December 23, 2008
Commercial Property Industry Seeks Bailout Aid
A group of trade associations representing the U.S. commercial
real estate industry is lobbying to be included in the Federal Reserve's
$200 billion asset-backed bailout plan in order to head off a wave of
foreclosures over the next few years, Reuters reported yesterday. In a
letter to U.S. Treasury Secretary Henry Paulson, industry organizations
have asked that the $200 billion Term Asset-Backed Securities Loan
Facility (TALF) provide guarantees or financing, or purchase highly
rated asset-backed securities collateralized by new or recently
originated mortgages. The program, aimed at unsticking frozen consumer
credit markets such as auto loans, student loans and credit cards, was
funded at $200 billion from the Fed, with the first $20 billion in
losses to be covered by the Treasury.
href='http://www.reuters.com/article/ousiv/idUSTRE4BL3ZD20081222'>Read
more.
Oil Refiner Flying J Files for Bankruptcy
Flying J Inc., an oil refiner, transporter and travel-center owner,
filed for chapter 11 yesterday, blaming a cash crisis brought on by
declines in oil prices, according to Bloomberg.com yesterday. The
company, based in Ogden, Utah, listed assets of more than $1 billion and
debt of $500 million to $1 billion in court documents filed today in
Wilmington, Del. The United States, with sales of more than $16.2
billion in 2007, according to court records. Founded in 1968 with four
gasoline stations, it now operates 200 travel centers, two refineries
and a 700-mile pipeline that carries gasoline and diesel from Houston to
El Paso, Texas, according to court filings.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aity2N8JKObo'>Read
more.
New York State Dry Cleaner Files for Bankruptcy
The largest dry cleaning chain in the Albany, N.Y., region filed for
chapter 11 bankruptcy protection due to a severe drop in revenue over
the past few months, the Albany Business Journal reported
yesterday. Schenectady, N.Y.-based Greener Cleaners Ltd., formerly known
as KEM Cleaners, filed the voluntary bankruptcy petition Dec. 19 in U.S.
Bankruptcy Court in Albany. The chain will remain open during the
court-supervised debt restructuring but expects to close three or four
of its 14 locations where landlords haven't been willing to renegotiate
the rent, said CEO B. Robert Joel. The company listed $647,276 in assets
and $1.15 million in liabilities in the bankruptcy petition. The largest
secured creditor is KeyBank, which is owed $300,000. The largest
unsecured creditor is one of the owners, David M. Siegal, who is owed
$522,753.
href='http://www.bizjournals.com/albany/stories/2008/12/22/daily4.html'>Read
more.
Circuit City Gets Final Approval for Financing
Electronics retailer Circuit City Stores received final bankruptcy court
approval yesterday for $1.1 billion in debtor-in-possession financing to
provide liquidity as it reorganizes, Reuters reported yesterday. The
financing enables the retailer to pay vendors and other business
partners for goods and services received. U.S. Bankruptcy Judge
Kevin Huennekens also approved a motion that would let
Circuit City void employment and severance contracts with 40 former
workers, including Philip Schoonover, who stepped down as chairman and
chief executive in September. Schoonover was entitled to at least $1.8
million in pay and other benefits as part of his employment agreement,
according to a regulatory filing. During a hearing, Circuit City lawyer
Gregg M. Galardi told the bankruptcy court that since
the chapter 11 filing, same-store sales had fallen 43 percent to 50
percent at stores that are not slated to close. The company filed court
notice last week, seeking to reject store leases for 154 of those stores
it is liquidating. The company canceled an auction of those leases last
week after it did not receive enough bids.
Bankruptcy Judge OKs Neuberger Sale
A bankruptcy judge approved the sale of Lehman Brothers Holdings' prized
investment management unit to a group of managers and employees, the
Associated Press reported yesterday. The sale was worth $922 million to
the Lehman bankruptcy estate and includes the Neuberger Berman money
management business. The employee group won a contested auction earlier
this month, beating two other bids. The bid from the Bain and Hellman
group would have been worth about $745 million. The lawyer said that
Crossmark's bid was worth less. Neuberger Berman was the last big asset
to be sold off in the Lehman bankruptcy. Under the deal, the Lehman
estate gets 93 percent of $875 million in preferred equity, while the
new owners get 7 percent of the preferred shares. The estate would get
49 percent of the common shares while the Neuberger managers would get
51 percent of the common shares in the new company, to be called
Neuberger Investment Management.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/22/AR2008122201309.html'>Read
more (free subscription required).
CIT to Convert into Bank Holding Company
The Federal Reserve Board yesterday approved an application from the
industrial loan company CIT Group Inc. to become a bank holding company
in a move that could give the company access to additional capital from
the Fed and the U.S. Treasury, according the Wall Street Journal
reported yesterday. The company announced its decision to apply to
become a bank holding company in mid-November, saying that approval from
the Fed would allow CIT to possibly receive a capital injection from the
U.S. Treasury. In addition, bank holding companies are eligible to
borrow from the Fed's discount window. The Fed's decision to green-light
the company's application comes just a few days after Standard &
Poors downgraded CIT's credit rating from 'A-' to 'BBB+.' The change to
bank-holding status will essentially convert the Salt Lake City-based
CIT Bank, a subsidiary of CIT Group, into a state bank.
href='http://online.wsj.com/article/SB122997980829927497.html'>Read more
(subscription required).
Madoff Victims May Have to Return Six Years of Profits,
Principal
Bernard Madoff clients who withdrew funds from his allegedly $50 billion
Ponzi scheme as long as six years ago may be sued on behalf of other
victims to return profits and even principal, securities and bankruptcy
lawyers say, according to a report from Bloomberg News today. Clients of
Madoff had about $36 billion with his firm, according to a Bloomberg
tally that may include some double counting. Before his arrest on Dec.
11, Madoff confessed to employees that his “giant Ponzi
scheme” may have cost as much as $50 billion, according to an FBI
complaint. His misconduct may have stretched back to at least the 1970s.
A so-called clawback of paid-out funds in the Madoff liquidation could
result in lawsuits against investors such as charities, hedge funds and
individuals who redeemed profits and took out principal.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kFmYaaw5sY&refer=home'>Read
more.
Regulator Allowed IndyMac Backdate Infusion
A senior bank regulator was removed from his job after being accused of
helping mortgage lender IndyMac Bancorp alter its records so it appeared
to be in better shape-weeks before it was seized by the government, the
Wall Street Journal reported today. Treasury Department Inspector
General Eric Thorson wrote that the federal OTS allowed the bank to
backdate records of capital infusions last spring. That leeway made
IndyMac, once the nation's 10th-largest mortgage lender, appear more
solid than was actually the case, shortly before federal regulators
seized the bank in July-at a cost of $8.9 billion to the government's
deposit-insurance fund. The key concern raised by Thorson was that OTS
supervisors allowed IndyMac to register an $18 million capital injection
from its holding company made on May 9 as if it had been carried out
before the end of March. That appeared to put the bank's total
risk-based capital ratio for the first quarter of the year over the 10
percent threshold for a 'well-capitalized' institution, when in fact the
bank had been below that mark and qualified only to be considered
'adequately capitalized.'
href='http://online.wsj.com/article/SB122998621544328009.html'>Read more
(subscription required).
KB Toys Permitted to Liquidate Stores
A Delaware judge has given KB Toys Inc. approval to conduct
going-out-of-business sales, said a report today on TheDeal.com. At a
Thursday, Dec. 18, hearing, Judge Kevin Carey in the U.S. Bankruptcy
Court for the District of Delaware in Wilmington gave the toy retailer
and its liquidators, Gordon Brothers Retail Partners LLC and Great
American Group LLC, approval to conduct the liquidation of 461 stores.
The Pittsfield, Mass., debtor said that holding going-out-of-business
sales during the holiday season maximizes the value of its assets for
creditors. Under the terms of the consulting agreement, the liquidators
receive no consulting fee if the sale proceeds are less than 48 percent
of the merchandise value. KB will close all of its stores in 41 states,
Puerto Rico and Guam. Of the outlets, 277 are in malls, 40 in strip
malls and 114 are in shopping centers. There are also 30 temporary
holiday stores. KB filed for chapter 11 protection on Dec. 11 and listed
assets and liabilities both in excess of $100 million. The company
received interim approval for cash collateral use on Dec. 12., with a
final hearing scheduled for Dec. 30.
href='http://www.thedeal.com/servlet/ContentServer?cid=1229013211027&pagename=TheDeal%2FNWStArticle&c=TDDArticle'>Read
more.
Northlake Seeks Liquidation Plan Approval
Bankrupt Northlake Foods Inc., the largest franchisor of Waffle House
Inc. restaurants, is ready to get out of the kitchen, according to
today's TheDeal.com. Palmetto, Fla.-based Northlake, which operates 121
Waffle House restaurants in Florida, Georgia and Virginia, will seek a
judge's confirmation of its liquidation plan on Jan. 22. Judge Caryl E.
Delano of the U.S. Bankruptcy Court for the Middle District of Florida
in Tampa approved the plan on Dec. 19. Under the plan, WHI of Norcross,
Ga., will get back the 121 restaurants and Northlake will establish a
liquidating trust in order to pay secured creditor Bank of America NA,
which is owed $6.75 million in pre-petition debt. Northlake filed for
chapter 11 on Sept. 15, listing $10 million to $50 million in total
assets and liabilities.
href='http://www.thedeal.com/servlet/ContentServer?cid=1229013212352&pagename=TheDeal%2FNWStArticle&c=TDDArticle'>Read
more.
Florida-based Multimedia Co. Files for Chapter 11
DNC Multimedia Corp., formerly Planetlink Communications, has filed for
chapter 11 bankruptcy, the South Florida Business Journal
reported yesterday. The designer, manufacturer and marketer of digital
media technology products has headquarters listed as Suwanee, Ga., but
the bankruptcy filing said that the principal remaining assets are
located at James Dodrill's law offices in Boca Raton, Fla. The company
has $1.15 million in assets and $1.16 million in debt, and more than 3
million outstanding shares of stock held by 116 stockholders, according
to the bankruptcy petition. Creditors hold $630,000 in secured
claims.
href='http://www.bizjournals.com/southflorida/stories/2008/12/22/daily9.html'>Read
more.
Fidelity National Financial Gets Court Approval of Amended Stock
Purchase Terms
Jacksonville, Fla.-based Fidelity National Financial Inc. said
in a press release yesterday that a Nebraska bankruptcy court has
granted approval for amended terms related to the acquisition of
LandAmerica Financial Group Inc., or LFG's two principal title insurance
underwriters, Commonwealth Land Title Insurance Co. and Lawyers Title
Insurance Corp., Marketwatch.com reported yesterday. Under the amended
terms, the total consideration for Commonwealth and Lawyers Title will
be about $235 million. Chicago Title Insurance Co. and Fidelity National
Title Insurance Co. will pay a total of about $135 million in cash to
LFG. Fidelity National Financial will also pay LFG a total consideration
of about $100 million consisting of a $50 million subordinated note due
in 2013, with interest at the five-year treasury rate at closing plus 1
percent, and about $50 million in Fidelity National Financial common
stock.
href='http://www.marketwatch.com/news/story/fidelity-national-financial-inc-announces/story.aspx?guid=%7BB56ACD44-FE2E-407F-A7D1-79753C9F87C1%7D&dist=msr_2'>Read
more.
Oregon 1031 Exchange Files for Chapter 11
Bend, Ore.-based Summit Accommodators Inc., which does business
as Summit 1031 Exchange, filed for chapter 11 bankruptcy protection
Friday and was placed in receivership, saying that it's short
approximately $14.2 million out of a total of $27.8 million due its
clients, according to a statement posted on the company's Web site, the
Bend (Ore.) Bulletin reported today. The company, which has
operations in eight mostly Western states, closed its Bend office Dec.
15, citing a cash crunch. The status of other Summit offices listed
online was unclear. In the statement, the company acknowledges it loaned
money from its clients to Inland Capital Corp., a company owned by the
same owners as Summit, which in turn loaned the money to various
entities and individuals involved in real estate investments, primarily
in Central Oregon.
href='http://www.bendbulletin.com/apps/pbcs.dll/article?AID=/20081223/BIZ0102/812230357/1001/NEWS01&nav_category=NEWS01'>Read
more.
Missing Dreier Escrow Snags Bankruptcy Payments
Within hours of Marc S. Dreier's arrest on Dec. 2 in Toronto on an
impersonation charge, a nearly nine-year-old bankruptcy, which was
supposed to be closed out with a final $38.5 million payment to
unsecured creditors, was brought to a standstill, the New York Law
Journal reported today. Norman N. Kinel, a lawyer from the
250-lawyer Dreier firm who represented the unsecured creditors'
committee in the 360networks (USA) bankruptcy, made three requests on
Dec. 1 and 2 that Dreier wire the money from a firm client trust account
so it could be distributed to creditors. The requests went unheeded. On
Dec. 17, Bankruptcy Judge Allan L. Gropper, who is
presiding over the 360 proceedings, authorized the appointment of a
'representative' of 360network's 580 unsecured creditors to investigate
what happened to the funds and to determine if any recovery actions
should be initiated. At a hearing Friday on the bankruptcy proceeding
involving Dreier's law firm, Steven J. Reisman, a partner at Curtis,
Mallet-Prevost, Colt & Mosle, stated that he had been designated as
the representative for 360's unsecured creditors. Reisman, who did not
return several requests for comment Monday, expressed concern at
Friday's hearing that some of the $1.1 million reportedly in the Dreier
firm's operating account last week may have come from client trust
accounts.
href='http://www.law.com/jsp/article.jsp?id=1202426977790'>Read
more.
Trustee: USVI Auction Delayed by Crisis
Auctions of companies that were part of a bankrupt U.S. Virgin Islands
media and communications network have been postponed because of the
global financial crisis, a court-appointed trustee said, the Associated
Press reported yesterday. Trustee Stan Springle said that several
companies that were part of St. Croix-based Innovative Communication
Corp. will be auctioned off in the first quarter of 2009 to allow
interested bidders more time to obtain financing in a potentially better
economic climate. The auction had been scheduled for this month. U.S.
Bankruptcy Court Judge Judith K. Fitzgerald of the
Western District of Pennsylvania approved the delay to sell about a
dozen ICC companies, including Innovative Telephone, Innovative Business
Systems and cable and cellular services for St. Maarten, the British
Virgin Islands and the U.S. Virgin Islands.
href='http://www.forbes.com/feeds/ap/2008/12/22/ap5853139.html'>Read
more.