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December 22, 2009
Fee Fight Mounting for Philadelphia Newspapers
A skirmish over fees for a chapter 11 financing package that never reached consummation is mounting in the bankruptcy of Philadelphia Inquirer and the Philadelphia Daily News, The Deal Pipeline reported today. The unsecured creditors' committee and the U.S. Trustee have opposed a claim by local real estate developer Bruce Toll, who is among the owners of Philadelphia Newspapers LLC and is part of a bidding group in an upcoming bankruptcy auction. Toll and others had proposed debtor-in-possession financing for the publisher, although after extensive litigation the debtor opted for a DIP loan from prebankruptcy lenders. Toll has submitted a roughly $65,000 claim for attorneys fees and other expenses related too the loan. Read more (subscription required).
name='2'>Pay Increase for AIG Executive Permitted
A top executive of the American International Group has been granted a more than $4 million increase in a pay package because the executive has decided to remain with the company, the Associated Press reported yesterday. The Obama administration's pay adviser, Kenneth R. Feinberg, approved a request by AIG to grant the executive a long-term compensation package that included stock options with a current value of $3.26 million and an additional incentive award of up to $1 million. The package comes on top of the person's 2009 base salary of $450,000. In a letter released by the Treasury Department on Monday, Feinberg said he was granting the request so that the executive's long-term package would be comparable to those already granted to AIG's other top 25 executives. The executive had been planning to leave the company and had not been granted long-term compensation benefits. In granting the compensation package request, Feinberg said it was appropriate 'to ensure that the employee contributes to AIG's long-term success and, ultimately, AIG's ability to repay taxpayers.' In a separate ruling, Feinberg said on Monday that he was amending the pay restrictions for Citigroup to expand the number of executives covered by special overseas living allowances to five from four. Read more.
name='3'>Hayes Lemmerz Emerges from Bankruptcy
Bankrupt auto parts maker Hayes Lemmerz International Inc. emerged from chapter 11 on Monday after slashing its debt and costs to better match the recent decline in auto output, Reuters reported yesterday. The Northville, Mich.-based company emerged with $240 million in debt, down from the $720 million it had when it filed for bankruptcy in May. The company also sought bankruptcy protection in 2001 and emerged from that filing in 2003. The company plans to diversify its operations globally to lessen its reliance on the United States. It also has said that it expects deep cost cuts to help it withstand the steep decline in global auto production that have halved the company's sales. The company's bankruptcy plan transferred 84.5 percent of the company's post-bankruptcy equity to lenders that provided the company's debtor-in-possession financing. The rest of the company's equity will be divided among secured lenders, bondholders and the Pension Benefit Guaranty Corp. PBGC became the trustee of the company's defined benefit pension plan and its approximately 4,700 participants, which the agency said was underfunded by $106 million. The company said on Monday that it will emerge with less than $75 million in pension and retiree medical liabilities. Hayes, the world's largest wheelmaker, reached a deal in October with unions and retirees to cut health insurance benefits for more than 2,000 families of former staff. The case is In re Hayes Lemmerz International Inc., U.S. Bankruptcy Court, District of Delaware, No. 09-11655. Read more.
name='4'>Ponzi Probe Ensnares Indiana Businessman
An Indiana businessman whose lavish lifestyle was featured on a television special about the super-rich is under investigation for running an alleged Ponzi scheme that sold supposedly safe, but high-yielding, notes to elderly investors and used the money to invest in other companies he controls, the Wall Street Journal reported yesterday. The federal investigation into Timothy S. Durham, who is also known for his extensive car collection and 30,000-square-foot mansion, is roiling Indiana politics, including Indiana Gov. Mitch Daniels. Agents from the Federal Bureau of Investigation raided two of Durham's companies last month, and the U.S. Attorney's office in Indianapolis filed documents in federal court accusing Durham and at least some of his companies of defrauding investors in a scheme that may involve hundreds of millions of dollars. No criminal charges have been filed. The probe centers on Fair Finance Co., an Akron, Ohio, investment firm that has sold investment certificates to Ohioans since 1934 and invested the money in consumer-finance loans such as health-club contracts. Read more (subscription required).
More Bailed-Out Community Banks Failing to Pay U.S. Dividends
A growing number of community banks that got federal bailouts are failing to pay quarterly dividends they owe to the government, including two banks that got aid after congressional intervention on their behalf, according to data released Monday by the Treasury Department, the Washington Post reported today. Fifty-five banks failed to make dividend payments in November, a 67 percent jump over the number of delinquent banks three months earlier. The missed payments reflect the struggles of many community banks, which have not benefited from the Wall Street windfalls that have helped return the largest banks to profitability. Many smaller banks focused their lending on real estate development in recent years, particularly in the suburbs of sprawling Sun Belt cities. The banks now are losing money as developers default on those loans. The Obama administration has expressed concern about the problems faced by smaller banks because they play a key role in the economy through their lending to small businesses. President Obama plans to meet at the White House on Tuesday with a group of community bankers to discuss ways to spark increased lending. The president met earlier this month to discuss the same subject with the heads of the nation's largest banks, which have not increased lending despite renewed profitability of their investment banking operations. Treasury is planning to offer banks about $30 billion in federal aid for a mix of programs to support lending to small businesses, according to people familiar with the matter. Read more (free subscription required).
name='6'>GM Hires Finance Chief from Microsoft
General Motors' chief executive, Edward E. Whitacre Jr., continued his hurry-up offense approach to remaking the automakers' management ranks Monday, naming Christopher P. Liddell, who led a recent $3 billion cost-cutting effort at Microsoft, as its chief financial officer and a vice chairman, the New York Times reported today. Liddell, whose departure from Microsoft was announced last month, is the first high-ranking executive hired by GM under Whitacre, who has also been elevating internal executives to more senior positions and creating a culture of greater accountability. When Microsoft announced in November that Liddell would leave at the end of 2009, the company said in a statement that he was 'looking at a number of opportunities that will expand his career beyond being a CFO.' There was considerable speculation at the time that he would move on to be the chief executive at another software company. At Microsoft, Liddell carried out a plan this year to help weather the economic downturn that included the software company's first mass layoffs, wage freezes and other spending cutbacks. Liddell became Microsoft's chief financial officer in 2005 after holding the same position at International Paper Company. Among his expected near-term responsibilities at GM will be to position the company for a public stock offering as soon as next year. Read more.
name='7'>YRC Trucking Makes Headway on Needed Debt Deal
U.S. trucking giant YRC Worldwide said on Monday that it had received the needed approvals from lenders and pension funds to allow it to proceed with a critical debt-for-equity exchange offer that could keep the company out of bankruptcy, Reuters reported yesterday. YRC has been trying to get a majority of its bondholders to agree to swap about $536.8 million in debt for equity. Last week after failing to get sufficient bondholder approval the company lowered the threshold, a move subject to approval by lenders. YRC said Monday that lenders had approved the needed amendments, and the U.S. Securities and Exchange Commission had declared the company's registration statement effective. In addition, the revisions to the minimum tender conditions have also been consented to by the required multi-employer pension funds involved in a contribution deferral agreement. YRC said last week it must convince bondholders to swap debt for equity by Dec. 31 in order to avoid a $19 million payment of interest and fees that the company said it cannot make if the swap fails. The company has said the debt-for-equity swap is crucial to its restructuring. Read more.
name='8'>Hawkeye Energy Unit Files Prepackaged Chapter 11
Ethanol producer Hawkeye Energy Holdings LLC said its unit, Hawkeye Renewables LLC, filed for bankruptcy protection under a prepackaged plan that will convert debt into equity, Reuters reported yesterday. The company added that its other units Hawkeye Growth, which owns and operates ethanol plants in Menlo and Shell Rock, Iowa and Hawkeye Gold, which is responsible for marketing ethanol and distillers grains, were not part of the reorganization and are unaffected by the bankruptcy filing. The company listed assets in the range of $100 million to $500 million and debt in the range of $500 million to $1 billion. The case is In re Hawkeye Renewables LLC, U.S. Bankruptcy Court, District of Delaware, No. 09-14461. Read more.
name='9'>Citadel Broadcasting Files for Chapter 11
Citadel Broadcasting Corp., the owner of radio stations in cities including New York and Chicago, filed for chapter 11 protection to shed $1.4 billion of debt, Bloomberg News reported on Sunday. The company listed assets of $1.4 billion and debt of $2.5 billion in its chapter 11 filing. Forstmann Little & Co., a New York-based private-equity firm, owns 29 percent of the company's common stock, according to court papers. Citadel sought bankruptcy to implement a prepackaged plan under which it has the support of 60 percent of its secured lenders, the company said. The plan will convert a $2.1 billion loan into a new $762.5 million term loan, giving senior lenders a pro rata stake and 90 percent of the shares in the reorganized company. The case is In re Citadel Broadcasting Corp., 09-17422, U.S. Bankruptcy Court, Southern District of New York (Manhattan). Read more.
name='10'>Heartland Publications Files for Chapter 11
U.S. newspaper publisher Heartland Publications LLC filed for chapter 11 protection yesterday, hurt by a fall in advertising revenue due to the economic downturn and growing competition from Internet-based alternatives, Reuters reported yesterday. Heartland Publications reported about $134.3 million in total assets and about $166.2 million in total liabilities as of Oct. 31, court documents show. Heartland Publications currently owns 50 community newspapers mainly in the Southern part of the United States. The case is In re Heartland Publications LLC, U.S. Bankruptcy Court, District of Delaware, No. 09-14459. Read more.
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