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August 17, 2007
w:st='on'>
id='1'
name='1'>Illinois
Increases Mirror Rest of the Nation
The total number
of
size='3'>Illinois
size='3'>bankruptcies filed in the first half of 2007 jumped 45.6
percent over the same period in 2006, largely mirroring national trends,
the Chicago
Tribune reported today. Total
size='3'>Illinois
reached 20,014 during the first six months, compared with 13,744 in the
same period of 2006. Of those,
w:st='on'>
size='3'>Illinois
size='3'>consumers made 19,521 bankruptcy filings, up 45.2 percent.
Businesses in the state seem to be having an even tougher time. The
number of businesses filing for bankruptcy in
w:st='on'>
size='3'>Illinois
in the first six months, up 63.8 percent. 'The upward trend in
bankruptcies reflects the economic reality of households under
increasing financial stress,' said ABI executive director Samuel
Gerdano. 'We expect bankruptcy filings to continue to rise for
the balance of 2007.'
href='http://www.chicagotribune.com/business/chi-fri_notebook_0817aug17,0,3589707.story'>Read
more.
href='http://www.abiworld.org/AM/TemplateRedirect.cfm?template=/CM/ContentDisplay.cfm&ContentID=48413'>Click
here to read
size='3'>ABI’s press
release on the 2007 first-half filing statistics.
size='3'>In Surprise Move, Fed Cuts Discount
Rate
The Federal Reserve, declaring that increased economic
uncertainty poses risks for
w:st='on'>
size='3'>U.S.
growth, announced today that it has approved a half-percentage point cut
in its discount rate on loans to banks. The decision means that the
discount rate, the interest rate that the Fed charges to make direct
loans to banks, will be lowered to 5.75 percent, down from 6.25 percent.
The Fed did not change its target for the more important federal funds
rate, which has remained at 5.25 percent for more than a year. However,
it has been infusing billions into the banking system over the past week
to keep that rate from rising above the target level. The Fed said that
it was ''monitoring the situation and is prepared to act as needed to
mitigate the adverse effects on the economy arising from the disruptions
href='http://www.nytimes.com/aponline/business/AP-Fed-Interest-Rates.html?ref=business&pagewanted=print'>
face='Times New Roman' size='3'>Read more.
Mortgages
name='3'>Countrywide Financial Makes Operational Changes, Taps into
Credit
Shut out of the
short-term debt market by an expanding credit crisis, Countrywide
Financial, the nation’s largest mortgage lender, turned yesterday
to 40 of the biggest banks, borrowing $11.5 billion as it tried to shore
up its cash, the New
York Times reported yesterday. Countrywide
said that it would make significant changes in its operations by largely
limiting itself to only the safest mortgages that can be bought by
Fannie Mae and Freddie Mac, the government-chartered agencies. In the
first six months of 2007, the company made $245 billion in home loans,
17.4 percent of the total nationwide. Analysts say Countrywide is likely
to have a better chance of surviving than many of its rivals. For one
thing, it had a contingency plan that included the committed bank loans
it used yesterday. The company also has a bank subsidiary, Countrywide
Bank, which it plans to use to make the majority of its loans by the end
href='http://www.nytimes.com/2007/08/17/business/17lend.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='4'>New Century Staves Off Software Copyright
Suit
Bankruptcy Judge
Kevin Carey
size='3'>bankruptcy denied Positive Software Solutions Inc.’s
efforts to lift the automatic stay in New Century Holdings Inc.'s case
in order to resume its multibillion-dollar suit against subprime lender
over the copyrights to a loan database program,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Carey also granted New Century's
cross-motion for sanctions against Positive Software over its violations
of the stay and scheduled a hearing for Oct. 2 to determine the amount
in damages that the lender should be awarded for them. The lawsuit has
continued for over four years regarding Positive Software's LoanForce
database program, which mortgage lenders use to market and originate
loans. In 2000, the company and New Century entered into a licensing
agreement under which the lender received a nonexclusive license for the
software. But Positive Software uncovered evidence during license
renewal negotiations in late 2002 and early 2003 that New Century was
planning to create its own software platform using coding and design
aspects of LoanForce, according to the suit.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32671'>Read
more. (Registration required.)
name='5'>Fannie Mae Predicts Housing Price Decline Will Accelerate
in '08
Fannie Mae, the mortgage
finance giant, yesterday predicted that housing prices will decline by 2
percent on average this year and by 4 percent next year as mortgage
delinquencies rise, lenders tighten borrowing standards and the volume
of unsold homes approaches record levels, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. 'This is clearly a market poised for more
severe overall credit losses,' said Enrico Dallavecchia, Fannie Mae's
chief risk officer. Adding to the trouble, Dallavecchia said, is that
many borrowers with adjustable-rate mortgages are facing rising monthly
payments, which could drive them into foreclosure. Fannie Mae, which was
chartered by the government to keep money flowing to mortgage lenders,
offered its assessment yesterday as it provided an update on its
financial condition. The company has been arguing that it could help
stabilize troubled mortgage markets if regulators loosened restraints on
its business, but that plea was rejected last week.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/16/AR2007081602393_pf.html'>Read
more.
Autos
name='6'>Unions Ask Court to Freeze Dana Appeal
Optimistic that the
unions and Dana Automotive will stick to their new pact, attorneys for
two labor organizations have asked a judge to temporarily suspend an
earlier appeal, triggered by the bankruptcy court's decision to sign off
on the supplier's bid to modify its employment agreements,
Bankruptcy Law360
reported yesterday. The International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America and
the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied Industrial and Service Workers International Union want
the
size='3'>Manhattan court to
put the appeal on hold until Oct. 23, when they will provide the judge
with a progress report on the state of the agreement.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32733'>Read
more. (Registration required.)
name='7'>Judge OKs Dura Backstop Agreement
A bankruptcy judge has
approved a controversial backstop rights purchase agreement for bankrupt
Dura Automotive Systems Inc., a move that brings the company closer to
its goal of emerging from bankruptcy protection by the end of the
year, Bankruptcy
Law360 reported yesterday. Dura filed an
amended backstop rights purchase agreement earlier this week. Dura
creditor Pacificor LLC will back the company's rights offering with a
commitment between $140 and $160 million. Dura said that the agreement
will allow the company to exit bankruptcy protection as a privately held
company with a range of minority shareholder protections.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32689'>Read
more. (Registration required.)
name='8'>Presidential Candidate Has Investing Tie to Subprime
Lenders
Despite regularly attacks
on subprime lenders, particularly those that have filed foreclosure
suits against victims of Hurricane Katrina, Democratic Presidential
candidate John Edwards has ties to lenders foreclosing on Katrina
victims, the Wall Street
Journal reported today. The
face='Times New Roman' size='3'>Wall Street Journal
size='3'>has identified 34
w:st='on'>New
Orleans
have faced foreclosure suits from subprime-lending units of Fortress
Investment Group LLC. Edwards has about $16 million invested in Fortress
funds and worked for Fortress, a publicly held private-equity fund, from
late 2005 through 2006. Edwards yesterday pledged that he would
personally provide financial assistance to New Orleanians who are facing
foreclosure by Fortress-affiliated businesses or have lost their homes
already. He also promised to cleanse his portfolio of any investments
that may be profiting from their losses.
href='http://online.wsj.com/article/SB118728685546999884.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
International
to Probe Credit Rating Agencies
The subprime mortgage
crisis has prompted a European Commission investigation into credit
rating agencies, with regulators pledging to look into the agencies'
slow response to the situation,
size='3'>Bankruptcy Law360 reported yesterday.
The Commission said on Thursday that it would ask the Committee of
European Security Regulators (CESR) to review the agencies' reaction to
the mortgage market crisis. Internal Markets Commissioner Charlie
McCreevy has asked to meet with CESR as part of an ongoing review of the
policies and practices of the three major credit rating agencies,
Standard & Poor's, Moody's and Fitch.
face='Times New Roman' size='3'>In addition to the CESR's investigation,
the International Organization of Securities Commissions will also take
a closer look at credit agencies' role in the ongoing crisis. IOSCO is
responsible for the code of conduct that binds the agencies. The
organization drafted the current regulations in the wake of the Enron
and Parmalat scandals, amidst concerns that the agencies had failed to
identify the problems that eventually caused the collapse of the two
companies.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=32651'>Read
more. (Registration required.)
name='10'>Australians Ringing Up More Card Debt
The Reserve Bank
of
face='Times New Roman'
size='3'>Australia
size='3'>reported that credit card balances in the country rose 11.4
percent to $32.01 billion in June from $28.77 billion in June 2006,
CreditandCollectionsWorld.com reported yesterday. The $32.01 billion
balance is a 1 percent increase from May’s figure of $31.6
billion.
face='Times New Roman'
size='3'>Australia
size='3'>had 13.5 million card accounts in June 2007, up 4 percent from
approximately 13 million in June 2006. As mortgages become more
expensive, more Australians are using credit cards to borrow money, said
Denis Orrock, general manager with Sydney-based financial researcher
Infochoice Ltd.
face='Times New Roman' size='3'>Australia
ranks third in terms of being at risk for household debt,
following
size='3'>Norway and
size='3'>New Zealand
size='3'>, according to a recent study of 16 industrialized countries by
href='http://www.creditcollectionsworld.com/article.html?id=2007081697VN9E19&from=creditandcollectionnews'>Read
more.
name='11'>Lenders in
w:st='on'>
size='3'>Canada
size='3'>Act to Fix a Problem in Their Debt
Market
Banks and money managers
came together Thursday to sign an agreement that is expected to resolve
a situation where some nonbank holders of asset-backed commercial paper
were unable to roll over their debt and get their banks to provide
emergency financing, the
size='3'>New York Times reported today. Unlike
the subprime mortgages causing turmoil in markets in the
size='3'>United States
size='3'>, the debt in the Canadian liquidity problem was viewed as
generally of high quality. It is made up largely of credit card loans,
auto loans and leases and market-rate mortgages that have been
repackaged into short-term securities. “This does not appear to be
an issue of the underlying assets,” said David Wolf, the head of
Canadian economics and chief strategist of Merrill Lynch
size='3'>Canada.
“The flare-up looks to be an outgrowth of increased risk aversion
globally.”
href='http://www.nytimes.com/2007/08/17/business/worldbusiness/17canada.html?ref=business&pagewanted=print'>Read
more.
name='12'>TROUBLED COMPANIES IN THE NEWS
The business
news articles below are taken from the U.S. Business Journal’s
Daily Summary of Troubled & Fast Growing U.S. Companies which is
published by Bastien Financial Publications.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
size='3'>Code 37
Barnwell Industries
Inc., a
w:st='on'>
size='3'>Honolulu
size='3'>, Hi. natural resources exploration and production firm,
reported its third quarter net income declined 75%–to $743,000, on
a 31% revenue decline–to $11.8 million.
Coast Distribution
System Inc.
size='3'>, a Morgan Hill, Ca. provider of parts and accessories for
recreational vehicles and boats which serves over 10,000 customers and
has seventeen warehouses in North America, reported its second quarter
net income declined 50%–to $1.5 million, on a 10% revenue
decline–to $50.8 million.
With Merrill Lynch & Co. assigning a “sell” rating
to Countrywide Financial
Corp.’s
shares, some are concerned about the nation’s largest home
mortgage lender’s ability to deal with the worsening credit
crunch. As one analyst described, if creditors were to suddenly
cut off funding to Countrywide, forcing the firm to sell assets in an
already weak market, a bankruptcy filing for Countrywide would not be
out of the question. The company’s most recent balance sheet
showed assets of $1.2 billion in cash and $34 billion of mortgage loans.
More recently, the company did say it had $50 billion of what it
termed highly reliable short-term funding liquidity.
Devcon International
Corp., a
w:st='on'>Boca
Raton
size='3'>, Fl. security firm, reported a second quarter loss of $6.8
million on revenue of $13.8 million. This compares with a loss of
$416,000 on revenue of $15 million for the same period one year earlier.
The company, which, less than a month ago, saw its board of
directors approve the repurchase of $5 million of its common shares,
reported that both its loss and revenue decline were the result of the
sale of its coastal wholesale operations.
Flanders
Corp., the
w:st='on'>
Petersburg
size='3'>, Fl. maker of air filtration products used in a number of
industries and which is undertaking a review of all of its operations
after it reported its second quarter earnings declined 68%–to
$800,000, has replaced its CEO and president. The firm is also in
the midst of recovering from a fire that destroyed one of its facilities
in Bartow, Fl.
Ford Motor
Co., as part of its efforts to reduce costs
and operate more efficiently, is selling a powertrain-parts supply plant
in
face='Times New Roman'
size='3'>Mexico
face='Times New Roman'>to Linamar Corp., a Canadian auto
parts manufacturer, for an undisclosed amount.
Hooper Holmes
Inc., a Basking Ridge, N.J. firm which
provides physical exams and collects medical records for life insurance
carriers in the
size='3'>U.S. and
size='3'>UK
face='Times New Roman'>, reported a second quarter net
loss of $1.8 million, on an 8% revenue decline–to $60.1 million.
The loss, which includes a restructuring charge of $732,000,
compares with a loss of $525,000 for the same period one year
earlier.
Intertape Polymer Group
Inc., a
face='Times New Roman' size='3'>Quebec
size='3'>,
w:st='on'>
size='3'>Canada
face='Times New Roman'>manufacturer of shrink wrap and
other packaging products, reported a second quarter net loss of $8
million, on a 14% sales decline–to $187 million. The loss,
which includes a $4.4 million charge related to closing certain
facilities, compares with an $18 million loss for the same period one
year earlier.
KKR Financial
Holdings,
the San Francisco, Ca. firm and affiliate of private equity company
Kohlberg Kravis Roberts & Co. which is in the process of selling
certain assets related to residential real estate, reported a loss of
nearly $40 million in selling more than $5 billion in residential
mortgage assets. The company may have to record a charge of as
much as $20 million–which could wipe out its net equity interest
in the securities.
Peco II
Inc., the
Galion, Oh. communications power systems manufacturer could face
delisting from NASDAQ if it is unable to raise its price per share above
$1–the minimum price bid required by the exchange, In its second
quarter the company reported a loss of $745,000, on a 22% revenue
decline–to $10.6 million.
Phoenix Footwear Group
Inc., a
face='Times New Roman' size='3'>Carlsbad
size='3'>, Ca. manufacturer whose footwear and accessories are sold
through 10,000
w:st='on'>
size='3'>U.S.
face='Times New Roman'>retailers, reported a second
quarter net loss of $929,000, on an 11% sales decline–to $25.1
million. This is more than double the loss for the same period one
year earlier.
Photon Dynamics
Inc.of San
Jose, Ca. has received a notice from NASDAQ that it is out of compliance
with the exchange’s listing requirements for failing to file its
financial report in a timely manner. The company has requested a
hearing on the matter.
The Quiznos
restaurant chain based in
w:st='on'>
size='3'>Denver
w:st='on'>Co.
has seen The Toasted Subs Franchisees Association Inc.
file suit on behalf of nearly 5,000 franchise owners nationwide.
The suit claims the
w:st='on'>
size='3'>Denver
defrauded its franchisees by forcing them to buy food and supplies at
inflated prices and by “unlawfully...scheming to sell franchises
by omitting or...misrepresenting key facts...”.
Quizno’s has already settled a dispute with a
size='3'>Texas
size='3'>franchisee for an undisclosed amount.
Sentinel Management
Group, the
face='Times New Roman'
size='3'>Northbrook
size='3'>, Il. money management firm with more than $1.5 billion under
its control and which was, as previously reported, fearing a run on its
accounts by its clients that could force the firm into liquidation
proceedings, has now frozen client assets in order to prevent that run.
Federal regulators are working to devise a plan that would resolve
the Sentinel crisis.
Sharper Image
Corp., the
size='3'>San Francisco
face='Times New Roman'>, Ca. retailer, reported that it
could be forced to file for bankruptcy protection if it has to pay as
much as $900 million to settle a class action lawsuit being sought
against it by twenty-seven different state attorneys general. The
suit relates to the company’s ionic breeze purifiers and claims
that they were ineffective in removing pollution from the air.
Sonesta International
Hotels Corp., a
w:st='on'>
size='3'>Boston
which operates or owns about twenty hotels internationally and operates
five cruise ships on the
w:st='on'>
size='3'>Nile
face='Times New Roman'
size='3'>River
face='Times New Roman'>, reported second quarter net
income of $762,000, a turnaround from the $233,000 loss reported for the
same period one year earlier. Revenue declined 15%–to $22.8
million.
Westwood One
Inc., the large
New York distributor and producer of radio programming serving over
5,000 affiliated stations nationwide, reported its second quarter net
income declined 43%–to $6.9 million, on a 17% revenue
decline–to $111.1 million.
Wheeling-Pittsburgh
Corp., the Wheeling,
W.V. firm whose main subsidiary, Wheeling-Pittsburgh Steel, makes both
cold-rolled and hot-rolled sheet steel as well as other coated steel
products, reported a second quarter net loss of $42 million, on a 6%
revenue decline–to $467 million.