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July 23, 2009
Senate Panel to Examine
Possible Bankruptcy Reforms to Help Stem Foreclosure
Crisis
The Senate Judiciary Administrative Oversight and the
Courts Subcommittee will hold a hearing today at 10 a.m. ET titled
“The Worsening Foreclosure Crisis: Is It Time to Reconsider
Bankruptcy Reform?” Witnesses include ABI
Resident Scholar
face='Times New Roman' size='3'>Adam Levitin
size='3'>of Georgetown University Law Center; Mark A. Calabria, Director
of Financial Regulation Studies at the Cato Institute; Alys Cohen, a
staff attorney with the National Consumer Law Center; Richard Genirberg
of the Genirberg Law Office; and homeowner
Joseph Verdelotti, Jr.
href='http://judiciary.senate.gov/hearings/hearing.cfm?id=3993'>Click
here to watch a live Webcast of the hearing.
Bernanke Tells Senate that
New Consumer Financial Protection Agency Isn’t
Needed
Federal Reserve Chairman Ben S. Bernanke put himself
at odds with the Obama administration yesterday by resisting its plan to
create a consumer protection agency for risky financial products, the
Associated Press reported yesterday. Consumer oversight coincides with
the Fed’s mission to oversee the safety and soundness of banks,
Bernanke said in testimony to the Senate Banking Committee. Consumer
groups and lawmakers have blamed the Fed under Bernanke’s
predecessor, Alan Greenspan, for not cracking down early on dubious
mortgages practices. High-risk mortgages fed the housing boom and led to
its collapse. Bernanke, who took over the Fed in February 2006,
eventually pushed through tougher rules, though some said the changes
came too late to ease the mortgage crisis. The Fed today plans to
propose to increase disclosures on mortgages and home equity lines of
credit. It will include rules covering the compensation of mortgage
originators.
href='http://www.nytimes.com/2009/07/23/business/economy/23bernanke.html?_r=1&ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/07/23/business/economy/23bernanke.html?_r=1&ref=business&pagewanted=print'>
Judge Approves $286 Million
Eddie Bauer Sale to Golden Gate Capital
Bankrupt retailer Eddie Bauer Holdings Inc. is
expected to close the $286 million sale of its business to Golden Gate
Capital in early August after receiving court approval for the sale
yesterday,
size='3'>Bankruptcy Law360 reported yesterday.
The retailer announced Friday that Golden Gate Capital had made the
highest and best bid of $286 million in cash in an auction for its
assets. The offer will also maintain the “substantial
majority” of Eddie Bauer stores and employees in a newly formed
going-concern company, and Eddie Bauer gift cards will be honored in the
ordinary course of business. The transaction is not expected to result
in any distribution to stockholders in Eddie Bauer.
href='http://bankruptcy.law360.com/articles/112728'>Read
more. (Subscription required.)
Autos
Executive Says Chrysler
May Liquidate If Dealer Bill Passes
Chrysler Group LLC could be forced to liquidate,
according to Chrysler vice president and associate general counsel
Louann Van Der Wiele, if Congress passes legislation to overturn the
closings of 789 dealerships as part of the car maker’s
restructuring, Dow Jones
face='Times New Roman' size='3'>Daily Bankruptcy Review
size='3'>reported today. Chrysler closed the dealerships June 9 as part
of a broad reorganization ordered by the Obama administration to justify
more government aid for the company. Chrysler said the closings, which
reduced its network to about 2,400, will improve brand value and
ultimately lead to bigger profits. Testifying before the
House Judiciary Subcommittee on Commercial and
Administrative Law,Van Der Wiele said that reversing the closings would
risk undoing the months-long reorganization the car maker just
completed. “Legislation aimed at reversing some of the painful but
necessary actions taken” during bankruptcy will lead Chrysler back
to the brink of collapse, but without a willing buyer this time, Van Der
Wiele said. The House passed a bill last week to force GM and Chrysler
to restore dealer rights under state franchise laws. The measure could
force the car companies to reopen dealerships, hold off on plans to
close others and increase severance payments to closed dealerships.
Support in the Senate appears less certain, and the White House has said
it strongly opposes the bill.
href='http://judiciary.house.gov/hearings/hear_090722.html'>Click
here to read the prepared witness testimony.
In related news, General Motors Co. is providing an
average of $462,000 in financial assistance to dealerships slated to be
shut as part of the automaker's government-backed restructuring,
the
size='3'>Wall Street Journal reported today.
Michael Robinson, GM's vice president and general counsel of North
America, told the House Judiciary
Subcommittee on Commercial and Administrative Law yesterday
size='3'>that the company is providing $600 million in total financial
assistance to rejected dealerships. Robinson said that includes $1,000
per unsold vehicle and eight months of rent coverage.
href='http://online.wsj.com/article/SB124827571703472417.html#mod=article-outset-box'>Read
more. (Subscription required.)
Ford Posts $2.3 Billion
Profit
Ford Motor Co. returned to profitability in its second
quarter and slowed its cash burn amid speculation that it may issue more
equity to reduce its debt, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. The automaker reported a net income of $2.3 billion or 69 cents a
share, compared with a loss of $8.67 billion, or $3.89 a share, for the
same period a year earlier. The company burned through about $1 billion
in cash during the quarter as it controlled incentive spending around
the world while increasing output in its North American plants. Ford's
profit came largely from a $3.4 billion gain it received related to
debt-restructuring actions in April. Excluding the one-time gains, the
company would have narrowed its quarterly loss to $424 million from a
loss of $1.03 billion a year earlier.
href='http://online.wsj.com/article/SB124834005025175293.html#mod=testMod'>Read
more. (Subscription required.)
Tribune Co. Seeks Court
Approval to Pay Bonuses
Tribune Co. filed a motion yesterday seeking
bankruptcy court authorization to pay millions of dollars in bonuses to
more than 700 managers and other key employees for their work this year,
the
size='3'>Chicago Tribune reported today. If
Tribune Co. and its various units meet their cash-flow targets for this
year, the total payouts would be at least $21.5 million, with a cap of
around $66.7 million if those goals are greatly exceeded, documents
showed. Additionally, Tribune Co. asked to pay nine of its top 10
executives $3.1 million in belated 2008 bonuses. Those incentive
payments were deferred this spring when Tribune Co. sought court
approval for last year's performance bonuses to expedite the
process.
href='http://www.chicagotribune.com/business/chi-thu-tribune-0723-jul23,0,6406497.story'>Read
more.
CIT Chapter 11 Filing May
Follow August Swap in Plan
Advisers to bondholders that rescued CIT Group Inc.
with a $3 billion loan said that creditors should push the company into
chapter 11 protection after a debt swap next month, Bloomberg News
reported today. The lenders should require New York-based CIT to
restructure its debt through a pre-packaged bankruptcy, even if the
company succeeds in swapping 90 percent of the $1 billion of
floating-rate notes that come due Aug. 17. Investors led by Newport
Beach, Calif.-based Pacific Investment Management Co. and Centerbridge
Partners LP in New York are preparing to take more control of CIT, which
said in a regulatory filing this week that it may need to file for
bankruptcy if it is unable to exchange the notes. Should the tender
offer, which expires Aug. 14, fail, Houlihan Lokey
Howard & Zukinwill recommend that the bondholders allow CIT to file
for bankruptcy before paying the August maturity. CIT is offering to buy
the notes for 82.5 cents on the dollar.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ahS47qdAgxB4'>Read
more.
Young Broadcasting Asset
Sale Gets Court's OK
Bankruptcy Judge
face='Times
New
Roman' size='3'>Arthur J. Gonzalez yesterday
signed off on a proposal to sell Young Broadcasting Inc. to a group of
its senior secured lenders led by Wachovia Bank NA in a deal worth $220
million, Bankruptcy Law360 reported
yesterday. While the deal will result in all of the company’s
assets being sold to a group of secured lenders, the deal still must be
cleared by the Federal Communications Commission. Young Broadcasting
Inc., which owns and operates 10 TV stations, filed for bankruptcy in
February, saying it had more than $575 million in assets and $980
million in debts as of Sept. 30. As part of the sale agreement, existing
management of Young Broadcasting will remain in place, and current CEO
Vincent Young will remain in control of the board.
href='http://bankruptcy.law360.com/articles/112659'>Read more.
(Subscription required.)
New York Attorney General
Claims Debt Collectors Used Fraudulent Practices
Tens of thousands of New York consumers had money
seized by creditors using court orders that had been obtained by fraud,
New York Attorney General Andrew Cuomo said yesterday, and that the
money should be returned, according to a
face='Times
New
Roman' size='3'>New York Times report today.
According to a lawsuit filed on Tuesday in New York Supreme Court in
Buffalo, lawyers and debt collectors obtained more than 101,000 court
orders that were improperly issued, allowing them to seize, on average,
$5,474 from each consumer. The lawsuit asserts that consumers were never
properly notified and were not given a chance to defend themselves in
court; creditors won default judgments. The total amount of money seized
exceeded $500 million, according to the attorney general’s
office.
href='http://www.nytimes.com/2009/07/23/business/23cuomo.html?ref=business&pagewanted=print'>Read
more.
Movie Actor Files for
Bankruptcy
Stephen Baldwin filed for bankruptcy on Tuesday, after
landing in more than $2.3 million worth of debt, the
face='Times New Roman'>San
Francisco Chronicle reported
today. The Usual Suspects actor, who
appeared on the TV show 'I'm A Celebrity...Get Me Out of Here!,' earlier
this year filed for chapter 11 protection, claiming he owes millions in
debt and he only owns a property worth $1.1 million. Reports last month
claimed that the star's New York house was going to be auctioned off
because he was unable to keep up with the large mortgage payments. The
actor owes around $1.2 million on two mortgages on the property and more
than $1 million in taxes, as well as mounting credit card debt,
according to the legal documents that were filed in New York.
href='http://www.sfgate.com/cgi-bin/blogs/sfgate/detail?blogid=7&entry_id=44076'>Read
more.
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