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June 25, 2009
Foreclosure More Likely to Have Stripped Equity
A new study by researchers Michael LaCour-Little of
California State University at Fullerton and Eric Rosenblatt and Vincent
Yao of Fannie Mae released at the American Real Estate and Urban
Economics Association's mid-year meeting earlier this month shows that
homeowners in southern California commonly took large amounts of equity
out of their properties through refinancings, making them vulnerable to
the effects of the housing downturn. The
researchers found this effect to be more significant than general price
declines, upward adjustments of ARMs and the economic
downturn.
href='http://www.areuea.org/conferences/papers/download.phtml?id=2133'>Click
here to read the study, 'Follow the Money: A Close
Look at Recent Southern California Foreclosures.'
Judge Allows Lehman to
Investigate Barclays Sale
Bankruptcy Judge
face='Times












New
Roman'
size='3'>James M. Peck granted a motion by
Lehman Brothers Holdings Inc. and some of its creditors to investigate
the sale of its brokerage unit to Barclays PLC shortly after it
collapsed last September,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Peck overruled objections by Barclays
to Lehman's motion and the joinders. In its objection to the joinders,
filed Tuesday, Barclays reiterated its position that Lehman could not
reopen a transaction that has already been approved by the court. Lehman
moved to be allowed to conduct focused discovery on the sale on May 18,
in the wake of certain “material discrepancies” coming to
light with regard to Barclays' liabilities and Lehman's benefits under
the September sale. Lehman hinted that the discrepancies may have given
Barclays an unfair windfall of potentially billions to the detriment of
the estate, its creditors and other parties.
href='http://bankruptcy.law360.com/print_article/107988'>Read
more. (Subscription required.)
Judge Rules that FDIC Can
Intervene in WaMu-JPMorgan Dispute
Bankruptcy Judge
face='Times












New
Roman'
size='3'>Mary Walrath yesterday maintained
control over a dispute between the failed thrift Washington Mutual Inc.
and JPMorgan Chase & Co. over billions of dollars of deposits by
ruling that the Federal Deposit Insurance Corp., which is the receiver
for Washington Mutual, may intervene in the case, Reuters reported
yesterday. Last Sept. 25, the FDIC seized the banking operations of
Seattle-based Washington Mutual and immediately sold them to JPMorgan
for $1.9 billion. The thrift's holding company filed for bankruptcy
protection the next day. The holding company subsequently filed separate
lawsuits, suing the FDIC, contending that the $1.9 billion sale price
was too low, and seeking more than $13 billion of damages. It also sued
JPMorgan, claiming that the bank wrongfully withheld more than $4
billion of cash from the bankruptcy estate, and which it believes should
be available for creditors. Judge Walrath concluded that she has
exclusive jurisdiction to decide what belongs to the estate, and
rejected requests to put two of the adversary proceedings on hold or
transfer the disputes to the Washington, D.C., federal district court
where Washington Mutual sued the FDIC.
href='http://www.reuters.com/article/bondsNews/idUSN2423546720090625'>Read
more.
Landlords Look to Have
Goody's Stub Rent Case Sent to Third Circuit
A group of landlords holding leases on Goody's LLC
outlets wants a federal appeals court to determine whether their claims
for stub rent should be dealt with as administrative or unsecured claims
by the bankruptcy court overseeing the liquidation,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Stub rent, also known as interim rent, is the money a renter has to pay
a landlord or equipment leaseholder for the period between when a lease
agreement is reached and the deal officially goes into effect. In a
motion filed in the U.S. District Court for the District of Delaware,
the landlords, including Diversified Realty Corp., PICOA Inc. and
E&A Acquisition Two LP, say that they have come to terms with
Goody's on the amount of money they will recover on their stub rent
claims, but want the U.S. Court of Appeals for the Third Circuit to make
a declaratory ruling on whether those claims should be treated as
administrative claims. The Delaware district court ruled last August
that the stub rent claims should be treated as administrative claims, a
decision that Goody's appealed. The bankrupt apparel retailer said that
the stub rent claims should be treated as unsecured claims.
href='http://bankruptcy.law360.com/articles/107932'>Read
more. (Subscription required.)
Lawmakers, Industry Spar on
Proposed Consumer Financial Protection Agency
Democrats are pressing the Obama administration to
find a way out of the foreclosure crisis as they moved ahead with plans
to create a government agency that would police the market for risky or
deceptive mortgages, the Associated Press reported yesterday. The agenda
has the financial industry nervous that it will find itself buried in
new regulations. House Financial Services Committee Chair Barney Frank
(D-Mass.) at a hearing yesterday said that his panel would begin
reviewing legislation in July to charter the Consumer Financial
Protection Agency. The bill would be included as part of a broader
regulation reform bill. Momentum behind the proposal came as 20
senators, including Majority Leader Harry Reid (D-Nev.) and Senate
Banking Committee Chairman Christopher Dodd (D-Conn.) sent a letter to
Treasury Secretary Timothy Geithner yesterday asking the administration
to develop a new strategy for preventing foreclosures.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062401171_pf.html'>Read
more.
In related news, the House Financial Services
Subcommittee on Financial Institutions and Consumer
Credit will hold a hearing today at 2 p.m. ET titled “Improving
Consumer Financial Literacy under the New Regulatory
System.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/FIhr_061809.shtml'>Click
here to view the witness list and to watch a live webcast of
the hearing.
Autos
Ford Says More of Its
Suppliers are Ailing
Ford Motor Co.'s top executive for auto parts
purchasing said yesterday that the number of the automaker's suppliers
that are under distress, bankruptcy protection or under observation has
more than doubled in the last year, the Associated Press reported
yesterday. Tony Brown, Ford's vice president for global purchasing,
declined to give an exact number of distressed suppliers, but said in a
briefing that more suppliers are in the category of being monitored as
slumping auto sales force automakers to slow production and order fewer
parts. Brown said that he had several teams looking at ways to aid
distressed suppliers operationally, as Ford has limited funds to
financially support the ailing companies. The Dearborn, Mich.-based
automaker has pledged to provide at least $125 million in
debtor-in-possession financing to its former subsidiary, Visteon Corp.,
which is under chapter 11 protection. Ford said that it is also
accelerating its plans to consolidate the number of suppliers it uses.
The company said 850, or 48 percent, of its suppliers will be eligible
for future work at the end of the year, down from the 1,683 eligible at
the end of 2008.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062401104_pf.html'>Read
more.
Lending for Car Inventories Cut Off by GMAC
GMAC LLC is suspending wholesale financing for certain
Chrysler Group LLC dealers it considers to be too risky to lend to,
the
size='3'>Wall Street Journal reported today.
About 60 percent of the roughly 2,400 dealers who survived Chrysler's
bankruptcy applied for interim wholesale financing with GMAC, according
to Chrysler. So far about 6 percent have been informed that their
wholesale financing has been temporarily suspended, the company said.
GMAC declined to say how many of the dealers so far have been vetted to
continue to receiving loans, and refused to confirm the number of
dealers it has suspended. The company said it will need about six months
to complete the vetting process.
href='http://online.wsj.com/article/SB124588312285050133.html#mod=testMod'>Read
more. (Subscription required.)
SemCrude Lenders Object to
Disclosure Statement
A group of SemCrude LP lenders has joined creditor
ConocoPhillips Co. in criticizing the disclosure statement accompanying
the bankrupt oil distributor's proposed reorganization plan, arguing
that the statement fails to provide adequate information regarding the
treatment of the group's claims,
face='Times












New
Roman'
size='3'>Bankruptcy Law360 reported yesterday.
According to the objection, SemCrude informed the group that the it
intended to submit a revised disclosure statement—partly in
response to the bankruptcy court's recent rulings on the priority of
claims of prepetition lenders—that might resolve its concerns. The
group said that it would wait until the filing of the revised statement
to detail its objections, but reversed the right to supplement its
preliminary objection. The U.S. term lender group filed a preliminary
objection to SemCrude's disclosure statement on Tuesday in the U.S.
Bankruptcy Court for the District of Delaware. The term lenders say they
are in ongoing discussions with SemCrude and have until July 7 to file a
full objection if those negotiations fail.
href='http://bankruptcy.law360.com/articles/107905'>Read
more. (Subscription required.)
Eastwind Maritime Files for
Chapter 7
Marshall Islands-based shipping company Eastwind
Maritime Inc. and its subsidiaries filed for chapter 7 liquidation
yesterday,
size='3'>Bankruptcy Law360 reported yesterday.
The shipping company estimated both its assets and liabilities to be
between $500 million to $1 billion, and requested the joint
administration of 57 subsidiaries, the vast majority of which are
corporations based in Liberia, the Marshall Islands and Panama,
according to the petition. The case is
face='Times New Roman' size='3'>Eastwind Maritime Inc.
size='3'>, case number 09-14047, in the U.S. Bankruptcy Court for the
Southern District of New York.
href='http://bankruptcy.law360.com/print_article/108039'>Read
more. (Subscription required.)
Survey: Hedge Funds Wary
of More Regulation
A survey conducted by a financial services consultancy
RSM McGladrey showed that the greatest fear among hedge fund managers
and executives, who have seen their industry shrink in the financial
crisis, is neither the flight of wealthy investors nor ill-functioning
markets but regulation, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Among respondents, 38 percent said that
'onerous government regulation' was the biggest threat to the industry,
reflecting their anxiety over Washington's heightened attention to hedge
funds and other Wall Street firms involved in the financial crisis. Lack
of willing investors was a distant second, with 16 percent. Other
factors, such as a lack of access to capital and a lack of market
transparency, received single-digit percentages.While 43 percent said
there is the 'right amount' of regulation now, 37 percent said they
favored more regulation, according to the survey.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062403450_pf.html'>Read
more.
AIG Gives Fed Stakes in
Two Units to Cut Debt
The American International Group, the insurance giant
bailed out by the federal government, announced today that it had
reached an agreement to reduce its debt with the Federal Reserve Bank of
New York by $25 billion, the
face='Times












New
Roman'
size='3'>New York Times reported today. Under
the deal, AIG will give the bank preferred interests in its two largest
life insurance units outside the United States — American
International Assurance (AIA), and American Life Insurance Company
(Alico). The Fed will hold an equity stake in AIA worth $16 billion, and
in Alico worth $9 billion, numbers based on a percentage of their
“estimated fair market value,” according to the AIG
statement. The two units are wholly owned subsidiaries of AIG, and will
remain so until the deal is closed in the second half of the
year.
href='http://www.nytimes.com/2009/06/26/business/26insure.html?_r=1&ref=business&pagewanted=print'>Read
more.
Federal Reserve Keeps Key
Interest Rate Near Zero
The Federal Reserve said that it would continue to
keep its key interest rate near zero and will proceed with previously
announced plans to buy up to $300 billion in long-term U.S. Treasury
bonds by autumn and up to $1.25 trillion in mortgage-backed securities
by year's end. The central bank noted that the U.S. economy 'is likely
to remain weak for a time' because consumer spending remains constrained
and businesses continue to cut staff and investment, but that 'the pace
of economic contraction is slowing.' In a notable shift, it didn't
mention the concern about the risks of deflation, or falling prices, as
it did earlier in the year. The Fed predicted that 'inflation will
remain subdued for some time,' despite rising oil prices and worries
that the government's heavy borrowing and the Fed's own lending will
lead to more inflation.
href='http://online.wsj.com/article/SB124586613456948709.html'>Read
more. (Subscription required.)
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