March 262008

 

Home
Mortgages

name='1'>McCain Rejects Broad

Government Aid on Home
Mortgages

Drawing a sharp
distinction between himself and the two Democratic

presidential candidates, Sen. John McCain (R-Ariz.) yesterday warned
against vigorous government action to solve

the deepening mortgage crisis and the market turmoil it has caused, the
New York Times reported today.

McCain said that “it is not the duty of government to bail out and
reward those who act irresponsibly,

whether they are big banks or small borrowers.” McCain said that
mortgage lenders had grown

“complacent” in a rising market and as a result acquired a
“false sense of security” that

caused them to “lower their lending standards.” McCain also
suggested that some homeowners had also

engaged in dangerous practices, including borrowing too much in hopes
that a rising market would cover their

mortgages. McCain’s comments came a day after Sen. Hillary Rodham
Clinton (D-N.Y.) called for direct

federal intervention to help affected homeowners, including a $30
billion fund for states and communities to

assist those at risk of foreclosure.
w:st='on'>

size='3'>Clinton’s
Democratic opponent, Sen. Barack Obama

(D-Ill.), has similarly called for greater federal involvement,
including creation of a $10 billion relief

package to prevent foreclosures. 

href='http://www.nytimes.com/2008/03/26/us/politics/26mortgage.html?ref=business&pagewanted=print'>Read

more.

name='2'>Thornburg Mortgage to Raise $1.35 Billion

in Debt Offering

Mortgage lender and investor
Thornburg Mortgage Inc. said yesterday that

it will raise $1.35 billion through a private-placement deal to help
keep the company in business and avoid

bankruptcy, the Associated Press reported. The capital-raising efforts,
coupled with recent Federal Reserve

actions to help improve liquidity in the credit markets, could provide
some stability to Thornburg. However,

those benefits could be offset by the company's corporate structure as a
real estate investment trust (REIT) and

continued weakness in the mortgage securities market. REITs are required
to pay out 90 percent of profits to

shareholders. The private placement of senior subordinated notes will
carry an initial interest rate of 18

percent, which can be reduced to 12 percent depending on certain
requirements. Thornburg will also offer the

investors in the new debt an option to purchase future shares of common
stock for 1 cent per share.

href='http://biz.yahoo.com/ap/080325/thornburg_mortgage.html?.v=4'>Read
more.

href='http://biz.yahoo.com/ap/080325/thornburg_mortgage.html?.v=4'>

name='3'>Swift Steps Help Avert Foreclosures

in

size='3'>Baltimore

As home foreclosure rates
rise around the country, they appear to

have stabilized or dropped in a neighborhood in
w:st='on'>Baltimore
size='3'>, providing a model that local housing

officials say can be copied in other areas, the
face='Times New Roman' size='3'>New York

Times reported today. For much of the decade,
Belair-Edison, a lower- and middle-income

neighborhood on the edge of
face='Times New Roman' size='3'>East

Baltimore, has had one of the
city’s highest foreclosure rates. From 1993

to 2003, one in three homeowners in the neighborhood lost their homes.
Since those peak years, however,

foreclosures have fallen by more than a third. Thomas E. Perez,

w:st='on'>
size='3'>Maryland’s

secretary of labor, licensing and regulation, credits the Belair-Edison
Neighborhood Initiative, which uses

public records and street level marketing to reach high-risk borrowers
before they fall too far behind. 

href='http://www.nytimes.com/2008/03/26/us/26baltimore.html?_r=1&oref=slogin&ref=business&pagewanted=

print'>Read more.

FDIC
Plans for Rise in Bank

Failures

Anticipating a surge in
troubled financial institutions, the

Federal Deposit Insurance Corp. (FDIC) aims to increase by 60 percent
the number of workers who handle bank

failures, the Associated Press reported yesterday. The FDIC wants to add
140 workers in the division that handles

bank failures, bringing the total to 360, said John Bovenzi, the
agency's chief operating officer. Bovenzi said

yesterday that most of the hires will be temporary and based in

w:st='on'>
size='3'>Dallas. There have

been five bank failures since February 2007 following an uneventful
stretch of more than two years. The last time

the agency was hit hard with failures was during the 1990-91 recession,
when 502 banks failed in three years.

Analysts predict more failures, but said they don't think they will
reach early-1990s levels. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/25/AR2008032502984_pf.html'>Read

more.

name='5'>Commentary: PBGC’s Investment Strategy

Should Raise Concern

News that the Pension
Benefit Guaranty Corp. (PBGC) will diversify

its portfolio to include investment in more equities should concern
taxpayers, according to an editorial in

today’s Wall
Street Journal. By

statute, the PBGC’s corporate premiums can only be invested in
fixed-income securities. However, there are

no such constraints on the way the agency invests the assets it inherits
from terminated pension plans. Congress

never anticipated that the lion's share of the PBGC's financing would
one day come from the investment of the

inherited assets, yet today revenues from corporate premiums comprise
just 21 percent of PBGC's total assets.

Charles Millard, the agency's director, says PBGC has some $55 billion
to invest under a new strategy. His plan,

which deviates from a policy adopted in 2004 that favored
duration-matched bonds, will allocate 45 percent to

diversified equity investments. Another 10 percent will go toward
'alternative investments' that will be split

between real estate and private equity. Some equity exposure makes sense
to hedge against longevity risk;

however, the issue in this case is whether it's prudent to start making
larger bets that could prove costly if

the PBGC guesses wrong. 

href='http://online.wsj.com/article/SB120649074075964087.html?mod=opinion_main_review_and_outlooks'>Read

more. (Registration required.)

Legal
Fights Brew over JPMorgan’s

Purchase of Bear Stearns

The legal fight over
JPMorgan Chase & Co.'s planned $1.18

billion purchase of Bear Stearns Cos. pushed into high gear yesterday as
two

w:st='on'>
size='3'>Michigan

pension funds filed court papers seeking a temporary
restraining order against the transaction,

the Wall Street
Journal reported today.

Two pension funds representing retired members of
w:st='on'>

size='3'>Detroit's police and fire
departments and other current and retired

employees of Wayne County, Mich., filed a motion in
w:st='on'>

face='Times New Roman' size='3'>Delaware
state chancery court

seeking an injunction against the deal. The pension funds are asking the
court to halt JPMorgan's plans to buy 95

million newly issued shares of Bear that would give it a 39.5 percent
stake in the company. Calling the

$10-a-share price 'grossly inadequate,' the motion contends that
JPMorgan and Bear Stearns, 'anticipating

stockholder disapproval...have devised an improper plan to buy the
necessary votes from the company.' The

Wayne

size='3'>County

size='3'>pension fund also sued Bear Stearns, its board of directors and
JPMorgan on Monday, alleging that Bear's

board breached its fiduciary duty by accepting a low-ball bid for the
firm. In that complaint, the pension fund

is seeking to unravel the current deal and compel Bear directors to look
for a higher offer. 

href='http://online.wsj.com/article_print/SB120648840104563909.html'>Read
more. (Registration

required.)

name='7'>Noteholders Want to Examine Dura's Financial

Records

Unhappy over Dura's
proposed reorganization plan, the

company’s ad hoc creditors’ committee has asked to examine
the bankrupt auto supplier's books and

records to hopefully allow the group to recoup some value on its
investment, Bankruptcy Law360 reported
yesterday. The noteholders want the

bankruptcy court to extend the deadline to file objections to the
disclosure statement or reorganization plan

until after the group has a chance to scour Dura's books. If granted
permission, the committee intends to

scrutinize two years' worth of income statements and balance sheets as
well as the general ledger, court papers

said. A hearing on the matter has not yet been scheduled. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51037'>Read
more. (Registration

required.)

name='8'>Handbag, Footwear Firm Files for Chapter

11

Isabella Fiore LLC,
a

w:st='on'>California
size='3'>company that makes handbags and footwear

worn by celebrities and featured in fashion magazines, has filed for
bankruptcy, the Associated Press reported

yesterday. The company listed having assets between $1 million to $10
million and debts between $10 million to

$50 million in its chapter 11 petition filed on Friday. Isabella Fiore's
largest unsecured creditors are Los

Angeles law firms Bird, Marella, Boxer, Wolpert, Nessim, Drooks &
Lincenberg, which claims to be owed

$230,924, and
size='3'>Christensen, Glaser,

Fink, Jacobs, Weil & Shapiro LLP, which claims to be owed
$119,152. 

href='http://biz.yahoo.com/ap/080325/isabella_fiore_bankruptcy.html?.v=1'>Read
more.

name='9'>Bondholders Threaten to Force Tropicana

Entertainment into Bankruptcy

Tropicana Entertainment
LLC said that its bondholders are trying

to force it into bankruptcy in an effort to gain a bargaining advantage
over the company, the Associated Press

reported yesterday. In papers filed Friday with
w:st='on'>

face='Times New Roman'
size='3'>Delaware's Court
of Chancery, the

company said that it is trying to cure a default on $960 million
worth of bond debt, but that investment

firms that own that debt will not let it. Bondholders have said that
they fear casino sales will strip the

company of revenue-generating assets, leaving them with little
collateral. Bondholders won the first round of a

fight with Tropicana in the
w:st='on'>

size='3'>Delaware court,
obtaining a ruling that the bond debt was

in default. Tropicana has until April 20 to fix the default, or
bondholders are entitled to demand immediate

payment. The
possibility of bankruptcy has loomed over

Tropicana since December, when the New Jersey Casino Control Commission
stripped Tropicana chief William J. Yung

III of his gaming license because of hygiene, safety and accounting
transgressions at the casino. 

href='http://biz.yahoo.com/ap/080324/tropicana_bankruptcy.html?.v=1'>Read
more.

name='10'>Asarco Balks at $468 Million Cleanup

Settlement

Asarco Inc. has filed a
formal objection to a settlement reached

by one of its subsidiaries regarding the cleanup of several mines in
southeastern

w:st='on'>
size='3'>Missouri

size='3'>, claiming the settlement amount is too expensive,

size='3'>Bankruptcy Law360 reported yesterday.
Government experts claim that Asarco is

liable for claims worth more than $468 million connected to the
southeastern

w:st='on'>
size='3'>Missouri

sites, but Asarco's experts place its liability for
environmental harms at those sites at under

$11 million, according to the company. Asarco also said that although
its subsidiary, Asarco LLC, had argued that

the settlement would allow the company to avoid costly litigation, the
risks of heading to court must be

reevaluated. 
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51021'>Read
more.

(Registration required.)

name='11'>Adelphia, NBC Reach $7.2 Million Deal over

Fees

Two years after NBC
objected to Adelphia Communications' chapter

11 plan because of fees owed to the network by the bankrupt cable
company, the two parties have reached a $7.2

million settlement deal, Bankruptcy
Law360 reported yesterday.

As part of a 2006 amendment to a $1.3 billion debtor-in-possession loan,
Adelphia arranged to retransmit

programming from NBC-owned networks to Time Warner Inc. and Comcast
Corp. NBC objected to that plan, since it did

not mention Adelphia's obligation to pay fees to NBC for its
programming. NBC's claims, filed in August 2006,

initially sought $12 million for Adelphia to cover
the cost of the fees due to it related

to the broadcasting of MSNBC, CNBC and Bravo. Under terms of the new
agreement, CNBC will receive $7.2 million,

'as full and final settlement of all issues” related to all of the
claims, according to court filings.

Bankruptcy Judge Robert E.
Gerber approved the deal on

Monday. 
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=51003'>Read

more. (Registration required.)

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=51003'>