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October
1, 2007
name='1'>Congressional Hearing to Examine
w:st='on'>
size='3'>U.S.
Program
The House Judiciary Crime,
Terrorism and Homeland Security Subcommittee, will be holding an
oversight hearing on Tuesday to examine the U.S. Trustee Program
(USTP). Witnesses for the hearing, titled “U.S. Trustee Program:
Watchdog or Attack Dog,' include Clifford J. White III, Director of the
Executive Office for U.S. Trustees (Washington, D.C.), Mary Powers,
former USTP Trial Attorney (Amherst, N.Y.),
size='3'>Bankruptcy Judges
size='3'>A. Jay Cristol (S.D.
size='3'>Fla.
face='Times New Roman' size='3'>Eugene R. Wedoff
size='3'>(N.D.
face='Times New Roman' size='3'>Ill.
size='3'>), and
size='3'>Paul Uyehara of the Community Legal Services Language Access
Project (
face='Times New Roman'
size='3'>Philadelphia
size='3'>).
Mortgage
Lending
name='2'>Countrywide Financial Criticized for Providing Minimal
Assistance to Troubled Homeowners
As the home mortgage boom
of recent years continues to deflate, hundreds of thousands of borrowers
are facing escalating monthly bills on adjustable-rate loans that are
either in foreclosure or near it, the
size='3'>New York Times reported yesterday.
Lenders, government officials and loan servicers contend that troubled
borrowers everywhere are being helped to stay in their homes by those
overseeing their loans, but neither data nor anecdotal evidence supports
this view. A recent survey of 16 top subprime loan servicers by
Moody’s Investors Service found that for the first six months of
2007, an average of only 1 percent of loans experiencing an interest
rate adjustment, or reset, had been modified. Borrower advocates who
work with a broad array of lenders say that none make it harder to
modify loans than Countrywide, the nation’s largest mortgage
originator and loan servicer.
href='http://www.nytimes.com/2007/09/30/business/30country.html?pagewanted=print'>Read
more.
name='3'>Commentary: Subprime Crisis Shows that Corporate Governance
Problems Persist
What we’re learning
from the housing mess is that the crisis of corporate governance, which
made headlines in the early years of this decade with Enron and
WorldCom, never went away, according to an op-ed in today’s
New York Times
size='3'>. As scrutiny of Countrywide Financial’s questionable
loans and practices during the housing boom continues, the
company’s CEO, Angelo Mozilo, is beginning to draw comparisons of
past corporate chiefs of companies like Enron’s Ken Lay and
WorldCom’s Bernie Ebbers. Though nobody has accused Mozilo of
breaking the law, he was paid $142 million last year, making him the
seventh-highest-paid chief executive in
w:st='on'>
size='3'>America
Last year Mozilo’s compensation drew a protest from a group of
shareholders including the American Federation of State, County and
Municipal Employees Pension Plan. In late 2006, even as Countrywide
began using shareholders’ money to buy back its own stock at more
than $40 a share, Mozilo was selling. Between November 2006 and August
2007 —during the months before investors fully realized the extent
to which the company would be hurt by the subprime mortgage crisis
— Mozilo unloaded $138 million worth of Countrywide’s
stock.
href='http://www.nytimes.com/2007/10/01/opinion/01krugman.html?_r=1&oref=slogin&ref=opinion&pagewanted=print'>Read
more.
name='4'>American Home Looks to Seize Employee Retirement
Savings
American Home Mortgage
Investment Corp. said that it should be allowed to go after about $23
million of its employees' retirement savings because it gave them fair
warning that the money could be seized if the company sank into
bankruptcy, BusinessWeek.com reported on Friday. American Home, once the
10th-largest mortgage lender in the United States,
filed for bankruptcy Aug. 6. It has since laid off more than 6,500 of
its employees, halted its loan-origination business and is attempting to
sell its loan-servicing unit. The company said that it intends to use
funds in its deferred-compensation trust to repay its
creditors. As of March 31, the company had $19.33 billion
in total liabilities and $20.55 billion in assets. Bankruptcy
Judge
size='3'>Chris
size='3'>topher Sontchi has scheduled a
hearing today to consider the request.
href='http://www.businessweek.com/ap/financialnews/D8RUQCFG0.htm'>Read
more.
name='5'>UBS to Report Big Loss Tied to
Credit Woes
Swiss banking giant UBS
AG, which recently ousted its chief executive in the wake of losses at
an in-house hedge fund and defections of top investment bankers, plans
to write down as much as 4 billion Swiss francs, or $3.41 billion, in
assets, including securities tied to U.S. subprime mortgages, the
Wall Street Journal
reported today. The big write-downs will make UBS one of
the highest-profile casualties of the recent turmoil in global credit
markets and raises questions about the management of its securities
business, especially its expansion into the United
States. The write-down at Europe's third-largest
bank would be steeper than those posted by the four big investment banks
to report results so far -- Goldman Sachs Group Inc., Lehman Brothers
Holdings Inc., Morgan Stanley and Bear Stearns Cos. -- all of which were
affected in varying degrees by the meltdown in the U.S. market for
subprime mortgages, but which nonetheless reported third-quarter
profits.
href='http://online.wsj.com/article/SB119122747351544695.html?mod=hpp_us_whats_news'>Read
more.
size='3'>(Registration required.)
name='6'>High-Priced Student Loans Could Put Damper on
Economy
The near doubling in the
cost of a college degree the past decade has produced an explosion in
high-priced student loans that could hurt the
w:st='on'>
size='3'>U.S.
size='3'>economy for a number of years, according to the Associated
Press yesterday. While scholarship, grant money and government-backed
student loans -- whose interest rates are capped -- have taken up some
of the slack, many families and individual students have turned to
private loans, which carry fees and interest rates that are often
variable and up to 20 percent. More than $17 billion in private student
loans were issued last year, up from $4 billion a year in 2001.
Outstanding student borrowing jumped from $38 billion in 1995 to $85
billion last year, according to experts and lawmakers. Demand for
bundled student loans sold to institutional investors worldwide fueled
lending to students. The market for private student loan-backed
securities leapt 76 percent last year to $16.6 billion from $9.4 billion
in 2005, according to Moody's Investors Service.
href='http://www.nytimes.com/aponline/business/AP-Student-Loans-The-Spiral.html?pagewanted=print'>Read
more.
IRS
Urged to Re-Examine Hybrid Pension Penalties
Thirty-two members of
the
face='Times New Roman' size='3'>House
Ways
Committee asked Treasury Secretary Henry Paulson to re-examine an
Internal Revenue Service interpretation that would penalize companies
that provide greater benefits to long-time workers when they switch to
hybrid pensions from traditional plans, InvestmentNews.com reported on
Friday. A Sept. 26 letter signed by committee Republicans and Democrats
and released today urged Mr. Paulson to allow employers to offer
employees the choice of the greater of benefits. Provisions of the
Pension Protection Act of 2006 clarified that employers could convert
from traditional defined benefit plans to hybrid pension plans. However,
the IRS has taken the position that when employers give pension
participants the option of receiving whichever benefits are greater from
either plan, the employers are violating tax code rules.
href='http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20070928/REG/70928006&template=printart'>Read
more.
name='8'>Interstate Bakeries Urged to Exit Chapter 11
Lenders and unsecured
creditors of Interstate Bakeries Corp. are calling on the troubled
company to quickly find a way out of bankruptcy protection as a crucial
deadline nears for it to reach new labor contracts, the Associated Press
reported on Friday. JP Morgan Chase Bank, the agent for Interstate
Bakeries' pre-bankruptcy lenders, said the maker of Hostess Twinkies,
Wonder Bread and other goods has had 'ample opportunity' to develop a
plan for ending its three-year chapter 11 case. The bank is asking the
U.S. Bankruptcy Court in
w:st='on'>Kansas
City
face='Times New Roman' size='3'>Mo.
size='3'>, to put a stop to the company's exclusive control over its
bankruptcy by the end of October.
href='http://www.forbes.com/feeds/ap/2007/09/28/ap4168730.html'>Read
more.
name='9'>NetBank Files for Bankruptcy after Regulators Take Over
Unit
The parent of NetBank, a
pioneer in Internet banking, filed for bankruptcy protection after the
savings-and-loan became the first in three years to fail, Bloomberg News
reported on Saturday. The filing in U.S. Bankruptcy Court by NetBank
Inc. in Jacksonville, Fla., listed assets of $87.2
million and debt totaling $42.4 million. The bankrupt holding company
plans to sell real estate it owns in
w:st='on'>
size='3'>Columbia
w:st='on'>
size='3'>S.C.
captive reinsurance subsidiary M.G. Reinsurance Inc. The chapter 11
filing occurred after a sale of the savings-and-loan fell through and it
was taken over by the Federal Deposit Insurance Corp. following a
shutdown of the unit by
w:st='on'>
size='3'>U.S.
size='3'>regulators. The case is In re NetBank Inc., No.
07-04295, (Bankr. M.D. Fla.).
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ajOPHuXaoV3c&refer=home'>Read
more.
name='10'>Bombay Company on Fast Track to Sell Assets
One week after the Bombay
Company Inc. filed for chapter 11, Bankruptcy Judge
face='Times New Roman' size='3'>D. Michael Lynn
size='3'>put the home furnishing retailer's bankruptcy case on a fast
track by signing off on its bid to sell its business in the next two
weeks, Bankruptcy
Law360 reported on Friday. The company now has
approval to sell its business as a going concern or to conduct
going-out-of-business sales at its more than 400 stores. It also has the
discretion to adjust the bid procedures to maximize the value it
receives in consultation with its creditors' committee and lenders and
upon court approval, Judge Lynn said. Bids for a going-concern
transaction were due Friday, while bids to conduct store-closing sales
and bids for the company's leases are due Oct. 5.
size='3'> An auction has been scheduled for
Oct. 10 in
size='3'>New York
is slated for Oct. 12.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=36115'>Read
more. (Registration required.)
name='11'>Judge Approves Metabolife's Liquidation
Plan
Bankruptcy Judge
John J. Hargrove
approved Metabolife International Inc.’s chapter 11
liquidation plan, which calls for a $56 million fund to settle product
liability suits over the diet pill ephedra,
size='3'>Bankruptcy Law360 reported on Friday.
Before the plan was approved, U.S. Trustee Steven Jay Katzman, who had
objected to the plan last month, withdrew his objection. The trustee had
argued that the plan would shield Metabolife's officials and
subsidiaries from future lawsuits not related to ephedra and free
fiduciaries of their responsibilities. The trustee agreed to withdraw
his objection once the injunction language in the plan was clarified to
include only those claims found in the product liability case. To show
his support, Katzman signed off on the order Metabolife submitted to
Judge Hargrove for approval.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=36111'>Read
more. (Registration required.)
name='12'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
size='3'>ABI
size='3'>Members receive a 50% discount off of our regular subscription
rate of $500 when subscribing to the complete Daily Summary.
/>
To subscribe email steve@creditnews.com
title='mailto:steve@creditnews.com'
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
37
size='3'>Celebrate Express Inc., a
size='3'>Kirkland
w:st='on'>
size='3'>Wa
size='3'>. seller of party products, reported a first quarter net loss
of $580,000. Sales fell 12%–to $17.6 million.
Finish Line
Inc., an
w:st='on'>
size='3'>Indianapolis
face='Times New Roman'>, In. retailer of footwear,
activewear and accessories, reported a second quarter net loss of $1.8
million, including a $13 million pretax charge stemming mostly from
asset impairment. Sales edged up 1%–to $343 million.
Foxtons North America
Inc., a
face='Times New Roman' size='3'>West Long Branch
size='3'>,
size='3'>N.J.
firm, after laying off more than 90% of its workforce, has shuttered its
operations in the
w:st='on'>
size='3'>U.S.
face='Times New Roman'>and announced it may file for
bankruptcy protection.
Hartmarx
Corp.’s stock price tanked 23% after
the
size='3'>Chicago,
w:st='on'>
size='3'>Il
size='3'>. apparel maker reported worse-than-expected results in its
third quarter. Earnings rose just short of 11%–to $542,000, while
sales slipped slightly to $135 million. The company also revised
downward its profit guidance for the year, with per-share earnings now
pegged at no more than 27 cents per share, compared to earlier profit
expectations of at least 50 cents a share. Hartmarx has been undertaking
a strategy shift to focus more on making clothing for higher-end
specialty stores and pulling back from moderately price apparel. The
company has also vowed to address profitability by engaging in a round
of job cuts.
size='3'>Jack
size='3'>son Hewitt Tax Service Inc. was
ordered by the Justice Department to end its ties with its biggest
franchiser and will have to spend more than $19 million to buy back some
of its more than 150 franchised businesses.
w:st='on'>
size='3'>Jack
in
size='3'>Parsippany,
w:st='on'>
size='3'>N.J.
size='3'>, earlier agreed to pay $1.5 million to the Internal Revenue
Service to settle an audit over tax-preparation work done by the
franchises in question. The franchiser, Farukh Sohail, had been accused
of arranging fraudulent federal tax returns of more than $750
million.
Jaco Electronics
Inc., a Hauppauge, N.Y. electronic components
distributor, reported a fourth quarter net loss of $2.8 million, on an
18% revenue decline–to $54.7 million. For the year, the firm
reported a net loss of $3.1 million, on a 5% revenue increase–to
$240 million.