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May 5, 2008
name='1'>Wall Street, Lenders Face Subprime
Scrutiny
Federal prosecutors are
stepping up their scrutiny of players in the subprime-mortgage crisis,
with a focus on Wall Street firms and mortgage lenders, the
face='Times New Roman' size='3'>Wall Street
Journal reported today. Prosecutors in the Eastern
District of New York in
size='3'>Brooklyn have formed a task force of
federal, state and local agencies that will involve as many as 15
law-enforcement agents and investigators. The
w:st='on'>
size='3'>U.S.
office, Benton J. Campbell, who supervises about 150 prosecutors, said
that the group will look into potential crimes ranging from mortgage
fraud by brokers to securities fraud, insider trading and accounting
fraud. The formation of the task force amplifies efforts already under
way in
size='3'>Brooklyn
investigating whether investment bank UBS AG improperly valued its
mortgage-securities holdings, as well as the circumstances surrounding
the failure of two hedge funds at Bear Stearns Cos., which collapsed
last summer because of losses tied to mortgage-backed
securities.
href='http://online.wsj.com/article_print/SB120994526338266255.html'>Read
more. (Registration required.)
name='2'>Housing Stimulus Package Heads for Vote on
Wednesday
Democrats will be working
on the House floor and behind-the-scenes in the Senate this week in an
attempt to craft a wide-ranging housing package that could stabilize a
shaky mortgage market, as well as revamp key government programs
designed to make home-buying more affordable,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported today. The House of Representatives will take the lead
on Wednesday when it brings legislation to the floor that would
allow the FHA to insure up to $300 billion in loans on the verge of
foreclosure. Under a bill sponsored by House Financial Services Chairman
Barney Frank (D-Mass.), lenders who want to participate in the program
would have to reduce the amount of the original note to as little as 85
percent of the home's appraised value. The Bush administration
has responded coolly to the bill, but Frank will attach two other
measures the House has passed and the administration has long advocated:
an overhaul of the FHA mortgage insurance program and a bill to
strengthen oversight of Fannie and Freddie and to siphon money from the
government-sponsored enterprises (GSE) for an annual $500 million
affordable housing trust fund. The Senate passed its housing-stimulus
package last month, but it was more narrowly tailored than the House
version, providing $4 billion so cities can purchase and rehabilitate
foreclosed properties and approximately $13 billion in tax breaks to
spur home sales and help homebuilders.
High
Fuel Costs Threaten Bankruptcy for Truckers
The increase in fuel costs is
particularly being felt in the trucking industry as diesel prices have
shot up nearly 25 percent since January to a $4.18-per-gallon average,
according to U.S. News and World Report on Saturday. With the cost of a
fill-up for an 18-wheeler now well over $1,000, fuel surpasses labor as
the biggest cost for some trucking firms. Trucking firm failures jumped
to 'catastrophic levels' in the first quarter of the year, reports
industry analyst Donald Broughton. He estimates that 42,000 trucks, or
2.1 percent of the nation's capacity, were idled in the first
quarter—with nearly 1,000 companies going bankrupt. Broughton says
the cash-flow crisis caused by unrelenting weekly diesel price increases
has truckers looking to borrow money for basic operating
expenses—license tags, insurance, and, of course, fuel. The
credit-crunched bankers are cutting their losses and repossessing
rigs.
href='http://www.usnews.com/articles/news/national/2008/05/02/high-fuel-costs-threaten-bankruptcy-for-truckers_print.htm'>Read
more.
w:st='on'>
name='4'>City
w:st='on'>
size='3'> Manager
w:st='on'>
size='3'>Urges
face='Times New Roman' size='3'>California
size='3'>City
size='3'> to File for Bankruptcy
Vallejo's
(
size='3'>Calif.) city
manager is advising the City Council to declare bankruptcy next week to
deal with a worsening budget crisis, the Associated Press reported on
Sunday. City Manager Joseph Tanner made the recommendation Friday after
weeks of negotiations with the police and fire unions failed to produce
a deal that would solve the city's chronic fiscal problems.
size='3'>Vallejo
projected $16 million budget shortfall in its next fiscal year and will
have no money in reserve. The City Council is expected to vote Tuesday
on whether to file for chapter 9 protection before its fiscal year ends
June 30.
href='http://cbs5.com/local/vallejo.bankruptcy.Tanner.2.715376.html'>Read
more.
UAL
Merger Discussions with US Airways Intensify
United Airlines parent
UAL Corp., spurned last month by Continental Airlines Inc., is
intensifying merger talks with US Airways Group Inc., and a deal could
emerge in as soon as 10 days, the
size='3'>Wall Street Journal reported today.
The companies have identified more than $1.5 billion in potential cost
savings and revenue enhancements from joining forces. The two carriers
haven't worked out all the deal terms, including who would run the
combined entity, and how much of a premium, if any, US Airways
shareholders would receive in a share-swap transaction. United also is
looking at other choices, including luring Continental to leave its
current alliance partners and team up with United.
href='http://online.wsj.com/article_print/SB120992416525565667.html'>Read
more. (Registration required.)
name='6'>Linens 'n Things Gets Interim Approval of $700 Million
Chapter 11 Loan
Linens 'n Things Inc. on
Friday won interim court permission to borrow $700 million from General
Electric Capital Corp. as it launches an effort to reorganize under
bankruptcy protection, Dow Jones Newswires reported. Bankruptcy
Judge
size='3'>Chris
size='3'>topher Sontchi approved the chapter
11 finance package on an interim basis at a hearing in the U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Wilmington
w:st='on'>
size='3'>Del.
subject to challenge later on in the case, which is one of the largest
retail bankruptcies in the country. The housewares retailer filed for
chapter 11 protection weighed down with more than $1 billion in debt,
including $650 million in bond debt as well as the pre-chapter 11 bank
loans.
href='http://money.cnn.com/news/newsfeeds/articles/djf500/200805021811DOWJONESDJONLINE000812_FORTUNE5.htm'>Read
more.
name='7'>Acting
w:st='on'>
size='3'>U.S.
size='3'>Trustee Appointed for Region 3
size='3'>Roberta A. DeAngelis has been
appointed acting U.S. Trustee for Delaware, New Jersey and Pennsylvania
(Region 3) for an interim period effective on May 4, 2008, according to
a press release from the Executive Office for U.S. Trustees. DeAngelis
replaces Kelly Beaudin
Stapleton, who resigned after serving as U.S.
Trustee for Region 3 since January 2005. DeAngelis joined the U.S.
Trustee Program as Assistant U.S. Trustee in the
w:st='on'>
size='3'>Newark
July 1999 after practicing bankruptcy and insolvency law for 20 years.
She has served as Acting General Counsel in the Executive Office for
U.S. Trustees in
face='Times New Roman' size='3'>Washington
size='3'>,
size='3'>D.C.
2005.
Toy
Maker Lionel Emerges from Bankruptcy
Lionel LLC emerged from
bankruptcy-court protection last week, ending a three-and-half-year
restructuring and bitter fight with a rival model-train company,
the Wall Street
Journal reported today.
size='3'>Breaking into the broader toy market is key to the company's
growth, said Lionel CEO Gerald Calabrese. During the company's stay
under bankruptcy protection, sales for Lionel starter sets --
kid-friendly systems that range in price from $129 to $300 -- more than
doubled. The company sold some 200,000 sets last year, with much of that
growth coming from sales at department stores and big-box retailers.
Lionel emerged from chapter 11 with $59 million in new cash from
private-equity firm Guggenheim Corporate Funding and the estate of the
late Martin Davis, former chairman of Paramount Communications Inc.
According to Lionel's chapter 11 plan, Guggenheim owns 48.6 percent of
the new Lionel and the
w:st='on'>Davis
size='3'>estate has a 28.6 percent stake.
href='http://online.wsj.com/article_print/SB120994921825666481.html'>Read
more. (Registration required.)
name='9'>Plastech Gets Approval to Borrow $87 Million from
Customers
Bankrupt auto parts maker
Plastech Engineered Products Inc. won permission on Thursday to borrow
from four of its biggest customers through the end of August to stay in
business, Bankruptcy
Law360 reported on Friday. The new financing
arrangement of $87 million will come from General Motors Corp., Ford
Motor Co., Johnson Controls Inc. and Chrysler LLC, Plastech's biggest
customers, An earlier short-term debtor-in-possession (DIP) financing
agreement between Plastech and a number of banks expired on Wednesday.
The car companies have purchased Plastech's outstanding debt from its
earlier DIP financing, as well as debt the company incurred before it
went bankrupt.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54987'>Read
more. (Registration required.)
name='10'>Saltchuk Buys Aloha's Cargo Business
Saltchuk Resources Inc.,
a Seattle-based holding company, agreed Thursday to acquire the cargo
division of Aloha Airlines Inc., the defunct carrier that recently
converted its chapter 11 case into a chapter 7 liquidation,
Bankruptcy Law360
reported on Friday. Saltchuk announced it would buy the
business only a few days after it backed down from an earlier $13
million bid. The terms of the new deal were not revealed, though it was
disclosed that the defunct cargo business was required to be back up and
running by midnight Friday. Saltchuk said Thursday that it and GMAC
Commercial Finance would present the deal Friday at an already scheduled
hearing in the U.S. Bankruptcy Court for the District of Hawaii, which
is overseeing Aloha's case. Saltchuk said that its renewed interest in
the business was based in part on the pleas of Sen. Daniel K. Inouye
(D-Hawaii).
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=54934'>Read
more. (Registration required.)
name='11'>Busy with Liquidation, Friedman's Wins Filing
Extension
Bankruptcy Judge
size='3'>Chris
size='3'>topher S. Sontchi granted jewelry
retailer Friedman’s Inc.'s request for a 120-day extension to file
its chapter 11 plan,
size='3'>Bankruptcy Law360 reported on Friday.
Friedman’s now has through Sept. 24 to file their reorganization
plan, and until Nov. 24 to lobby for acceptance of a plan. The
debtors — Friedman's and affiliate Crescent Jewelers —
requested the extension after arranging an
expedited sale and asset disposition, according to the extension motion
they filed on April 17. On April 4, Judge Sontchi gave Friedman's the
approval to liquidate approximately $400 million in inventory from 377
of its stores.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54950'>Read
more. (Registration required.)
name='12'>Strapped Governments Revive Pension Bonds
Pension bonds are making
a comeback, as states and cities from Alaska to Philadelphia bet they
can use the proceeds to help fill deficits in their retirement funds and
still generate a higher return than what they pay in interest, Bloomberg
News reported yesterday. Officials may sell a record $35 billion of the
securities this year as offerings have declined since 2003, according to
data compiled by Bloomberg.
w:st='on'>
size='3'>Connecticut
size='3'>issued $2.2 billion of pension debt last month, paying an
average rate of 5.88 percent on money that state officials projected
would earn 8.5 percent when invested. With the economy slowing and
states facing budget deficits that Standard & Poor's said would top
$30 billion next year, officials are turning to the quick fix of
borrowing even though the $50 billion worth of pension bonds that were
sold produced mixed results for taxpayers.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/05/03/AR2008050301700_pf.html'>Read
more.
name='13'>Buffett Says Fed Avoided Chaos in Bear
Stearns
Warren Buffett said on Saturday
that the Federal Reserve avoided financial market 'chaos' in
coordinating the March bailout of Bear Stearns Cos., which faced
imminent bankruptcy before agreeing to be acquired by JPMorgan Chase
& Co., Reuters reported. 'I think the Fed did the right thing in
stepping in on Bear Stearns,' Buffett said. 'Just imagine the thousands
of counterparties around the world having to undo contracts.' Buffett
said the Bear debacle illustrates how some investment banks and
commercial banks may have grown too large to effectively manage risk.
'The big investment banks, a number of them, and big commercial banks, I
think they're almost too big to manage effectively from a risk
standpoint in the way they've elected to conduct their business,' he
said.
href='http://news.yahoo.com/s/nm/20080503/bs_nm/berkshire_dc_1'>Read
more.