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September 16,
2009
size='3'>Lehman Says Barclays Received $5 Billion
Windfall from Deal, Looks to Reclaim Some Assets
Lehman Brothers Holdings Inc. said Barclays Plc
received at least a $5 billion windfall when it bought the collapsed
bank’s North American brokerage business and some real estate
within days of its bankruptcy filing a year ago and wants some assets
returned, Bloomberg News reported today. “The fact is that the
deal was actually structured to give Barclays an immediate and enormous
windfall profit,” according to the filing. “Certain Lehman
executives agreed to give Barclays an undisclosed $5 billion discount
off the book value of securities.” Lehman said Barclays’
windfall may have been more than $8.2 billion once margin deposits and
liabilities that Barclays assumed are taken into consideration. The
collapsed bank is asking Bankruptcy Judge
face='Times 

New Roman'
size='3'>James Peck to revise the deal and
force Barclays to return assets to Lehman’s estate and give it the
opportunity to pursue claims for breach of contract, breach of fiduciary
duty and unauthorized transfer of assets.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a4bSLQEjmTH4'>Read
more.
Oversight to Include Subprime Lenders
The Federal Reserve announced yesterday that it will
extend its regulatory umbrella to cover a group of lenders that includes
several major originators of subprime loans, policing whether they
follow federal laws that protect consumers of mortgages, credit cards
and other financial products, the
face='Times 

New Roman'
size='3'>Washington Post reported today. While
banking regulators already oversee bank holding companies, the Fed will
extend the same oversight to other businesses owned by those holding
companies, such as units that make home-equity loans. The policy places
subprime lenders such as CitiFinancial, an arm of Citigroup, and Wells
Fargo Financial, an arm of Wells Fargo, under Fed oversight for the
first time. The same laws protect all borrowers, but until now, no
federal agency watched to make sure non-bank subsidiaries followed the
law.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/15/AR2009091503311_pf.html'>Read
more.
New Rules Ease the
Restructuring of CMBS Loans
The Treasury, responding to the growing pain in the
commercial real-estate industry, released new tax rules that make it
easier for distressed property owners to restructure loans that were
packaged by Wall Street firms and sold as securities, the
face='Times New Roman'>Wall
Street Journal reported today. The move is the
first round of 'additional guidance' the Treasury is weighing to stave
off what many fear will be a commercial real-estate crisis. A record of
more than $150 billion of loans bundled into commercial-mortgage-backed
securities, or CMBS, will come due between now and 2012. Until now, tax
rules have made it difficult for borrowers who are current on their
payments to hold restructuring talks with the servicers of these bonds.
The new guidance from the Treasury makes it clear that discussions
involving lowering the interest rate or stretching out the loan term
'may occur at any time' without triggering tax consequences. In
addition, the guidance allows servicers to modify loans regardless of
when they mature. The servicer only has to believe there is 'a
significant risk of default' even if the loan is performing, the
guidance states.
href='http://online.wsj.com/article/SB125306317643414339.html'>Read
more. (Subscription required.)
Battle Looms in Congress on
Tax Break for Home Buyers
When Congress passed an $8,000 tax credit for
first-time home buyers last winter, it was intended as a dose of shock
therapy during a crisis, but now experts are questioning whether the
housing market can function without it, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. As many as 40 percent of all home buyers this
year will qualify for the credit, and it is on track to cost the
government $15 billion, more than twice the amount that was projected
when Congress passed the stimulus bill in February. Real estate industry
expert and some economists contend that the credit is doing what it was
meant to do: encouraging a recovery in the housing market that is
gathering steam. The real estate industry, including the National
Association of Realtors, wants Congress to extend the credit at least
through next summer. The group hopes to expand the program to $15,000
and to allow all buyers, not just those who have been out of the market
for at least three years, to qualify.
href='http://www.nytimes.com/2009/09/16/business/16home.html?_r=1&ref=business&pagewanted=print'>Read
more.
Analysis: BofA Ruling
Questions an SEC Tool for Regulating Markets
Legal experts said Monday's rejection by U.S. District
Judge Jed S. Rakoff of the Security and Exchange Commission's proposed
$33 million settlement with Bank of America Corp. could bring tougher
scrutiny of other settlements over alleged wrongdoing, the
face='Times New Roman'>Wall
Street Journal reported today. For decades,
the SEC has resolved more than 90 percent of its investigations through
settlements, lawyers estimate. In rejecting the proposed fine aimed at
settling allegations that Bank of America shareholders were deceived by
a proxy statement into thinking no bonuses would be paid at Merrill
Lynch & Co., Judge Rakoff said that the deal wasn't fair, while
questioning why the SEC didn't go after individuals. The settlement has
garnered the attention of a House Oversight Committee, which Tuesday
asked SEC Chairman Mary Schapiro to testify about the SEC's settlement
at a hearing later this month.
href='http://online.wsj.com/article/SB125305845632913893.html'>Read
more. (Subscription required.)
Commentary: Congress Should
Pass Student Lending Reform
Congress should end the boondoggle that allows private
lenders to earn a handsome subsidy for making risk-free student loans
that are guaranteed by the federal government, according to a
size='3'>New York Times editorial today. The
House is expected to vote on Thursday on a bill that would simplify the
loan system — and save the country nearly $90 billion over the
next decade — by ending the subsidy program and allowing students
to borrow directly from the government through their colleges and
universities. The claim by critics that ending the subsidized program
would expand government — and push private companies out of the
business — is not true, according to the editorial, because the
loans would be handled through colleges but serviced and collected by
private companies and nonprofits.
href='http://www.nytimes.com/2009/09/16/opinion/16wed3.html?ref=opinion&pagewanted=print'>Read
more.
Bankruptcy Judge Approves
Magna’s Sale of Racetracks
Bankruptcy Judge
face='Times 

New Roman'
size='3'>Mary Walrath yesterday approved the
sale of two of Magna Entertainment Corp.'s horse racing tracks —
Thistledown in Ohio and Remington Park in Oklahoma City — for a
combined total of almost $170 million, the Associated Press reported
yesterday. Judge Walrath approved the results of an auction held on
Monday that ended with a winning bid of $89.5 million for the
Thistledown track near Cleveland from Harrah's Operating Co., a wholly
owned subsidiary of Nevada-based casino giant Harrah's Entertainment
Inc. Harrah's offered $42 million in cash at closing and contingent
payments of $47.5 million. Also yesterday, Judge Walrath approved the
sale of Remington Park for $80.25 million to Global Gaming Solutions RP
LLC, a subsidiary of the Chickasaw Nation that plans to continue casino
and racing operations at the track.
href='http://news.yahoo.com/s/ap/20090915/ap_on_bi_ge/us_magna_entertainment_bankruptcy_2/print'>Read
more.
1031 Trustee Asks Court to
Approve $92 Million in Settlements
1031 Tax Group LLC's chapter 11 trustee,
face='Times New Roman'>Gerard
A. McHale, asked for court approval of five
groups of settlements with insurers, former 1031 attorneys, former
owners of 1031 intermediaries and Wachovia Bank NA, which will provide a
total of $92 million in funding for 1031's reorganization
plan,
size='3'>Bankruptcy Law360 reported
yesterday. Company founder Edward H. Okun
was sentenced in August to 100 years in prison for misappropriating more
than $130 million from his company to fund a lavish lifestyle.Wachovia
Bank NA and several of its subsidiaries are on the hook for nearly half
of the total settlement funds, agreeing to pay $45 million to settle the
adversary proceeding McHale filed in October 2008 alleging they assisted
in the misappropriation, according to McHale. Three insurers that had
issued primary crime policies to 1031 have agreed to settle all claims
for employee dishonesty and theft under the policies for more than $26
million collectively, to be held in escrow by the trustee, McHale
said.
href='http://bankruptcy.law360.com/print_article/122272'>Read
more. (Subscription required.)
Bank Seeks Refinancing of
Lyondell DIP Facility
The Bank of New York Mellon has asked a bankruptcy
court to compel Lyondell Chemical Co. to refinance its
debtor-in-possession financing, contending that better terms are now
available and that the lenders may use a rapidly approaching maturity
date to squelch a $22 billion lawsuit over a leveraged buyout of the
chemical firm,
size='3'>Bankruptcy Law360 reported yesterday.
The bank filed its motion Monday in the U.S. Bankruptcy Court for the
Southern District of New York noting that the DIP facility is scheduled
to mature on Dec. 15, two weeks after the beginning of a trial in a
lawsuit alleging that Basell AF SCA overburdened Lyondell Chemical Co.
with debt. The bank further noted that Lyondell’s primary
shareholder, Access Industries, continues to have board representation
over Lyondell and can direct the company’s operations, despite
also being a defendant in the suit.
href='http://bankruptcy.law360.com/articles/122289'>Read
more. (Subscription required.)
PBGC Objects to Philly
Papers Bidding Procedures
The Pension Benefit Guaranty Corp. filed an objection
to the bidding procedures for Philadelphia Newspapers LLC's proposed $43
million chapter 11 asset sale,
face='Times 

New Roman'
size='3'>Bankruptcy Law360 reported
yesterday. Philadelphia Newspapers entered
into an asset purchase agreement Aug. 20 with Philly Papers LLC, a
stalking-horse bidder comprised of local interests, which is expected to
yield more than $43 million in gross proceeds for the publisher,
according to court documents.The bidding procedures Philadelphia
Newspapers proposed fail to provide that the company will give credit
for the value of the liabilities under the pension plan that any bidder
agrees to assume, the PBGC said. The company's pension plan provides
retirement benefits to about 251 employees and retirees, and the debtors
would become jointly and severally liable to PBGC for the plan’s
unfunded benefit liability and termination premiums if it were to be
terminated, PBGC said.
href='http://bankruptcy.law360.com/print_article/122131'>Read
more. (Subscription required.)
Metal Processor Files for
Chapter 11
Metal processing company Barzel Industries Inc. filed
for chapter 11 yesterday with plans to sell its assets to Chriscott USA
Inc. for $65 million,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Barzel listed assets of about $370.1
million and liabilities of about $375.4 million, according to a
declaration filed along with its bankruptcy petition in the U.S.
Bankruptcy Court for the District of Delaware. The company was saddled
with a heavy debt load due to its acquisition of Novamerica, including
$315 million in 11.5 percent senior notes due 2015, with interest
payable every six months. Two-thirds of these notes are held by JPMorgan
Chase & Co., and the rest are held by CIBC World Markets Inc.
JPMorgan and CIBC also extended a $175 million revolving credit facility
to Barzel to fund the acquisition, according to the declaration. About
$18.5 million is outstanding under this facility.
href='http://bankruptcy.law360.com/print_article/122207'>Read more.
(Subscription required.)
Models
General Motors Co. dealers are pushing the carmaker to
boost availability of some of its hottest-selling models, forcing the
company to reconsider ramped-up production plans for 2009, the
size='3'>Wall Street Journal reported today.
GM Vice Chairman Bob Lutz said Tuesday that the carmaker underestimated
demand for a slate of new products that hit the market after its
bankruptcy filing in June. The miscalculation was due primarily to the
fact GM aimed to be overly cautious as it planned production volumes,
and because its conversations with dealers earlier in the year led the
company to expect softer demand than GM has seen in recent weeks. While
stopping short of laying out specific additional production beyond plans
GM announced last week, Lutz said that the automaker may need to add a
second plant for compact crossover-vehicle production beyond the
facility it uses in Canada. GM also is looking to add workers to
factories that are short-staffed, including at a crossover plant in
Michigan.
href='http://online.wsj.com/article/SB125305886067314043.html#mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Consumer Prices Rose in
August on Energy Costs
The Labor Department said today that the Consumer
Price Index rose 0.4 percent in August, after a flat reading in July,
the Associated Press reported. Excluding volatile food and energy
prices, the core price index rose 0.1 percent, matching expectations.
Gas prices rose 9.1 percent in August on a seasonally adjusted basis and
accounted for 80 percent of the rise in the consumer price index. Still,
gas prices are 30 percent below last year’s record levels, when
prices at the pump topped $4 a gallon.
href='http://www.nytimes.com/2009/09/17/business/economy/17econ.html?ref=business&pagewanted=print'>Read
more.
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