February 62008

 

name='1'>‘Medical Bankruptcy Fairness Act’
Introduced

The “Medical
Bankruptcy Fairness Act of 2008,” introduced by Representative
Carol Shea-Porter (D-N.H.), would increase the federal homestead
exemption in bankruptcy to $250,000 for “medically distressed
debtors,” BankruptcyLawNetwork.com reported
yesterday.  H.R. 5138 also prohibits trustees

in such instances from dismissing a case or converting to chapter 13
based on the substantial abuse provision of 707(b) of Title
ll.  The bill defines a medically distressed
debtor as a debtor in bankruptcy who has spent more than 25 percent of
annual income on unreimbursed medical expenses or has lost more than
four weeks of work due to the debtor’s or a relative’s
illness. 

href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h5138ih.txt.pdf'>Click

here to read the text of H.R. 5138.

CDO
Market Is Almost Frozen, JPMorgan, Merrill Say

Securities traders said
that the buying and selling of collateralized debt obligations based on
mortgage bonds, high-yield loans or preferred shares has ground to a
near-halt, Bloomberg News reported yesterday. “We're definitely in

a period of very low liquidity at the moment, which has actually been
dropping precipitously in the last few weeks,” Ross Heller, an
executive director at JPMorgan Securities Inc., said yesterday. The
slowdown of the more than $2 trillion CDO market follows record
downgrades in mortgage-linked securities last year. Demand for new CDOs
has stalled, with just one created in the United
States so far this year, according to JPMorgan. The
creation of CDOs dipped about 10 percent last year to $494.7 billion,
according to the company. Fitch Ratings today said it may downgrade the
$220 billion of CDOs it assesses that are based on corporate securities.

The New York-based company said it may lower the notes by as much as
five levels after failing to accurately assess the risk of debt that
packages other assets.  Merrill Lynch &
Co. last week said that it will cut back on underwriting new structured
finance securities and CDOs “for the foreseeable
future.” 

href='http://www.bloomberg.com/apps/news?pid=email_en&refer=&sid=aN6qn2s5bAuA'>Read

more.

Legislative

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size='3'>Battle
over GSE Loan Limits Continues

The legislative battle
over whether to raise loan limits for Fannie Mae and Freddie Mac has
shown the difficulty in settling the bigger fight over how the federal
government will continue to regulate the two government-sponsored
enterprises that own or guarantee repayment of 40 percent of the
nation's residential mortgages, CongressDaily reported today.
Banking Chairman ='Safe Tag' ctagtype='1' ctagattrs=' w:st=@zzquote;on@zzquote;'
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size='3'>Chris Dodd (D-Conn.) has

promised Treasury Secretary Henry Paulson to move legislation that would

revamp oversight at the GSEs in the likely aftermath of increasing their

loan limits -- via the stimulus package -- from $417,000 to almost
$730,000 in certain areas. The spike would remain in effect through the
end of the year. Sen. Charles Schumer (D-N.Y.) has blasted the GSEs over

what he says is their reluctance to take on higher loan limits that
could provide more liquidity to the jumbo loan market, a crucial issue
for high-cost states such as California, New York and Massachusetts. The

continued sparring is taking place in advance of the Senate Banking
Committee’s hearing on the matter tomorrow. 

href='http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=290'>Click

here to read more about the hearing, titled “Reforming
the Regulation of the Government Sponsored Enterprise,” set to
take place at 10 a.m. tomorrow in Room 538 of the Dirksen Senate
Office Building.

name='4'>Relocation Company Files for Chapter 11

Citing the troubled
housing market,
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face='Times New Roman'
size='3'>U.S. relocation company

Sirva Inc. and its affiliates filed a pre-packaged

chapter 11 yesterday to restructure their more than $1 billion in
debt, Bankruptcy
Law360 reported yesterday. Sixty debtors
affiliated with Sirva Inc., including Allied Van Lines, requested that
their petitions be jointly administered under one case. In its petition,

Sirva Inc. estimated over 100,000 creditors and listed assets between
$500 million and $1 billion and liabilities over $1 billion. The
company’s restructuring is expected to be completed over the next
two to three months. The main case is

size='3'>In re DJK Residential LLC, case no.
08-10375, in the U.S. Bankruptcy Court for the Southern District of New
York. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=46100'>Read

more. (Registration required.)

name='5'>Bankruptcy Court Keeps Monitor Oil Case in
size='3'>
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After a heated dispute
between Monitor Oil Plc and its bondholders’ committee over
cross-border jurisdiction, Bankruptcy Judge

size='3'>Martin Glenn allowed Monitor to
continue its chapter 11 proceedings in the
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size='3'>United States
size='3'>, Bankruptcy
Law360 reported yesterday. Judge Glenn ruled
Monday that the bondholders had failed to show that Monitor’s
bankruptcy proceeding should be moved to the Cayman Islands or
the
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Roman'

size='3'>United Kingdom
size='3'>. Monitor’s bondholders filed a motion to halt the parent

company’s chapter 11 case in the United States
size='3'>shortly after Monitor and its two subsidiaries, Monitor US
FinCo Inc. and Monitor Single Lift 1 Ltd., filed for bankruptcy
protection on Nov. 21, 2007. The committee claimed that as a Cayman
Islands corporation headquartered in
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size='3'>London with stock
traded on a Norwegian exchange, Monitor did not have enough of a
connection to the United States 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=46157'>Read

more. (Registration required.)

Movie

Gallery Receives Disclosure Statement Approval

Movie Gallery Inc. won approval

of its disclosure statement yesterday, clearing

size='3'>the way for the company to start soliciting support for its
restructuring plan,

size='3'>Bankruptcy Law360 reported yesterday.

In addition to signing off on the  disclosure

statement, Judge Douglas

O. Tice established March 24 as the deadline
for voting on the Movie Gallery’s reorganization plan and set a
date of April 9 for the confirmation hearing. Movie Gallery also
announced yesterday that it would shutter 400 “underperforming and

unprofitable” Movie Gallery and Hollywood Video stores. These 400
closures come on top of the approximately 520 store closings Movie
Gallery announced in September 2007. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=46153'>Read

more. (Registration required.)

name='7'>Chrysler and Plastech Reach Interim Deal

Chrysler LLC and bankrupt

supplier Plastech Engineered Products Inc reached an interim deal
yesterday that would allow the
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size='3'>U.S.
size='3'>automaker to resume production at four idled plants and avoid
closing all of its assembly operations, Reuters reported. Attorneys for
the two companies said that the deal runs through Feb. 15 and has been
presented to Plastech creditors. A hearing has been scheduled for Feb.
13 for arguments on whether Chrysler can seize tooling equipment at
Plastech plants that the automaker says it owns. Plastech's other
customers include General Motors Corp., Ford Motor Co. and Toyota Motor
Corp. - all of which had said they were not affected by the dispute and
bankruptcy - as well as Johnson Controls Inc. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/05/AR2008020501596_pf.html'>Read

more.

GMAC
Posts $724 Million Loss

GMAC said yesterday that it
lost $724 million in the fourth quarter, hurt by the housing slump and
disruptions in the credit and capital markets, the Associated Press
reported yesterday. The lender said it had taken “aggressive
actions” to stem the drag in its home mortgage division and it
forecast a return to profitability in 2008. GMAC said its mortgage unit,

Residential Capital L.L.C., or ResCap, lost $921 million in the quarter,

its fifth consecutive quarterly loss. Losses skyrocketed from
write-downs on credit residuals and mortgage-backed securities,
restructuring charges and higher funding costs. GMAC is reviewing its
options for the residential lending unit, but declined to comment on
specific plans. 

href='http://www.nytimes.com/2008/02/06/business/06gmac.html?_r=1&ref=business&oref=slogin'>Read

more.

name='9'>Recession Fears Intensify on Service-Sector
Report

Recession worries surged,

slamming financial markets, amid signs that service businesses –
from hotels and retailers to banks – may be stumbling in both
the
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size='3'>Europe, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The Institute for Supply Management said that
its index of nonmanufacturing business activity, which is based on a
survey of purchasing managers in service industries, fell to 41.9 in
January from 54.4 in December, marking the sharpest decline in the
survey's 10-year history. (A reading below 50 indicates the industries
are shrinking.) The service sector has grown in importance in recent
years as Americans have shifted more of their spending to health care,
travel and entertainment, as well as an array of personal services.
About 60 percent of consumer spending -- the largest component of
the United States gross domestic product -- goes
for services, with the rest spent on goods. 

href='http://online.wsj.com/article_print/SB120221986525544121.html'>Read

more. (Registration required.)

name='10'>Market Value of Leveraged Loans Decrease

Many of the corporate
loans used to finance giant buyouts in the past few years are reeling in

secondary market trading, making it virtually impossible for banks to
unload other commitments they have made, the

size='3'>Wall Street Journal reported today.
Double-digit declines in the market value of leverage loans are very
unusual and a big problem for many banks, which sit on a pipeline of
$152 billion in loans that they have promised to make but have yet to
sell to investors. With the prices of existing loans tumbling, investors

have little incentive to buy new loans unless they are sold at steep
discounts, something banks are reluctant to do. Some of the results seen

from the downturn include more assets building up on bank balance
sheets, growing tensions among rival bankers who had grown accustomed
during the buyout boom to cooperating with each other and a deepening
crisis in the market for buyout debt. 

href='http://online.wsj.com/article_print/SB120222620470044309.html'>Read

more. (Registration required.)

href='http://online.wsj.com/article_print/SB120222620470044309.html'>