July 152009

 

Senate Panel to Examine
Regulation of Hedge Funds; House Panel to Hear Banking Industry Views on

Proposed Financial Regulations

The Senate Banking Securities, Insurance and
Investment Subcommittee will hold a hearing today at 2:30 p.m. ET titled

“Regulating Hedge Funds and Other Private Investment
Pools.” 

href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=b4b5348b-ba91-4512-bca2-bf45b2e5fbde'>Click

here to view the witness list for the hearing. Also, the
Congressional Research Service released a report on Monday examining
some of the issues and proposals surrounding the potential regulation of

hedge funds. 
href='http://www.abiworld.org/e-news/CRSReportonHedgeFunds.pdf'>Click
here to read the report titled, “Hedge Funds: Should They Be
Regulated?”

In related news, the House Financial Services
Committee will hold a hearing today at 10 a.m. ET titled “Banking
Industry Perspectives on the Obama Administration’s Financial
Regulatory Reform Proposals.” 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchr_071509.shtml'>Click

here to view the witness list and to watch a live Webcast of the
hearing.

SEC Chief Targets the Credit

Raters

In a sign that credit-rating firms may face tougher
rules, the head of the Securities and Exchange Commission signaled her
support for proposals that would make it easier for investors to sue,
the
size='3'>Wall Street Journal reported today.
SEC Chairman Mary Schapiro told the House Financial Services
Subcommittee on Capital Markets yesterday that she believes proposals to

impose liability standards, which go beyond anything currently suggested

by the Obama administration, could result in higher-quality work by the
firms. The SEC also is considering ways to curb to the practice of
issuers 'shopping' for the best rating as it explores ways to curb
conflicts of interest and improve transparency and accountability by
ratings companies, she said. 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/cmhr_070709.shtml'>Click

here to read Schapiro’s testimony.

Regulators Near Deal on
Package to Save CIT

CIT Group Inc. and federal regulators were working to
iron out details of an aid package yesterday after customers drained
hundreds of millions of dollars from the lender, the Wall Street
Journal reported today. Under the plan, regulators would allow CIT
to transfer assets from its holding company to its bank in Utah, the
Federal Reserve would let CIT pledge some of those assets at its
discount window and the company would take steps to refinance some of
its existing debt. The package isn't yet finalized, and uncertainty
remains as to whether a deal can be struck. The financial position of
CIT, a lender to almost a million small and midsize businesses, has
weakened in recent days and government officials have come under
increasing pressure to find a solution. 

href='http://online.wsj.com/article/SB124761812925042431.html#mod=testMod'>Read

more. (Subscription required.)

Lawmakers to Unveil Bill
Today to End Student Lending Program

House Democrats will unveil a sweeping higher
education bill today that would dismantle a major federal student loan
program and use the billions of dollars in resulting savings to provide
more money to low-income college students,

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size='3'>CongressDaily reported today. The
bill will end the Federal Family Education Loan (FFEL) program and
originate all federally backed student loans through the Education
Department's Direct Loan Program. Ending FFEL would be a serious blow to

student lenders across the country, many of which rely heavily on
business generated from government-backed loans. The bill would restrict

the role of loan giants like Sallie Mae and the Nebraska-based Nelnet to

servicing loans after they are made by the Education Department.
President Obama proposed the change in his FY10 budget request, and CBO
estimated it would save $87 billion over 10 years. The plan is cheaper
because it ends subsidies to student lenders and because the government
can borrow money more cheaply than private entities.

Auto Parts Maker Contech
Converts to Chapter 7

Bankruptcy Judge

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size='3'>Steven W. Rhodes granted a request
from specialty auto parts maker Contech U.S. LLC on Monday to convert
its bankruptcy proceedings from chapter 11 to chapter 7, and agreed to
fast-track a request by the company to use a portion of its remaining
cash to pay legal fees,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Rhodes yesterday shortened the notice

requirements for Contech's motion to use $115,200 in cash collateral to
pay attorneys for time worked, following the expiration of a previous
cash collateral agreement. Under a previous agreement with lenders,
Contech was permitted to use $7.2 million in cash collateral to pay
expenses, but that financing agreement expired on June 30, leaving legal

fees unpaid for July 1 through the conversion date, the motion said.
Lenders have agreed to the payment of $115,200 in legal fees, provided
that the lenders have the right to review the fees for reasonableness,
the motion said. 
href='http://bankruptcy.law360.com/articles/111089'>Read
more. (Subscription required.)

Trustee Sues Offshore Hedge
Fund in Madoff Case

The trustee overseeing the liquidation of Bernard
Madoff's assets has sued a hedge fund based in the Cayman Islands,
claiming that it should return $587 million it earned with Madoff to
investors wiped out by the disgraced financier's colossal fraud, the
Associated Press reported yesterday. The complaint filed yesterday
against the Herald Fund also names HSBC Bank as a defendant and alleges
that the London-based bank withdrew the money from Bernard L.
Madoff Investment Securities for the fund within three months before the

firm's liquidation began. The fund 'knew or should have known that
(Madoff's business) was predicated on fraud' when it received
double-digit returns during market downturns, the complaint
said. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/14/AR2009071403073_pf.html'>Read

more.

A Path for Lehman Clients to

Recover Assets

Former clients of Lehman Brothers International, who
have had their accounts frozen since the Wall Street firm filed for
bankruptcy last September, may finally begin to receive some of their
assets back by next year, the New York Times reported today.
Creditors, including several hedge funds and insurance companies, and
PricewaterhouseCoopers, the trustee overseeing the liquidation of the
London-based unit, have reached an agreement to expedite the repayment
of about $32 billion of client assets that have been entangled in the
Lehman bankruptcy for more than nine months. At the time of the Lehman
bankruptcy, on Sept. 15 the assets were valued at about $23 billion, but

some have appreciated over time. As Lehman’s troubles grew last
year, many funds began to withdraw assets, switching to larger, more
stable banks. The 200-page proposal, expected to be filed with the High
Court in London today, is meant to avoid a “lengthy, onerous and
unpredictable process that could otherwise take years to bring to
finality,” PricewaterhouseCoopers said in a statement released
early Wednesday morning in London. If approved, creditors could file new

claims by the end of the year and are expected to start receiving their
assets back in the first quarter of 2010. 

href='http://www.nytimes.com/2009/07/15/business/15lehman.html?ref=business&pagewanted=print'>Read

more.

Crisis at Opus Signals
Trouble at Private Developers

Opus Corp., until recently one of the largest private
real-estate developers in the nation, is facing the biggest crisis in
its 56-year history, showing how the recession is humbling even
companies once regarded as well-managed, the

face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The problems of Opus also could be an early
indicator of trouble brewing for private real-estate companies, whose
struggles often remain quiet until they end up in court. In the past
several months, Opus has sought bankruptcy-court protection for three of

its five regional operating companies. Phoenix-based Opus West, the
company's West Coast division with dozens of shopping centers, office
complexes, industrial buildings and condominiums across California,
Arizona and Texas, filed for chapter 11 last week, listing $1.28 billion

in assets and roughly $1.46 billion in debt. Opus East, in Washington,
filed for chapter 7 liquidation on July 1, with about $238 million in
assets and $502 million in liabilities, and Atlanta-based Opus South
filed for chapter 11 in April, facing expirations on $324 million in
bank loans. The company's remaining divisions, Opus North, based in the
Chicago-area, and Opus Northwest, in Minnetonka, Minn., the company
headquarters, are still running and aren't expected to file for
bankruptcy, according to Opus. 
href='http://online.wsj.com/article/SB124762064089442615.html'>Read
more. (Subscription required.)

Bankruptcy Judge Approves
CDX Affiliate's Chapter 11 Plan

Bankruptcy Judge

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size='3'>Letitia Z. Paul signed off on CDX Rio

LLC's first amended chapter 11 reorganization plan, which includes an
amendment settling the U.S. government's recent objections that Rio's
asset sales ran afoul of rules governing the transfer of oil and gas
leases on tribal land,

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size='3'>Bankruptcy Law360 reported yesterday.

In addition to confirming the chapter 11 plan, Judge Paul dismissed with

prejudice a related adversary proceeding in the bankruptcy court filed
by the Jicarilla Apache Nation. On June 25, the American Indian tribe
sued both the Bank of Montreal and Credit Suisse as administrative and
collateral agents for CDX. The gas exploration company had mortgaged
tribal land it had leased for oil exploration with the two banks without

the Jicarilla tribe's permission, according to the complaint. In its
adversary complaint, the Jicarilla Apache Nation sought declaratory
relief that Bank of Montreal and Credit Suisse do not hold a
“mortgage” in CDX Rio's interest in Jicarilla lands. The
U.S. government made similar claims in its June 26 objection to CDX
Rio's amended plan. 
href='http://bankruptcy.law360.com/print_article/110916'>Read
more. (Subscription required.)

Flying J Asks Court to
Approve Merger, DIP Financing

Flying J Inc. has asked a bankruptcy court to approve
a merger with Pilot Travel Centers LLC, a deal that includes $100
million in debtor-in-possession financing that could allow the oil
company to pay all creditor obligations and move closer to emerging from

chapter 11,

size='3'>Bankruptcy Law360 reported yesterday.

In a letter of intent filed yesterday with the U.S. Bankruptcy Court of
Delaware, Flying J said Pilot would provide the financing for its
continued operations. In exchange for the financing and equity, the
agreement allows Pilot to acquire Flying J’s travel center
operations. However, it excludes Longhorn Pipeline, Big West Oil, Flying

J Oil & Gas, Haycock Petroleum and Transportation Alliance
Bank. Read
more. (Subscription required.)

JPMorgan Fights Proposed
Limits

JPMorgan Chase & Co., freed from the government's
strictures after repaying $25 billion in federal money, is stepping up
its opposition to the government's proposed legislation on derivatives
and telling the Treasury Department it is fed up with haggling over the
value of warrants that the government holds on the bank, the

size='3'>Wall Street Journal reported today.
The bank also is talking tough with clients and taking market share and
top performers from competitors. Although the bank's mortgage and credit

card businesses are being hurt badly by rising unemployment and the
recession, its traditional Wall Street businesses are booming. The bank
also is expected to provide a strong showing from retail branches that
it acquired last fall from failed thrift Washington Mutual. 

href='http://online.wsj.com/article/SB124761714342342375.html#mod=testMod'>Read

more. (Subscription required.)

Health Care Proposal Hits
Small Businesses

House Democrats yesterday unveiled sweeping
health-care legislation that would hit all but the smallest businesses
with a penalty equal to 8 percent of payroll if they fail to provide
health insurance to workers, the

face='Times
















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size='3'>Wall Street Journal reported today.
The House bill, which also would impose new taxes on the wealthy
estimated to bring in more than $544 billion over a decade, came as
lawmakers in the Senate raced against a self-imposed deadline of this
week to introduce a bill in time for action this summer.Under the House
measure, employers with payrolls exceeding $400,000 a year would have to

provide health insurance or pay the 8 percent penalty. Employers with
payrolls between $250,000 and $400,000 a year would pay a smaller
penalty, and those less than $250,000 would be exempt. Certain small
firms would get tax credits to help buy coverage.The relatively low
thresholds for penalties triggered the sharpest criticism yet from
employer groups, who said the burden on small business is too high and
doesn't do enough to help them expand insurance coverage. 
href='http://online.wsj.com/article/SB124759535535340189.html#'>Read
more. (Subscription required.)

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