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January 19, 2010
Airlines files for Bankruptcy Protection
Japan Airlines Corp. has filed
for bankruptcy protection, taking the first step in a turnaround that
the Japanese government hopes will end its dependence on state loans and
return it to profitability, the Deal Pipeline reported
today. Asia's biggest carrier filed for a court-led rehabilitation,
Japan's version of chapter 11, according the Enterprise Turnaround
Initiative Corp. (ETIC). The ETIC, a state-backed fund, has agreed to
spend about ¥900 billion ($10 billion) to finance JAL's
restructuring. JAL has been bailed out three times by the Japanese
government over the past ten years and has made three losses in the past
four years, dragged down by high labor costs, old equipment and by
operating unprofitable routes.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005378168'>Read
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Paperwork
Woes Plague Mortgage Plan
Thousands of homeowners
participating in the Obama administration's foreclosure-prevention plan
could miss a government deadline for completing necessary paperwork,
putting them at risk of disqualification, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported yesterday. The program, a cornerstone of President
Barack Obama's housing-rescue effort, was launched in February and has
been bedeviled by paperwork problems from the start. Many companies have
given borrowers modified mortgage terms on a trial basis, based on
verbal information, and have struggled to get the documents required to
finalize mortgage modifications. According to data released by the
Treasury Department Friday, more than 900,000 borrowers have begun trial
modifications under the program, but just 7 percent of them have
received permanent changes so far. Borrowers must make three trial
payments and provide a hardship affidavit and other paperwork to receive
a permanent mortgage fix. The administration last month gave borrowers
who were current on their payments after at least three months an
extension until Jan. 31 to provide needed paperwork. But the
administration doesn't plan to extend that deadline, Assistant Treasury
Secretary Michael Barr said Friday.
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Information from Chrysler on Property Taxes
The city of Detroit and two
nearby counties have filed an objection to the disclosure plan of Old
Carco LLC, saying that a lack of detail leaves their property tax
situation up in the air,
size='3'>Bankruptcy Law360 reported on Friday.
Detroit and the treasurers for Wayne and Oakland counties asked the U.S.
Bankruptcy Court for the Southern District of New York to require Old
Carco to explain who will own several parcels of property in their
districts after the bankruptcy concludes. Though it's known that most of
the company's assets will pass to Chrysler Group, the disclosure
statement's alleged lack of clarity on the ultimate ownership of real
and personal property parcels in the region leaves the municipality's
fiscal situation unclear, the municipalities said. The county treasurers
support the disclosure hearing going forward, but want the statement to
include a “clear description” of the treatment of the
properties, they said.
href='http://bankruptcy.law360.com/print_article/143779'>Read more.
(Subscription required.)
name='4'>Denver Post
size='3'>Owner Plans Pre-packaged Chapter 11
Filing
The holding company for MediaNews
Group Inc. newspapers, including the
size='3'>Denver Post and
face='Cambria' size='3'>San Jose Mercury News,
said Friday that it is preparing to file a pre-packaged chapter 11 plan,
the Associated Press reported on Saturday. The filing would be at least
the 13th bankruptcy filing by a U.S. newspaper publisher in the past 13
months. The owners of dozens of newspapers have been pushed into
bankruptcy protection as the recession and competition from the Internet
have sapped advertising revenue. MediaNews' management and newspaper
operations, employees and vendors won't be affected by the holding
company's restructuring, MediaNews Group Chairman and CEO William Dean
Singleton said. Under the plan, the company's debt would fall from about
$930 million to $165 million. Senior lenders would swap debt for stock,
the company said. The group of 116 lenders, led by Bank of America,
would hold a majority of stock but not voting control.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/16/AR2010011600620_pf.html'>Read
more.
Capmark
Investments Follows Parent Company into Chapter 11
Investment advisory firm Capmark
Investments LP, a manager of more than $1.7 billion in real estate and
mortgage-related investments, has followed its parent company into
bankruptcy with a chapter 11 filing of its own, Bankruptcy
Law360 reported on Friday. Capmark Investments LP filed for
bankruptcy Friday in the the U.S. Bankruptcy Court for the District of
Delaware, noting that its filing does not include any of the funds
managed by Capmark Investments, or its general partnerships in the
funds. In documents filed with the bankruptcy court, Capmark Financial
has already asked that the two bankruptcy cases be jointly administered.
A hearing on the matter is scheduled for today. The subsidiary's filing
is In re Capmark Investments
LP, case number 10-10124, in the U.S.
Bankruptcy Court for the District of Delaware. The parent company's
filing is In re Capmark
Financial Group Inc., case number 09-13684, in
the U.S. Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/print_article/143910'>Read
more. (Subscription required.)
Claw Back TARP Cash
Showing little sympathy for
critics of his proposed fee on big financial institutions, President
Barack Obama vowed to recover all the cash taxpayers spent on the
Troubled Asset Relief Program, saying that he won't let Wall Street
'take the money and run,' the
size='3'>Wall Street Journal reported on
Saturday. Obama said that the large banks that are gearing up to dole
out billions in bonuses can afford to pay his planned 'financial crisis
responsibility fee,' which is designed to generate $90 billion over 10
years. The proposed tax, which must be approved by Congress, has
triggered stiff opposition from the banking sector. Opponents say it
will hinder banks' ability to lend and unfairly saddle Wall Street with
the cost of the auto-sector bailout. Many banks would be hit by the fee,
even though they have already repaid their TARP funds. However, Obama
said that the criticism ignores the fact that the entire financial
sector benefited not only from the bailout, but from government aid to
American International Group Inc. and homeowners, and the Federal
Reserve's emergency measures.
href='http://online.wsj.com/article/SB10001424052748703959804575006550254834626.html?mod=WSJ_newsreel_us'>Read
more. (Subscription required.)
Generation
Brands Reorganization Plan Confirmed
Bankruptcy Judge
face='Cambria' size='3'>Peter J. Walsh on
Friday confirmed lighting fixture and ceiling fan maker Generation
Brands' reorganization plan to cut $150 million of the company's
debt, Bankruptcy
Law360 reported on Friday. The plan also
reduces interest expenses and extends maturities until 2014, the company
said. Generation Brands said the confirmation clears the way for the
company to emerge from chapter 11 by the end of January. Upon its
emergence from bankruptcy, the company said, it will receive a $20
million equity investment from an affiliate of Quad-C Management Inc.,
Generation Brands' principal stockholder.
href='http://bankruptcy.law360.com/print_article/143892'>Read
more. (Subscription required.)
Lehman's
Bankruptcy Tab Climbs
The lawyers, financial advisers
and consultants working to unwind Lehman Brothers Holdings Inc. in
bankruptcy racked up $568.7 million in fees through December 2009,
the Wall Street
Journal reported on Friday. In papers filed
with the U.S. Bankruptcy Court in Manhattan on Thursday, Lehman detailed
the fees it paid to the professionals working on its chapter 11 case
between its Sept. 15, 2008, bankruptcy filing and the end of December
2009. All told, 28 law firms, financial advisers, investment banks and
consulting firms were paid $568.7 million in fees and expense
reimbursements through December. The firms working on the case are
subject to 10 percent fee hold backs, which weren't included in the
total.
href='http://online.wsj.com/article/SB10001424052748703657604575005100938481936.html?mod=WSJ_business_IndustryNews_DLW'>Read
more. (Subscription required.)
End of TALF
Could Spell Problems for Some Credit Issuers
Some kinds of consumer-loan-backed
securities will be at more of a disadvantage than others when the
Federal Reserve in March winds down a program it has used to prop up the
market, according to a report in yesterday’s Wall Street
Journal. Stronger issuers and the higher-quality bonds won't be
affected, industry participants say, but weaker issuers, with deals
backed by loans more likely to underperform, will lose out. Michael Wade
of Barclays Capital in New York said the end of the central bank's Term
Asset-Backed Securities Loan Facility, or TALF, will have little effect
on some asset classes like prime auto and credit cards. For others, such
as floorplan, private student loans, retail credit cards and subprime
auto, the expiration of TALF is likely to have a bigger effect, said
Wade. TALF, launched last March, offers cheap loans that investors use
to buy newly created bonds backed by auto, student and equipment loans,
as well as credit card debt. The market for these asset-backed
securities froze in 2008 as investors lost confidence in the collateral
backing them.
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Court Confirms Reader's Digest
Reorganization Plan
A bankruptcy court on Friday
confirmed Reader's Digest Association Inc.
face='Times New Roman'>’
face='Times New Roman'>s reorganization plan, clearing the way for the
publishing company to emerge from bankruptcy by the end of the month,
Reuters reported on Friday. The plan calls for Reader's Digest
Association to reduce its total debt by 75 percent to $555 million from
$2.2 billion, by effectively transferring ownership of the company to
its lenders through a swap of senior secured debt for equity. The
87-year-old publisher of 50 editions of Reader's Digest and
other magazines filed a pre-packaged chapter 11 in August 2009. The case
is In re The Reader's Digest Association Inc., U.S. Bankruptcy
Court, Southern District of New York, No. 09-23259.
href='http://www.google.com/search?q=In+re+Reader%27s+Digest+Association+Inc.&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a'>Read
more.
name='11'>Commentary: Cool Anger over Wall Street Bonuses by
Governing How They Are Handed Out
While many sides argue over how much is the right
amount to pay a Wall Street trader, there is no objective, scientific
answer to such a question, according to an editorial in today's
Washington Post. Therefore, it is best left to market forces and
the decisions of private-sector figures, such as executives and the
boards of directors who are supposed to hold them accountable, on behalf
of shareholders, according to the editorial. There are two provisos:
First, government's say on pay properly grows when financial
institutions are living off taxpayer support, as they have been for much
of the past two years. Second, even when taxpayer support ends, the
public has a legitimate interest in financial stability, including an
interest in ensuring that Wall Street's pay systems are not
destabilizing. The Federal Deposit Insurance Corp., at the urging of
Chairwoman Sheila Bair, has begun formal consideration of a proposal to
link banks' deposit insurance fees' to their adoption of payment rules.
There are serious questions about whether the FDIC is the appropriate
agency to spearhead such an effort. However, the general idea that banks
should be free to pay people as much as they want, as long as the method
of payment is not financially destabilizing, makes sense, according to
the editorial. Boards of directors and shareholders must also take a
much more active role in ensuring sound pay policies, according to the
editorial.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/18/AR2010011803731_pf.html'>Read
more.
AIG Tries to Defuse
Bonus Pay Showdown
American International Group Inc. is seeking to reduce
and pay out early a batch of retention payments to employees at its
financial products division, as the insurer tries to defuse a potential
showdown over the bonuses, the Wall Street Journal reported
yesterday. AIG is obligated to pay out $195 million in retention bonuses
in March to AIG Financial Products employees. The company recently
discussed a proposal to make the payment several weeks early if
employees agree to have it reduced by 10 to 15 percent. AIG wants to
appease demands from U.S. pay czar Kenneth Feinberg, who has told the
company to reduce its March 2010 retention awards and insisted that
pledges from AIGFP employees to return portions of their March 2009
retention payments be fully honored. AIG hopes to satisfy demands that
some of the earlier bonuses paid to employees of the unit be returned.
AIG is currently scheduled to pay out another $195 million in retention
awards by March 15. The company is hoping to reduce those awards by $26
million, which would enable the full $45 million in pledged amounts from
the March 2009 retention payments to be repaid.
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