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June 12, 2009
Autos
GM Bondholders to Fight
Restructuring Plan
A group of individual General Motors Corp. bondholders
are preparing to mount a challenge to the planned sale of the bulk of
the bankrupt auto giant's assets to a spinoff company known as New
GM,
size='3'>Bankruptcy Law360 reported yesterday.
The three creditors, who hold about $2.3 million in GM bonds and are
seeking appointment of a noninstitutional bondholders’ committee,
will file an objection to the U.S. government-funded restructuring
proposal by June 19. The bondholders' counsel,
face='Times New Roman'>Michael
P. Richman of Patton Boggs LLP, said that
proponents of the plan were trying to avoid their confirmation
obligations under the Bankruptcy Code by dressing it up as an asset sale
similar to Wednesday's purchase of Chrysler LLC by Italian car maker
Fiat SpA. “There's a big difference between this and Chrysler.
Chrysler was a real sale involving a legitimate third party. With GM,
there is no true, independent purchaser,” Richman said.
href='http://bankruptcy.law360.com/articles/105920'>Read
more. (Subscription required.)
Commentary: Washington
Can't Be “Hands-Off” with GM
Many commentators worry that this new, nationalized GM
will answer to politicians rather than profit and loss and they fear
that this could lead to a $100 billion quagmire, according to a
commentary in today’s
face='Times New Roman' size='3'>Wall Street Journal
size='3'>. GM's management caused its failure, according to the
commentary, and many of the same people who drove the company into the
dirt are running the company now on the federal government's dime. It's
naïve to believe that President Obama will take a backseat to the
company's management, according to the commentary. The biggest question
now facing the GM is whether the federal government has a viable exit
strategy to remove itself from the debacle ahead.
href='http://online.wsj.com/article/SB124476752573308561.html'>Read
more. (Subscription required.)
Senators Prod Automakers
to Reimburse Dealerships
Sens. Bob Corker (R-Tenn.) and Bill Nelson (D-Fla.)
proposed legislation Thursday that would require General Motors Corp.
and Chrysler LLC to use part of the bailout money they receive during
bankruptcy to reimburse jettisoned dealers for leftover
inventory,
size='3'>CongressDaily reported today. 'We
continue to hear example after example of GM and Chrysler not
reimbursing their dealerships for parts and inventory as they have
agreed to do,' Corker said. He added that he hopes the companies will
make good on their promises and 'make this bill
unnecessary.'
a Deal to Sell Saab
A deal to sell General Motors Corp.'s Saab Automobile
AB could come as soon as today, signaling that the company is close to
resolving a critical loose end in its global restructuring, the
size='3'>Wall Street Journal reported today.
Swedish TV station SVT reported that Saab had agreed to be sold to
Swedish exclusive sports-car maker Koenigsegg Automobile AB. In a clear
sign the Saab is close to finding a new owner, the Swedish government
said Thursday that it will start negotiating a loan guarantee with the
car maker. The government said that it has decided to let its National
Debt Office start formal discussions about the state guaranteeing a
€500 million ($700 million) loan that Saab has supplied for with
the European Investment Bank. GM in February sought protection from
creditors for Saab in an effort to sell or spin off the unit. The
company has said its goal is to have a deal with one of three bidders by
the end of June. Along with Koenigsegg, the final candidates are
reportedly Renco Group Inc., a private holding company, and Merbanco
Inc., a Wyoming-based private investment group.
href='http://online.wsj.com/article/SB124477811150809185.html#mod=testMod'>Read
more. (Subscription required.)
Retail Bankruptcies Seen
Picking Up
As U.S. retailers prepare for the upcoming
back-to-school and holiday shopping seasons, there may also be an uptick
in the number of retailers that are preparing for a trip to bankruptcy
court, according to two retail experts, Reuters reported yesterday. 'I
expect that the numbers of bankruptcies are going to increase throughout
the year as retailers now have to start spending money to increase
inventory for Back-to-school and the Christmas season and they don't
have the necessary funds,' said
face='Times
New
Roman' size='3'>Matthew Bordwin, managing
director at KPMG Corporate Finance. Nina Kampler, executive vice
president of strategic retail and corporate solutions at Hilco Real
Estate, also said that she expects to see more retail bankruptcies in
the coming months, as retailers struggle with interest payments on their
debt or find themselves unable to pay back loans that are coming due.
The tipping point for many of these companies may be a struggle to get
inventory in their stores, as vendors are increasingly demanding
cash-on-delivery for their goods.
href='http://www.reuters.com/article/GlobalRetail09/idUSTRE55A7F920090611'>Read
more.
Report: Mortgage and Credit
Card Delinquencies May Have Peaked
U.S. consumers fell further behind on their debts last
month, and consumer bankruptcies continue to increase at a double-digit
rate, but Equifax Inc. said that the rate of mortgage and credit card
delinquencies may have peaked, Reuters reported yesterday. Among U.S.
homeowners with mortgages, 7.01 percent were at least 30 days late on
their loans in May, an increase of 58.4 percent from a year ago and up
1.3 percent from the previous month, according to monthly data by
Equifax. By comparison, 4.42 percent were delinquent in May 2008. Much
closer scrutiny of new mortgages will help limit delinquency rates,
according to Equifax now that lenders have adopted stricter underwriting
standards to limit their losses. Lenders, meanwhile, continue to curtail
access to credit cards by closing accounts and reducing charge limits.
The number of U.S. accounts fell to 365 million last month, compared
with a peak of 440 million in June of last year. Card companies have
withdrawn more than $600 billion in credit in the past year, to less
than $3 trillion in May.
href='http://www.reuters.com/article/newsOne/idUSN1139585720090612'>Read
more.
Restrictions
Less than a day after the Obama administration
announced a plan to set executive pay levels at bailed-out companies
like Citigroup and Bank of America, a spat broke out among members of
House Financial Services Committee yesterday about the regulation of
corporate compensation, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The ideological clash came at a hearing before
the House Financial Services Committee during which lawmakers debated
whether executive pay should be curbed at all companies, not just those
receiving federal money. The topic sent the committee’s Republican
members into an uproar, with several balking at the idea of the
government setting rules that would interfere with the internal affairs
of companies. “There is no question that there have been some
questionable decisions made by some of our major corporations regarding
executive pay,” said Spencer Bachus (R-Ala.). “However, I
strongly believe that it is neither the executive branch nor
Congress’s role to mandate compensation policies, or the role of
this Congress or the executive branch to say who sits on a corporate
board of directors or interfere with governance in any way.”
Committee Chairman Barney Frank (D-Mass.), disagreed, saying that it
needed to come up with a bill that would alter the structure of
executive pay before the congressional summer recess. “We have had
a system of compensation for top decision makers in which they are very
well rewarded if they take a risk that pays off but suffer no penalty if
they take a risk that costs the company money,” Frank
said.
href='http://www.nytimes.com/2009/06/12/us/politics/12pay.html?ref=business&pagewanted=print'>Click
here to read the full story.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_061109.shtml'>Click
here to read the prepared testimony from the hearing.
Senate Banking Committee
Chair Endorses Consumer Protection Agency
Senate Banking Chairman Christopher Dodd (D-Conn.)
yesterday called for an independent consumer protection agency as part
of a package to revamp the nation's financial regulatory
structure,
size='3'>CongressDaily reported yesterday. His
endorsement puts more momentum behind the proposal, which would regulate
financial products in the same way that the Consumer Product Safety
Commission covers most commercial products. Dodd's proposal would
require the agency to be responsible for protecting consumers from
predatory schemes by payday lenders, mortgage brokers and banks. In
addition, it would work with the safety and soundness regulators who
would make up a systemic risk council that is under consideration.
Business groups oppose the measure, contending that primary regulators
overseeing various fields should have their consumer protection
departments beefed up instead of having one agency that may not have the
same expertise. The Obama administration is weighing whether to include
the proposal in its outline on the revamp that it is expected to unveil
next week.
U.S. Trustee Calls Anchor
Blue Outlet Sale “Troubling”
U.S. Trustee
face='Times
New
Roman' size='3'>Roberta A. DeAngelis said that
the rapid timing of the proposed sale of Anchor Blue's Dockers Outlet by
Most to Levi's might preclude the company from getting the best
price, Bankruptcy Law360 reported
yesterday. DeAngelis said that the quick sale did not provide enough
time to effectively market the outlet chain. The trustee also objected
to the 4 percent breakup fee and $1.75 million in expenses embedded in
the stalking horse agreement should a rival bidder be successful in
purchasing the Most outlets, as well as the minimum $5 million initial
bid increment. A hearing on the proposed $72 million sale of the Most
outlet chain to Levi's is scheduled for June 30.
href='http://bankruptcy.law360.com/articles/105843'>Read
more. (Subscription required.)
Bid Spurs Union Worries over CBAs
Newsprint producer AbitibiBowater Inc.'s bid to take
steps toward permanently closing two facilities in Alabama has drawn an
objection from the United Steelworkers Union, which argues that Bowater
Alabama is bound by federal labor law to negotiate with the union
regarding the effects of the shutdown,
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. The union filed a limited objection Wednesday saying that the
debtors' motion should be rejected to the extent that it seeks to
relieve the debtors of their obligations under the two collective
bargaining agreements covering the facilities, §1113 of the
Bankruptcy Code, federal labor law, and/or the Worker Adjustment and
Retraining Notification Act. At issue are a sawmill facility and a
planer facility that the debtors claim are dated and unprofitable.
Bowater Alabama and the union are parties to two CBAs governing the
operations at the respective facilities, which are effective through
March 2011, according to the objection.
href='http://bankruptcy.law360.com/articles/105821'>Read
more. (Subscription required.)
Bank of America CEO Takes
Heat from Congress but Defends Merrill Deal
Lawmakers yesterday grilled Bank of America Corp. CEO
Kenneth Lewis on his decisions to seek cover from the Federal Reserve
and not tell shareholders about losses at Merrill Lynch & Co. last
December, the Wall Street Journal reported
today. However, Lewis stood his ground before the House Committee on
Oversight and Government Reform, defending the decision to go ahead with
the government-assisted Merrill takeover and keep the firm's ballooning
losses secret. The CEO also said he didn't feel that federal officials
acted improperly in the deal. Lewis did acknowledged for the first time
that the government threatened to remove him or other Bank of America
executives if the bank reneged on its deal to buy Merrill despite the
mounting losses. 'Why did a private business deal, announced in
September, and approved by shareholders in December, with no mention of
government assistance, end up costing taxpayers $20 billion in January?'
said Rep. Edolphus Towns (D-N.Y.), who is chairman of the oversight
panel. Rep. Darrell Issa (R-Calif.) said that pressure from the Fed and
Treasury for the bank to close the deal in a series of tense
negotiations last December should raise serious concerns for policy
makers. Rep. Dennis Kucinich (D-Ohio) said the committee needs to hear
testimony from the Fed and Treasury about the negotiations that occurred
in December and January before finishing its investigation.
href='http://online.wsj.com/article/SB124472321695405977.html#mod=testMod'>Read
more. (Subscription required.)
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