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March 23, 2007
Mortgages
name='1'>Foreclosures Force Suburbs to Fight Blight
In a sign of the
spreading economic fallout of mortgage foreclosures, several suburbs are
looking to maintain vacant houses as they try to contain blight and
real-estate panic, the New York Times reported today. City
officials are installing alarms, fixing broken windows and mowing lawns
at the vacant houses in hopes of preventing a snowball effect, in which
surrounding property values suffer and worried neighbors move away. The
officials are also working with financially troubled homeowners to
renegotiate debts or, when eviction is unavoidable, to find
apartments.
size='3'>Cuyahoga
face='Times New Roman' size='3'>County
size='3'>, including
w:st='on'>
size='3'>Cleveland
suburbs, has one of the country’s highest foreclosure rates, and
officials say the worst is yet to come. In 1995, the county had 2,500
foreclosures; last year there were 15,000. Officials blame the weak
economy and housing market and a rash of subprime loans for the high
numbers, and the unusual prevalence of vacant houses.
href='http://www.nytimes.com/2007/03/23/us/23vacant.html?pagewanted=print'>Read
more.
In related news,
automated underwriting software spawned an array of subprime mortgages
and effectively helped move what was a niche product only a decade ago
into the mainstream, the
size='3'>New York Times reported today.
Through his private software company in
w:st='on'>
size='3'>Austin
w:st='on'>
size='3'>Tex.
Jones and his son, Michael, designed a program that used the Internet to
screen borrowers with weak credit histories in seconds. The software was
among the first of its kind. By early 1999, his company, Arc Systems,
had its first big customer: First Franklin Financial, one of the biggest
lenders to subprime buyers.
size='3'>The old way of processing mortgages involved a loan officer or
broker collecting reams of income statements and ordering credit
histories, typically over several weeks. But by retrieving real-time
credit reports online, then using algorithms to gauge the risks of
default, Jones’s software allowed subprime lenders like First
Franklin to grow at a rapid pace.
href='http://www.nytimes.com/2007/03/23/business/23speed.html?ref=business'>Read
more.
name='2'>Private Lenders Face More Scrutiny over Student
Loans
University financial aid
offices and the loan companies that do business with them are under
unprecedented assault from state and federal authorities, the
Wall Street Journal reported today. New York
Attorney General Andrew Cuomo sent a letter yesterday to Education
Finance Partners Inc., a San Francisco-based student-loan provider,
saying that he intended to file a civil fraud lawsuit against the
company. Cuomo is accusing the company of paying undisclosed kickbacks
to schools for a spot on their coveted lists of 'preferred lenders.' He
said as many as 60 schools have received such payments and named 12,
including such well-known institutions as Boston University,
Philadelphia's Drexel University and Pittsburgh's Duquesne University.
The action comes as the federal government is scrutinizing the
student-loan industry as well. Earlier this week, Senate Health,
Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.)
sent a letter to 16 student-loan lenders asking for information on their
practices. The U.S. Department of Education has also said it wants to
examine preferred lender lists.
href='http://online.wsj.com/article/SB117460914399846212.html?mod=home_whats_news_us'>Read
more. (Registration required.)
w:st='on'>
name='3'>U.S.
id='3' name='3'> Energy Biogas Makes Deal with
size='3'>Illinois
ICC
U.S. Energy Biogas Corp.
reached an agreement with the state of
w:st='on'>
size='3'>Illinois
the Illinois
Commerce Commission (ICC) on Thursday to eliminate about $63 million in
balance sheet liabilities from an ICC loan over the next 13
years, Bankruptcy
Law360 reported yesterday. The company said
that the agreement will also let USEB recognize pre-tax gains of around
$30 million in the first quarter of 2007. In return for ICC not pursuing
the $63 million loan, UESB agreed to pay it $5 million as soon as it
exits bankruptcy. As a result of the agreement with the ICC, the
renewable energy company said that it expects to soon file its proposed
reorganization plan, which has already won the support of its creditors.
The company expects to exit chapter 11 in the first half of
2007.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=21091'>Read
more. (Registration required.)
NWA
Hedge Funds Surrender Trading Data
After weeks of protest, a
group of hedge funds decided Wednesday to turn over information
regarding its trading activity in Northwest Airlines Corp.’s stock
and debt, Bankruptcy
Law360 reported yesterday. In a marked
departure from its previous stance, the ad hoc equity
stakeholders’ committee opted to submit trading details to the
U.S. Bankruptcy Court in
w:st='on'>
size='3'>Manhattan
abandoning its appeal of an order recently handed down by Judge
Allan Gropper
size='3'>. Owl Creek Asset Management, Sandell Asset Management, Taconic
Capital Advisors, Gracie Capital, Greywolf Capital Management, Latigo
Partners, Marathon Asset Management, Mason Capital Management and Jeremy
Hosking are among the funds that have chosen to cooperate with the
order despite previous concerns.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=21072'>Read
more. (Registration required.)
In related news, a
bankruptcy judge has postponed ruling on a claim by Northwest Airlines'
8,000 flight attendants for $1.1 billion in lost wages and
benefits, Bankruptcy
Law360 reported yesterday. The Association of
Flight Attendants wants $1.08 billion for five years of future wages and
benefits lost when the company rejected its collective bargaining
agreement in July, plus another $83.25 million in interim wages lost
since then, $30.6 million from individual grievances and unspecified
damages for pension contributions. Judge
size='3'>Allan Gropper said Wednesday that he
needed more time to weigh the issue of whether Northwest’s
rejection of the CBA violated nonbankruptcy labor laws and gave the AFA
a right to make its demands.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=21094'>Read
more. (Registration required.)
Autos
name='5'>Bankruptcy Judge Approves Bonuses for
w:st='on'>
size='3'>Delphi
size='3'>Executives
Judge
face='Times New Roman' size='3'>Robert Drain
size='3'>ruled on Thursday that Delphi Corp. may pay up to $37.4 million
in bonuses to executives for the first six months of 2007, despite
objections from the auto parts maker's unions, Reuters reported
yesterday.
size='3'>Delphi
bankruptcy protection in October 2005, remains in talks with its unions
over proposed wage and benefit cuts and other issues necessary to
complete its reorganization. Some 440 executives could receive payments
ranging from a total $20.1 million if
face='Times New Roman' size='3'>Delphi
size='3'>met operating targets to a maximum of $37.4 million under the
plan Drain approved in a hearing at the U.S. Bankruptcy Court for the
Southern District of New York.
href='http://www.nytimes.com/reuters/business/business-delphi-bankruptcy.html?pagewanted=print'>Read
more.
name='6'>Tower Gets More Time to Develop Reorganization
Plan
Judge
face='Times New Roman' size='3'>Allan L. Gropper
size='3'>gave Tower Automotive Inc. a temporary extension on its
exclusive right to develop a turnaround plan despite the opposition of
the bankrupt auto parts maker’s creditors,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Tower asked the court in January to extend
its exclusive rights to file and solicit support for a restructuring
plan, marking the ninth time the company has made such a request. The
company said it has negotiated and distributed a confidential draft of
its chapter 11 plan, but that a critical aspect of the plan is whether
it will be able to secure a substantial equity investment to fund the
company’s restructuring, possibly through a rights offering. The
temporary extension granted by Judge Gropper will last until March
30.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=21118'>Read
more. (Registration required.)
Bonuses May Complicate Labor Talks
For the first time since
2003, General Motors Corp. is giving bonuses in the form of stock to
Chairman and Chief Executive Rick Wagoner and other top executives, a
move that could complicate GM's efforts to get further concessions from
its biggest
w:st='on'>
size='3'>U.S.
size='3'>labor union this year, the Wall Street Journal
reported today. Wagoner received restricted stock valued at $2.8 million
and 500,000 options, according to disclosures GM made to the Securities
and Exchange Commission. A total of 18 executives disclosed equity
grants in separate filings yesterday. The company will disclose full
compensation details in its annual proxy, which will be released in late
April. Later this year, GM will negotiate a new four-year contract with
the United Auto Workers union. GM is expected to push for significant
cash savings related to health care costs. UAW leaders have criticized
top executives of the big
w:st='on'>
size='3'>Detroit
makers for taking bonuses or other awards while they seek cuts in hourly
workers' benefits and working conditions.
href='http://online.wsj.com/article/SB117461832528046419.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='8'>Werner Picks Stalking Horse Bidder
Werner Co. has designated
a lead bidder in the auction for its assets, choosing a $265 million
offer put forward by Black Diamond Capital Management and Brencourt
Advisors, Bankruptcy
Law360 reported yesterday. The investment
companies have been battling a group of second-lien lenders, known as WH
Acquisition Co., for the top bidding spot since January. Until recently,
the second-lien lenders, comprised of Trust Co. of the West, Schultze
Asset Management LLC, Milk Street Investors LLC and Levine Leichtman
Capital Partners II LP, appeared to be in the lead with a $261.75
million offer for the company, but the first-lien investors won. Despite
winning the court’s endorsement, other interested bidders still
have until April 20 to make an offer for the ladder maker as long as the
proposal is at least $1 million more than Black Diamond and
Brencourt’s. A hearing has been scheduled for April 25 to choose
the winning bidder.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=21114'>Read
more. (Registration required.)
name='9'>Blackstone Says It Plans to Go Public
The Blackstone Group, the
largest private equity firm in the nation, said yesterday that it would
seek an initial public offering that would value the firm at as much as
$40 billion, the New
York Times reported today. Blackstone, which
has led multibillion-dollar buyouts of Equity Office Properties,
Freescale Semiconductor and Michaels Stores, will be the first of the
major private equity firms to go public. The $4 billion offering is a
role reversal for an industry that has long espoused the benefits of
private ownership and has acted as a haven for public companies seeking
to escape the pressure of meeting quarterly earnings estimates as well
as the scrutiny of regulators. The large amounts of cash raised from
pension funds and other big investors have allowed private equity to go
on a record spending spree, acquiring some $600 billion worth of
publicly traded companies last year. Blackstone’s private equity
business, which has $31.1 billion in assets under management, has booked
annual returns of 30.8 percent since the firm began in 1987. (After
Blackstone took its fees, it still had a robust annualized return of
22.8 percent.) Last year, the private equity business reported income
before taxes of $1 billion.
href='http://www.nytimes.com/2007/03/23/business/23IPO.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
International
name='10'>German Insolvency Administrator May Sue
BenQ
The insolvency
administrator of BenQ Mobile
w:st='on'>
size='3'>Germany
size='3'>may sue parent BenQ for up to €500 million ($669
million), Reuters reported yesterday. Prager was currently checking
whether claims from creditors of the bankrupt German mobile phone
business were fit to stand up in court, and could then sue if the
creditors' committee agreed to such a move. Taiwanese technology group
BenQ acquired the loss-making business from German conglomerate Siemens
in 2005 and invested several hundred million euros into the business
before saying last September it would file for bankruptcy in
size='3'>Germany
size='3'>.
size='3'>BenQ Mobile
w:st='on'>
size='3'>Germany
size='3'>'s assets are now being sold off, while creditors including
German chipmaker Infineon are demanding a total of almost €1.2
billion. About 3,000 ex-BenQ employees in
w:st='on'>
size='3'>Germany
size='3'>have lost their jobs.
href='http://search.news.yahoo.com/search/news?p=bankruptcy&n=20&c=news'>Read
more.
name='11'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
Daily e-Summary, that emails you information on over 70 such companies
each morning, email
face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.com
size='3'>your name, company name, address, phone and fax.
We’ll set you up within 24 hours.
Receive an ABI
member’s discount of 50% off the $500 annual subscription
fee. Indicate “ABI CODE 27” in
your email.
size='3'>Anadarko Petroleum Corp., the
Houston, Tx. oil exploration company which announced $4 billion in asset
sales that are expected to close within the next three months and which
expects its outstanding debt, by 12/31, to be less than $12 billion, has
reached agreement on a new $10 billion facility to be underwritten by
Credit Suisse, Citigroup and UBS Investment Bank. The agreement replaces
its existing $24 billion acquisition facility. The company, which
is focused on maintaining its investment grade ratings, reported the
move extends the maturity date of its debt to 4/08.
size='3'>Applebee’s International Inc.,
the
size='3'>Overland Park
chain which has more than 1,900 company-owned and franchised restaurants
throughout the
w:st='on'>
size='3'>U.S.
closing twenty four of its underperforming outlets. The company
expects to take charges of nearly $29 million. In addition, the
company’s board has recommended it’s shareholders reject
certain director nominees offered up by Breeden Capital Management LLC,
which controls 5% of Applebee’s outstanding shares. The hedge fund
feels that Applebee’s should reduce its number of company-owned
restaurants, using its cash to increase cash flow to
shareholders.
size='3'>Automatic Data Processing Inc., the
Roseland, N.J. provider of payroll and tax filing services which is
spinning off its brokerage service group operations and which is
expecting that move to be completed by 3/31, has reduced its earnings
outlook for the year. For its fiscal year, ending 6/30, the
company had anticipated earnings from continuing operations of as much
as $2.22 per share. It has reduced that outlook to no more than
$1.83 per share. Revenue, which had been expected to reach $9.8
billion, is now expected to be no more than $7.8
billion.
size='3'>Bombay Company Inc., the
size='3'>Fort Worth
retailer which operates nearly 500 stores, reported a fourth quarter net
loss of $1.6 million on a slight sales increase–to $188
million. For the year, the company reported a net loss of $52.7
million on a 5% sales decline–to $536 million. The losses for both
the quarter and year included charges of $10 million due to asset
impairment.
size='3'>Congoleum Corp., a
w:st='on'>
size='3'>Mercerville
manufacturer, experienced somewhat of a turnaround in its fourth
quarter. The company reported earnings of $265,000 compared to a
net loss of nearly $7 million for the same period one year
earlier. That loss included more than $9.8 million in charges
related to asbestos liabilities. Revenue for the quarter declined
25%–to $46 million. For the year, the company reported net
earnings of $679,000 on a 7% revenue decline–to $219
million.
size='3'>Ford Motor Co. is recalling more than
37,000 of its F-Series super duty trucks after reports that flames were
coming out of the truck’s trailpipe.
size='3'>JetBlue Airways Corp. has reduced its
profit margin outlook for fiscal 2007. Where the company had anticipated
margins of as much as 5%, that has been reduced to between 2% and
4%. Only a month ago the airline reduced its annual growth
expectations from 18% to 12%.
size='3'>KB Homes, the
w:st='on'>
Angeles
reported its first quarter net declined 84%–to $27.5 million amid
turmoil in the housing market. Revenue declined 19%–to
nearly $1.8 billion.
size='3'>Longaberger Co., the
size='3'>Newark
privately-held basket making firm which has more than 3,000 employees,
is laying off 700 workers (20% of its workforce) over the next two
weeks.
size='3'>Media General Inc., the
size='3'>Richmond
w:st='on'>
size='3'>Va.
television firm, expects to report a first quarter loss of as much as 30
cents per share. The company intends upon taking a loss more than
$2 million from its SP Newsprint investment.
size='3'>Motorola Inc., the giant
size='3'>Schaumburg
w:st='on'>
size='3'>Il
telecommunication equipment firm which is accelerating its stock buyback
program by nearly $2 billion, now expects a fourth quarter loss of as
much as nine cents a share. Analysts had anticipated earnings in
the range of seventeen cents per share. While Wall Street was
expecting first quarter sales of $10 million, Motorola now expects sales
to be no more than $9.3 billion for the period. In addition, the
company expects its earnings for the year to be less than previously
anticipated.
size='3'>New England Media Group, a unit of
the New York Times, has seen employees oversubscribe to the
company’s voluntary buyout offer. The Boston Globe,
Worcester Telegram & Gazette as well as the New York Observer
announced they have the right to reject buyout applications should too
many employees opt out of the media firms’
employ.
size='3'>Rockford Corp., the
w:st='on'>
size='3'>Tempe
whose products include car speakers, reported its fourth quarter net
loss jumped from $2.7 million to $4.7 million on a year-to-year
basis. Sales decline 28%–to $20 million. For the year,
its net loss doubled to $8.8 million while sales declined 24%–to
$102.7 million.
Spanish Broadcasting System Inc. of Coconut Grove, Fl.
reported its fourth quarter net loss more than doubled–-to $7
million on a 5% revenue decline–to $44.4 million. For the
year, the company reported net income of $49.8 million, primarily as the
result of a $47 million gain from the sale of assets. Revenue
increased 4%–to $177 million.