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July 2, 2009
Bank Fees Rise as Lenders
Try to Offset Losses
Despite the tough economic times and increased
scrutiny from lawmakers, banks are keeping most fees at record highs,
and are making slight increases on others like overdraft charges —
a step they rarely took during past recessions, the
face='Times New Roman'>New York
Times reported today. The nation’s
biggest banks — those that received the biggest bailouts from
taxpayers, and are once again gaining strength — charge fees that
are on average at least 20 percent higher than those at smaller lenders,
according to Moebs Services, a economic research firm used by banks and
federal regulators. Several big banks — including JPMorgan Chase,
US Bancorp and Wells Fargo — recently began billing some
small-business customers for federal deposit insurance increases.
Citigroup and PNC Financial assess around a 3 percent international
transaction fee when customers swipe their debit cards overseas. Bank of
America recently introduced a raft of changes. In June, it raised the
fees on its basic monthly checking account to $8.95 from $5.95. In
April, the bank considered raising its overdraft charge to $39, nearly
double what the typical bank charged a decade ago. It backed down only
after an eruption of consumer complaints, tweaking its rules to keep its
href='http://www.nytimes.com/2009/07/02/business/02fees.html?_r=1&ref=business&pagewanted=print'>Read
more.
Fraud Charges
Federal prosecutors filed criminal conspiracy charges
yesterday against Beazer Homes USA and reached a deal that allows it to
clear its record after it pays millions of dollars to compensate
borrowers who were defrauded by its former mortgage arm, the
size='3'>New York Times reported today. The
charges against Beazer Homes, one of the nation’s 10 largest
homebuilders, involve the company’s loan origination practices,
which came under federal scrutiny in March 2007 after a series of
articles in the
face='Times New Roman' size='3'>Charlotte Observer
size='3'>. Beazer Homes, based in Atlanta, said yesterday that it had
closed its mortgage unit in February 2008 and revised its financial
reports in May 2008 to correct improper accounting practices. Under a
deferred-prosecution agreement negotiated with federal prosecutors, the
company must accept responsibility for its offenses and pay up to $50
million in restitution to affected home buyers by its 2014 fiscal year.
If Beazer complies with the agreement, the criminal charges will be
dropped.
href='http://www.nytimes.com/2009/07/02/business/02beazer.html?ref=business&pagewanted=print'>Read
more.
FTC Issues Advisory Opinion
on Debt Collector Communications
The Federal Trade Commission (FTC) recently released
an advisory opinion to ACA International clarifying a conflict between
the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit
Reporting Act (FCRA), according to a press release. The FTC states in
its opinion that a debt collector does not violate §805(c) of the
FDCPA, which prohibits a debt collector from communicating with a
consumer after receiving a written request to cease communications
except under certain circumstances, if the consumer directly disputes
information in his or her consumer report after sending the cease
communication request, and the debt collector informs the consumer of
the results of its investigation. In December 2007, federal agencies
with authority to promulgate rules and regulations implementing the FCRA
issued a notice of proposed rulemaking regarding the accuracy and
integrity of information furnished to consumer reporting agencies
(CRAs), as well as the circumstances under which a data furnisher is
required to investigate a direct dispute from a consumer concerning the
accuracy of information contained in his or her consumer report.
href='http://www.acainternational.org/files.aspx?p=/images/14382/p064803-ftc-advisory-opinion.pdf'>Click
here to read the full advisory opinion.
Autos
GM Says Approval of
Restructuring Is Urgent
General Motors mounted a final push yesterday for its
historic restructuring plan, arguing before Bankruptcy Judge
size='3'>Robert Gerber that the U.S.
government would cut off funding unless it won quick approval for its
turnaround proposal, the
face='Times









New
Roman'
size='3'>Washington Post reported today. The
government has 'no intention to further fund this company if the sale
order is not entered by July 10,' said Harry Wilson, a member of the
Obama administration's auto task force who oversaw the government's
day-to-day dealings with GM. Wilson's testimony came during the second
day of hearings on a request to approve the sale of the automaker's
assets to a 'new' GM that would be 61 percent owned by the U.S.
government. Wilson told the court that he expected an initial public
offering of the new GM's stock in 2010. That would allow the Obama
administration, which has said it does not want to run private
companies, to sell its GM stake. In closing arguments, attorneys for GM
and the governments of the United States and Canada, which has also
provided funding, urged Judge Gerber to approve the sale quickly. Under
the proposed agreement, the government can walk away if the judge does
not approve the deal by July 10 or if the sale is not completed by Aug.
15.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/01/AR2009070104044_pf.html'>Read
more.
In related news, General Motors Corp. yesterday
reported a 34 percent drop in monthly U.S. sales for June, its first
sales results since it filed for bankruptcy in a restructuring funded by
the Obama administration, Reuters reported. GM said that it delivered
176,571 vehicles in June, compared with 265,937 a year earlier, roughly
in line with analysts' expectations given the turmoil of its
restructuring. Still the top-selling automaker in the United States,
GM's sales declines were led by brands it expects to carve away as part
of its restructuring. Sales of GM's Saturn brand fell 60.2 percent, Saab
sales were down 58.4 percent and Hummer brand sales were down 48 percent
from a year earlier. GM hopes to sell those brands.
href='http://www.reuters.com/article/pressReleasesMolt/idUSTRE5604QS20090701'>Read
more.
Lear to File Bankruptcy
after Lenders Agree to Terms
Lear Corp., the world’s second-largest maker of
automotive seats, plans to file for chapter 11 protection after reaching
an agreement with representatives of secured lenders and bondholders,
Bloomberg News reported today. The company said that it has commitment
for $500 million in financing for the bankruptcy and exit from a
syndicate led by JPMorgan Chase & Co. and Citigroup Inc. The
restructuring will protect customers and suppliers, and provide pay for
the “vast majority of trade creditors in full,” Lear said.
The manufacturer said it will seek bankruptcy protection because low
auto production globally by customers such as bankrupt General Motors
Corp. cut into sales. More than 20 parts-makers have filed for
bankruptcy this year, according to the Original Equipment Suppliers
Association trade group.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ar11teVLjLaE'>Read
more.
Lemon Law Provision of Purchase Agreement
The former Chrysler LLC has asked the bankruptcy court
to approve a process to ease the implementation of the lemon law
provision in Italian carmaker Fiat SpA's $2 billion agreement to
purchase the company,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Before Chrysler’s sale was approved,
several state attorneys general and consumer groups pushed for the
rights of consumers under state lemon laws to be adequately protected
under the deal. To resolve these concerns, New Chrysler agreed to assume
many of the lemon law obligations, and a lemon law provision was
inserted into the sale order. Under that provision, New Chrysler took on
many of the lemon law obligations, but did not assume certain forms of
relief or liabilities, like punitive, exemplary or consequential damages
or claims for personal injury. New Chrysler also did not take on
liabilities for vehicles that were manufactured more than five years
before the sale's closing. The provision did not detail exactly how New
Chrysler is to assume the lemon law liabilities, particularly the
pending lemon law actions against the debtors. Upon entering bankruptcy
protection, Chrysler was a defendant in some 1,350 lemon law actions in
various states. In a motion filed Tuesday, Chrysler requested that the
court approve a clear process to allow pending and future lemon law
claims against old Chrysler to be switched to New Chrysler, allowing the
remaining debtor and the bankruptcy court to be freed of involvement
from the cases.
href='http://bankruptcy.law360.com/articles/109199'>Read more.
(Subscription required.)
Pension Funds to Lead Suit
Against Bank of America
A group of five public pension funds, including state
funds in Ohio and Texas, have won the right to lead investor
class-action lawsuits against the Bank of America Corp. over its
acquisition of Merrill Lynch & Co., Reuters reported yesterday. U.S.
District Court Judge Denny Chin granted lead plaintiff status on Tuesday
to funds including the State Teachers Retirement System of Ohio, the
Ohio Public Employees Retirement System and the Teachers Retirement
System of Texas. Investors are accusing Bank of America of misleading
them about the state of Merrill’s health ahead of the Jan. 1
closing, even as it was becoming clear Merrill was on its way to what
would be a loss of $15.84 billion in its fourth quarter.
href='http://www.nytimes.com/2009/07/02/business/economy/02merrill.html?ref=business&pagewanted=print'>Read
more.
Corporate Bond Market
Showing Recovery Since Lehman Collapse
Nowhere is the recovery in financial markets more
evident than in corporate bonds, where Lehman Brothers Holdings
Inc.’s bankruptcy is becoming a distant memory, Bloomberg News
reported yesterday. U.S. investment-grade company debt returned 9.2
percent in the first half of the year, outperforming Treasuries by 13.7
percentage points, the most on record, according to Merrill Lynch &
Co. index data. Corporate bonds also did better than the Standard &
Poor’s 500 Index of stocks, marking the first time since 2002 that
the fixed-income securities outshined both Treasuries and equities. The
gains may be the clearest indication that the more than $12.8 trillion
pledged by the government and Federal Reserve to thaw frozen credit
markets is starting to pull the economy out of the worst recession since
href='http://www.bloomberg.com/apps/news?pid=20601014&sid=aJmoNXkjJhjY'>Read
more.
Crabtree & Evelyn Files
for Chapter 11 Protection
Soap and lotion seller Crabtree & Evelyn Ltd. said
yesterday that it filed for chapter 11 protection and will be evaluating
its real estate portfolio in order to terminate leases on
underperforming stores to try to restructure and emerge from bankruptcy,
the Associated Press reported. The Woodstock, Conn.-based company
reported in a court filing that it has debt totaling $10 million to $50
million and assets in the same range. The company runs 126 retail stores
as well as wholesale, export and online businesses.
href='http://www.google.com/hostednews/ap/article/ALeqM5hfoFAbrrzQTcon0pCtT8sWU_sMwQD995NIAG0'>Read
href='http://www.google.com/hostednews/ap/article/ALeqM5hfoFAbrrzQTcon0pCtT8sWU_sMwQD995NIAG0'>
Eddie Bauer $202 Million
Asset Sale to CCMP Approved
Bankruptcy Judge
face='Times









New
Roman'
size='3'>Mary F. Walrath signed off on Eddie
Bauer Holdings Inc.'s proposed $202 million asset sale to an affiliate
of global private equity firm CCMP Capital Advisors LLC,
size='3'>Bankruptcy Law360 reported yesterday.
The transaction, approved Tuesday by Judge Walrath, is pursuant to a
stalking-horse agreement with CCMP Capital, a transaction that Eddie
Bauer said it hoped to complete within 60 days. Concluding that the
bidding procedures and agreement are in the best interest of the debtors
and their creditors, the court scheduled the auction for July 16.
Despite clearing that hurdle Tuesday, the debtors now face objections
from dozens of utility companies disputing the debtors' request to
prohibit their approximately 400 utility providers from altering,
refusing or discontinuing service. Several utilities had sought adequate
assurance of two months' payment, but the debtors said they would
provide only two weeks' payment, according to a motion filed with their
bankruptcy petition on June 17.
href='http://bankruptcy.law360.com/articles/109118'>Read
more. (Subscription required.)
Accredited Home Tries to
Block Conversion to Chapter 7
Mortgage lender Accredited Home Lenders Holding Co.
has balked at a bid by creditors — led by a unit of JPMorgan Chase
& Co. — to convert its bankruptcy to chapter 7, arguing that
its liquidation plans have moved expeditiously and efficiently to
eliminate significant expenses,
face='Times









New
Roman'
size='3'>Bankruptcy Law360 reported yesterday.
Since filing for chapter 11, Accredited Home Lenders has continued to
implement the plan — retaining the necessary professionals and
rejecting executory contracts that were found to be burdensome, among
other things, the motion says. The company said that the shift would
disrupt the its efforts to enter into a stalking-horse bid and resolve
issues associated with a $144 million claim filed by the Internal
Revenue Service.
href='http://bankruptcy.law360.com/articles/109134'>Read
more. (Subscription required.)
Anchor Blue's Executive
Bonus Plan Wins Approval
Bankruptcy Judge
face='Times









New
Roman'
size='3'>Peter Walsh approved $800,000 in
bonuses for executives at bankrupt clothing retailer Anchor Blue Retail
Group Inc. despite objections from a U.S. Trustee who claimed that the
bonus plan was really a retention plan in disguise that improperly
compensated the company’s executives regardless of
performance,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Walsh approved an asset purchase
agreement between Anchor Blue and Levi Strauss & Co., and he also
approved a settlement between Anchor Blue, its unsecured creditors and
its lenders. Under the settlement, Anchor Blue and its creditors agreed
not to assert any claim against lenders Ableco Finance LLC and Wachovia
Bank, who at the petition date were owed $76 million and $14.5 million,
respectively.
href='http://bankruptcy.law360.com/print_article/109133'>Read
more. (Subscription required.)
Transmeridian, United
Energy Reach Chapter 11 Plan Deal
Bankruptcy Judge
face='Times









New
Roman'
size='3'>Marvin Isgur issued approved
Transmeridian Exploration Inc.'s disclosure statement for a liquidation
plan after the energy company agreed to make changes to the plan as part
of an effort to appease objecting creditor United Energy Group Ltd.
(UEGL),
size='3'>Bankruptcy Law360 reported yesterday.
In its earlier objection to Transmeridian’s first disclosure
statement and plan, UEGL, a holder of $43.2 million in secured
Transmeridian notes, said that it had been defrauded by Transmeridian
and its oil field holding company JSC Caspi Neft TME regarding the sale
of $12 million in equipment. Transmeridian’s reorganization plan
is centered on a sale of a significant portion of its oil field holdings
to Ufex Advisors Corp.
href='http://bankruptcy.law360.com/articles/109266'>Read
more. (Subscription required.)
Trustee’s Tally of
Madoff Losses Nears $3 Billion
With thousands of claims still pending, trustee
size='3'>Irving H. Picard reported yesterday
that the documented total of cash losses in Bernard L. Madoff’s
Ponzi scheme totals nearly $3 billion, the
face='Times New Roman'>New York
Times reported today. Picard reported that 543
of the 8,800 filed claims had been processed. At Madoff’s
sentencing hearing on Monday, federal prosecutors said that net cash
losses in accounts opened since 1996 would total at least $13 billion.
Records for older accounts must be converted from microfilm before the
accounts can be reconstructed, according to the trustee’s office.
At the time of Madoff’s arrest in December, his customers believed
they had almost $65 billion invested in their Madoff accounts. In
reality, almost all of the cash they had invested was paid out to other
investors as dividends or withdrawals. The Securities Investors
Protection Corp., which provides a degree of protection to brokerage
customers, will pay up to $500,000 of the documented cash losses. So
far, its commitments to Madoff victims total $231 million, which is more
than the total amount SIPC paid out in 11 of its largest previous
liquidations, according to SIPC president Stephen P. Harbeck.
href='http://www.nytimes.com/2009/07/02/business/02madoff.html?ref=business&pagewanted=print'>Read
more.
No Deal Yet for AIG
Investments Unit
Prolonged efforts to sell American International Group
Inc.'s asset-management business have failed to produce a deal yet, with
another exclusive negotiation period ending this week amid signs that
the price has fallen, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported. AIG faces pressure to sell off assets to pay back
tens of billions of dollars in government aid. Since May, it has been
negotiating exclusively with a team of bidders led by West Coast
mutual-fund firm Franklin Templeton Investments Inc., which said it is
interested in buying AIG Investments, a division that oversees some $85
billion in assets for AIG clients including pension funds and other
insurance companies. The initial month-long exclusive negotiating period
between the parties ended in mid-June and was extended by two weeks, but
that also expired this week with no agreement.
href='http://online.wsj.com/article/SB124647929876382145.html'>Read
more. (Subscription required.)
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