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May 4, 2009
Banks Get
Tougher on Credit Line Provisions
Banks are shortening the terms on
lines of credit that have long been used by companies to avoid cash
crunches -- a sign that while lending is reviving, businesses are facing
new hurdles to obtaining credit, the
size='3'>Wall Street Journal reported today.
These revolving lines of credit typically ran for three or five years
and let companies borrow at low interest rates, in part because they
were rarely drawn upon before the credit crunch. Now, lenders are
cutting the length of many commitments to less than a year. They are
charging higher fees for the lines of credit, known as revolvers. Also,
banks will now charge more if the cost of insuring the company's debt
against default is higher instead of promising an interest rate
determined mainly by the company's credit rating.
href='http://online.wsj.com/article/SB124139573742681835.html#mod=testMod'>Read
more. (Subscription required.)
Commentary:
FHA Mortgage Loan Delinquencies a Cause for Concern
Last year banks issued $180
billion of new mortgages insured by the Federal Housing Administration,
and many of these loans have the same characteristics as subprime loans:
low down-payment requirements, high-risk borrowers, and in many cases
shady mortgage originators, according to an editorial in
today’s Wall Street
Journal. FHA now insures nearly one of every
three new mortgages, up from 2 percent in 2006. The financial results so
far are not as dire as those created by the subprime frenzy of
2004-2007, but taxpayer losses are mounting on its $562 billion
portfolio. According to Mortgage Bankers Association data, more than one
in eight FHA loans are now delinquent -- nearly triple the rate on
conventional, nonsubprime loan portfolios. Another 7.5 percent of recent
FHA loans are in 'serious delinquency,' meaning they are at least three
months overdue.
href='http://online.wsj.com/article/SB124139474675481713.html'>Read
more. (Subscription required.)
Subprime
Lender Files for Chapter 11
Subprime mortgage banker
Accredited Home Lenders Holding Co. filed for chapter 11 protection on
Friday citing “extremely challenging” conditions in the
market for home loans and residential real estate,
face='Cambria' size='3'>Bankruptcy Law360
size='3'>reported. The company said that it would start an orderly
wind-down of its operations and noted that it was in the process of
selling its remaining financial assets, including its mortgage-servicing
platform and its portfolio of bank-owned properties. San Diego-based
Accredited said Friday that it would also soon file a motion with the
bankruptcy court related to the sale of those assets. The bankruptcy
case is In re Accredited Home
Lenders Holding Co. et al., case number
09-11516, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/99599'>Read more.
(Subscription required.)
Thornburg
Mortgage files for Bankruptcy
Santa Fe, N.M.-based jumbo mortgage
lender Thornburg Mortgage Inc. on Friday said that it has filed for
chapter 11 protection, the Associated Press reported on Saturday. The
company said that it had been hit hard since mid-2007 by the mortgage
and credit market crisis. Thornburg announced its plans a month ago to
file for bankruptcy protection, liquidate assets and to go out of
business. The company laid off 130 employees in April.
href='http://www.kwes.com/global/story.asp?s=10291791'>Read
more.
Chrysler May
Seek Approval to Sell Assets by May 22
Chrysler LLC, under orders by
President Barack Obama to conduct a quick bankruptcy, may ask court
approval to auction most of its assets in three weeks, Bloomberg News
reported yesterday. Chrysler said that it would ask a judge today to
approve the sale, creating an alliance with Italy’s Fiat SpA. The
transaction would help create the world’s sixth-largest carmaker,
a merger Chrysler wasn’t able to do outside bankruptcy because of
opposition by some of its secured lenders. The company is asking
Bankruptcy Judge Arthur
Gonzalez to approve an auction quickly.
Chrysler wants a schedule that would require creditor objections to the
sale to be submitted by May 11 and an auction held by May 22. Read more.
The case is In re Chrysler
LLC, 09-50002, U.S. Bankruptcy Court, Southern
District of New York (Manhattan).
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aCdWbWzyoGYA&refer=home'>Read
more.
name='6'>Filene’s Basement Files for Chapter 11
Protection
Filene’s Basement Inc.
filed for chapter 11 today for the second time in the past decade,
Bloomberg News reported. The company filed its petition in U.S.
Bankruptcy Court in Wilmington, Del., citing more than $100 million in
liabilities and between $50 million and $100 million in assets. The case
is In re Filene’s Basement
Inc., 09-11525, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEvc6_usWbVY'>Read
more.
Tousa Gets
Approval to Keep Using Cash Collateral
Bankruptcy Judge
face='Cambria' size='3'>John K. Olson on
Thursday gave homebuilder Tousa Inc. permission to continue using its
secured lenders' cash collateral while it begins to wind down its
operations and solicit acceptances for a reorganization plan it filed
earlier this month, Bankruptcy
Law360 reported on Friday. Judge Olson’s
order grants approval of an agreement between Tousa and its secured
lenders to allow it to continue drawing on the collateral through July
29, subject to a budget agreed to by Tousa and the lenders. The extended
cash-collateral agreement preserves a paydown provision in its previous
cash-collateral agreement that had drawn the objection of a group of
minority noteholders.
href='http://bankruptcy.law360.com/articles/99566'>Read
more. (Subscription required.)
Shipping
Company Files for Chapter 11
U.S. Shipping Partners LP on
Wednesday filed for chapter 11 protection after a decrease in demand for
long-haul petroleum shipments and increased competition from other
vessels caused the shipping company to experience cash-flow
problems, Bankruptcy
Law360 reported on Friday. The Edison,
N.J.-based shipper listed nearly $717.4 million in assets and $606.5
million in liabilities. The company is one of the leading providers of
long-haul marine transportation services between ports in the United
States. The case is U.S.
Shipping Partners LP, case number 09-cv-12711,
in the U.S. Bankruptcy Court for the Southern District of New
York. Read
more. (Subscription required.)
Brooke
Trustee Looks to Convert Cases to Chapter 7
The chapter 11 trustee overseeing
insurance agency Brooke Corp.'s bankruptcy has asked a judge to convert
the proceedings to chapter 7, saying that there is no prospect of
reorganization and that a settlement agreement with several
securitization company creditors calls for the conversion bid,
Bankruptcy Law360
size='3'>reported on Friday. Albert Riederer, who was appointed as
chapter 11 trustee for Brooke Corp., Brooke Capital Corp. and Brooke
Investments Inc., asked Judge
size='3'>Dale Somers of the U.S. Bankruptcy
Court for the District of Kansas to convert the jointly administered
proceedings from chapter 11 to chapter 7 in a motion filed on Thursday.
“At this stage, there is nothing left to be done with respect to
these three debtors that could not be accomplished in a more streamlined
chapter 7 proceeding,” according to Riederer's chapter 7 bid.
Riederer tried to get a settlement agreement with several securitization
company creditors (including Bayerische Hypo und Veriensbank AG, DZ Bank
AG and the Bank of New York Mellon) approved in January, but the
bankruptcy court partly denied the motion.
href='http://bankruptcy.law360.com/articles/99570'>Read
more. (Subscription required.)
Citigroup
May Need Up to $10 Billion in New Capital
Citigroup Inc. may need to raise
as much as $10 billion in new capital as the government continues
negotiations with banks over the results of the government’s
financial “stress tests,” the
size='3'>Wall Street Journal reported on
Saturday. The bank, like many others, is negotiating with the Federal
Reserve and may need less if regulators accept the bank's arguments
about its financial health. The discussions stem from the tests being
run by the Fed and the Treasury to assess the health of the country's 19
largest banks. Those results will be released on Thursday, later than
initially planned. The tests will predict each bank's potential losses
in certain asset categories under dire economic scenarios. The
government is expected to direct several banks, including Bank of
America Corp., to bolster their capital by raising new funds or
converting existing securities into common stock.
href='http://online.wsj.com/article/SB124118983425877399.html'>Read
more. (Subscription required.)
Analysis:
Tests of Banks May Bring Hope More than Fear
As results of the bank stress
tests are to be released this week and include more detailed information
about the financial health of individual banks, the Obama administration
seems prepared to argue that while a few banks may need additional
money, the broad financial system is healthier than many investors fear,
the New York Times
reported today. At the core of the test will be a
judgment about whether each of the country’s 19 biggest banks has
enough money to withstand a deep recession and, if not, how much more
capital it needs to be able to lend at a healthy pace, according to
regulators. Unless regulators change course this week, the tests are
also likely to forecast potential losses in individual slices of the
credit markets, like residential mortgages, credit card loans and
commercial loans, for each bank over the next two years.
href='http://www.nytimes.com/2009/05/04/us/politics/04stress.html?_r=1&ref=business&pagewanted=print'>Read
more.
name='12'>New York Timesto File
Notice It Will Close Boston
Globe
The
face='Cambria' size='3'>New York Times Co.
said last night that it is notifying federal authorities of its plans to
shut down the Boston
Globe, the
size='3'>Washington Post reported today. After
down-to-the-wire negotiations did not produce millions of dollars in
union concessions, the Times Co. said that it will file today a required
60-day notice of the planned shutdown under the Worker Adjustment and
Retraining Notification Act. The move could amount to a negotiating ploy
to extract further concessions from the
size='3'>Globe's unions, since the notice does
not require the Times Co. to close the paper after 60 days. The
deadline, however, would put the unions under fierce pressure to produce
additional savings, and the Boston Newspaper Guild promptly called the
step a 'bullying' tactic by the company.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/03/AR2009050300269_pf.html'>Read
more.
to End Certain Offshore Tax Rules
President Barack Obama will propose
today to outlaw three offshore tax-avoidance techniques that U.S.
companies such as Caterpillar Inc. and Procter & Gamble Co. want to
use to save $190 billion over the next decade and make it riskier for
Americans to stash money in tax-haven banks, Bloomberg News reported.
Obama and Treasury Secretary Timothy Geithner will target a strategy
that allows U.S.-based multinational companies to effectively hide from
the Internal Revenue Service the role their foreign subsidiaries play in
shifting profits into low-tax jurisdictions such as the Cayman Islands,
an administration official said. The proposal, affecting tax rules known
as “check the box,” would net $86.5 billion in revenue
between 2011-19.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a4.7CIfqd5h0&refer=home#'>Read
more.
New York
Fed Chairman's Ties to Goldman Raise Questions
While the Federal Reserve Bank of
New York shaped the federal government’s response to the financial
crisis late last year, the bank’s chairman, Stephen Friedman, sat
on Goldman's board and had a large holding in Goldman stock,
which—because of Goldman's revised status as a bank holding
company—was a violation of Federal Reserve policy, the
Wall Street Journal
size='3'>reported today. Goldman received speedy approval to become a
bank holding company in September and receive a $10 billion capital
injection soon after. The New York Fed asked for a waiver, which, the
Fed granted nearly three months later. While it was weighing the
request, Friedman bought 37,300 more Goldman shares in December.
Friedman also was overseeing the search for a new president of the New
York Fed, and his choice was a former Goldman executive.
href='http://online.wsj.com/article/SB124139546243981801.html#mod=testMod'>Read
more. (Subscription required.)
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