for 30 Percent of Bond
Trading
A survey by Greenwich
Associates found that
hedge funds are responsible for nearly 30 percent of all
w:st='on'>
size='3'>U.S.
size='3'>fixed-income trading,
the Wall Street Journal
size='3'>reported
today. That level, which reflected activity over a 12-month period
through April, was double
the amount of trading hedge funds accounted for the previous
year.
w:st='on'>Greenwich
size='3'>found that
hedge-fund trading comprises 55 percent of
w:st='on'>
w:st='on'>
size='3'>U.S.
activity in derivatives with investment-grade ratings,
and also 55 percent of
the trading volume for emerging-market bonds. In some corners of
the
w:st='on'>
size='3'>U.S.
size='3'>debt market, hedge
funds practically are the market. For instance, hedge funds generated
more than 80 percent
of the trading for derivatives with high-yield ratings, and more than 85
percent of volume
in distressed debt,
w:st='on'>Greenwich
size='3'>found.
href='http://online.wsj.com/article/SB118843899101713108.html?mod=hps_us_whats_news'>Read
more.
name='10'>Doctors Offering
No-Interest Loans to Patients
Zero-interest financing,
a familiar sales
incentive at car dealerships and furniture stores, has found its way to
another big-ticket
consumer market: doctors’ and dentists’ offices, the
New York Times reported
today. For $3,500
laser eye surgery, $6,000 ceramic tooth implants or other procedures not
typically covered
by insurance, millions of consumers have arranged financing through more
than 100,000
doctors and dentists that offer a year or more of interest-free monthly
payments. As the
price of health care continues to rise and big lenders pursue new areas
for growth, this
type of medical financing has become one of the fastest-growing parts of
consumer credit,
led by lending giants like Capital One and Citigroup and the CareCredit
unit of General
href='http://www.nytimes.com/2007/08/30/business/30medloan.html?ref=business&pagewanted=
print'>Read more.
name='11'>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.
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
title='mailto:steve@creditnews.com'
href='mailto:steve@creditnews.com'>
color='#0000ff'><mailto:steve@creditnews.com> or call
800-407-9044—use ABI Code 37
Borders Group Inc., the
w:st='on'>Ann
Arbor, Mi.-based bookseller, reported a second
quarter net loss of
$25.1 million, including net charges of $9.8 million. That compares with
a loss of $18.4
million in the year-earlier period. Sales rose 10%–to $957
million, helped by
sales of the latest Harry Potter book.
Cyberonics Inc., a Houston, Tx. manufacturer of medical
devices, reported a
first quarter net loss of $8.2 million, on a 14% revenue
decline–to $29 million.
DaimlerChrysler AG, the German car maker which recently
sold its Chrysler
Group operations to Cerberus Capital Management LP and which expects
earnings of just over
$10.5 billion in 2007, is buying back nearly 10% of its shares for $10
billion.
Finlay Enterprises Inc., a New York-based firm which
operates leased
jewelry departments in retail outlets nationwide, reported a second
quarter net loss of $8.4
million, on a slight sales decline–to $148 million.
General Mills Inc.,
Valley
close two plants, including a waffle facility in
w:st='on'>Allentown
w:st='on'>
w:st='on'>Ontario, resulting in the loss of 500
jobs. The
maker of cereals and other foods added up some $20 million in charges
related to the
reductions, which it said stemmed from weak financial results.
Movie Gallery Inc. received a second extension on a
forbearance agreement
with its senior lenders, who said they won’t take any action
against the
w:st='on'>
video-rental chain
until 9/30. Movie Gallery, now the second-biggest video chain in
the
w:st='on'>
w:st='on'>U.S.
4.500 locations, has suffered from competition from the development of
online movie
services.
Nanometrics Inc., a supplier of advanced metrology
equipment for
semiconductor companies, sold certain real estate in both
w:st='on'>Milpitas, Ca. and
w:st='on'>
w:st='on'>Japan as it seeks to trim
costs and reduce its
debt. The move should help it cut its debt by $1.2 million and allow it
to pump another $2
million in cash back into its operations. The assets being sold
are part of an attempt
to exit businesses that it considers “no longer critical” to
its strategy.
Nanometrics will take related third quarter restructuring charges of as
much as $4
million.
New Edge Networks, a
w:st='on'>Vancouver,
w:st='on'>Wa
Internet services for businesses, is cutting its payroll of more than
340 workers by more
than 7% in connection with plans by its parent company, EarthLink Inc.,
to cut 900 jobs and
close four offices. New Edge was purchased by EarthLink a year and
a half ago for $138
million.