July 272009

 

House Panel to Examine Issue

of Medical Debt

The House JudiciarySubcommittee on Commercial and
Administrative Law will hold a hearing tomorrow at 11 a.m. ET titled,
“Medical Debt – Is Our Healthcare System Bankrupting
Americans?” Witnesses to be announced; 
href='http://judiciary.house.gov/hearings/hear_090728.html'>click
here for more information.

Autos

Senate Commerce Committee

Chairman Seeks Audit of Automakers

Congress turned up the heat on General Motors Corp.
and Chrysler Group with a senior lawmaker calling for a U.S. Treasury
Department review of decisions to cut more than 2,000 dealers, Reuters
reported on Friday. Senate Commerce Committee Chairman John Rockefeller
(D-W.Va.) asked on Friday for the internal watchdog of the agency's
financial bailout fund to look into the matter. 'There is substantial
confusion, even among dealers themselves, as to how GM and Chrysler
selected dealerships to terminate and what benefits, if any, they might
gain by doing so,' Rockefeller said in a letter to Neil Barofsky,
special inspector general of the Troubled Asset Relief Program (TARP).
Last week, the House Financial Services Committee approved a resolution
that would require the Obama administration's autos task force to turn
over documents on dealer decisions and other matters related to the
automakers' bankruptcies. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/24/AR2009072403371_pf.html'>Read

more.

Delphi Retirees Seek
Answers from U.S. Auto Task Force

The salaried retiree group from Delphi Corp.has asked
the Obama administration's automotive task force to help sort out how
the Pension Benefit Guaranty Corp.'s takeover of six Delphi pension
plans will impact retiree benefits,

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size='3'>Bankruptcy Law360 reported on Friday.

The Delphi Salaried Retiree Association met with members of the task
force on Thursday and pushed for the same treatment under the deal for
salaried employees who worked as clerks, supervisors and engineers as
for union-represented hourly employees. In addition, the group asked
that laws be revised to prevent the loss of health care and life
insurance for retirees, that health care be given priority status in
bankruptcy, and that pension fund money not be used for nonpension
expenses like buyouts and severance payments. The PBGC announced on
Wednesday that it would take over the six pension plans covering 70,000
workers and retirees of Delphi. 
href='http://bankruptcy.law360.com/print_article/113101'>Read
more. (Subscription required.)

Indiana Town May File for
Chapter 9 Protection

Facing a debt of $1.45 million over a long-delayed
sewage plant project, the town of Georgetown, Ind., has taken the first
step toward filing for chapter 9 protection, an unprecedented move for
an Indiana municipality, the

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size='3'>Louisville Courier-Journal reported
today. Whether Georgetown could do that, however, is in dispute as state

officials say that Indiana law doesn't authorize a town to declare
bankruptcy. Georgetown's leaders “have no authority” to
declare the town bankrupt, said Brian Bailey, general counsel for the
Indiana Department of Local Government Finance. Bailey cited a 1994
update to the Bankruptcy Code that says a municipality “must be
specifically authorized” by state law to be a debtor, and no
Indiana law does that. However, Georgetown Town Council President Billy
Stewart said there may be no other option as the town does not have the
money to pay its debts. 

href='http://www.courier-journal.com/article/20090727/NEWS02/907270309/1025/rss02'>Read

more.

Executive Compensation

U.S. Pay Czar to Rework
Contracts Deemed High

U.S. pay czar Kenneth Feinberg, who is now preparing
to vet the compensation at businesses receiving major federal aid, will
push to renegotiate contracts that he views as excessive or seek other
ways to reduce overall outlays, the

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size='3'>Wall Street Journal reported today.
Feinberg, a Treasury Department official who has authority to oversee
pay for the 100 highest-paid employees at
size='3'>Citigroup Inc., Bank of America Corp., American International
Group Inc., General Motors Co., Chrysler Corp., Chrysler Financial and
GMAC Financial Services Inc, has been meeting regularly with the seven
firms to help them fix a level and structure of compensation that the
government deems proper. None of the firms have yet submitted their
proposed pay packages. GMAC has proposed to Mr. Feinberg that it be able

to pay its top people a mix of 20 percent cash and 80 percent
stock. 

href='http://online.wsj.com/article/SB124865384313282569.html#mod=testMod'>Read

more. (Subscription required.)

In related news, the House Financial Services
Committee will hold a mark-up hearing tomorrow on
size='3'>H.R. 3269, the “Corporate and Financial Institution
Compensation Fairness Act of 2009.” 

href='http://www.house.gov/apps/list/speech/financialsvcs_dem/fcmrk_072809.shtml'>Click

here for additional details.

Commentary: Congress
Needs to Reform Risk-Driven Executive Compensation

Earlier this month, when Goldman Sachs reported record

quarterly profits — and prepared to pay large bonuses — it
was widely noted that the firm was leading the way back to a future in
which outsized pay for short-term gains could once again foster
excessive risk-taking, according to a

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size='3'>New York Times editorial today.
Additional firms now look to be returning to the bonus-driven risk
culture, while comprehensive executive compensation reform will probably

take until next year. A solution, according to the editorial, is for
Congress to handle bankers’ compensation as a stand-alone issue as

there is a need to end the perverse incentives that helped to set off
the financial crisis. Among the needed pay reforms are rules to tie
executive payouts to long-term results, like prohibitions against
cashing out equity-based compensation until many years after options or
shares have vested. Bonuses need to be delayed to ensure that the
profits on which they are based do not prove transitory. An insightful
reform recommended by Lucian Bebchuk, a Harvard Law professor and
director of the law school’s Program on Corporate Governance,
would require that executive compensation be tied not only to the
company’s stock performance, but also to the long-term value of
the firm’s other securities, like bonds. 

href='http://www.nytimes.com/2009/07/27/opinion/27mon1.html?ref=opinion&pagewanted=print'>Click

here to read the full editorial.

Treasury Secretary Looks to
Ease Congressional Concern over New Agency

Treasury Secretary Timothy Geithner said that he would

consider changes in the proposed Consumer Financial Protection Agency to

lessen some of the industry opposition that has stalled the plan's
movement,

size='3'>CongressDailyreported on Friday.
Geithner told the House Financial Services Committee that the proposal
would not conflict or undermine the safety and soundness of banks and
would better consolidate consumer protection mandates into one agency to

make it more effective. 'It is time for a level playing field for
financial services competition based on strong rules, not based on
exploiting consumer confusion,' Geithner said in his prepared remarks.
Opponents argue that federal bank regulators should retain their powers
because they are better prepared to oversee such functions -- a charge
echoed by the regulators themselves, including Federal Reserve Chairman
Bernanke. 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_072409.shtml'>Click

here to read the prepared testimony.

General Growth's Extension
Bid Raises Objections

General Growth Properties Inc.'s bid to extend its
control of its bankruptcy for six more months has drawn opposition from
parties including lenders who say that the proposed extension is too
long,

size='3'>Bankruptcy Law360 reported on
Friday.The Prudential Insurance Co. of America filed an objection on
Wednesday saying that while it didn't have a problem with a reasonable
extension of the debtors' exclusivity period, the six-month extension
was 'far too long with respect to the four single asset real estate
debtors that are the only entities that are direct borrowers from
Prudential.'U.S. Bank National Association filed a limited objection on
behalf of lenders under a July 2008 loan agreement worth $1.51 billion,
claiming that the six-month extension was too long and that a 90-day
extension was warranted. 
href='http://bankruptcy.law360.com/print_article/113204'>Read more.
(Subscription required.)

Six Flags Proposes
Reorganization Plan

Six Flags Inc., which filed for bankruptcy protection
in June, has proposed a plan to restructure its business that would
convert a significant portion of the theme park operator’s debt
into equity, including almost all of the common stock of a newly
reorganized company,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Under the plan, the holders of prepetition
credit agreement claims would receive 92 percent of the common stock of
a reorganized Six Flags, while the company would obtain a new $600
million five-year loan. Similar claims from creditors of Six Flags
Operations Inc., a direct subsidiary through which the company does most

of its business, would be discharged and exchanged for a new guaranty.
All other allowed secured claims would be repaid in full or reinstated
at the company’s discretion. 
href='http://bankruptcy.law360.com/print_article/113136'>Read
more. (Subscription required.)

Applied Solar Files for
Chapter 11

Applied Solar, Inc., a building-integrated solar
products, filed for chapter 11 on July 24 and declared assets of $17.6
million with total debts of $29.1 million, Reuters reported yesterday.
The San Diego-based company had said in May that it would seek
bankruptcy protection as part of a loan agreement with its largest
investor, The Quercus Trust. The solar company had borrowed $698,000
from Quercus, an investment firm that focuses on clean technology
companies. 

href='http://www.iii.co.uk/news/?type=afxnews&articleid=7441609&action=article'>Read

more.

Dayton Superior Looks to
Emerge from Chapter 11

Commercial construction materials supplier Dayton
Superior Corp.filed its disclosure statement and reorganization planon
Thursday, which includes the conversion of around $161 million of
certain senior subordinated notes to equity,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Under the plan, approximately $161 million
of the company’s 13 percent senior subordinated notes due in 2009
would be converted to equity. Additionally, qualified prepetition
noteholders would have the option to purchase additional shares of stock

of the reorganized Dayton through a $100 million rights
offering. 
href='http://bankruptcy.law360.com/print_article/113046'>Read more.
(Subscription required.)

Analysis: Bank Lending
Continues to Shrink as Economic Fears Linger

Lending continues to slow as bankers and borrowers
refrain from taking risks, in a bearish sign for the economy, the

size='3'>Wall Street Journal reported today.
The total amount of loans held by 15 large U.S. banks shrank by 2.8
percent in the second quarter, and more than half of the loan volume in
April and May came from refinancing mortgages and renewing credit to
businesses, not new loans, an analysis by the
face='Times New Roman'>Wall
Street Journal shows. The loan figures
reviewed by the
face='Times New Roman' size='3'>Journal
size='3'>include giants such as JPMorgan Chase & Co., Bank of
America Corp. and Citigroup Inc., as well as regional banks such as
Fifth Third Bancorp, and Regions Financial Corp. The 15 banks hold 47
percent of federally insured deposits and got $182.5 billion in
taxpayer-funded capital infusions through the Troubled Asset Relief
Program. As of June 30, the banks had $4.2 trillion of loans on their
balance sheets, down from $4.3 trillion as of March 31. 

href='http://online.wsj.com/article/SB124865259057482435.html#mod=testMod'>Read

more. (Subscription required.)

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