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July 16, 2008
Countrywide Settles Lending Suit in
Pennsylvania
Countrywide Home Loans has agreed to pay $325,000 to the chapter 13
bankruptcy trustee in Pittsburgh, settling a matter that accused the
lender of abusive practices in almost 300 mortgage loans overseen by the
court, the New York Times reported today. Saying that the
company had lost or destroyed more than $500,000 in checks paid by
homeowners in foreclosure from December 2005 to April 2007, Chapter 13
Trustee Ronda J. Winnecour asked the bankruptcy court to impose
sanctions against Countrywide, the nation's largest loan servicer.
Countrywide, which was acquired by Bank of America this month, disputed
Winnecour's allegations about the lost checks, saying that the company
had no record of having received the payments that the trustee said had
been sent. However, Countrywide settled the case on June 18 with her
office, and the settlement is now pending approval by Bankruptcy Judge
Thomas P. Agresti. Questionable practices by loan
servicers have been under investigation by the Executive Office for the
U.S. Trustees since October.
href='http://www.nytimes.com/2008/07/16/business/16lend.html?ref=business&pagewanted=print'>Read
more.
SEC Moves to Curb
Short-Selling
The Securities and Exchange Commission took unprecedented action
yesterday as it issued an emergency order to curb improper short-selling
in the stocks of struggling mortgage giants Fannie Mae and Freddie Mac,
as well as those of 17 financial firms, including Goldman Sachs Group
Inc., Lehman Brothers Holdings Inc., Morgan Stanley and Merrill Lynch
& Co., the Wall Street Journal reported today. The plan,
which is expected to go into effect on Monday, will expire in 30 days.
However, the SEC will also begin considering whether to extend the new
requirements to all stocks traded in the United States.
href='http://online.wsj.com/article/SB121614248005255151.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Lawmaker Criticism over Treasury's GSE
Rescue Plan Could Complicate Housing-Assistance Bill's Path
Including a provision to let the Treasury Department provide capital to
Fannie Mae and Freddie Mac in housing-recovery legislation expected on
the floor next week has complicated the vote for House Republican
leaders as Democratic leaders face a potential backlash,
CongressDaily reported today. Senior GOP lawmakers and staff
said Republican leaders had retreated from Sunday's expression of
support for the Bush administration's proposal following a number of
surprising calls for slow and steady review of the plan by key members
of their Republican Conference. After announcing Sunday that they were
'ready to work with [Treasury] Secretary Paulson and congressional
Democrats to take appropriate steps to ensure the soundness of our
mortgage markets,' Minority Leader John Boehner (R-Ohio) and Minority
Whip Roy Blunt (R-Mo.) yesterday called for hearings into the matter.
Rep. Jeb Hensarling (R-Texas), who chairs the conservative Republican
Study Committee, has called for consideration of the Treasury proposal
under regular order, including a complete committee review.
Law Firms Wait for Anticipated
Business Bankruptcy Wave
Despite the high-profile filings of Linens 'n Things Inc., Aloha
Airgroup Inc., Sharper Image Corp. and, just last week, retailer Steve
& Barry's LLC, law firms are still waiting for the anticipated rush
of corporate filings that were predicted for 2008, the Wall Street
Journal reported today. Last month, 4,992 businesses entered
bankruptcy court protection, up from 3,408 in June 2007, according to
Automated Access to Court Electronic Records, or AACER, a bankruptcy
data and management company. Lynn LoPucki, a bankruptcy law expert at
the University of California, Los Angeles, said the AACER statistics
don't account for the size of the filing. According to his own
Bankruptcy Research Database, 2008 is on pace to finish with about 26
chapter 11 filings by companies valued at $250 million or more, twice
the 13 filed in 2007 but fewer than a third of the 97 filed in 2001,
during the last economic slump.
href='http://online.wsj.com/article/SB121617624913657095.html'>Read
more. (Registration required.)
Pierre Foods Files for Bankruptcy
Protection
Privately held Pierre Foods Inc., which produces beef, pork and chicken
for schools and other markets, said yesterday that it filed for chapter
11 protection, the Associated Press reported. The company, which cited
the rising cost of raw materials as the primary reason for the filings,
said that it will restructure its debt and take steps to strengthen and
streamline operations, but expects to continue operating during the
reorganization. Pierre received up to $35 million in financing to fund
operations from private equity firm Oaktree Capital Management
LP.
href='http://biz.yahoo.com/ap/080715/pierre_foods_ch_11.html?.v=1'>Read
more.
Vertis Communications Files Restructuring Plan
Marketing company Vertis Communications yesterday filed its chapter 11
restructuring plan as part of its prepackaged reorganization to allow it
to cut debt and complete its proposed merger with printer American Color
Graphics, Reuters reported. American Color Graphics has also commenced
its own voluntary chapter 11 proceedings and filed its own prepackaged
plan. The restructurings will cut the combined company's debt
obligations by about $1 billion. The noteholders of Vertis and American
Color Graphics will exchange their bonds for an aggregate of $550
million in new notes and substantially all of the new equity in the
merged company.
href='http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN1531833420080715'>Read
more.
Judge Confirms Fieldstone's
Reorganization Plan
Bankruptcy Judge James F. Schneider approved a
reorganization plan for Fieldstone Mortgage Co. following a vote by its
creditors, paving the way for the company to leave chapter 11
protection, Bankruptcy Law360 reported today. Fieldstone's
first reorganization plan, filed April 14, drew objections from a number
of creditors, including Fieldstone's unsecured creditors' committee. The
committee withdrew its objections to the revised plan during the
confirmation hearing. The revised reorganization plan was filed Friday,
along with Judge Schneider's order. The plan provides for Planet
Financial Group LLC to provide $1.2 million in debtor-in-possession
financing to fund the company's reorganization.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=62307'>Read
more. (Registration required.)
Regulators Take Steps to Aid Bank
Liquidity
The Federal Deposit Insurance Corp.'s five-member board yesterday agreed
on a new policy aimed at encouraging the development of a 'covered bond'
market, which policymakers hope will direct more funding toward mortgage
lending, the Wall Street Journal reported yesterday. U.S. and
foreign regulators are expected to separately publish broad
liquidity risk-management policies over the next few months
aimed at diversifying a bank's access to money and testing the
contingency plans it has in place. The actions come at a crucial time
for the country's more than 8,000 federally insured banks and thrifts.
There are now more than 100 financial institutions on regulators'
'problem' list -- a confidential list of companies that are at a higher
risk of failure.
href='http://online.wsj.com/article/SB121617160741756507.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Wachovia Looks to Bolster Financial
Reserves
Wachovia's stock fell to a 17-year low yesterday after an analyst warned
that the commercial bank will face two years of losses arising from the
credit crisis and a dramatic restatement of troubled assets on its
books, the Washington Post reported today. Wachovia said
yesterday that it has enough money to cover about 84 percent of its
non-performing loans. Company officials disclosed yesterday that the
bank was raising enough money to add $4.2 billion to its reserves and
$1.3 billion more to cover losses in the second quarter.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/07/15/AR2008071503065_pf.html'>Read
more.
Delta Reports a Loss of $1.04
Billion
The airlines' struggles with the high cost of jet fuel and the weakening
economy hit Delta Air Lines as it reported a $1.04 billion loss for its
second quarter, the New York Times reported today. The
loss is $2.64 a share compared with a profit of $1.59 billion a
year ago in the same quarter. The airline, which in April agreed to
merge with Northwest, said its revenue rose 10 percent to $5.50 billion.
Oil prices, which closed at $138 a barrel yesterday, have doubled in the
past year. Delta has estimated it will pay an extra $4 billion for fuel
this year.
href='http://www.nytimes.com/2008/07/17/business/17air.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.