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March 20, 2008
Mortgage
Lending
name='1'>Congress, Regulators Look to Expedite Housing Relief
Proposals
Now that the Federal
Reserve has pledged billions of dollars to rescue Wall Street bankers
from possible default, lawmakers and regulators are turning their
attention to helping average citizens -- from homeowners in danger of
foreclosure to people who want to buy a home, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Bush Administration officials are working with
lawmakers on proposals that would help new home buyers and small
investors by strengthening rules that govern mortgage lending.
Meanwhile, the House of Representatives plans to move within weeks to
approve a multibillion-dollar program to prevent hundreds of thousands
of home foreclosures. The outlook for the plan, the most ambitious of
several proposals, is uncertain; President Bush continues to resist
large-scale legislation to bail out homeowners in distress.
Congressional leaders are focusing on a proposal advanced last week by
House Financial Services Chairman Barney Frank (D-Mass.) and Senate
Banking Committee Chairman
face='Times New Roman' size='3'>Chris
size='3'>topher J. Dodd (D-Conn.). Under the measure, the Federal
Housing Administration, which helps provide low-cost home loans, would
be given a key role in helping renegotiate distressed mortgages and
would provide insurance for up to $300 billion in new mortgages.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/19/AR2008031903275_pf.html'>Read
more.
In related news, the
House Financial Services Committee will be holding a hearing on April 9
titled 'Using FHA for Housing Stabilization and Homeownership
Retention.' The hearing will take place at 9 a.m. in room 2128 of
the
face='Times New Roman' size='3'>Rayburn
size='3'>House
face='Times New Roman' size='3'>Office
size='3'>Building
size='3'>.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/HR_04_09_2008.shtml'>Click
here for more details.
name='2'>Judge Approves New Century's Disclosure
Statement
Despite
objections from the
w:st='on'>
size='3'>U.S. T
size='3'>rustee in New Century Financial Corp.'s chapter 11 case,
Bankruptcy Judge Kevin
J. Carey signed off on the bankrupt lender's
disclosure statement,
size='3'>Bankruptcy Law360 reported yesterday.
U.S. Trustee Kelly
Stapleton had objected to the plan, saying
that it gave a “truncated” account of a special examiner's
report that said New Century may have misled investigators regarding its
post-petition cash collateral use. Earlier this month, New Century filed
a new plan in response to some creditors that have filed objections
similar to Stapleton's, including Goldman Sachs and Wells Fargo. No
creditors have yet weighed in on the new plan in court filings. Among
other changes, the new plan significantly increases its estimate of the
number of unsecured claims lodged against New Century, from 2,284 to
6,568. New Century estimated that reconciling those claims would cost
somewhere between $1 billion and $2 billion. Judge Carey scheduled a
confirmation hearing for April 24.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=50519'>Read
more. (Registration required.)
name='3'>Thornburg Mortgage Seeks $1 Billion to Avert Bankruptcy
Risk
Thornburg Mortgage Inc., a
struggling 'jumbo' home loan provider, said yesterday that it would try
to quickly raise nearly $1 billion of capital to keep five lenders at
bay and avert a possible bankruptcy filing, Reuters reported yesterday.
Shares in the lender plunged because the plan to sell $1 billion of
convertible debt and give lenders a 27 percent stake in the company
would significantly dilute existing shareholders' stakes. The Santa Fe,
N.M.-based company had previously said its survival was in question
after being unable to meet lender demands for more than $600 million of
cash or collateral. Thornburg said the new, 364-day agreement with
affiliates of Bear Stearns Cos., Citigroup Inc., Credit Suisse Group,
Royal Bank of Scotland Group Plc and UBS AG would reduce margin
requirements and free it from further margin calls and other
obligations. Thornburg said that the lenders were providing about $5.8
billion of financing and that it must raise a net $948 million within
seven business days as a condition of the funding agreement.
href='http://sg.news.yahoo.com/rtrs/20080319/tbs-thornburg-capital-7318940.html'>Read
more.
name='4'>Congress Examines Bear Stearns Rescue
The details of the
government-backed deal that rescued Bear Stearns Cos. from failure are
going to be closely examined on Capitol Hill, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Leading members of the House and Senate were
kept apprised of efforts to shore up Bear Stearns this past weekend as
the White House and Federal Reserve scrambled to prevent further
financial-market turmoil. House Oversight and Government Reform
Committee Chairman Henry Waxman (D-Calif.) has begun making inquiries
into the deal with hopes of determining whether the move sets any
precedents for future federal interventions. The Senate Finance
Committee, which has broad jurisdiction over the
w:st='on'>
size='3'>U.S.
size='3'>economy, is also ramping up for its own examination. Among
other things, the committee wants to look at the terms of the
transaction, in which Bear Stearns is being taken over by JPMorgan Chase
& Co. with the backing of the Fed, and the potential risk to
American taxpayers.
href='http://online.wsj.com/article/SB120596447169149939.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Banks End Federal Loans to Students
Three big banks have
dropped out of the federal student-loan program for the coming academic
year, adding uncertainty to the financial-aid arena at a time when
students are poised to receive admissions notices and begin to line up
borrowing, the Wall
Street Journal reported today. Believed to be
the first large banks to exit the federal program during the current
credit crunch, the institutions are HSBC Bank USA, a U.S. unit of
London-based HSBC Holdings PLC; M&T Bank Corp. of Buffalo, N.Y.; and
TCF Financial Corp., Wayzata, Minn. Officials at all three banks said
the resulting squeeze on profits was a major reason they decided to stop
making new student loans. The three rank among the 50 largest providers
of such federal student loans, lending a combined total of more than
$560 million of the $119.2 billion made in loans in the 2006 federal
fiscal year, the last tally available.
href='http://online.wsj.com/article_print/SB120597361953150429.html'>Read
more. (Registration required.)
name='6'>Powermate Files Bankruptcy
Power equipment
manufacturer Powermate Corp. has filed for chapter 11 protection and
announced plans to close its
w:st='on'>
size='3'>Kearney
eliminating about 200 jobs, the Associated Press reported yesterday.
Powermate said in its
w:st='on'>
size='3'>U.S.
size='3'>bankruptcy court filing Monday that it owes between $50 million
and $100 million to creditors, most of which are
suppliers. The
company, which has plants in
face='Times New Roman' size='3'>Kearney
size='3'>,
size='3'>Neb.
w:st='on'>
size='3'>Springfield
w:st='on'>
size='3'>Minn.,
manufactures portable generators, air compressors and pressure washers.
Powermate owes more than $4 million to Chicago-based engine maker Robin
America Inc., which is the largest unsecured debt Powermate
owes.
href='http://biz.yahoo.com/ap/080319/ne_powermate_bankruptcy.html?.v=1'>Read
more.
name='7'>Southern Building Products Files for Chapter
11
Southern Building
Products Inc.,
size='3'>Florida
roof and floor trusses, has filed for chapter 11, the latest victim of a
slowdown in the
w:st='on'>
size='3'>U.S.
size='3'>housing market, the Associated Press reported yesterday. The
company said that its sales revenue fell from a high of $33 million in
2005 to $11.6 million in 2007. When lender Bank Atlantic froze its line
of credit, Southern Building said that a chapter 11 reorganization
became its 'only alternative to maximize return to all creditors.' Bank
Atlantic is owed more than $5.8 million, according to court
papers.
href='http://www.forbes.com/feeds/ap/2008/03/19/ap4794854.html'>Read
more.
face='Times New Roman' size='3'>
name='8'>Delphi
size='3'> Approved to Pay Executives $39 Million in
Bonuses
Delphi Corp. won court
permission to pay executives as much as $39 million in bonuses over six
months and give creditors the right to review its business decisions if
it doesn't exit bankruptcy by Aug. 15, Bloomberg News reported
yesterday. Bankruptcy Judge
size='3'>Robert Drain yesterday approved the
incentive program for executives, which will pay between $21.2 million
and $39.1 million, depending on how close
w:st='on'>
size='3'>Delphi
billion pretax earnings target for the first half of 2008. The bankrupt
former parts unit of General Motors Corp. requested the additional
incentive pay as its exit from court protection remained stalled by
tight credit markets.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4Kco_AQrZ2k'>Read
more.
name='9'>Paper-Products Maker Warns of Loan Default
Xerium Technologies Inc.
paper disclosed that it may default on some of its loans and that it
could file for bankruptcy soon if the lenders call in the debts,
Bankruptcy Law360
reported yesterday. The company said that it “was
in compliance with its financial covenants under the credit agreement at
Dec. 31, 2007 and expects that it will generate cash flow from
operations sufficient to service the debt under the credit agreement
prior to the stated maturity of the debt if there is not otherwise an
event of default under the debt.” However, Xerium said that it
expects it will not meet the terms of the covenant
face='Times New Roman' size='3'>for the first quarter of 2008 and
afterward. The company said that it is contemplating a private placement
of equities in order to generate enough cash flow, through private
investors, to pay down the debt it has absorbed from its credit
agreement.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=50597'>Read
more. (Registration required.)
name='10'>Bank Liquidators Allege Telecom Exec Stole $120
Million
Bankrupt
telecommunications company Tricom SA may find itself at the center of
the chapter 11 case of a different company after liquidators of
Bancredit Cayman Ltd. alleged that officials from the telecom may have
stolen $120 million from the bank,
size='3'>Bankruptcy Law360 reported yesterday.
In documents filed Monday in the U.S. Bankruptcy Court for the Southern
District of New York, Richard E. L. Fogerty and G. James Cleaver, the
joint official liquidators of Cayman Islands-based Bancredit, renewed
their plea to have an independent examiner appointed in the Tricom case.
They claim that former Tricom CEO and one-time Bancredit controlling
shareholder
size='3'>Manuel Arturo Pellerano
looted the bank of $120 million for the benefit of Tricom. The filing
claims that Tricom's prepackaged chapter 11 plan is specifically
designed to benefit Pellerano and various insiders at the expense of the
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=50576'>Read
more. (Registration required.)
name='11'>Costly Fuel, Economic Woes Weigh Down
size='3'>U.S.
size='3'>Airlines
U.S. airlines, which
seemed last year to have shaken off a half-decade slump, may face a new
round of restructuring amid a stumbling economy and spiraling fuel
prices, the Wall Street
Journal reported today. The turnabout reflects
the headwinds that have buffeted the industry as oil prices have risen
75 percent in the past year and the housing slump now has consumers
cutting back on spending. The airlines have hoarded big piles of cash,
estimated at nearly $25 billion at the end of 2007. However, with
jet-fuel prices around $132 a barrel, those cash piles could shrink
fast, putting carriers in danger of breaching debt covenants with
lenders. Consolidation was expected to help insulate the domestic
carriers from such difficulties and better prepare them to compete with
rich overseas rivals. However, a proposed merger of Delta Air Lines Inc.
and Northwest Airlines Corp. that was supposed to jump-start the deal
making appears to have run aground because the airlines' unionized
pilots can't agree on a common seniority system.
href='http://online.wsj.com/article_print/SB120597217088750375.html'>Read
more. (Registration required.)
In related news, Delta Air
Lines Inc.'s pilots union yesterday rejected the idea of submitting to
arbitration with its counterpart at Northwest Airlines Corp. to break
their impasse over integrating seniority lists as part of a possible
combination of the carriers, the Associated Press reported. Pilot union
leaders at Northwest had suggested in a memo to rank-and-file Northwest
pilots on Tuesday that arbitration may be a way to break the
deadlock.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/20/AR2008032000379_pf.html'>Read
more.
name='12'>Visa Raises $17.9 Billion in Record-Breaking
IPO
Visa Inc., set a record
for U.S. IPOs by selling 406 million shares at $44 each late Tuesday and
raising $17.9 billion, The Deal reported yesterday. The IPO
eclipses AT&T Wireless Group's $10.6 billion stock offering in 2000
and comes in second in the world only to the $22 billion debut of
Industrial & Commercial Bank of China Ltd. in 2006.
J.P. Morgan Securities Inc., Goldman, Sachs & Co.,
Banc of America Securities LLC, Citigroup Global Markets Inc., HSBC
Securities (USA) Inc. and Merrill Lynch & Co. are leading the
15-bank underwriting team. Visa's member banks are also expected to
benefit nicely from the offering. According to a regulatory filing with
the Securities and Exchange Commission, the largest selling shareholder
is JPMorgan, which will see its fortunes rise by about $1.25 billion by
offering nearly 29 million shares of Visa - times more than the New
York-based bank has agreed to pay in the proposed takeover of Bear
Stearns Cos.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1205923888123'>Read
more.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1205923888123'>