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January 26, 2007
name='1'>Subprime Lenders Face Market Retraction
The once booming market
for subprime mortgages is coming under greater pressure as Wall Street
firms reduce their investments in subprime mortgage lenders, the
New York Times
size='3'>reported today. Several mortgage lenders have recently
collapsed, and though the failures so far are small in number, some
industry officials are concerned that they could be the first in a wave.
The subprime sector, which produced loans worth more than $500 billion
in the first nine months of last year, could shrink significantly. The
evidence can be seen in rising default rates, increasingly strained
finances at mortgage lenders and growing doubts among investors. In
addition to the bankruptcy of Ownit Mortgage Solutions, Sebring Capital
Partners closed in December, and Mortgage Lenders Network of Middletown,
Conn., has stopped making loans through brokers. It also laid off more
than 800 employees and is under investigation by state
regulators.
href='http://www.nytimes.com/2007/01/26/business/26mortgage.html?pagewanted=print'>Read
more.
Autos
name='2'>Big Three Automakers Face New Obstacles in
Restructuring
w:st='on'>
size='3'>Detroit
three auto makers spent last year shedding tens of thousands of workers,
overhauling their marketing and shaking up their managements, but it's
becoming clear that even more drastic action may be needed to turn them
around, the Wall Street
Journal reported today. Yesterday, Ford Motor
Co. announced losses of $5.8 billion for the fourth quarter and $12.7
billion for all of 2006, the deepest deficit in the 103-year history of
the nation's No. 2 auto maker. Also expected to report losses for the
year are General Motors Corp. and DaimlerChrysler AG's Chrysler Group.
That would make 2006 the first year since 1991 that all three companies
were in the red. While three
w:st='on'>
size='3'>U.S.
size='3'>auto makers continue to labor under heavy cost burdens,
including hefty obligations to their union workers, their real challenge
is how to stop burning cash in futile efforts to manage decline. They
can no longer rely on the cost-cutting and sales-boosting strategies of
the past, such as squeezing parts suppliers for discounts, pressuring
dealers to accept excess inventory and demanding higher prices from
consumers.
href='http://online.wsj.com/article/SB116904576369978969-search.html?KEYWORDS=bankruptcy&COLLECTION=wsjie/6month'>Read
more. (Registration required.)
name='3'>New Ford Chief Shifting Automaker’s
Strategy
Ford CEO Alan R. Mulally,
recruited last fall from Boeing to run Ford, has signaled that the
“bigger-is-better” worldview that has defined Ford for
decades is being replaced, the
size='3'>New York Times reported today.
Instead of insisting that Ford reverse its slide, Mulally says that Ford
will become much smaller as forecasts show the company may fall from
second to fourth place this year in the American market, behind General
Motors,
face='Times New Roman' size='3'>Toyota
and Chrysler. Ford, whose market share dropped to 17.5 percent
last year, is in the middle of shedding 44,000 workers, a third of its
total staff. It is also closing 16 plants, and has said it does not
expect to make any money in
face='Times New Roman' size='3'>North America
size='3'>until 2009. By then, it expects to sell only about 14 percent
of the cars and trucks purchased in the
w:st='on'>
size='3'>United States
size='3'>.
href='http://www.nytimes.com/2007/01/26/automobiles/26ford.html?ref=business&pagewanted=print'>Read
more.
Holds Results and Plans Big Restatement
General Motors said that
it expected to post a profit for the fourth quarter, but that it would
delay reporting the results because its finance arm needs more time to
complete calculations, the
size='3'>New York Times reported today. At the
same time, GM said it would restate earnings for the previous five
years, including some reports that have already been revised once.
Unlike a year ago, when GM altered its 2005 annual report to show an
additional $2 billion loss, the corrections are not expected to have a
material impact on cash flow, GM’s chief financial officer,
Frederick A. Henderson, said. Retained earnings from the end of 2001
through the third quarter of 2006 were understated by $450 million to
$600 million, he said.
href='http://www.nytimes.com/2007/01/26/automobiles/26auto.html?pagewanted=print'>Read
more.
Airlines
name='5'>City of
w:st='on'>Los
Angeles
Reorganization Plan
The city of Los Angeles
said in a bankruptcy court filing that Delta Air Lines Inc.'s
reorganization plan can't be approved because of the undue authority it
gives the company to reject certain leases, the Associated Press
reported today.
size='3'>Denver
w:st='on'>Palm Beach
County
w:st='on'>
size='3'>Fla.
a
size='3'>Puerto Rico
objected, as did an ad hoc creditors’ committee and some banks. If
the disclosure statement, which details Delta's operations, is still
approved after a hearing currently scheduled for Feb. 7, the
Atlanta-based company would be permitted to begin soliciting votes to
approve its reorganization plan, which calls for it to emerge from
bankruptcy as a standalone carrier.
href='http://www.nytimes.com/aponline/business/AP-Delta-Bankruptcy.html?pagewanted=print'>Read
more.
name='6'>Mesaba Unveils Executive Bonus Plan
Mesaba Airlines filed a
disclosure statement Wednesday that revealed a $1.1 million executive
compensation plan pursuant to the company’s successful emergence
from bankruptcy,
size='3'>Bankruptcy Law360 reported yesterday.
If approved, the plan would reward Mesaba President John G. Spanjers
with up to $308,348 in bonuses. It would also give William T. Poerstel,
vice president of flight and technical operations, up to $212,282 in
bonuses, and Steven L. Holme, vice president of ground operations;
William D. Pal-Freeman, vice president of technology and services; and
Thomas M. Schmidt, vice president of finance, up to about $189,000 in
bonuses each. The money would come from an administrative expense
reserve and would be handed out in stages as the company repaid its
unsecured claims.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=17163'>Read
more. (Registration required.)
name='7'>Lenders Object to Nellson's Extension Bid
The first-lien
lenders’ committee in the Nellson Nutraceutical Inc. bankruptcy
has asked the court to deny the company’s request for an
exclusivity extension, saying the diet-food maker has compromised its
“ability to function as an honest broker” because of a
settlement agreement with a controlling shareholder and another
lender, Bankruptcy
Law360 reported yesterday. The committee,
which filed its motion Tuesday in the U.S. Bankruptcy Court for the
District of Delaware, argues that an exclusivity extension would
unfairly shift the balance of power towards the second-lien lenders.
Under the settlement agreement with Fremont and UBS AG, which has not
yet been approved, Nellson would surrender its board of directors to a
single director picked by the second-lien agent, and Fremont and the
second-lien lenders would become bound to pursue a stand-alone
reorganization in which
w:st='on'>
size='3'>Fremont
size='3'>participates in a post-reorganization capital structure,
according to the motion.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=17143'>Read
more. (Registration required.)
name='8'>Solutia Wins $400 Million DIP Increase
Judge
face='Times New Roman' size='3'>Prudence Carter Beatty
size='3'>of the U.S. Bankruptcy Court for the Southern District of New
York permitted Solutia Inc. to increase its debtor-in-possession (DIP)
financing by an additional $400 million and to extend the terms of its
loan, Bankruptcy
Law360 reported yesterday. The increase in DIP
funding marks the fifth time the company has received an extension of
the loan. Solutia’s debtors already have plans for the increase in
funds. In December the company said that it had reached an agreement to
purchase Akzo
Nobel N.V.’s stake in Flexsys, a rubber chemicals joint venture
between Akzo Nobel and Solutia, as well as Akzo Nobel’s Crystex
business in
w:st='on'>
size='3'>Japan
According to court documents, $150 million of the newest DIP loan
increase can only be used in a financial transaction to purchase the 50
percent of Flexsys that Solutia does not yet own.
face='Times New Roman' size='3'>
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=17197'>Read
more. (Registration required.)
Law
Firm, Lay Dropped from Enron Suit
A
w:st='on'>
size='3'>Texas
overseeing a massive securities class action against Enron Corp. has
granted the lead plaintiff’s request to dismiss several
defendants, including the law firm Vinson & Elkins LLP and deceased
Enron founder Ken Lay from the lawsuit,
size='3'>Bankruptcy Law360 reported yesterday.
U.S. District Judge Melinda Harmon on Wednesday issued a 13-page opinion
and order allowing the lead plaintiff, The Regents of the
size='3'>of
size='3'>California,
to pare down the pool of defendants to include Merrill Lynch & Co.,
Deutsche Bank AG, the Canadian Imperial Bank of Commerce, Barclays PLC,
Citigroup Inc. and Credit Suisse First Boston Corp.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=17171'>Read
more. (Registration required.)
name='10'>FDIC May Extend Moratorium on Retail Banks
With expiration looming
on a regulatory freeze that prohibits Wal-Mart Stores Inc. and other
retailers from acquiring bank charters, the Federal Deposit Insurance
Corp. (FDIC) is considering a plan to extend the moratorium for a year
so they and lawmakers can study the issue further, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The FDIC, which insures the deposits of roughly
60 state-chartered industrial loan companies, or ILCs, placed a
six-month moratorium on such applications in July. The original
six-month freeze ends Jan. 31, and the FDIC has scheduled a public
meeting for that day to discuss the matter. Several lawmakers, including
House Financial Services Committee Chairman Barney Frank (D-Mass.) and
Rep. Paul Gillmor (R-Ohio), are trying to create a statutory barrier
that would permanently block retailers like Wal-Mart and Home Depot from
owning bank subsidiaries. Frank and Gillmor are expected to introduce
legislation early next week that would prohibit commercial ownership of
ILCs. The House passed similar language last year but it was never
brought to a vote in the Senate.
href='http://online.wsj.com/article/SB116978042799788614-search.html?KEYWORDS=bankruptcy&COLLECTION=wsjie/6month'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB116978042799788614-search.html?KEYWORDS=bankruptcy&COLLECTION=wsjie/6month'>