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July 12, 2007
name='1'>Study: Credit Card Disclosures Might Not Prevent
Overspending by Consumers
A study funded in part by the
size='3'>ABI
detailed disclosure of credit interest rates and minimum payment
requirements might not be enough to prevent people from acquiring too
much debt, the Omaha
World-Herald reported today. 'Emotional reactions sometimes
get in the way of using the information wisely,' said Richard Wiener,
director of the
face='Times New Roman' size='3'>University
size='3'>Nebraska
Law/Psychology Program.
size='3'>Wiener said his studies indicate that enhanced disclosure of
credit card terms helps some shoppers but could inadvertently create
negative emotions like fear or guilt among others, triggering even more
spending as they try to end a bad mood. Policymakers could do a variety
of things to help people, including supporting education that emphasizes
the emotions behind money and credit, so that children, college students
and others can learn how to better handle their finances, Wiener
said.
href='http://www.omaha.com/index.php?u_page=1208&u_sid=10076467'>Read
more.
Private
Equity
name='2'>Senate Committee Members Skeptical of Tax on Private Equity
Managers
Senate Finance Committee
members on both sides of the aisle yesterday took a skeptical view of
proposals to raise taxes on the managers of hedge funds and other
investment partnerships, as a senior Treasury official said that the
current tax law is working well,
size='3'>CongressDaily reported today. Some
senior Democrats said they were reluctant to tax all fund managers'
profits as ordinary income because of concerns about the effect it might
have on capital formation. 'One thing to consider is that we don't want
to do anything to stifle creativity and entrepreneurship,' said Sen.
Charles Schumer (D-N.Y.). Schumer stopped short of opposing a tax change
in the area, but said that as a starting point, any tax change should
not single out financial services but should also apply to oil and gas,
real estate and other partnership ventures. Sen. John Kerry (D-Mass.)
also advised caution. 'It seems to me you fundamentally flip the capital
market on its ear if you blur the lines ... between what is legitimate
performance-based [income] and what is legitimate asset appreciation and
payoff for that risk-taking,' he said. 'We have to be thoughtful as to
where the separation is.'
href='http://finance.senate.gov/sitepages/hearing071207.htm'>
face='Times New Roman' size='3'>Click here to read the
written testimony from the hearing.
name='3'>House Financial Services Committee Diminishes Prospects of
Hedge Fund Regulation Proposals
House Financial Services
Committee members signaled today that they were not inclined to move
legislation that would further regulate hedge funds, even while
conceding that the typically private funds for the wealthy could pose a
systemic risk to the economy,
size='3'>CongressDaily reported today.
Congress is increasingly interested in the $1.4 trillion industry as
fund assets have grown by more than 400 percent since 1999. At the same
time, lawmakers have been disturbed by last year's collapse of Amaranth
Advisors LLC, which lost $6 billion in the natural gas trading market,
and the Bear Stearns Cos. being forced last month pledge up to $3.2
billion to bail out two of its hedge funds that invested heavily in the
subprime mortgage market. Committee Chairman Barney Frank (D-Mass.) said
that the panel's hearing was more for educating members as well as
probing the regulatory structure of the funds, which engage in riskier
strategies such as short-selling and derivatives. Erick Sirri, SEC
director of market regulation, said he would be 'very careful' about
such a requirement. 'The potential cost of something like that is to
cause those hedge funds to leave the
w:st='on'>
size='3'>U.S.
perhaps locate overseas,' Sirri said. Treasury Undersecretary Robert
Steel conceded that regulation has 'developed in a patchwork basis and
there isn't an overarching strategy.' Other panel members were wary
about further regulation, but did show concern over the number of
pension funds investing hedge funds to generate higher profits. Rep.
Richard Baker (R-La.) said that he was concerned many pension fund
managers do not have the knowledge and sophistication to invest in hedge
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr0705074.shtml'>Click
hereto view the written testimony of the
witnesses.
name='4'>SEC Sets Hedge Fund Constraint
The Securities and
Exchange Commission (SEC) has adopted rules ensuring that it can sue
hedge funds for misleading investors, after a court ruling put in doubt
the regulator’s authority over the $1.6 trillion industry,
Bloomberg News reported today. The SEC barred hedge funds from lying
about investing strategies, performance, a manager’s experience
and the risks of putting money in a fund. Commissioners unanimously
approved the rule in a public meeting yesterday in
w:st='on'>
size='3'>Washington
w:st='on'>
size='3'>D.C.
acted after a federal appeals court rejected regulations last year that
required hedge funds to report their size to the agency and submit to
routine inspections. In its decision, the court said the client of a
hedge fund adviser was the fund itself, raising questions about whether
the agency could take aim at managers for defrauding individual
investors.
href='http://www.nytimes.com/2007/07/12/business/12hedge.html?ref=business&pagewanted=print'>Read
more .
name='5'>Report Sheds Light on Refco Collapse
A report by an
independent bankruptcy examiner found that law and accounting firms may
face legal claims in connection with the 2005 downfall of commodities
and derivatives trading firm Refco Inc., the Wall Street Journal reported
today. The report comes nearly two years after Refco collapsed in which
debtors incurred a loss of almost $1 billion. At the heart of the Refco
collapse are a series of what are called 'round trip loans.' Refco used
these loans -- between related entities and outside investors -- to
shift bad debts off its books starting in 1997 or 1998 and lasting
through 2005, according to the report. The loans – ranging from
$50 million to $720 million – typically were unwound days after
the reporting period or audit. The disclosure of these loans when a new
employee stumbled on them in 2005 triggered the firm's collapse and,
later, the indictment of its top executive on criminal-fraud charges.
The report provides new detail on what it claims were the roles of law
and accounting firms.
href='http://online.wsj.com/article/SB118417698983663542.html?mod=home_whats_news_us'>Read
more . (Registration required.)
Subprime
Lending
name='6'>CDOs Take Hit from Subprime Fallout
Moody's Investors Service
said yesterday that it may cut its credit ratings on slices of 91
collateralized-debt obligations, or about $5 billion of securities,
signaling that subprime fallout is rippling through financial markets to
an important class of investments, the
size='3'>Wall Street Journal reported today.
In another sign of these ripple effects, Fitch Ratings released a report
yesterday raising cautionary flags about the commercial real estate
market. It projected rising defaults in this sector after years of
increasingly lax lending standards, which could hit bonds backed by
commercial real estate loans. The CDO market has exploded in size in the
past few years. Last year alone, $320 billion of CDOs were issued by
Wall Street, according to data from Deutsche Bank. That included $170
billion backed by asset-backed securities, including subprime mortgages.
Moody's action came a day after it and Standard & Poor's said they
would downgrade hundreds of subprime mortgage-backed bonds widely held
by CDOs. S&P has also released a long list of CDOs it believes are
holding some of the bonds on which it will soon cut ratings.
href='http://online.wsj.com/article/SB118419947763764004.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='7'>Subprime Lender Approved for UBS Loan Platform
w:st='on'>
w:st='on'>Sale
Bankrupt subprime lender
People’s Choice Home Loan Inc. has received bankruptcy court
approval to sell its single-family residential mortgage loan platforms
to UBS AG for $2.5 million, allowing the liquidating lender to continue
its plan to divest its assets,
size='3'>Bankruptcy Law360 reported yesterday.
People’s Choice filed its motion to sell its origination and
servicing platforms to UBS on July 3. Since filing for bankruptcy
earlier this year, People’s Choice has been offering up its assets
for sale. In May, Bankruptcy Judge
size='3'>Robert Kwan approved the sale of the
company’s subservicing rights and residual interests in seven
securitized trusts to Equity One Inc.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29221'>Read
more. (Registration required.)
name='8'>Company Seeks Copyright Suit against New
Century
Positive Software
Solutions Inc. has asked a bankruptcy court judge to lift the stay in
the chapter 11 case of subprime lender New Century Holdings Inc. so that
a multibillion-dollar copyright dispute between the two companies can
proceed, Bankruptcy
Law360 reported yesterday. The case has been
ongoing for more than four years and centers around Positive Software's
application and data storage system known as LoanForce, which is used by
mortgage lenders to market their loan products and to facilitate the
origination of mortgage loans. In 2000, the company and New Century
entered into a licensing agreement under which the lender received a
nonexclusive license for the software. The motion said that during
license renewal negotiations in late 2002 and early 2003, Positive
Software uncovered evidence that New Century was planning to create its
own software platform using coding and design aspects of
LoanForce.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29119'>Read
more . (Registration required.)
Autos
name='9'>Debt Uncertainty Complicates Chrysler Deal
Funding
John Snow, the chairman
of Cerberus Capital Management LP, yesterday acknowledged that investors
have lost some of their appetite for debt at a time when the
private-equity firm is trying to raise billions in financing for its
planned purchase of Chrysler Group, the
size='3'>Wall Street Journal reported today.
Still, Snow said that he expects the buyout group will be able to raise
the funds needed to take control of the
w:st='on'>
size='3'>U.S.
size='3'>auto maker. His comments come amid uncertainty in debt markets,
which has raised questions about the ability of buyout firms to continue
to tap the credit needed to finance big deals. Debt financing for such
deals could become more expensive should buyout firms have to offer
significantly better terms. Investors who sat in on Cerberus's
presentations as well as bankers familiar with its offering said that
the market is taking a cautious look at the company's bid to raise $62
billion for the deal.
href='http://online.wsj.com/article/SB118418062362063587.html?mod=us_business_whats_news'>Read
more.
name='10'>Judge Approves
w:st='on'>
size='3'>Sale
Cerberus
Bankruptcy Judge
Allan Gropper
size='3'>yesterday approved Tower Automotive Inc.'s plan to emerge from
chapter 11 protection by selling its assets to Cerberus Capital
Management LP,
size='3'>Bankruptcy Law360 reported yesterday.
The deal, which is valued at approximately $1 billion, will allow Tower
to pay off most of its debt. Tower has said that the deal should allow
for the full payment of its debtor-in-possession credit facility,
second-lien loan facility, assumption of the company’s pensions
and certain recovery for unsecured creditors. Cerberus is also involved
in Delphi Corp’s bankruptcy, joining Appaloosa Capital Management
LP, Harbinger Capital Partners Master Fund I Ltd., Merrill Lynch
&
size='3'>Co.
Goldman Sachs Group Inc. in a $3.4 billion restructuring plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29240'>Read
more. (Registration required.)
name='11'>ASC's Creditors Push to Convert Case to Chapter
7
Unsecured creditors of ASC Inc.
say the automobile-sunroof maker has abdicated its fiduciary duties and
they're asking a judge to convert the company's chapter 11 bankruptcy
reorganization into a chapter 7, the Associated Press reported
yesterday.Southgate,
Mich.-based ASC's pursuit of 'wholly unnecessary' funding from its
noteholder and parent company, American Specialty Car Holdings LLC,
illustrates that the case is being run for the benefit of Holdings,
ASC's unsecured creditors’ committee said Tuesday in a court
filing. Conversion of the case is required, the committee said, given
Holdings' actions and ASC's abdication of its fiduciary duties by
agreeing to the financing arrangement. A hearing on ASC's bid for $3
million in new bankruptcy funding from American Specialty Car Holdings
was set for last Thursday in the U.S. Bankruptcy Court in
size='3'>Detroit
last minute, however, ASC asked the court to adjourn the hearing for two
weeks. The court complied, pushing the session back to July 18. At the
same time, the court will take up the committee's request to convert the
case to a chapter 7 liquidation.
href='http://www.forbes.com/feeds/ap/2007/07/11/ap3904530.html'>Read
more.
href='http://www.forbes.com/feeds/ap/2007/07/11/ap3904530.html'>
name='12'>WR Grace Asks Court to Deny
w:st='on'>
size='3'>Claim
As WR Grace and Co. works
to determine asbestos liabilities in its chapter 11 case, the specialty
chemical manufacturer is seeking to block a $30 million damages claim
filed by New Jersey's environmental regulators on the grounds that it is
too late to submit such a demand,
size='3'>Bankruptcy Law360 reported yesterday.
The dispute dates back to June 2005, when
w:st='on'>
Jersey's Department of
Environmental Regulation filed an $800 million fraud lawsuit against
Grace nearly four years after the business first ducked into bankruptcy
protection. Among other charges, WR Grace stands accused of knowingly
using asbestos-laced vermuculite ore gleaned from a
w:st='on'>
size='3'>Montana
size='3'>New Jersey
size='3'>manufacturing operations. Though the two sides had been in
settlement talks regarding the suit, negotiations fell apart in April,
triggering the multimillion-dollar bankruptcy claim.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=29105'>Read
more. (Registration required.)
name='13'>Sallie Mae’s Suitors Say the Deal Is at
Risk
A consortium planning to
buy the student loan giant Sallie Mae said yesterday that Congressional
legislation aimed at reducing subsidies to lenders might cause the $25
billion deal to falter, a move that some analysts suggested was a
negotiating tactic to lower the price, the New York Times reported today.
In public filings, the bidders informed the SLM Corporation, the owner
of Sallie Mae, that the proposed legislation “could result in a
failure of the conditions to the closing of the merger to be
satisfied.” Sallie Mae’s board, in turn, said that it
“strongly disagreed.” Despite
the comments, there was no indication yesterday that either side was
ready to walk away, which would force the payment of a $900 million
breakup fee. At issue is the interpretation of an escape clause in the
sales agreement, which indicated that the deal could be scuttled if any
change in the student-lending laws was substantially harmful to either
side. The buyout group contends that the proposed new laws meet that
condition; Sallie Mae contends that they do not.
href='http://www.nytimes.com/2007/07/12/business/12sallie.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
International
name='14'>Rosneft Pays $229 Million for Yukos'
Licenses
State-controlled Russian
oil company Rosneft said that it acquired licenses formerly held by
Yukos to develop a number of eastern Siberian oil fields, the Associated
Press reported today. Rosneft said it paid $229 million, or 5.85 billion
rubles, garnered in a bankruptcy auction for properties including the
licenses. OAO Rosneft bought Yukos' main fields and refineries in
liquidation auctions this spring that propelled it to the top spot
among
face='Times New Roman'
size='3'>Russia
oil producers. Yukos assets were sold off to pay billions of dollars in
back tax claims that Kremlin critics say were part of a drive to boost
the state's presence in the oil sector. The largely undeveloped fields
of eastern
size='3'>Siberia
key source of oil and gas in the years ahead amid rising global
demand.
href='http://www.nytimes.com/aponline/business/AP-Russia-Rosneft-Yukos.html?pagewanted=print'>Read
more.
href='http://www.nytimes.com/aponline/business/AP-Russia-Rosneft-Yukos.html?pagewanted=print'>