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March 31, 2009
U.S. Threatens
Bankruptcy for GM, Chrysler
President Obama delivered an
ultimatum to General Motors and Chrysler yesterday, telling them to
adopt radical changes in short order or face bankruptcy after
discussions concluded that a controlled bankruptcy might be the best way
to reorganize the two ailing auto giants, the
face='Cambria' size='3'>New York Times
size='3'>reported today. The president decided to throw the companies a
short lifeline by giving GM 60 days and Chrysler one month to avert
bankruptcy and restructure on their own. However, during that period,
Obama warned that the automakers will have to drastically reshape their
businesses in a way that experts say will severely shrink them.For GM,
the president’s decision means not only the loss of its chief
executive, Rick Wagoner, who was forced out as part of the deal, but
also some tough negotiations with the United Automobile Workers and
bondholders, who have thus far balked at the company’s
demands.Chrysler, meanwhile, must expedite a merger deal with the
Italian automaker Fiat.The Obama administration has concluded that
Chrysler is not viable as a stand-alone company, and is giving the
automaker until April 30 to complete the Fiat merger or face a cutoff of
taxpayer help.
href='http://www.nytimes.com/2009/03/31/business/31auto.html?_r=1&ref=busines…'>Read
more.
In related news, the Obama
administration is weighing a fix for General Motors Corp. and Chrysler
LLC that would divide their 'good' and 'bad' assets and send the
automakers into bankruptcy to purge their biggest problems, the
Wall Street Journal
size='3'>reported today. Under the plan GM would file for bankruptcy and
transfer its valued assets to new GM. The 'new GM' would have a
less-burdened balance sheet than GM currently has though the nearly $20
billion the federal government has lent to it would remain on its sheet.
Bankruptcy might be pursued to meet the Obama administration's demand
that Chrysler's creditors agree to huge reductions in their expected
recoveries on Chrysler debt.
href='http://online.wsj.com/article/SB123845591244871499.html#mod=testMod'>Read
more. (Subscription required.)
Senate
Banking Committee to Mark Up Credit Card Legislation
The Senate Banking Committee today will
mark up S. 414, the Credit Card Accountability Responsibility and
Disclosure Act of 2009. The bill, sponsored by Senate Banking Committee
Chair Christopher Dodd (D-Conn.) proposes additional credit card
disclosures and protections for consumers.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileSt…'>Click
here to read the text of S. 414.
In related news, the House Financial
Services Committee tomorrow will mark up H.R. 627, the Credit
Cardholder’s Bill of Rights Act of 2009.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bill…'>Click
here to read the bill text.
name='3'>Chicago Sun-Times
face='Cambria' size='3'>Parent Files for
Bankruptcy
The Sun-Times Media Group, parent
of the Chicago
Sun-Times newspaper, filed for chapter 11
protection today, earning Chicago the distinction of being the first
U.S. city served by two insolvent newspapers, Reuters reported today.
The Sun-Times also said that it hired Rothschild Inc. to try to
sell some of its assets, which include 59 newspapers and their Web
sites. The publisher joins its much larger, Chicago-based rival, Tribune
Co., in a growing list of newspaper companies that are choosing
bankruptcy as the best way to restructure as advertising revenue
plummets.The Sun-Times plans to complete the bankruptcy process
this year.
href='http://money.cnn.com/2009/03/31/news/companies/chicago_suntimes_bankrup…'>Read
more.
Mid-States
Bankruptcy Filing May Signal Further Trucking Woes
The bankruptcy filing of Mid-States
Express Inc., a midsized U.S. trucking company, is raising industry
concerns about a fresh wave of failures amid slowing demand, Dow Jones
Newswires reported yesterday.The privately held company, based in
Aurora, Ill., started notifying customers late last week that it would
cease operations and filed for bankruptcy in an Illinois court on
Friday.The U.S. trucking sector saw dozens of bankruptcies in the first
half of last year as slowing demand collided with soaring diesel prices.
The failure rate abated in the fall as fuel started to moderate.However,
demand fell sharply from last November, adding to existing
overcapacity.The fall in volume led to layoffs, furloughs and service
cutbacks at carriers that transport goods either by truck, rail or cargo
plane.
href='http://online.wsj.com/article/BT-CO-20090330-714041.html'>Read
more.
Delco Held
Liable for $21.5 Million in Loan Default Case
A federal court on Thursday found
bankrupt motor fuel distributor Delco Oil Inc. and its sole shareholder
liable for more than $21 million after defaulting on a line of credit
provided by commercial lender Capital Source Finance LLC,
Bankruptcy Law360
size='3'>reported yesterday. U.S. District Court Judge Deborah K.
Chasanow partially granted Capital Source's motion for summary judgment
regarding the breach-of-contract claims in the suit, but denied summary
judgment with respect to claims that Delco's former president
fraudulently misrepresented the company's financial condition in order
to secure the credit line.The judgment includes the loan balance and
accrued interest of $19.3 million, as well as $2.2 million in accrued
default interest, according to the order.
href='http://bankruptcy.law360.com/articles/94065'>Read
more. (Subscription required.)
A bankruptcy filing is not
imminent for General Growth Properties Inc. asbondholders have
refrained from forcing mall owner into bankruptcy court, despite lack of
a deal on a debt extension, the
size='3'>Wall Street Journal reported today.
Creditors so far have been willing to let deadlines pass because they
believe there is little to be gained and much to be lost through a
bankruptcy. General Growth's mall operations are stable and many
bondholders hope for a greater recovery outside of bankruptcy court.
With the credit market for realestate deals frozen, there is little hope
of General Growth selling enough malls or development land to pay off
debts that are expected to reach $3 billion by June. General Growth
became even more vulnerable after a March 16 deadline passed for
repaying $395 million in bonds.
href='http://online.wsj.com/article/SB123842063675069619.html'>Read
more. (Subscription required.)
Merrill to
Pay $40 Million in Refco Case
In one of the biggest awards
levied against a Wall Street firm, Merrill Lynch & Co. has been
ordered to pay $39.8 million in a case that grew out of the collapse of
financial firm RefcoInc., the
size='3'>Wall Street Journal reported today.
The Financial Industry Regulatory Authority awarded $30.6 million in
compensatory damages and $9.2 million in interest to the trustees of the
Masonic Hall and Asylum Fund in Utica, N.Y.The fund is an endowment for
a health-care facility in Utica. It filed a claim against Merrill Lynch,
now a unit of Bank of America Corp., alleging that a subsidiary
broker-dealer advised it to purchase a limited partnership interest in
Sphinx Managed Futures Index Fund LP, a privately held fund in a
business unit of Refco Inc.
href='http://online.wsj.com/article/SB123846518384172335.html'>Read
more. (Subscription required.)
Congressman
Demands Details of Merrill Lynch Bonuses
House Oversight and Government
Reform Domestic Policy Subcommittee Chairman Dennis Kucinich (D-Ohio)
appealed yesterday for full disclosure about bonuses paid to Merrill
Lynch executives just before the government brokered Bank of America's
$25 billion acquisition of the investment firm,
face='Cambria' size='3'>CongressDaily reported
today. Kucinich wrote to Federal Reserve Chairman Bernanke and Bank of
America CEO Ken Lewis asking for documents related to $3.6 billion in
bonuses paid to executives at Merrill before it was taken over by Bank
of America on Jan. 1. New York Attorney General Andrew Cuomo is also
investigating the payments amid public outrage about executive
compensation at some financial companies that have gotten federal
bailout funds. Bank of America received about $45 billion from the
Troubled Asset Relief Program last year.
Coalition
Begins Lobbying Campaign on Card Fees
A retailer coalition has launched
a campaign to persuade eight House Financial Services Committee members
to endorse an effort to curb the fees that banks charge merchants for
using a credit or debit card,
size='3'>CongressDailyreported yesterday. The
merchants are protesting the fee, which averages 1.75 percent, that they
are charged for using Visa and MasterCard networks to process each
debit- and credit-card transaction, arguing that they have no say in the
pricing and that rules are arbitrary. The fees totaled $48 billion in
2008. Banks dispute the contention, saying that that merchants are
looking to reduce their costs, not pass savings on to
consumers.
International
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