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May 29, 2009
Autos
from Bankruptcy
Delphi Corp., the auto parts maker that has been in
bankruptcy proceedings for the last four years, may finally emerge from
chapter 11 and avert liquidation, the
face='Times
New
Roman' size='3'>New York Times reported today.
As Delphi’s one-time parent, General Motors, lays the final
groundwork for its own bankruptcy filing, the Obama
administration’s auto task force is pushing for a sale of at least
some Delphi assets to a third-party buyer, possibly another parts
supplier or an investment firm. GM, still a major Delphi customer, might
reacquire some assets as well. As part of its reorganization, GM has
agreed to take back five Delphi plants, although the terms of that
transaction have not been settled.
href='http://www.nytimes.com/2009/05/29/business/29delphi.html?ref=business&pagewanted=print'>Read
more.
Auto Slump, Debt Drive
Parts Supplier into Chapter 11
Metaldyne Corp., a parts supplier to Chrysler LLC,
Ford Motor Co. and General Motors Corp., filed for bankruptcy on
Wednesday with plans to sell off most of its assets, citing sharp
declines in vehicle sales and manufacturing, a heavy debt load, and
banks' reluctance to lend to automotive suppliers,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Metaldyne listed assets and liabilities both between $500 million and $1
billion. The company's 34 non-U.S. subsidiaries, as well as parent
company Asahi Tec Corp., are not involved in the bankruptcy, however,
Metaldyne noted. Metaldyne said it also struck two nonbinding deals to
sell off a majority of its assets to private equity firms RHJ
International and the Carlyle Group. The case is
face='Times New Roman'>In re
Metaldyne Corp. et al., case number 09-13412,
in the U.S. Bankruptcy Court for the Southern District of New
York. Read
more. (Subscription required.)
11
The Obama administration plans to usher General Motors
Corp. into bankruptcy court Monday and push through a restructuring that
will cost taxpayers billions of dollars more than previously envisioned,
the
size='3'>Wall Street Journal reported today.
The possibility of a speedy bankruptcy process gained ground yesterday
after the government altered the terms of the restructuring and offered
GM bondholders a sweetened deal if they would forgive $27 billion in
unsecured debt and pledge not to oppose the reorganization in court. A
group representing key investors agreed to the new terms. As part of the
revised plan, the U.S. would provide GM with at least $30 billion in
financing to carry it through and out of bankruptcy, on top of the $20
billion in loans the government already has given the company.
href='http://online.wsj.com/article/SB124352012143262677.html'>Read
more. (Subscription required.)
Commentary: Government
Gave GM Bondholders Little Room to Maneuver
The Obama Administration made GM's bondholders an
offer they couldn't refuse this week, as the bondholders risked being
wiped out in GM's now-inevitable bankruptcy, according to an editorial
in
size='3'>today’s Wall Street Journal.
Under the terms of the Treasury's offer, GM bondholders will receive 10
percent of the company's stock in exchange for their $27 billion in
bonds, plus warrants to buy an additional 15 percent stake in seven to
10 years. That's an improvement on the government's earlier offer, but
it's a far cry from what the Administration offered the United
Automobile Workers for their $20 billion in claims. Assuming the UAW
ratifies a new labor agreement, which its locals were voting on
Thursday, the union's retiree benefit trust will receive $10 billion in
cash, $6.5 billion in preferred stock paying a 9 percent dividend, $2.5
billion in debt, 17.5 percent of the new company and warrants to buy
another 2.5 percent in five years.
href='http://online.wsj.com/article/SB124355299610364475.html'>Read
more. (Subscription required.)
Directory Publisher Files
for Bankruptcy
R.H. Donnelley Corp., the publisher of more than 600
print directories, sought bankruptcy protection from creditors after
missing a $55 million interest payment on its senior unsecured notes due
April 15, Bloomberg News reported today. The Cary, N.C.-based company
had assets of $11.9 billion and debt of $12.4 billion as of Dec. 31,
according to the chapter 11 petition. Nineteen affiliates also sought
court protection. R.H. Donnelley, whose publications included telephone
Yellow Pages, said May 14 that its lenders and bondholders had agreed to
forbear until May 28 and wouldn’t take any action on the
company’s missed payment. The company had revenue of $602 million
in the March quarter, resulting in $164 million operating income and a
$401 million net loss. The case is
face='Times
New
Roman' size='3'>In re R.H. Donnelley Corp.,
09-11833, U.S. Bankruptcy Court, District of Delaware
(Wilmington).
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=axsYDD5NYDU0&refer=home'>Read
more.
Madoff Trustee Makes the
Tough Decisions
Irving H. Picard and his
legal team are quietly making life-shaping decisions every day in
deciding who will be paid quickly, who will be paid eventually, who will
not be paid at all and who will be asked to pay back money from the
Madoff ponzi scheme, according to a profile story in
today’s New York Times. Seeking to
recover more than $10.1 billion, Picard has sued several prominent
Madoff victims, accusing them of being willing beneficiaries of the
fraud. He has settled with two offshore hedge funds and gathered a total
of $1.25 billion so far for victims. He has also created a hardship
program to speed compensation to victims facing serious financial
emergencies, like the loss of medical care or foreclosure. In the first
two weeks of that program, 59 out of 144 hardship requests have been
approved.
href='http://www.nytimes.com/2009/05/29/business/29claims.html?ref=business'>Read
more.
Banks Seek Role in Bid to
Overhaul Derivatives
The battle lines are being drawn in the derivatives
market as Wall Street tries to pre-empt new laws that could drain a big
source of banks' profits, the
face='Times
New
Roman' size='3'>Wall Street Journal reported
today. A group of banks and money managers will next week present a plan
designed to help fend off some rules proposed by the Obama
administration, which wants to reform trading practices in the market
for over-the-counter derivatives. Earlier this month, a proposal was put
forth to give the Securities and Exchange Commission and the Commodity
Futures Trading Commission authority to mandate centralized clearing of
certain derivatives, impose new trade-reporting requirements and force
trading of 'standardized' contracts onto exchanges or electronic
platforms that will make prices more transparent. Potentially billions
of dollars in revenue is at stake. An effort earlier this decade to
improve transparency in the corporate-bond market ended up cutting bank
fees by more than $1 billion in a year, according to some
studies.
href='http://online.wsj.com/article/SB124355213446564401.html'>Read
more. (Subscription required.)
Commentary: Government
Should Take Careful Steps in Municipal Finance Rescue
As government officials try to sort through the
mortgage and automotive situations, states and localities are asking for
federal aid for the variable rate demand obligation (VRDO) finance
measure, according to a
face='Times New Roman' size='3'>New York Times
size='3'>editorial today. A VRDO is a type of municipal bond that
combines a long maturity with a floating interest rate and other tricky
features. With some $400 billion outstanding, VRDOs are a big chunk of
the $2.7 trillion in municipal debt that has been issued by more than
50,000 entities, mainly state and local governments. As the recession
has deepened, impairing the credit quality of insurers and banks that
back the bonds, interest-rate increases have been triggered on some
VRDOs. At first glance, support for the municipal bond market seems like
one more unfortunate but unavoidable lifeline for a troubled financial
system. However, the need to rescue this market is not as urgent as some
politicians are claiming — or if such support would be
wise.
href='http://www.nytimes.com/2009/05/29/opinion/29fri1.html?ref=opinion&pagewanted=print'>Read
more.
Financial Services Groups
Revive “Carry-Back” Bid
Trade groups including the American Bankers
Association, the Financial Services Roundtable and the Securities
Industry and Financial Markets Association urged Treasury Secretary
Geithner to endorse their eligibility for a five-year net operating loss
'carry-back' period, which lawmakers have declined,
face='Times New Roman'>
size='3'>CongressDaily reported yesterday. The
provision lets companies smooth out recent losses by converting taxes
paid on profits earned in better times into instant refunds. Generally,
companies can only carry back losses for two years while carrying them
forward for 20, but the carry-back period is considered more valuable,
particularly when future profits are uncertain. Under the economic
stimulus legislation, the only firms that are eligible for the
carry-back provision are those with $15 million or less in annual
revenues and that have not received Troubled Asset Relief Program funds.
The provision expires at the end of this year.
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