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March 11, 2010

Senate Bill on Finance to Include Agency that Tracks Financial Risk

Senate Banking Committee members from both parties said on Wednesday that they had agreed to include in their regulatory overhaul bill a new Office of Research and Analysis that would provide early warnings of possible systemic collapses, the New York Times reported today. The proposed agency, which has sometimes been referred to as the National Institute of Finance, is intended to give federal regulators daily updates on the stability of individual firms as well as that of their trading partners, including hedge funds. By standardizing financial instruments and reporting mechanisms, the agency would give regulators a broader view of the health of participants in the financial markets and the potential for problems to spread. The idea's supporters say that kind of information was lacking in recent years as the housing bubble burst and troubles spread from firm to firm. The new agency, which was also endorsed Wednesday by Sen. Bob Corker (R-Tenn.), would have no policy responsibilities but would instead collect and analyze data, building models to assess relative risks and predict how one firm's problems might affect others. But it faces significant resistance in Congress and is unlikely to be part of the revised bill that is expected to be introduced this month by Senate Banking Committee Chairman Christopher J. Dodd. Read more.

name='2'>Wayzata-Led Group Bids $93 Million for RathGibson

RathGibson Inc. has reached a deal to sell its assets to a group of bidders led by Wayzata Investment Partners LLC for $93 million plus the assumption of liabilities, The Deal Pipeline reported yesterday. Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware in Wilmington will consider the sale's bidding procedures on March 23. The buyers are several of RathGibson's debtor-in-possession financing lenders and noteholders, court filings show. If Sontchi approves the bidding procedures, the bidders' acquisition vehicle, RathGibson Acquisition Co. LLC, will enter a May 19 auction for the bankrupt maker of stainless steel and alloy tubular products as the stalking-horse bidder. According to court documents, holders of about 70 percent of the debtor's 11.25 percent senior notes due Feb. 15, 2014, are involved in the stalking-horse bid. The DIP lenders will charge RathGibson a $1.2 million fee for extending the DIP. The company had received approval on the disclosure statement outlining its first reorganization plan on Aug. 31, but the confirmation hearing was postponed indefinitely. Read more (subscription required).

name='3'>Trash Hauler EnviroSolutions Files for Bankruptcy Protection

EnviroSolutions Holdings Inc., a U.S. trash hauler and landfill operator, and 21 of its affiliates filed for chapter 11 protection, Bloomberg reported today. The company has $100 million to $500 million in both assets and debt, according to filings yesterday in U.S. Bankruptcy Court in Manhattan. Standard & Poor's Financial Services LLC said in a report last month that closely-held EnviroSolutions' operating earnings were likely to remain 'weak' for the next several quarters and that the company might violate the covenants under its credit agreement or be unable to service its debt if it couldn't get an amendment or a waiver from its debt holders. The case is EnviroSolutions of New York LLC, 10-11236, U.S. Bankruptcy Court, Southern District of New York (Manhattan). Read more.

Judge Hears Final Arguments in Trump Casinos' Bankruptcy

A case that could have major implications for Atlantic City's gambling industry wound down yesterday in U.S. Bankruptcy Court in Camden, on the same day that revenue figures revealed a rough February for the resort, the Philadelphia Inquirer reported today. Billionaire Carl Icahn and banker Andy Beal are vying to gain control of the three Trump casinos. Their bankruptcy-exit plan is locked squarely against a plan offered by the bondholders, Trump Entertainment Resorts Inc., and Donald Trump himself, with daughter Ivanka. Attorneys for the two sides gave closing arguments yesterday before Judge Judith H. Wizmur, who is expected to make a decision next month. Walsh said Icahn had neither a strategic vision for the casinos nor the support of the noteholders, the majority of whom voted for the bondholders/company plan, which would inject $225 million in equity into the firm and guarantee the continued use of the Trump name on the casinos. The 11 Atlantic City casinos, battered by Pennsylvania slots parlors and three major snowstorms, reported $261.6 million in revenue last month, down 15.7 percent from the same month last year. Read more.

name='5'>Politics, Shaky Economy Create No Rush to Restructure Fannie and Freddie

The federal government has spent the past half-year seeking to roll back its emergency efforts at propping up the financial markets, with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac, the Washington Post reported today. As the government has pledged more and more money to cover the companies' losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1. No plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms. Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system. As other financial firms have exited the market and credit has seized up, Fannie and Freddie have been behind the vast majority of mortgages made since the start of the financial crisis. The companies now own or back more than half of all U.S. home loans. The government's extended involvement in the companies has opened the administration to criticism from both parties that it has failed to begin winding down Fannie Mae and Freddie Mac fast enough. Read more.

name='6'>JP Morgan Private Bank to Expand Away from U.S.

JP Morgan's private bank has embarked on an international expansion in a bid to reduce its focus on the United States, expand its European footprint and join the battle to tap the ultra-wealthy in emerging markets, Reuters reported today. Pablo Garnica, private banking chief for Europe, the Middle East and Africa (EMEA), said the bank had kicked off a hiring spree and is also looking at possible acquisitions. He added that the bank had looked at potential acquisition targets in the U.K. and continental Europe. The strategy to globalize the business, which caters to super-rich clients with more than $20 million in investible assets, hinges in part on chasing new wealth being created in emerging markets such as the Middle East, Garnica said. The head of Citi Private Bank, part of Citigroup, also recently said that the bank expects to diversify its business globally away from a focus on its U.S. home market. Read more.

name='7'>Rattner in Talks to Settle a Probe

Wall Street financier and former auto czar Steven Rattner is in settlement talks to resolve his role in the 'pay to play' investigation at the New York state pension fund, The Wall Street Journal reported today. A guilty plea on Wednesday by David Loglisci, the former chief investment officer of the $129 billion fund, turned a spotlight on Rattner, a well-known Wall Street player who last year spearheaded the Obama administration's auto overhaul. For months, Rattner's lawyers have been engaged in protracted settlement discussions with both the New York attorney general and the Securities and Exchange Commission over his conduct in the case. The New York-based firm obtained a $100 million investment from the New York pension fund three weeks after a DVD company owned by Quadrangle agreed to distribute 'Chooch,' a low-budget movie co-produced by Loglisci and his brother, according to court papers. Quadrangle also paid a $1.1 million finder's fee to Hank Morris in exchange for securing the investment from the New York fund. Loglisici said Wednesday that he had 'effectively ceded' his authority over the fund's private-equity investment decisions to Morris, a former top New York political adviser. Rattner left Quadrangle a year ago to join the Obama administration. On Wednesday, Rattner spoke at a bankruptcy conference in New York and said that the overhaul is structured so that the federal government will get most of the money it put up to rescue General Motors. Read more.

name='8'>Lehman to Judge: Make the Examiner's Report Public

Lehman Brothers and its lawyers at Weil, Gotshal & Manges sent a clear message this week to the judge hearing Lehman's bankruptcy case: Make public the full report about Lehman's demise, according to a report from The American Lawyer, Law.com posted yesterday. In a motion filed Monday by Weil's Harvey Miller, Lehman says it has cooperated fully with the special examiner investigating the bank's failure and has turned over more than 20 million pages of e-mail. The examiner in the case, Jenner & Block chairman Anton Valukas, was given full subpoena power to investigate Lehman's epic fall. Issues of particular interest include whether Barclays got a sweetheart deal when it purchased Lehman's North American operations days after Lehman filed for bankruptcy; how Lehman shifted billions from unit to unit hours before its bankruptcy filing; and whether JPMorgan Chase acted appropriately as Lehman's main lender. Valukas and Jenner also have filed papers urging Judge James Peck to make the report public - with some redactions to protect proprietary and otherwise sensitive information from the entities Valukas examined during his investigation, which include JPMorgan, Barclays and the Federal Reserve Bank of New York. In a letter submitted to Peck on Tuesday, Jenner says Valukas and his team have resolved those confidentiality issues with all but one party, and that they have done so by 'agreeing to redactions' of information that 'has no relevance' to the report. The only holdout: CME Group (also known as the Chicago Mercantile Exchange), which is haggling over how to disclose the contents of five documents totaling seven pages, the letter says. Read more.

name='9'>Extended Stay Examiner Completes Investigation

A court-appointed examiner in the bankruptcy of U.S. hotel chain Extended Stay America Inc. has completed his investigation into the company's 2007 leveraged buyout and will seek to make his report public, according to court documents filed late Tuesday, Reuters reported yesterday. Ralph Mabey, a former bankruptcy judge who was appointed in September to look into the acquisition of Extended Stay by David Lichtenstein's Lightstone Group, said that he believes his examiner's report should be made public. Extended Stay filed for bankruptcy protection in June, saying it was 'significantly over-leveraged' and that projected cash flows could not continue to service its more than $7 billion in debt. Lightstone had borrowed $7.4 billion to purchase the chain of 680 hotels from a Blackstone Group LP affiliate in 2007. Mabey said he was contacting those involved in his investigation to see if he could get consent to publicly disclose the information in his report, but would seek the court's approval to make his report publicly available at an April 8 hearing. He is also seeking approval to file his report with the court under seal on Friday. The case is In re Extended Stay Inc., U.S. Bankruptcy Court, Southern District of New York, No.09-13764. Read more.

name='10'>Shareholders Want New Bankruptcy Plan for Visteon

Hedge funds that own about 7 percent of the stock of Visteon Corp. want to meet with the bankrupt auto parts maker's board this week to discuss an alternative reorganization, according to a regulatory filing, Reuters reported yesterday. The hedge funds said in a letter dated March 8 that they have formed an ad hoc committee and want to discuss Visteon's improving performance no later than Friday. The letter cited cash holdings and operating cash flow that exceeded forecasts in the company's disclosure statement, which it must provide to creditors who will vote on the company's proposed plan of reorganization. The ad hoc committee said in a regulatory filing they paid a combined $4.77 million for their 9.5 million shares, or an average of 50.2 cents per share. The company filed for bankruptcy in May, when the U.S. automotive industry was roiled by the bankruptcies of General Motors and Chrysler. The company's reorganization plan would give secured lenders nearly all of the company's equity as well as new secured debt. Unsecured creditors, except for the government's agency that guarantees pensions, would be wiped out, as would shareholders. The company entered talks with unsecured creditors earlier this year over developing an alternative plan that would provide them some recovery. The case is In re Visteon Corp., U.S. Bankruptcy Court, District of Delaware, No. 09-11786. Read more.

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