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April 18, 2007
Subcommittee Looks at Executive Compensation in Chapter 11
Cases
The House
Judiciary’s Subcommittee on Commercial and Administrative Law held
an oversight hearing yesterday titled 'Executive Compensation in Chapter
11 Bankruptcy Cases: How Much is Too Much?' looking at incentive,
retention and severance payments for executives. Witnesses included
Richard Levin of the National Bankruptcy Conference, Antoinette Muoneke
of the Association of Flight Attendants, Damon Silvers, Associate
General Counsel for the American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO) and Mark S. Wintner of Stroock &
Stroock & Lavan LLP.
href='http://judiciary.house.gov/oversight.aspx?ID=297'>Click here
to read the prepared witness testimony from
yesterday’s oversight hearing.
name='2'>Business Bankruptcies Surged at End of Last
Year
Business bankruptcy
filings began to surge in the last three months of 2006, although the
total for the year was sharply lower than it was in 2005, the
Wall Street Journal
reported today. The Administrative Office of the U.S.
Courts said business bankruptcy filings averaged 1,862 a month in the
last three months of 2006. That compared with an average of 1,567 in the
first nine months of the year. The numbers validated expectations of
many bankruptcy experts that business bankruptcy filings would rebound
after a steep drop in late 2005 and early 2006. 'The sense on the street
is that an upswing is coming, and it continues to be predicted for
sometime in 2007,' said ABI Chairman
size='3'>John Penn. 'The main drivers for the
low numbers still continue to be a strong economy and the excess
liquidity in the system.'
href='http://online.wsj.com/article/SB117686575940573685-search.html?KEYWORDS=bankruptcy&COLLECTION=wsjie/6month'>Read
more. (Registration required.)
Subprime
Mortgages
name='3'>Lawmakers Turning to Credit Rating Agencies' Role in
Subprime Loan Crisis
Congress is probing
whether credit rating agencies contributed to problems in the subprime
mortgage market, putting the highly concentrated industry under
congressional purview for the second time in less than a year,
CongressDaily
size='3'>reported today. Lawmakers are investigating how the industry,
dominated by Moody's Investors Service and Standard & Poor's Rating
Service, rated mortgage-backed securities that drove growth in the
subprime lending market. Many of the loans were sold by investment firms
into the secondary market, where they have been pooled, sliced off into
tranches and sold based on risk. House Financial Services Chairman
Barney Frank (D-Mass.) probed housing industry officials during a
Tuesday hearing on how good of a job the rating agencies did considering
an estimated 13 percent of subprime loans are now in default and that an
increasing number of lenders have filed for bankruptcy. Senate Banking
ranking member Richard Shelby (R-Ala.) also has expressed concerned
about the industry, of which he has been a persistent critic. The
industry defended itself during a Senate Banking Securities Subcommittee
hearing Tuesday, saying that it had little historical background to rank
new subprime loan products that featured more risky
characteristics.
href='http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=256'>Click
here to read the prepared hearing testimony of yesterday’s
Senate Banking Securities Subcommittee hearing.
name='4'>Chapter 11 Trustee Requested for New Century
Case
The government is seeking
the appointment of a chapter 11 bankruptcy trustee for New Century
Financial Corp. to replace its management and take control of the sale
of assets, Reuters reported yesterday. New Century also expects next
week to disclose results of an internal probe by its audit committee
into why it needed to restate results for the first three quarters of
2006, court papers show. That probe was announced one month before the
Irvine, Calif.-based company's April 2 bankruptcy filing. In a Tuesday
filing with the U.S. bankruptcy court in Wilmington, Del., U.S.
Trustee Kelly Beaudin
Stapleton said management's failure 'to ensure
accurate financial accounting and to institute adequate internal
controls constitutes cause mandating the appointment' of a
trustee.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/04/17/AR2007041701153_pf.html'>Read
more.
Financial Services Chairman Likely to Move Measure to Give OCC More
Power
House Financial Services
Chairman Barney Frank (D-Mass.) said yesterday that he would likely move
legislation that would give the Office of the Comptroller of the
Currency greater authority to regulate consumer affairs in the aftermath
of a Supreme Court decision that ruled federal regulators could pre-empt
state banking laws, CongressDaily reported yesterday. Frank
said he was disappointed in Tuesday's 5-3 ruling that said the OCC was
correct when it issued a 2001 ruling that said state laws restricting
the mortgage-lending practices of state-chartered subsidiaries of
national banks were improper under the National Bank Act. Frank said he
will hold hearings in June to determine what the OCC and the Office of
Thrift Supervision need to carry out consumer protection programs, an
area of jurisdiction the two agencies do not currently have. Frank said
one area he will likely explore is what role state attorneys general
could play in filing lawsuits in the aftermath of the court
ruling.
w:st='on'>
name='6'>U.S.
face='Times New Roman' size='3'> Energy Biogas Set for Chapter 11
Emergence
A
w:st='on'>
size='3'>U.S.
size='3'>bankruptcy judge on Tuesday approved an agreement between the
Illinois Commerce Commission and U.S. Energy Biogas Corp., setting the
stage for the renewable energy company’s emergence from chapter 11
next month, Bankruptcy
Law360 reported yesterday. Judge
Robert D. Drain
approved the agreement, which was reached last month,
saying the terms of the agreement are “fair and equitable and
represent a reasonable resolution of the claims asserted by the
parties.” Under the agreement, the state of
w:st='on'>
size='3'>Illinois
Illinois Commerce Commission eliminated about $63 million in balance
sheet liabilities from an ICC loan over the next 13 years, allowing USEB
to recognize pre-tax gains of around $30 million in the first quarter of
2007. In return for
not pursuing the $63 million loan, the ICC will receive $5 million from
USEB as soon as it exits bankruptcy.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=22869'>Read
more. (Registration required.)
Extends Adelphia’s Claims Objection Deadline
Bankruptcy Judge
Robert E. Gerber
has granted the request of Adelphia Communications Corp.
to provide the cable provider’s plan administrator with more time
to object to claims filed against the reorganized debtor,
Bankruptcy Law360
reported yesterday. Judge Gerber signed off on the motion
on Monday, pushing the deadline back to June 13, 2007 for Adelphia and
its administrator to submit objections. Adelphia first sought more time
last month after becoming worried that it would be unable to meet the
60-day timeframe usually attached to claims objections once a
reorganization plan has been approved. The cable operator’s
restructuring proposal received final approval back in February after
weeks of delay at the hands of the bondholders. At the end of January,
an estimated 19,700 proofs of claim seeking $3.98 trillion had been
filed against Adelphia, according to court documents.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=22811'>Read
more. (Registration required.)
name='8'>Vonage Says That It May Face Bankruptcy
The Internet phone service
provider Vonage Holdings, which a federal court found had infringed on
three patents owned by Verizon Communications, said its legal woes could
lead to bankruptcy, Reuters reported today. The company also detailed
other risks from continuing litigation in a filing yesterday with the
Securities and Exchange Commission. They include the possible
interruption of service, an inability to repay its debt and a decline in
its stock that could lead to its delisting from the New York Stock
Exchange. Vonage was ordered to pay $58 million and royalties on future
sales to Verizon after it lost the patent infringement case in March.
The court also barred Vonage from adding new customers while it appealed
the decision. An appeals court allowed it to continue signing up new
customers ahead of a hearing to consider a permanent stay on the bar on
April 24 .
href='http://www.nytimes.com/2007/04/18/technology/18vonage.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Dow
Industrials Regain Ground on Buyout Wave
Less than two months
after plunging 416 points on Feb. 27, the Dow Jones Industrial Average
has made a comeback fueled by cheap loans available to private
investment funds that are permitting them to buy publicly
traded companies and take them private, bidding up share prices in the
process, the Wall Street
Journal reported today. The current wave of
buyouts has swelled to a point that, in many ways, now dwarfs the buyout
frenzy of the 1980s. Skeptics are worried that the growing fascination
with such deals may be distracting investors from taking a hard look at
the performance of the companies whose stocks they own, injecting an
element of froth into the market, as happened in the '80s. More than
$435 billion in buyouts were announced in 2006, according to Thomson
Financial. That figure includes the debt owed by the target companies
when the deals were announced. Last year's 1,348 deals were three times
the number announced in 1988, Thomson says. So far this year, almost
$183 billion in buyouts have been announced, putting the value of deals
this year on pace to surpass $700 billion. That compares with $99
billion in 1988, at the height of the '80s boom.
href='http://online.wsj.com/article/SB117685615034273383.html?mod=us_business_whats_news'>Read
more. (Registration required.)
International
name='10'>Corporate Bankruptcy Cases in
w:st='on'>
size='3'>Moscow
50 Percent
The number of bankruptcy
cases of strategic facilities handled by the
w:st='on'>
size='3'>Moscow Arbitration Court
at the beginning of this year has shrunk by approximately
50 percent compared to 2006, Interfax reported today. A court spokesman
told Interfax that in the middle of March the court was handling five
such cases.The court spokesman noted the fact that bankruptcy procedures
against certain companies have been launched several times by the same
or different claimants.
name='11'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
Daily e-Summary, that emails you information on over 70 such companies
each morning, email
face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.com
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size='3'>Ashton Woods USA LLC, a
privately-held
face='Times New Roman' size='3'>Atlanta
size='3'>,
size='3'>Ga.
reported its third quarter net income sank 64%–to $6.2 million,
amid the housing downturn. Its revenue in the quarter was $129 million,
compared to $158 million a year ago.
size='3'>Fremont General Corp.’s stock
price surged 26% after it announced that it found a buyer for $2.9
billion of its subprime mortgage loans. The
w:st='on'>Santa
Monica
added that the buyer, which it didn’t identify, is also in
exclusive negotiations to acquire most of
w:st='on'>
size='3'>Fremont
residential real-estate operations and assets.
w:st='on'>
size='3'>Fremont
likely take a pretax hit of about $100 million on the deal. In addition,
the company said that it wants to exit the residential-loan unit even if
it doesn’t succeed in selling the business.
size='3'>Lazare Kaplan International Inc.,
a
size='3'>Manhattan,
w:st='on'>
size='3'>N.Y.
processes raw diamonds and sells them to wholesalers and retailers,
reported its third quarter net income plunged 89%–to $60,000.
Sales were down 34%–to $104 million.
size='3'>Merrimac Industries Inc., an
size='3'>East Caldwell
size='3'>N.J.
microwave and radio-frequency components, reported a fiscal net loss of
$2.2 million. The loss, which compares with net income of $761,000 in
the year earlier, included restructuring charges of $286,000. Sales for
the year fell almost 8%–to $27.4 million.
size='3'>Powell Industries’ stock price
sank 13% after the
face='Times New Roman'
size='3'>Houston, Tx.
manufacturer of electrical equipment announced that it uncovered
accounting errors at one of is units.
size='3'>Rexam Beverage Can North America Co.
size='3'>was hit by a United Steelworkers labor strike at nine of its
locations because of alleged unfair labor practices.
size='3'>Solutia Inc., a
w:st='on'>
Louis
w:st='on'>
size='3'>Mo.
company, added 40,000 metric tons of production capacity for its Vydyne
and Ascent resins and compounds in order to meet increasing worldwide
demand for the products. Solutia is in the process of emerging
from Chapter 11 bankruptcy protection.
size='3'>SunTrust Banks Inc.,
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
to soon announce a cost-cutting plan that could include
layoffs.
size='3'>Universal Forest Inc., a
size='3'>Grand Rapids
maker of wood and construction products, reported its first quarter net
income sank 76%–to $3.9 million. Revenue declined 18%–to
$549 million.