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August 4, 2009
Senator Ready to Push
Mortgage Cramdown Measure Again
Senate Majority Whip Dick Durbin (D-Ill.) yesterday
repeated a pledge to push for a cramdown measure allowing bankruptcy
judges to modify home mortgages, even though his last effort fell 15
votes short in April on a key test,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday. Durbin said that his bill, which is
bitterly opposed by the banking industry, is necessary because the
economy remains gripped by the foreclosure crisis despite a bounce in
new home sales last month. He added that he might include new sweeteners
such as giving homeowners extra time to stay in their homes by letting
them pay fair-market value during foreclosure proceedings. In addition,
Durbin said, there should be federal funds for cities that implement
mandatory mediation proceedings for foreclosures, but banks that do not
meet an Obama administration goal to have started 500,000 loan
modifications by Nov. 1 should face penalties, he added. One of those
penalties could be a bankruptcy option, in which judges would have the
ability to lower a loan to its fair-market value. 'That is, at the end
of the rope, a possibility,' Durbin said. 'I think it is an incentive
for action.'
FTC Aims to Curb Misleading
Debt-relief Companies
A rising tide of complaints about companies that
promise to provide debt relief for consumers, but don't deliver, spurred
the Federal Trade Commission last week to propose modifications to its
rules defining and governing telemarketers as one way to control shady
debt-relief operations, the Associated Press reported yesterday. The aim
is to rein in unscrupulous companies that tout their ability to settle
debts for ''pennies on the dollar,'' but frequently take hundreds or
thousands of dollars in fees. The proposal calls for a regulatory switch
that would apply telemarketing rules to debt-relief companies that
receive telephone calls in response to advertising, as well as to those
that reach out to consumers. It would ban debt-relief companies from
charging fees before providing services; prohibit them from making
misleading claims about how fast they can help or how much money they
can save for someone, and from masking for-profit companies as nonprofit
agencies. The new rules would also require debt-relief companies to meet
a series of disclosure requirements when discussing their services with
consumers. If passed, the companies would have to tell consumers how
long it would take to achieve the results they're promising, outline
details on how any settlement offer the company makes would work and
explain that not all creditors will accept balance, fee or interest rate
href='http://www.nytimes.com/aponline/2009/08/03/business/AP-US-Debt-Relief.html?_r=1&pagewanted=print'>Read
more.
Bank of America Settles SEC
Suit over Merrill Deal
The Securities and Exchange Commission yesterday
accused Bank of America of misleading its shareholders about $5 billion
in bonuses paid by Merrill Lynch, and Bank of America has agreed to pay
$33 million to settle the SEC’s claims without admitting or
denying the accusations, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The $50 billion merger, completed at the behest
of federal officials, has been the subject of heated hearings in
Congress, as has the question of who knew what and when about the
Merrill bonuses. The payments were made despite mounting losses that
soon forced Bank of America to seek a second lifeline from the federal
government. The SEC’s lawsuit centers on statements Bank of
America made in its proxy statement about the Merrill deal, which was
announced last Sept. 15. The bank, one of the nation’s largest,
told its investors in the proxy on Nov. 3 that Merrill had agreed not to
pay year-end performance bonuses or other incentive pay before closing
the deal without Bank of America’s consent. However, unknown to
investors, Bank of America had already agreed that Merrill could pay up
to $5.8 billion in year-end compensation to employees, the SEC said in
its complaint.
href='http://www.nytimes.com/2009/08/04/business/04bofa.html?ref=business&pagewanted=print'>Read
more.
Autos
Bankruptcy
Cooper-Standard Holdings Inc., an auto-parts maker
co-owned by Goldman Sachs Group Inc., has filed for bankruptcy
protection along with its U.S. and Canadian affiliates after vehicle
sales plunged, Bloomberg News reported yesterday. Cooper-Standard, which
makes door seals, engine mounts and systems for handling fuel, brake and
cooling fluids, has $1.7 billion in assets and $1.8 billion in debt,
according to the company’s chapter 11 petition filed yesterday.
Goldman Sachs and Cypress Group LLC each own 49.2 percent of the Novi,
Mich.-based company, according to the filing. At least 17 U.S. parts
suppliers have sought bankruptcy protection this year as automakers cut
production amid a 35 percent drop in first-half sales of cars and light
trucks. The company has secured commitments from its current lenders for
up to $175 million in debtor-in-possession financing, which will permit
it to continue normal operations, Cooper-Standard said in a statement
today. The case is
face='Times New Roman' size='3'>In re Cooper-Standard Holdings
Inc., 09-12743, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4.Tm.kD0f.U'>Read
more.
GM to Lay Off Thousands
General Motors expects to lay off thousands of factory
workers after the number who voluntarily quit through a recent buyout
and early retirement program fell short of the carmaker’s target,
the
size='3'>New York Times reported today. GM
said Monday that about 6,000 hourly workers had left as of Saturday.
That means the company still has about 48,000 hourly workers, which is
7,500 more than its year-end goal of 40,500. The company said that it
planned to meet with the United Automobile Workers union to determine
how it could meet its goal by Dec. 31, but that it was not considering
another buyout offer. The cuts are part of the turnaround plan that GM
developed under the oversight of the Obama administration. GM has
borrowed $50 billion from the government to help it restructure and
spent a little more than a month operating under bankruptcy
protection.
href='http://www.nytimes.com/2009/08/04/business/04gm.html?ref=business&pagewanted=print'>Read
more.
Path Toward Boosting
'Clunkers' Program Gets Easier in the Senate
The path toward Senate passage this week of a $2
billion boost for the 'Cash for Clunkers' program got a bit easier
yesterday after those seeking higher fuel-efficiency requirements
signaled they will support a House-passed extension without
changes,
size='3'>CongressDaily reported today. Sens.
Dianne Feinstein (D-Calif.) and Susan Collins (R-Maine) said yesterday
that they are no longer worried the program would inadequately boost
fuel efficiency after being briefed by the National Highway Traffic
Safety Administration. Those numbers -- echoed in talking points the
Obama administration sent all Senate offices yesterday -- tout an
average of 25.4 miles per gallon for vehicles sold in the program, which
unexpectedly ran out of its initial $1 billion congressional financing
in less than a week. Collins also touted NHTSA's argument that the
program saves consumers between $700 and $1,000 annually in gas. She
predicted more GOP support than the four who backed the initial $1
billion in funding for the program as part of a supplemental spending
bill because it would be paid for this time through unused stimulus
funds.
In related news, U.S. auto sales in July climbed to
their highest pace in 11 months, as customers rushed to showrooms amid
uncertainty about the future of the federal government's 'Cash for
Clunkers' incentive program, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Some automakers signaled they plan to raise
production to restock showrooms emptied by months of production cuts and
the government-fueled sales surge. However, the increases appear
measured, as carmakers also want to use the unusually short supply of
popular models to lift transaction prices. Automakers also will look for
evidence that the sales rebound can outlast the end of the
subsidies.
href='http://online.wsj.com/article/SB124931253429401705.html'>Read
more. (Subscription required.)
GMAC's Loss Widens as Woes
Mount
GMAC Financial Services' second-quarter loss widened
on charges as the company's credit woes continued to mount and loan-loss
provisions increased, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. GMAC posted a loss of $3.9 billion, deeper than
its year-earlier loss of $2.48 billion. The results included $3.51
billion in net charges related to the company's incorporation, the
disposition of mortgage assets and a goodwill write-down, among other
items. GMAC said in June that it wouldn't have to file for bankruptcy
and continues to meet all its obligations amid fears the company would
follow in the footsteps of General Motors Co., which now owns less than
10 percent of GMAC. The lender, which is now serving Chrysler Group LLC
as well as GM, got a $5 billion capital infusion under the Treasury
Department's Troubled Asset Relief Program as it became a bank holding
company several months ago.
href='http://online.wsj.com/article/SB124938562150604409.html'>Read
more. (Subscription required.)
Agents Raid Bank and Lender
in Florida
Agents with the FBI and the Treasury
Department’s Troubled Asset Relief Program raided a bank and a
wholesale mortgage lender in Florida yesterday after the collapse of a
proposed partnership that could have brought them more than $500 million
in federal bailout money, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Christopher Sharpley, deputy special inspector
general for the Treasury program, would not comment on why the bank, the
Colonial BancGroup, Florida’s sixth-largest bank, and the mortgage
lender, Taylor, Bean & Whitaker, based in Ocala, Fla., were being
investigated. However, the inquiry appears to reveal the largest case by
far being investigated by the bailout inspector general, given that
about $550 million in bailout money is involved. Banking experts said
that the investigation seemed related to an arrangement set up by the
Treasury Department that required Colonial to obtain at least $300
million in private investment before being granted a bailout. The goal,
regulators said, was to raise the bank’s risk-based capital ratio
to 12 percent by Sept. 30 to offset losses from loans tied mainly to
real estate in Florida.
href='http://www.nytimes.com/2009/08/04/business/04florida.html?ref=business'>Read
more.
of Stock, Consolidation
VeraSun Energy Corp., once one of the largest ethanol
producers in the U.S., has filed a liquidation plan and disclosure
statement that would merge most of its subsidiaries into one entity and
cancel all shares of the company’s common stock and unsecured
notes as the company winds down,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. However, its subsidiary US BioEnergy Corp.
and several regional VeraSun entities will not be consolidated and will
be treated as separate entities. All claims against the VSE and ASA
debtors will be deemed a single claim and single obligation of the
respective debtors, VeraSun said. Prepetition make-whole claims, nontax
priority claims and other secured claims will not be entitled to vote on
the plan, according to VeraSun. All shares of VeraSun common stock will
be canceled if the plan is approved, and the shareholders will not
receive any property or distributions for their shares.
href='http://bankruptcy.law360.com/articles/114647'>Read more.
(Subscription required.)
StarTrib Disclosure
Statement Wins Court Approval
Bankruptcy Judge
face='Times New Roman' size='3'>Robert D. Drain
size='3'>has approved the disclosure statement accompanying Star Tribune
Holdings Corp.'s chapter 11 plan and set a Sept. 17 hearing date for the
plan's confirmation,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company had resolved every outstanding
issue in connection with the disclosure statement, including an
objection by the U.S. Trustee in the case, who claimed the statement
lacked adequate detail about third-party releases, Star Tribune said in
its approval motion. Star Tribune has reached an agreement with U.S.
Trustee
face='Times
New
Roman' size='3'>Diana G. Adams to treat her
objection as an objection to confirmation of Star Tribune's
reorganization plan, not to approval of the disclosure statement, the
motion said. Adams objected to the discharge of nondebtor third parties,
contending that neither the disclosure statement nor the proposed
reorganization plan explained why the releases were warranted. A
third-party release prevents a nondebtor from prosecuting claims against
another nondebtor.
href='http://bankruptcy.law360.com/print_article/114630'>Read
more. (Subscription required.)
Million from Former Kmart CEO
The U.S. Securities and Exchange Commission wants
former Kmart CEO Charles Conaway to pay $22.6 million, alleging that he
misled investors before the company filed for bankruptcy in 2002,
Reuters reported today. The agency requested that the court ask Conaway
to return $13.7 million in what it described as 'ill-gotten gains' and
impose an $8.9 million civil penalty on him. The SEC had accused Conaway
of making omissions and misrepresentations about Kmart's financial
condition in its 10-Q regulatory filing in October 2001. 'The document
included no disclosure of the liquidity crisis or the fact that Kmart
had delayed over $1 billion in vendor payments in an effort to survive
it,' according to the SEC filing.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/04/AR2009080400039_pf.html'>Read
more.
Seeks Chapter 9 Protection
Washington Park, Ill., has filed for chapter 9
protection for the second time in five years under the weight of
mounting debt and the embezzlement of more than $440,000 by two town
workers, the Associated Press reported yesterday. The St. Clair County,
Ill., community of roughly 5,300 people filed for chapter 9 protection
last month, citing assets of less than $50,000 and debt of more than $1
million. Washington Park, Ill., with a median household income roughly
half the national average at just $21,132 as of the 2000 Census, made a
similar filing in 2004, claiming a $1.6 million debt. However, that case
was dismissed because the town emerged from insolvency, albeit only
briefly. The town now says its two largest creditors are the Illinois
Department of Employment Security, which is owed $448,793.29, and John
'Chico' Matt, the town's former public safety chief, who is owed
$300,000. In 2000, Matt won a court award of $165,000 for emotional
distress and humiliation, which a judge said was caused by town trustees
who tried to fire him, the
face='Times New Roman' size='3'>Belleville News-Democrat
reported.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/03/AR2009080301748_pf.html'>Read
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/03/AR2009080301748_pf.html'>
Auction for Phoenix
Coyotes Delayed
Bankruptcy Judge
face='Times New Roman' size='3'>Redfield T. Baum
size='3'>has moved the local auction of the Phoenix Coyotes from
tomorrow to Sept. 10 as NHL officials question whether Jerry Reinsdorf's
$148 million bid will still be on the table at that date, the Associated
Press reported yesterday.NHL deputy commissioner Bill Daly worried that
Reinsdorf may be wavering in his effort to buy the financially ailing
franchise amid repeated challenges by Coyotes owner Jerry Moyes and
Canadian billionaire Jim Balsillie, who wants to move the team to
Hamilton, Ontario.Reinsdorf's frustration apparently grew when Moyes'
attorneys, in court filings, revealed details of Reinsdorf's
negotiations with the city of Glendale on a possible new lease for
Jobing.com Arena.Reinsdorf has asked for a special taxing district to be
created near the arena that would pay the new owners as much as $23
million next year, according to documents obtained by the
Arizona Republic. If the
team were still losing money after five years, Glendale would have to
pay Reinsdorf $15 million for each year of losses or allow the team to
be sold and moved without penalty, according to the newspaper.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/03/AR2009080302543_pf.html'>Read
more.
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