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August 21, 2007
Mortgage
Lending
name='1'>Democrats Press for Action to Aid
Homeowners
Democrats in Congress and
on the presidential campaign trail are seizing on the turmoil in
mortgages to criticize the Bush administration’s approach to what
they believe is a spreading crisis, the
size='3'>New York Times reported today. Senate
Banking Committee Chair
face='Times New Roman' size='3'>Chris
size='3'>topher J. Dodd (D-Conn.), who is seeking the Democratic
presidential nomination, has summoned Treasury Secretary Henry M.
Paulson Jr. and the chairman of the Federal Reserve to a meeting on
Tuesday to discuss steps to stabilize the markets and stave off home
foreclosures. Sen. Hillary Rodham Clinton (D-N.Y.), the Democratic
presidential front-runner, recently proposed a $1 billion fund to help
distressed families catch up on their mortgage payments. John Edwards,
the former senator from
w:st='on'>North
Carolina
similar bailout fund and has argued that federal regulators should force
mortgage lenders to restructure the terms on many of their loans.
Democrats in Congress are also pressing for much tougher regulation of
mortgage lenders and brokers. Some have called for stricter rules
against what they call deceptive and unfair practices, such as big
penalties for paying off a loan early or “teaser” interest
rates that start off low but rise sharply after two or three
years.
href='http://www.nytimes.com/2007/08/21/business/21housing.html?ref=business&pagewanted=print'>Read
more.
name='2'>Countrywide Said to Begin Layoffs
Despite reassurance to
customers that the liquidity problems dogging its mortgage operations
were not affecting its banking unit, Countrywide Financial Corp. started
laying off an undisclosed number of employees as it tries to ride out
the credit crunch that has rocked the home loan industry, the Associated
Press reported yesterday. The job cuts occurred in Countrywide's Full
Spectrum Lending unit, which handles mortgages given to customers with
minor credit problems or who can't provide the full income
documentation required for traditional prime loans. The developments
left many Countrywide Bank customers frazzled over the security of their
deposits and many have converged on bank branches in search of answers.
Countrywide is the largest mortgage lender by volume, accounting for
more than 13 percent of the loan servicing market as of June 30,
according to the mortgage industry publication
face='Times New Roman' size='3'>Inside Mortgage Finance
size='3'>.
href='http://biz.yahoo.com/ap/070820/countrywide_mortgages.html?.v=10'>Read
more.
name='3'>Capital One to Close Mortgage Loan Unit
Capital One Financial,
the McLean, Va.-based financial services company, said that it is
closing a mortgage banking subsidiary and eliminating 1,900 jobs,
joining a number of firms that took steps yesterday to adjust to the
widening credit crunch, the
size='3'>Washington Post reported today.
Capital One's GreenPoint Mortgage subsidiary is based in
size='3'>California
issues mortgages and sells them to investors. The company specialized in
unconventional loans -- jumbo mortgages and loans made without full
documentation of the borrower's income or assets. Those types of loans
helped fuel the housing boom but lately have fallen out of favor with
investors. Capital One acquired GreenPoint in December with its purchase
of North Fork Bancorporation, just as the mortgage business was on the
verge of a dive. Closing the business will entail after-tax costs of
$860 million, the company said.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/20/AR2007082001252.html'>Read
more.
name='4'>Lawsuit Is Latest Obstacle to Accredited Home Lenders, Lone
Star Deal
The sale of Accredited
Home Lenders Holding Co. to Lone Star Fund may still happen, but recent
developments, including the filing of a lawsuit against the prospective
buyers, may impede the transaction, the
size='3'>San Diego Business Journal reported
yesterday. The troubled
w:st='on'>San
Diego
struck its deal with Lone Star in June and has been hanging on for much
of this year while many other mortgage companies fail or file for
bankruptcy. Lone Star said in a securities filing Aug. 10 that
Accredited would be unable to fulfill all the conditions of its tender
offer by an Aug. 14 deadline. Accredited responded by filing suit in the
Delaware Court of Chancery, seeking to compel Lone Star to meet its
contractual obligations in the June tender offer. Accredited announced
on Aug. 14 that more than 97 percent of its outstanding shares had been
tendered to Lone Star, including about 40 percent tendered through
notices of guaranteed delivery. On Aug. 14, Lone Star extended the
deadline for the tender offer until midnight Aug. 28. In its filing,
Lone Star said that Accredited had not satisfied all the
conditions for closing the offer, “in light of, among other
things, the drastic deterioration in the financial and operational
condition of the company.”
href='http://www.sdbj.com/article.asp?aID=116578'>Read
more.
Diocese
name='5'>Judge Rules Against
w:st='on'>San
Diego
Abuse Cases
A U.S. District Court
judge ruled Monday against the Roman Catholic Diocese of San Diego's
request to remove the authority to estimate the value of childhood
sexual abuse cases from federal bankruptcy court, the
face='Times New Roman' size='3'>San Diego Union-Tribune
size='3'>reported today. “At this juncture, the bankruptcy court
is in the best position to determine from a case-management standpoint
how and when these actions should proceed for estimation or
liquidation,” wrote Judge Irma Gonzalez in her nine-page ruling.
Instead, she set another hearing for Nov. 26 to check on the status of
the chapter 11 case and attempts to settle lawsuits involving some 150
men and women who say they were sexually molested as minors by priests
and other church workers. The diocese has valued the abuse claims at $95
million; plaintiffs' lawyers want twice that amount.
href='http://www.signonsandiego.com/news/metro/20070820-1634-bn20diocese.html'>Read
more.
name='6'>Legal Fees in
w:st='on'>
size='3'>Portland Diocese
Bankruptcy Reach $19 Million
Lawyers have submitted
their final bills to the
size='3'>Portland
w:st='on'>
size='3'>Ore.
for bankruptcy proceedings, with the total nearing $19 million,
theOregonian
reported today. Attorneys for priest accusers who filed
the lawsuits that sent the archdiocese into bankruptcy in 2004 earned an
estimated one-third of the $50 million in sex abuse settlements, putting
the total payout to lawyers at about $35 million. The Portland
Archdiocese emerged from bankruptcy in April by settling with about 175
people who claimed they were sexually abused by priests or other
employees of the archdiocese. The archdiocese also set up a $20 million
fund for future lawsuits.
href='http://www.oregonlive.com/metro/oregonian/index.ssf?/base/news/118766673164840.xml&coll=7'>Read
more.
SEC
Files Fraud Charges Against Sentinel Management
The Securities and
Exchange Commission (SEC) filed civil-fraud charges against investment
adviser Sentinel Management Group Inc., claiming the bankrupt
company’s woes are a case of fraud disguised as a casualty of the
markets, the Wall Street
Journal reported today. Early last week,
Sentinel, a company that manages short-term cash for hedge funds and
futures brokers, told clients it was halting redemptions because of the
'liquidity crisis' in the credit markets. The news contributed to a
207.61-point fall in the Dow Jones Industrial Average when it became
public Tuesday, and added to the sense of fear that gripped credit and
stock markets all week long. In a complaint filed yesterday in U.S.
District Court in
face='Times New Roman'
size='3'>Chicago
alleged that Sentinel suffered losses for several months leading up to
the Aug. 13 letter to clients because of 'undisclosed use of leverage,
commingling and misappropriation of clients' securities.'
href='http://online.wsj.com/article/SB118763942037803234.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
w:st='on'>
name='8'>Dana
size='3'>U.S.
face='Times New Roman' size='3'>Trustee Object to Mounting Legal
Fees
The U.S. Trustee overseeing
Dana Corp.'s chapter 11 proceedings joined the bankrupt
face='Times New Roman'>auto parts company on Friday in
opposing an award of fees for lawyers and consultants who worked for the
company's employees,
size='3'>Bankruptcy Law360 reported yesterday.
The fee dispute stems from a settlement Dana struck with its nonunion
workers early this year. Under the terms of the settlement, Dana agreed
to pay for the services needed to set up a fund to compensate its
nonunion retirees. In its objections, Dana argued that Stahl Cowen
Crowley and Segal have billed it for services involved in maintaining,
rather than merely setting up, the fund. The U.S. Trustee's office said
in its motion that 20 percent of the fees should be held back, adding to
earlier fee holdbacks in the case.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32928'>Read
more. (Registration required.)
name='9'>Deputy Director Appointed at EOUST
Mark A.
Redmiles has been appointed as Deputy Director of the Executive
Office for U.S. Trustees, effective Aug. 19, according to an EOUST
release yesterday.
size='3'>Redmiles has served at the EOUST since December 2004 as Chief
of the U.S. Trustee Program’s Civil Enforcement Unit, which
employs civil law remedies to protect against abuse of the bankruptcy
system by debtors, creditors, attorneys, bankruptcy petition preparers
and others. Redmiles guided the Program’s implementation of the
civil enforcement provisions in the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA), and served as a Program
representative to the U.S. Judicial Conference’s Advisory
Committee on Bankruptcy Rules, assisting in the development of new
bankruptcy rules and forms. Redmiles joined the Program in February 2002
after spending more than 11 years in private practice in
size='3'>Denver
specializing in bankruptcy law and litigation. He received his law
degree from Duke University School of Law in
w:st='on'>
size='3'>Durham
w:st='on'>
size='3'>N.C.
size='3'>Adelphia Shareholders' Claims Against
Banks Rejected
Bankruptcy Judge
Robert Gerber
size='3'>dismissed 12 of 13 claims by Adelphia Communications Corp.
shareholders accusing the former cable TV operator's investment banks of
fraud and other wrongdoing, Reuters reported yesterday. Judge Gerber
threw out claims alleging breach of contract, unjust enrichment and
violations of federal racketeering laws because the committee
representing shareholders failed to show or adequately allege
wrongdoing, according to the Aug. 17 ruling. The judge let stand one
claim accusing Citigroup Inc's Salomon Smith Barney unit of negligence
in recommending that Adelphia sell shares in public offerings and
private placements when it knew the company wasn't getting enough value
for them. Gerber also allowed the investors to refile claims against
some banks alleging fraud and fraudulent concealment.
href='http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyid=2007-08-20T204312Z_01_N20304238_RTRUKOC_0_US-ADELPHIA-LAWSUIT-BANKS.xml'>Read
more.
name='11'>Global Home Creditors Object to Extension
Request
Global Home Products LLC's
unsecured creditors are asking the court overseeing the
face='Times New Roman'>bankrupt housewares company's
chapter 11 proceedings to either outright reject the debtors' bid for
extensions of its exclusive filing and solicitation rights or impose a
deadline for putting together a restructuring plan and disclosure
statement, Bankruptcy
Law360 reported yesterday. While the unsecured
creditors concede that some progress has been made with respect to
working out a consensual chapter 11 plan, those
face='Times New Roman' size='3'>negotiations would be expedited if the
parties would enter into a term sheet and the debtors were required to
give the committee a draft of a reorganization plan and disclosure
statement by the end of the month. The unsecured creditors pointed out
that Global Home Products' operating assets have all been sold off, and
that the debtors are no longer generating revenue.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=32948'>Read
more. (Registration required.)
name='12'>Reliant Energy Plant Seeks Bankruptcy
Protection
A Reliant Energy Inc.
power plant filed for chapter 11 protection yesterday, but the company
said that no other bankruptcies were forthcoming at the independent
power company, Reuters reported yesterday. The unit, Reliant Energy
Channelview LP, produces electricity and steam mainly for Equistar
Chemicals, LP and sells any surplus power to the
w:st='on'>
size='3'>Texas
market. Approximately two-thirds of its surplus power was sold to
the
size='3'>Texas
said Reliant spokeswoman Pat Hammond. The company said that the plant's
lenders were unwilling to extend a $14 million revolving credit facility
href='http://investing.reuters.co.uk/news/articleinvesting.aspx?type=marketsNewsUS&storyID=2007-08-20T221130Z_01_N20315420_RTRIDST_0_RELIANTENERGY-PLANT-BANKRUPTCY-CORRECTED.XML'>Read
more.
name='13'>Commentary: Can Private Equity Firms Get Out of
Buyouts?
Amid the tightening
market for corporate debt and a roller coaster of a stock market, many
on Wall Street are beginning to ask if private equity firms that
committed to all those supersize leveraged buyouts can get out of them,
the New York
Times reported today.
size='3'>Investors are already betting that some of the biggest deals
may collapse, or at least be renegotiated. For example, shares of the
SLM Corporation, the parent of the student lender Sallie Mae, are 19.5
percent below the price that a consortium of buyout firms and banks had
agreed to pay. Adding to the speculation about transactions that have
been announced but have not closed is Home Depot’s announcement
last week that it was in talks with a consortium buying its wholesale
business over whether it would accept less than the agreed-upon $10.3
billion. Private equity firms are being pushed to rethink deals by the
banks that had committed to loan the money and are now expected to rack
up billions in losses by selling the debt at a fraction of what they had
href='http://www.nytimes.com/2007/08/21/business/21place.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='14'>Commentary: Warren Buffett Patient as Market Tumult
Grows
For the past three years,
Warren Buffett's traditional bargain-hunting investment strategy has
been partly stymied as debt-fueled private-equity funds and hedge funds
drove asset prices out of his value-investing orbit, but now he's
sitting on a war chest of nearly $50 billion in cash in the midst of the
shake-up in the financial markets, the
size='3'>Wall Street Journal reported today.
With the shakeout in the subprime-mortgage market forcing the end of
easy money and the distressed sale of assets -- such as Thornburg
Mortgage Inc.'s sale yesterday of $20.5 billion of its top-rated
mortgage-backed securities -- many see Buffett, the chairman of the
giant Berkshire Hathaway Inc. holding company, as one of the last buyers
standing. Some investors speculate
face='Times New Roman' size='3'>Berkshire
size='3'>could be a buyer for parts of mortgage lender Countrywide
Financial Corp., whose stock price has been hit hard by subprime
worries.
href='http://online.wsj.com/article/SB118765494900503539.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='15'>Deals for Ford Units Seen Fairly Soon
Ford Motor may have
chosen the new owner for Jaguar and Land Rover by the time it reports
its third-quarter results in October, the New York
Times reported today. Ford expects offers for
the two British brands to come in by Sept. 30, and could decide on the
winning bidder within two weeks after that. Even if the winning bidder
is chosen by mid-October, the deal may not close by the end of 2007 due
to the credit squeeze that has swept capital markets recently, causing
some transactions to be delayed or fall apart. That also could push down
the selling price for the two brands. Ford said this month that it was
talking to “selected parties” about Land Rover and Jaguar
and that it had begun a “strategic review” of Volvo, the
Swedish carmaker. That was its first public acknowledgment that it
wanted to shed that unit, which it bought in 1999. It bought Jaguar in
1990 and Land Rover in 2000.
href='http://www.nytimes.com/2007/08/21/business/21ford.html?ref=business&pagewanted=print'>Read
more.
name='16'>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.
face='Times New Roman' size='3'>ABI
size='3'>Members receive a 50% discount off of our regular subscription
rate of $500 when subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com or call 800-407-9044—use
size='3'>ABI
37.
size='3'>Amgen Inc., the
w:st='on'>Thousand
Oaks
to trim its payroll in
size='3'>Rhode Island and
size='3'>Massachusetts
is offering 200 employees voluntary buyouts.
size='3'>Additionally, at the end of this year, the firm expects to
close two of its older plants. The firm,
making up for declining sales of its anemia drug Aranesp, hopes to save
$1 billion over the next year with its restructuring efforts which
include cutting 14% of its workforce–as many as 2,600
jobs.
size='3'>BabyUniverse Inc., a Jupiter, Fl.
online retailer of baby products, reported a first quarter net loss of
$1.7 million, on a 10% sales decline–to $8.5 million.
This compares with a loss of $197,000 for the same period
one year earlier which included a restructuring charge of
$117,000.
size='3'>Concurrent Computer Corp.,
size='3'>Duluth
w:st='on'>
size='3'>Ga.
fourth quarter net loss of $712,000 on revenue of $21.1
million. This compares with a loss of $4.2
million on revenue of $16 million for the same period in
2006. For the year, the firm reported a net
loss of $12.2 million on revenue of $69 million.
size='3'>The results include $2 million in severance
expenses. This compares with a net loss of
$9 million on revenue of $71.6 million for fiscal
2006.
size='3'>Countrywide Financial Corp. has
started to trim its payroll by an unspecified number of employees at its
Full Spectrum Lending unit, which deals in Alt-A loans, in an effort to
reduce its lending costs and in response to a lack of investor
confidence. Analysts predict this will lead to a decline in short term
earnings for the firm.
size='3'>Delta Gilal Industries Ltd., an
Israel-based manufacturer of licensed and private-label intimate
apparel, reported a first quarter net loss of $13.2 million, including a
restructuring charge of $10.5 million.
size='3'>Revenue declined 7.3%–to $159.4 million. The results
compare with a loss of $997,000 for the same period in 2006, including a
gain of $258,000 related to the realization of assets.
size='3'>Dominion Homes Inc., a
size='3'>Dublin
homebuilder, reported a first quarter net loss of $11.5 million, on a
45% revenue decline–to $33.8 million.
size='3'>First Magnus Financial Corp.,
the
size='3'>Tucson
which is on of the nation’s leading privately-held mortgage
companies which funded $30 million in loans last year, has seen an
official report that a bankruptcy filing is possible. Additionally, the
firm is substantially reducing its nationwide workforce of 5,000
employees.
size='3'>Hallwood Group Inc., the Dallas, Tx.
manufacturer of polyester and high-tech nylon fabric and which is a
subsidiary of Brookwood Cos., reported a first quarter net loss of $7.3
million, on an 8% revenue decline–to $28.3 million. The results
compare with net income of $464,000 for the same period one year
earlier.
size='3'>Sipex Corp., a
w:st='on'>
size='3'>Milpitas
manufacturer of analog integrated circuits, reported a first quarter net
loss of $6.3 million, on a 6% revenue decline–to $16.9
million. The results compare with a loss of
$13.8 million for the same period in 2006.
size='3'>TeamStaff Inc., the
w:st='on'>
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
size='3'>administrative and staffing services firm, reported a second
quarter net loss of $1 million, on a 3.7% revenue decline–to $17.8
million. The results compare with a loss of
$212,000 for the same period in 2006.
size='3'>TRM Corp., a
w:st='on'>
size='3'>Portland
which sells and rents ATM machines to stores, reported a fiscal net loss
of $120 million, including an impairment charge of $46.6 million. Sales
declined 14%–to $111.7 million. The
results compare with a loss of $8.9 million for the same period one year
earlier.