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February 12, 2010
Dodd to Work with Corker on
Financial Regulatory Overhaul Measure
Senate Banking Chairman Christopher Dodd (D-Conn.)
said yesterday that he would work with Sen. Bob Corker (R-Tenn.) to
strike a bipartisan deal on legislation to revamp the nation's financial
regulatory structure after he failed to reach an agreement with Banking
ranking member Richard Shelby (R-Ala.), CongressDaily reported
today. Corker has already reached across the aisle, working with Sen.
Mark Warner (D-Va.) on language to set up a procedure to unwind firms
whose collapse would disrupt financial markets, putting an end to
propping up firms 'too big to fail' with federal dollars. Corker and
Warner have been leaning toward a structure to force most firms through
a specialized bankruptcy process. However, in a few exceptional cases,
it would allow a resolution process like the FDIC has for failed banks,
a structure favored by the Obama administration.
CCS Medical Receives
Approval for Its Second Reorganization Plan
Bankrupt CCS Medical Holdings Inc. has received
approval of its second reorganization plan, which will explore either a
sale or a reorganization of its debt, the Deal Pipeline reported
yesterday. Bankruptcy Judge Christopher Sontchi approved the
direct-to-home seller of medical supplies' disclosure statement on
Tuesday, Feb. 9, court papers said. According to the plan, if bidders
offer less than $295 million in cash for the bankrupt company, it will
instead do a debt-for-equity swap, which would give its first-lien
lenders $200 million in new debt and 100% of the reorganized equity.
Through the sale, the company will look to dispose of either its
reorganized equity or substantially all of it assets. The confirmation
hearing is scheduled for March 11.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005389588'>Read
more. (Subscription required.)
Taylor Bean Creditors Seek
Authority to Sue Farkas, Insiders
Creditors of Taylor Bean & Whitaker Mortgage Corp. are asking a
bankruptcy judge for authority to sue company insiders, including former
leader Lee Farkas, Dow Jones Daily Bankruptcy Review reported
today. The creditors' committee said in court filings on Tuesday that
Taylor Bean's lawyers have 'conflicts or other concerns that make it
unable or unwilling' to pursue the suits, but the committee said the
company is backing its efforts. The committee says that it plans to
pursue claims against Farkas, colleague Coda Roberson III and 'certain
of their entities' - namely 3201 Partnership, Uplead Technology LLC,
South Towne Capital Holdings LLC and Dine Design Group Inc. - in
addition to other insiders over loans made by the mortgage lender.
Bankruptcy Judge Jerry Funk has scheduled a Feb. 19 hearing to
consider the committee's request.
Prosecutors Set Sights on
Madoff Kin
Federal prosecutors are pursuing criminal tax-fraud
cases against Bernard Madoff's brother and sons, the Wall Street
Journal reported today. His brother, Peter Madoff, was the chief
compliance officer of Bernard L. Madoff Investment Securities LLC. Sons
Mark and Andrew Madoff helped run the firm's market-making division,
which was separate from the investment arm where Bernard Madoff
perpetrated his multibillion-dollar Ponzi scheme. Through
representatives, they all have denied knowledge of the fraud. Peter,
Mark and Andrew Madoff were tax clients of David Friehling, who pleaded
guilty last year to criminal charges of preparing false tax returns for
Madoff and other unnamed Madoff investors and also admitted to signing
off on sham audits of the Madoff firm. Separately, Irving Picard,
the court-appointed trustee in charge of recovering assets for Madoff's
investors, in October alleged in a civil lawsuit that four Madoff family
members who worked at the Madoff firm used it as a 'piggy bank' to pay
for personal expenses such as homes, cars and boats, as well as
credit-card charges for restaurants and vacations.
href='http://online.wsj.com/article/SB10001424052748704337004575059753363224076.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Judge Approves
LyondellBasell's Deal with Noteholders
Bankruptcy Judge Robert Gerber yesterday approved a settlement
between LyondellBasell Industries AF and a group of noteholders that
clears an obstacle in the chemical company's bid to exit bankruptcy, Dow
Jones Daily Bankruptcy Review reported today. The settlement resolves a
series of disputes between LyondellBasell and owners of about $475
million in notes. Lyondell says that the deal is a key step in moving
the company closer to negotiating with creditors to restructure about
$20 billion in debt. Unsecured creditors, who are battling
LyondellBasell's bid to exit bankruptcy, opposed the noteholder
settlement because they said that it binds the company to pursuing its
proposed plan and will potentially 'stalemate' the case. Under the
settlement approved Thursday, the noteholders, who own so-called Arco
and Equistar notes, will see an improved recovery in LyondellBasell's
reorganization in exchange for dropping several legal battles against
the company. The deal calls for LyondellBasell's restructuring plan to
provide the noteholders new stock based on the company's entire
enterprise rather than just based on its U.S. operations, as was
originally proposed in the plan. The pact also reduces senior lender
claims, according to court documents.
Tribune Co. Seeks to Block
Challenge by Junior Creditors
Tribune Co. and a group of senior creditors yesterday
sought to block an attempt by junior creditors to challenge the legality
of Sam Zell's 2007 leveraged buyout of the Chicago-based media
conglomerate, the Chicago Tribune reported today. The moves were
part of a broader effort by Tribune Co., owner of the Chicago
Tribune, and its creditors at all levels to stake out negotiating
positions ahead of a key Feb. 18 hearing in Wilmington, Del., that could
help determine whether the company emerges from bankruptcy sooner or
much later. At issue is a Feb. 1 filing by the unsecured creditors'
committee seeking Carey's permission to bring a case alleging that the
Zell-led LBO was an instance of fraudulent conveyance, meaning the
transaction itself rendered the company insolvent from day one. If the
committee was able to prove its charges, Judge Kevin Carey could
wipe out more than $8.6 billion in claims owned by the senior creditors
who financed the deal, leaving a much bigger pie for junior creditors
further down the claims hierarchy.
href='http://www.chicagotribune.com/business/ct-biz-0211-tribune-20100211,0,5210535.story'>Read
more.
Flying J Files
Reorganization Plan
Bankrupt oil company Flying J Inc. filed a
reorganization plan yesterday that proposes to pay back all of its
senior creditors in full by selling most of its assets, including its
travel center and trucking operations, Reuters reported yesterday.
Flying J, based in Ogden, Utah, filed for bankruptcy in December 2008,
saying that it had been pushed to bankruptcy by a drop in oil prices and
tighter credit markets.The reorganized company will include a minority
stake in the travel center or highway hospitality business, a 50 percent
stake in its financial and fuel card services business, the 30,000
barrel per day NSL Refinery in Utah and the Transportation Alliance
Bank, an FDIC-insured business that makes loans to the transportation
industry. It will continue to have some real estate holdings as well.
The case is In re Flying J Inc., U.S. Bankruptcy Court, District
of Delaware, No. 08-13384.
href='http://www.reuters.com/article/idUSSGE61A0HU20100211'>Read
more.
W.R. Grace Reports No
Opposition to $1.2 Billion Exit Financing Deal
W.R. Grace & Co. said that it has encountered no opposition to its
decision to enlist Goldman Sachs Group Inc. and Deutsche Bank AG to put
together $1.2 billion worth of bankruptcy-exit financing, Dow Jones
Daily Bankruptcy Review reported today. Awaiting a decision from
a Bankruptcy Judge Judith Fitzgerald on whether she'll recommend
confirmation of its chapter 11 plan, Grace this week filed papers
certifying there were no objections to its agreements with the lenders,
which stand to collect as much as $30 million in fees for finding the
money. W.R. Grace will need the funds to cover commitments in its
chapter 11 plan, which the company hopes to be able to implement by
June. The Maryland-based specialty chemical company's chapter 11 plan is
the product of a settlement involving asbestos claimants and
stockholders. Asbestos claimants will get a trust to cover their
damages, and stockholders will get to keep their shares in a company
that will operate free from the overhang of hundreds of thousands of
lawsuits.
District Judge Hears
Arguments on Stanford Bankruptcy Issue
U.S. District Judge David Godbey said that he will try
to rule by the end of the month on whether to put jailed Texas financier
R. Allen Stanford's businesses into bankruptcy, the Associated Press
reported yesterday. Greg Blue, an attorney for the investors, said that
placing the companies in bankruptcy would give fleeced investors a voice
in a potential recovery. Receiver Ralph Janvey, court-appointed to
return as much money as possible to investors, opposes bankruptcy. The
government accuses Stanford of running a $7 billion Ponzi scheme by
promising inflated returns on certificates of deposit at his Antiguan
bank. He also is accused of skimming more than $1 billion for personal
use.
href='http://www.chron.com/disp/story.mpl/ap/business/6862443.html'>Read
more.
Class-Action Suit
A U.S. federal judge denied MBIA Inc.'s motion to
dismiss a class-action fraud case brought after the company decided to
split its bond-insurance unit in the wake of a meltdown in credit
markets, the Wall Street Journal reported today. A year ago, MBIA
divided the operations as part of an attempt to restart its business of
selling financial guarantees on bonds issued by cities, water
authorities and other public-finance entities. Its main unit was left
with fewer claims-paying resources for its troubled mortgage exposures,
and was downgraded by several credit-ratings firms. Banks, investment
funds and other policyholders balked at the plan when they were left
holding contracts with what they argued was a financially weaker insurer
when MBIA transferred about $5 billion in capital from its main unit to
another company that guarantees only U.S. municipal bonds. MBIA also
moved about $537 billion of U.S. public finance exposure in force to the
new company, called National Public Finance Guarantee Corp. A group of
hedge funds, including Aurelius Capital Partners LP and funds managed by
Fir Tree Partners, brought the lawsuit. A decision in state court on a
motion to dismiss a similar case brought there could come next
week.
href='http://online.wsj.com/article/SB10001424052748703382904575059601103875406.html?mod=WSJ_business_IndustryNews_DLW'>Read
more. (Subscription required.)
Georgia Loosens Bank
Lending Limits
Georgia, the top state in bank failures, is making it
easier for banking survivors to deepen their exposure to a single
borrower, the Wall Street Journal reported today. Georgia Gov.
Sonny Perdue (R) yesterday signed into law a bill that allows banks
chartered by the state to exceed current lending limits if a borrower
hasn't fallen behind on payments. For decades, it was illegal for such
banks to pour more than 25 percent of their total capital into an
existing lending relationship secured with collateral or more than 15
percent to an unsecured borrower. Some bankers hailed the new law, which
cleared both chambers of the Georgia General Assembly by a combined vote
of 217-1, as an important step toward stabilizing financial institutions
throughout the state. Supporters also worried that Georgia banks would
lose some of their best borrowers unless the limits were loosened. Loan
losses since the housing bubble burst have eaten into capital levels at
many of the 251 state-regulated banks that existed as of Dec. 31, 2009,
causing them to collide with the caps even when trying to extend
additional credit to longtime, highly reliable borrowers.
href='http://online.wsj.com/article/SB10001424052748704337004575059823971151054.html?mod=WSJ_business_whatsNews'>Read
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