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February 25,
2010
Obama May Compromise on Consumer
Agency to Pass Financial Regulation
The Obama administration is no longer insisting on the creation of a
stand-alone consumer protection agency as a central element of the plan
to remake regulation of the financial system, the Washington Post
reported today. President Obama's economic team is now open to housing
the consumer regulator inside another agency, such as the Treasury
Department, though they still prefer a stand-alone agency. In either
case, they are insisting on a regulator with political autonomy and real
teeth so it can effectively enforce rules designed to protect consumers
of mortgages, credit cards and other financial products. The
administration may also have to compromise on Obama's recent proposal
for a rule to limit risky activities at banks by prohibiting them from
engaging in many kinds of speculative investments. Treasury officials
are preparing to send Capitol Hill a toughly worded measure that would
bar banks from making certain investments that benefit only the firms'
bottom line rather than their customers. However, there is little
support among either Democratic or Republican lawmakers for this
proposal, known as the 'Volcker rule,' and Senate leaders are now
closing ranks around legislation that would leave it to banking
regulators, rather than the law, to decide which activities to
ban.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/02/24/AR2010022405573_pf.html'>Read
more.
Trident to Launch a $200 Million Rights
Offering
Bankruptcy Judge Mary F.
Walrath on Tuesday authorized Trident Resources Corp. to enter
into a commitment letter for a $200 million rights offering, the Deal
Pipeline reported yesterday. The rights offering will be backstopped
by a group of junior lenders, which hold 90 percent of a $410 million
secured loan led by Credit Suisse Group's Toronto branch and 95 percent
of a $139.2 million unsecured loan led by Wells Fargo Bank NA, court
papers said. Through the rights offering, the lenders would receive 60
percent of the Calgary, Alberta-based natural gas exploration company's
reorganized stock. Credit Suisse Securities USA LLC, Mount Kellett
Capital Management LP, Chilton Global Natural Resources Partners LP,
Anchorage Capital Master Offshore Ltd., Whippoorwill Associates Inc.,
McDonnell Loan Opportunity Ltd., Restoration Holdings Ltd., Northwestern
Mutual Life Insurance Co. and Jennison Associates LLC are backstopping
the rights offering, court filings show. Jennison is the only member of
the group with a piece of the unsecured loan.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005393925'>Read
more. (Subscription required.)
id='3' name='3'>Lehman Reaches Deal on J.P. Morgan
Claim
Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. have reached
a deal that tentatively settles a $7.68 billion claim J.P. Morgan has
against Lehman following the investment bank's bankruptcy filing, the
Wall Street Journal reported today. The agreement would also
transfer to Lehman a pool of illiquid securities held by J.P. Morgan as
collateral and potentially worth billions of dollars. Lehman plans to
manage those assets over time and ideally increase their value. Under
the agreement, which requires court approval, J.P. Morgan will take
about $7.1 billion in cash collateral it is holding and reduce its claim
against Lehman from $7.68 billion to $557 million. Lehman will then make
a $557 million cash payment to J.P. Morgan. The deal gives Lehman the
right to later contest J.P. Morgan's claim, according to court
papers.
href='http://online.wsj.com/article/SB10001424052748704240004575086581482494308.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
Westfield Weighs Bid for General Growth
/>
The takeover battle for mall owner General Growth Properties Inc.
reached a boiling point yesterday as General Growth unveiled a deal with
Canadian property investor Brookfield Asset Management Inc. even as
Australian mall owner Westfield Group considered entering the fray, the
Wall Street Journal reported today. Westfield, which owns 119
malls in the U.S., Australia and Britain, signed a nondisclosure
agreement this week to begin discussions with General Growth about a
possible offer. As Westfield deliberated, General Growth laid out a plan
to exit bankruptcy proceedings this year by splitting the company in
two, with Brookfield pledging $2.63 billion to that effort. The complex
plan, drafted partly by activist investor and General Growth board
member William Ackman, is meant to top a $10 billion buyout bid that
rival mall owner Simon Property Group Inc. made last week. The General
Growth-Brookfield plan values General Growth at $15 a share and the
Simon offer at $9 a share.
href='http://online.wsj.com/article/SB10001424052748704240004575085310282974350.html?KEYWORDS=bankruptcy'>Read
more. (Subscription required.)
GM to Close Hummer after Sale
Collapses
General Motors said yesterday that it would shut down Hummer, its
brand of big sport-utility vehicles, after a deal to sell it to a
Chinese manufacturer fell apart, the New York Times reported
today. The buyer, Sichuan Tengzhong Heavy Industrial Machines, said in a
statement that it withdrew its bid because it was unable to get approval
from the Chinese government, which is trying to put a new emphasis on
limiting China’s dependence
on imported oil and protecting the environment.GM said that it had no
specific timetable for completing the wind down, but left open the
possibility for new bids on the unit. GM had been trying to sell Hummer
for nearly two years, and struck a preliminary deal with Tengzhong last
June. The two companies had planned to close the $150 million deal by
the end of January, then delayed the deadline by a month in the hopes of
getting the green light from China.
href='http://www.nytimes.com/2010/02/25/business/25hummer.html?hp=&adxnnl=1&adxnnlx=1267052487-h1pi6dsMyDIMi4IXJhfj4w&pagewanted=print'>Read
more.
White Birch Paper Seeks
Bankruptcy Protection In U.S., Canada
White Birch Paper Co., the second-largest newsprint manufacturer in
North America, filed for bankruptcy protection yesterday from creditors
in the U.S. and Canada, as waning newspaper readership drags down demand
for its product, Dow Jones Daily Bankruptcy Review reported
today. The privately held paper maker placed its U.S. unit, Bear Island
Paper Co., into chapter 11 in U.S. Bankruptcy Court for the Eastern
District of Virginia. In addition to struggling with its heavy debt load
and the declining demand for newsprint, White Birch blamed its financial
woes on a worldwide decline in newsprint prices, as well as the
increased strength of the Canadian dollar against the U.S. dollar. The
company's outstanding liabilities include some $590 million in bank
debt, according to court papers. The company also owes more than $50
million to counterparties under interest-rate swaps the company used to
hedge business and currency fluctuations. White Birch owes trade
creditors about $9.5 million.
Blockbuster Talks with
Advisers on Reworking Debt
Blockbuster Inc. said yesterday that it was talking
with several advisers, including a law firm and an investment bank, to
explore ways for the video rental firm to recapitalize its $1 billion
debt load, Reuters reported yesterday. Law firm Weil, Gotshal &
Manges and the bank, Rothschild Inc, are among parties involved in the
discussions which are focused on various strategies, such as
acquisitions or partnerships. The Wall Street Journal reported
bondholders were talking with advisers to move toward reworking
Blockbuster's capital structure, such as converting debt to
equity.
href='http://www.reuters.com/article/idUSN2411671620100224'>Read
more.
href='http://www.reuters.com/article/idUSN2411671620100224'>
Moody's: Clear Channel
Restructuring 'Inevitable'
Moody's Investors Services reported yesterday that a
restructuring of radio broadcaster Clear Channel Communications is
inevitable, though its private equity owners Bain Capital and Thomas H.
Lee Partners may try to delay it as long as possible, Reuters reported
yesterday. While Clear Channel could issue additional debt through its
outdoor unit to make it through 2014, that would only postpone a
restructuring by a couple of years, Moody's analyst and lead author Neil
Begley said. The company will still face a critical hurdle in 2016, when
about $13.8 billion of debt comes due, and leverage is expected to
remain too high to attract more investment and refinance the debt,
Moody's said. Laden with nearly $16 billion in additional debt by its
2008 buyout, Clear Channel then faced tumbling advertising revenues amid
one of the worst consumer-led recessions in recent history, according to
the Moody's report.
href='http://www.reuters.com/article/idUSN2411458320100224'>Read
more.
SEC Passes Short-Selling
Rules
The Securities and Exchange Commission enacted new restrictions on short
selling yesterday aimed at restoring investor confidence by
preventing speculators from pouncing on stocks already in a tailspin,
the Washington Post reported
today. The rules, which were approved in a 3 to 2 party-line vote, come
as the agency has faced intense pressure from lawmakers and investors to
crack down on the practice, which some on Wall Street have blamed for
crashing the stock values of major financial companies during the 2008
market crisis. The new restrictions, which will take eight months to put
into effect, only affect stocks that have declined at least 10 percent
since the previous day. At that point, short sellers essentially will
have to pay a small premium to bet against a stock. They'll have to pay
a slightly higher price for transactions than investors who are simply
looking to buy shares or sell shares they already own.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/02/24/AR2010022405571_pf.html'>Read
more.
House Financial Services Will Not Take Up
Debate on Interchange Fees
House Financial Services
Committee Chair Barney Frank (D-Mass.) said that his committee will not
take up this year the contentious issue of how much banks can charge
merchants for using their credit and debit card networks,
CongressDaily reported yesterday. The issue has sparked a
major lobbying battle in recent years. The retail community has pushed
legislation to regulate the fees, which average 1.75 percent for
purchases used with Visa and MasterCard, arguing that they are arbitrary
and unfair. In response, banks, credit unions and the networks have
lined up their own coalition, saying that any savings would not be
passed along to consumers.
Fed Gives Some Ground on
Transparency
Federal Reserve Chairman Bernanke testified before the
House Financial Services Committee yesterday that Congress should pass
legislation requiring that the names of firms that received federal
emergency assistance during the financial crisis should be released
'after an appropriate delay,' CongressDaily reported yesterday.
During his semiannual testimony on monetary policy before the House
Financial Services Committee, Bernanke said that the delay was necessary
so that investors would not shun companies that had received federal
help. In addition, Bernanke said, the Fed would 'welcome' a GAO review
of the Fed's 'management of all the facilities created under emergency
authorities.' But the Fed's monetary policy decisions should 'continue
to be insulated from short-term political pressures,' he said. The Fed
has been criticized by many lawmakers for its handling of the financial
bailouts and its actions leading up to the crisis. As part of a
House-passed bill that would revamp the nation's financial regulatory
system, GAO would be given more authority to audit the central bank's
activities, giving them access to every item on its balance sheet. The
language was sponsored by Rep. Ron Paul (R-Texas) but has not been
embraced by the Senate, where Banking Chairman Christopher Dodd
(D-Conn.) hopes to unveil his revised bill soon.
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