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June 1, 2009
Autos
GM Files for Bankruptcy Protection
General Motors filed for bankruptcy protection this morning listing $82.29 billion in assets and $172.81 in debts on a consolidated basis, the Washington Post reported today. Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent. The United States will invest another $30 billion during and after the GM bankruptcy process, officials said last night, bringing the U.S. commitment to $50 billion. Read more.
Click here to read GM's petition via Prof. Stephen Lubben on the CreditSlips Blog.
name='2'>Analysis: Potential Conflicts Abound in Government Role
Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington, D.C., the Wall Street Journal reported today. The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender. Given the size of the $50 billion U.S. investment, it will be hard for President Barack Obama and Congress to say they will remain uninvolved in a company saved only by taxpayer largesse. Already the administration has said it wants to direct GM to make more fuel-efficient small cars, a potential threat to the company's near-term profitability. And members of Congress successfully pressured GM to roll back a decision to ship some jobs to China. Read more (subscription required).
name='3'>Chrysler Set to Emerge from Bankruptcy
Judge Arthur Gonzalez yesterday approved the sale of most of Chrysler's assets to a group led by Italian automaker Fiat, clearing the way for the automaker to emerge from chapter 11 protection soon, CNN.com reported today. Judge Gonzalez emphasized that Chrysler had actively pursued all available options before deciding upon the asset sale to Fiat and other entities. The Chrysler ruling capped three days of hearings that included six hours of testimony from Bob Nardelli, who is serving as chief executive during the bankruptcy process. Much of the testimony featured cross-examination by lawyers representing three Indiana pension funds with a 1 percent stake in Chrysler that opposed the deal. Read more.
name='4'>Analysis: Major American Corporations Survive Bankruptcy
While some analysts wonder if General Motors can re-emerge from chapter 11 as a profitable and viable automaker, other major American companies such as Texaco, Dow Corning, Delta Airlines and United Airlines have gone through the chapter 11 process and successfully exited, according to a USA Today report today. 'Bankruptcy does not have the stigma attached to it that is used to have,' said Sheryl Toby of Dykema Gossett PLLC. Companies with brick-and-mortar assets have a better chance than a Silicon Valley-type firm whose key asset is its employees, said Prof. David Skeel of the University of Pennsylvania Law School. Companies often fail to re-emerge from bankruptcy as operating entities because of time-consuming legal disputes among the creditors, suppliers, other vendors and parties with legal claims. 'Usually, shorter is better just because of the cost of the process in terms of the drag on the business,' said John Penn of Haynes and Boone LLP. Read more.
name='5'>More Auto Parts Firms to File for Chapter 11
More automotive parts suppliers will file for bankruptcy in the weeks ahead, analysts said, a consequence of a cash drought brought on by falling production that could intensify after General Motors Corp.'s chapter 11 filing, the Detroit Free Press reported on Sunday. Last week, Visteon Corp. and Metaldyne Corp. filed for bankruptcy protection. They followed Hayes Lemmerz International Inc. and Noble International into bankruptcy this year. The auto industry is experiencing its second major wave of supplier bankruptcies this decade. Several large suppliers filed for chapter 11 in the first half of the decade, including Dana Corp. and Tower Automotive Inc., as automakers demanded lower prices and material costs rose. Analysts say surviving suppliers will run into another wave of this crisis when sales pick up, and they need money to pay workers and ramp up production. Read more.
name='6'>Analysis: Federal Reserve's Mortgage Efforts Prove Costly
The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact, the Wall Street Journal reported today. An analysis of the timing of the Fed's purchases of mortgage-backed securities by JPMorgan Chase & Co. shows the Fed is 'under water' on its portfolio by about 1 percent, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market. Since last autumn, the Fed has purchased more than $480 billion, out of an allowance of $1.25 trillion, in mortgage-backed securities and more than $130 billion, of $300 billion, in Treasury bonds to help keep mortgage rates low. Many analysts believe the Fed plans to hold these securities until they mature in 10 years or so, with no plans to sell them into the market, so the losses will probably never be realized. The central bank owns the majority of securities sold in 2009, with interest payments of 4, 4.5 and 5 percent, according to J.P. Morgan's research. As interest rates rise, the value of these securities falls because new bonds are backed with higher-interest mortgage loans and thus pay higher coupons. Read more (free subscription required).
name='7'>BearingPoint Gets Approval for $44 Million Asset Sale to PricewaterhouseCoopers
Bankrupt consulting firm BearingPoint Inc. has received bankruptcy court approval to sell a substantial portion of its North American commercial services unit and other assets to PricewaterhouseCoopers (PwC) LLP for $44 million, Bankruptcy Law360 reported on Friday. A PwC subsidiary had separately agreed to purchase BearingPoint's global delivery center in Bangalore, India, which was not subject to bankruptcy court approval, PwC said, bringing the total deal to $44 million. The deal for portions of the commercial services unit, including BearingPoint's financial services segment, is expected to close by the end of June, assuming it receives final approval from the bankruptcy court. Closing dates for the global delivery center are expected in the coming months. Read more (subscription required).
Judge Rules that Skinner Chapter 11 Must Convert to Chapter 7
Asserting that the proposal is the result of collusion, Bankruptcy Judge M. Bruce McCullough has rejected a chapter 11 exit plan for Skinner Engine Co. calling for the company's liability insurers to fund asbestos settlements and has ordered that the case be converted to chapter 7, Bankruptcy Law360 reported yesterday. The plan, which seeks to end an 8-year-long bankruptcy proceeding, proposes to settle disputed, unliquidated prepetition asbestos claims against the companies using liability insurance policies from Travelers Casualty and Surety Co. and Hartford Accident and Indemnity Co., among others, the ruling said. However, Judge McCullough found that under Pennsylvania law, the insurers are not obligated to fund the settlement under the conditions presented in the case, and, lacking the insurers' consent to participate, the plan is unworkable. Additionally, Judge McCullough's ruling said that many of the asbestos claims are not likely to be successful. He noted that most were administratively dismissed prepetition by the U.S. District Court for the Eastern District of Pennsylvania from an asbestos product liability multidistrict litigation docket. Read more (subscription required).
name='9'>County Objects to Lehman Bid to Sell Small Assets
The treasurer and board of commissioners of a Colorado county have objected to Lehman Brothers Holdings Inc.'s motion to sell smaller assets in its bankruptcy proceedings, saying the county could lose money from tax liens on properties owned by debtor LB Rose Ranch LLC, Bankruptcy Law360 reported on Friday. Garfield County on Thursday in the U.S. Bankruptcy Court for the Southern District of New York filed an objection to Lehman's motion for an order authorizing procedures to sell or abandon de minimis assets. The county asked that the motion not be granted with respect to LB Rose, or that it contain provisions restricting the sale of certain assets and requiring proceeds from the asset sales to first go toward paying property taxes. Lehman's motion requested approval to sell assets of $500,000 or less without further court approval and without notice to any party, and to allow purchasers to take the titles free of liens, claims or other interests on those properties, according to the objection. Read more (subscription required).
name='10'>LandAmerica Settlement with PBGC Gets Court's Approval
Bankruptcy Judge Kevin R. Huennekens on Thursday approved a settlement between bankrupt title insurance underwriter LandAmerica Financial Group Inc. and the Pension Benefit Guaranty Corp. regarding unfunded pension obligations, overruling an objection by the plan's current trustee SunTrust Banks Inc., Bankruptcy Law360 reported on Friday. According to the deal, the title insurance company would set aside about 30 percent of the proceeds of sales from two business units for potential PBGC claims. SunTrust, which has fiduciary obligations to pension plan participants under the Employee Retirement Income Security Act of 1974, had expressed concern in its objection that the settlement does not expressly require LandAmerica ensure the proper administration of the plan before and during its termination process. Read more (subscription required).
name='11'>Hawaii Superferry Files for Bankruptcy
Hawaii Superferry filed for bankruptcy protection Friday, telling a Delaware court that a Hawaii Supreme Court ruling caused the Alakai to cease operations in March and has sapped the company's revenues, the Honolulu Advertiser reported on Sunday. Superferry and its parent company, HSF Holding Inc., listed between $1 million and $10 million in assets and $50 million to $100 million in debts. Superferry has just $1 million in cash and was facing a $2.9 million principal and interest payment on one of the ferry construction loans yesterday. The company listed fewer than 50 creditors, including the state of Hawai'i, and maintained it should not have to make payments on $40 million worth of state harbor improvements because the operating agreement with the state was voided by a Maui court. Read more.
name='12'>New York Attorney General Stay in Approved SEC Pension Case
A federal judge on Friday approved New York Attorney General Andrew Cuomo's request to delay the U.S. Securities and Exchange Commission's pension kickback case, rejecting defense attorneys' arguments that this could give the federal regulator an unfair advantage, Reuters reported on Friday. Cuomo is investigating millions of dollars of fees investment firms paid to middlemen in return for being hired to invest some of the state's $110 billion pension fund. The SEC is conducting a separate, civil probe of the same ties between investment firms and the agents, lobbyists and lawyers they hired. 'This litigation is a non-entity until the criminal matter is concluded in the New York State Supreme Court,' said Judge Colleen McMahon of the Southern District of New York in Manhattan. Read more.
International
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