April 32008

 

ATA
Airlines Files for Chapter 11, Discontinues Service

ATA Airlines said that it filed

for chapter 11 yesterday, citing the unexpected cancellation of a key
contract for the airline’s military charter business, according to

a press release today. The airline said that it had discontinued all
operations today, canceling all flights and no longer honoring
reservations or tickets. ATA contacted other airlines that serve ATA
destinations to help provide assistance to customers.
“Unfortunately, the cancellation of a critical agreement for our
military charter business undermined ATA’s plan to address the
current conditions facing all scheduled service airlines, including the
tremendous spike in the price of jet fuel in recent months,” said
ATA COO Doug Yakola. “It became impossible for ATA to continue
operating.” ATA recently received notification from the FedEx
Corp. that ATA would no longer be a member of the FedEx Teaming
Arrangement. This arrangement gave ATA a significant share of the
airlift contracts under the International Program of the Department of
Defense Air Mobility Command, which facilitates transportation for
military personnel and their families to and from overseas destinations.

This arrangement accounted for most of ATA’s charter
business. Click here for
additional information about ATA’s shutdown and chapter 11
proceedings.

href='http://www.bmccorp.net/geninfo.aspx?ClientID=151'>Click here
for ATA court filings and claims information.

Housing
Downturn

name='2'>Senate Moves Forward on Housing Relief

Senate leaders were able
to reach a compromise on a $15 billion bipartisan plan to spur the
housing market and scheduled the package to be considered on the Senate
floor today, the Wall
Street Journal reported. Democrats dropped a
provision from the bill’s language to allow bankruptcy judges to
modify the mortgage of a chapter 13 debtor’s primary residence,
though the provision could be offered as an amendment. They also agreed
to halve funds for counseling at-risk homeowners to $100 million.
Republicans accepted $4 billion in block grants for communities to buy
and refurbish foreclosed properties, and they agreed to a smaller tax
credit for homeowners than they initially wanted. The plan would raise
the size of loans backed by the Federal Housing Administration to
$550,000 and increase the down payment requirement to 3.5 percent from 3

percent. The legislation includes a $6 billion tax break for home
builders and other troubled companies, an additional $10 billion of
mortgage-revenue bonds that states can issue for refinancing and for
first-time home buyers, and a provision to allow an estimated 28 million

homeowners who don't itemize their taxes to get a deduction on their
property taxes. In addition, people buying a residence facing
foreclosure would get a two-year, $7,000 tax credit. The bill doesn't
include a controversial Democratic proposal to give the FHA the ability
to insure $400 billion in mortgages, with Senate Banking Chairman

size='3'>Chris Dodd (D- Conn.)
agreeing that his committee would hold hearings later on the
proposal. 

href='http://online.wsj.com/article/SB120717537474684659.html?mod=hpp_us_whats_news'>Read

more. (Registration required.)

In related news, the Senate
Judiciary Committee today will mark up two bills focused on allowing
bankruptcy judges to modify mortgage loans on a chapter 13 debtor's
primary residence. S. 2136 sponsored by Sen. Richard Durbin (D-Ill.),
and the competing proposal, S. 2133 sponsored by Sen. Arlen Specter
(D-Penn.), are the first two bills scheduled for the mark-up
hearing set for 10 a.m. in room 226 of the
w:st='on'>
size='3'>Senate 
w:st='on'>
size='3'>Dirksen
face='Times New Roman' size='3'>Office

size='3'>Building. 

href='http://www.abiworld.org/pdfs/UpdatedMortgageModificationLegislationChart.pdf'>Click

here to read a summary of the the mortgage modification legislation
as introduced.

 

name='3'>Judge Approves Fed Subpoenas of
Countrywide

Bankruptcy Judge
Thomas Agresti ruled yesterday that the Justice
Department can subpoena documents and question Countrywide Financial
Corp. executives under oath to determine whether the lender abused
borrowers and the bankruptcy court process, the Associated Press
reported. Judge Agresti said that 'it certainly has not been proven

that Countrywide did anything wrong,' but noted that a bankruptcy
trustee 'has made a showing of a common thread of potential wrongdoing'
in several cases. The cases are a representative sample of nearly
300

size='3'>Pennsylvania
size='3'>bankruptcy cases involving Countrywide borrowers. The potential

wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of

the Justice Department, Judge Agresti said. Countrywide has acknowledged

errors in handling some debts, but has denied any systematic effort to
thwart bankruptcy protections to collect money. 

href='http://biz.yahoo.com/ap/080402/countrywide_foreclosure.html?.v=2'>Read

more.

name='4'>Novastar Reports $733 Million Loss, Warns of
Bankruptcy

Former mortgage lender
Novastar Financial Inc. lost more than $733 million in 2007 and has said

that it could file for bankruptcy if adverse liquidity events cause the
company to exhaust its existing cash reserves,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company said in a filing with the U.S.
Securities and Exchange Commission on Tuesday that there is a
significant possibility that the company might not have enough cash
available to operate its business, pay debts and meet other obligations.

The filing also said that Novastar has received subpoenas or information

requests from various federal and state regulators and law enforcement
officials, including the Federal Trade Commission, the U.S. Department
of Justice, the FBI, the New York attorney general, the Department of
Labor and the SEC. Novastar warned that an adverse outcome in litigation

against the company could push it into bankruptcy. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51877'>Read

more. (Registration required.)

name='5'>Bankrupt Mortgage Lender Sues Merrill over
Transfers

Mortgage Lenders Network
USA Inc. filed suit Monday against Merrill Lynch & Co., seeking to
recover nearly $5 million that it says Merrill Lynch unilaterally
transferred to itself shortly before the mortgage lender filed for
bankruptcy, Bankruptcy
Law360 reported yesterday. In the 90 days
before Mortgage Lenders filed its bankruptcy petition, it alleged that
Merrill Lynch sold loans that were rightfully the property of Mortgage
Lenders and made incomplete payments to Mortgage Lenders under the
agreements between the companies, according to the complaint. As a
result, the complaint said, Merrill Lynch effectively transferred
$4,922,882 from Mortgage Lenders to itself. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51935'>Read

more. (Registration required.)

name='6'>Fannie Mae Tightens Loan Standards

Fannie Mae told lenders that it

will require a minimum credit score for the loans it buys, tightening
mortgage standards to protect itself from record foreclosures sweeping
the country, Reuters reported yesterday. Lawmakers have been pressuring
the company, along with its rival Freddie Mac, to more aggressively buy
home loans in a bid to lower mortgage rates and prop up housing. In
response to soaring mortgage defaults, the two government-chartered
companies are increasing fees, restricting the loans they purchase and
trying to preserve and raise capital. The latest steps are part of
amended underwriting practices for loans Fannie Mae buys, aimed at
adjusting prices to reflect heightened housing market risk and
protecting the company’s capital. Fannie Mae will require a
minimum score of 580 for most loans, adding that it will still acquire
loans with lower credit scores in certain circumstances. 

href='http://www.nytimes.com/2008/04/02/business/rtlend-web.html?ref=business'>Read

more.

name='7'>Judge Approves Disclosure Statement for
w:st='on'>
size='3'>Iowa Diocese
Settlement

Bankruptcy Judge
Lee Jackwig
size='3'>yesterday approved the disclosure statement to be sent to 162
victims of sexual abuse by priests in the Catholic Diocese of Dubuque,
the Des Moines
Register reported today. 
size='3'>The decision by Judge Jackwig bodes well for overall approval
of a $37 million settlement plan between abuse victims and the diocese,
attorneys said. The disclosure statement and reorganization plan will
likely be mailed to victims this week, said Richard Davidson, attorney
for the diocese. Victims will have until April 23 to vote on the plan
before Jackwig considers approval. The plan outlines terms of the $37
million settlement and 17 nonmonetary steps the diocese would take to
restore confidence and prevent further abuse. The reorganization plan
will be discussed in a confirmation hearing April 30. 

href='http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20080402/NEWS/80402029#pluckcomments'>Read

more.

Fed
Chief Sees Possible Contraction in First Half

Federal Reserve chairman Ben S.

Bernanke said yesterday that the American economy could contract in the
first half of 2008, meeting the strict definition of a recession, and he

called on Congress to strengthen the nation’s distressed housing
industries, the New York Times reported today. While not
endorsing any specific proposals, Bernanke made clear that the home
mortgage crisis remained the single biggest drag on prospects for a
recovery, and said that it was up to Congress to act. He cited a need to

strengthen federal agencies that insure mortgages. Bernanke defended the

Fed’s involvement in the Bear Stearns deal, especially its role in

providing a loan that was secured by mortgage-related securities of
uncertain value. A chaotic credit crisis, potentially affecting
thousands of individuals and institutions, would have resulted from a
Bear Stearns bankruptcy filing, Bernanke said, adding that he regarded
the condition of Bear Stearns as unusually dangerous and that he saw no
comparable threats on the horizon now. 

href='http://www.nytimes.com/2008/04/03/business/03fed.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read

more.

name='9'>Bankruptcy Judge Approves $12 Million Cash Collateral for
Ziff Davis

Technology magazine
publisher Ziff Davis Media Inc. received court approval on Monday to use

up to $12 million in cash collateral,

size='3'>Bankruptcy Law360 reported yesterday.

Bankruptcy Judge Burton
R. Lifland directed Merrill Lynch & Co.,
the operator of Ziff Davis' accounts, to transfer $12 million from a
segregated account into the company's initial account. The funds come
from a sales agreement from the summer, when Ziff Davis sold several of
its assets and assigned certain liabilities to Enterprise Media Group
Inc. to the tune of roughly $150 million. The net proceeds from the
sale, after taking away $17 million to be placed in escrow accounts and
$7.9 million for fees and expenses, stood at around $125.1 million and
was placed in Ziff Davis' initial account. The net proceeds were later
transferred from the initial account to a special-purpose, segregated,
interest-bearing account at Merrill Lynch under a forbearance agreement
between Ziff Davis, its granters and its collateral trustee. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51873'>Read

more. (Registration required.)

name='10'>Enron’s Skilling Asks Court to Overturn His
Conviction

Jeffrey K. Skilling, the former

CEO of Enron who was convicted for his role in the company’s
collapse, took risks when he ran the company but they were always for
its benefit, his lawyer told an appeals court Wednesday, according to
the Associated Press. His actions negate his convictions, which rest on
a legal theory that Skilling deprived Enron of his “honest
services” and put his own interests above those of the company,
Skilling’s lawyer Daniel M. Petrocelli told a three-judge panel of

the U.S. Court of Appeals for the Fifth Circuit. However, prosecutors
argued that Skilling’s actions were dishonest and contrary to the
needs of the company’s shareholders and its financial stability.
The appeals court was not expected to rule yesterday on Skilling’s

appeal to have his conviction overturned. 

href='http://www.nytimes.com/2008/04/03/business/03enron.html?ref=business&pagewanted=print'>Read

more.

href='http://www.nytimes.com/2008/04/03/business/03enron.html?ref=business&pagewanted=print'>