href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif'>
August 15, 2008
PBGC Pressures Delphi Over Pension
Obligations
The Pension Benefit Guaranty Corp. is trying to force Delphi to transfer
more than $1.5 billion of unfunded pension obligations to General Motors
by Sept. 30, the New York Times reported today. The federal
agency is warning Delphi that if it misses the deadline, it will have to
contribute more than $2 billion to the fund, a burden that could dash
any hopes of Delphi emerging from bankruptcy with its pension plan
intact. The PBGC is warning that it would then lay immediate claim to $8
billion, diluting the claims of Delphi's other unsecured creditors, who
are owed about $3.5 billion. The pension agency has already been placing
liens on a number of Delphi's foreign plants and other assets.
href='http://www.nytimes.com/2008/08/15/business/15delphi.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Commentary: Americans Saving too
Little for Retirement Years
Even before the housing bubble, the country was facing a retirement
crisis, with most Americans saving too little for their post-working
years, according to an editorial in today's New York Times. As
housing prices surged through the middle of this decade, the already low
savings rate turned negative. Many Americans were living beyond their
means, in part, because swelling home values created an illusion of
wealth. Now, with house prices falling, nearly 10 million people have
lost all of their home equity. Millions more have given up all of the
gains of the boom years - a wipeout totaling $3.5 trillion so far.
Millions of Americans will not be able to recover their equity or build
their savings in time to have a secure retirement. The sooner lawmakers
and employers respond to this crisis - with legislation and education -
the better the chances for limiting the damage.
href='http://www.nytimes.com/2008/08/15/opinion/15fri1.html?ref=opinion&pagewanted=print'>Read
more.
Commentary: Changing Perception of
Home Equity Loans Led Many Americans to Expand Debt Loads
While it was not long ago that second mortgages were considered
the borrowing of last resort, these loans have now become universally
accepted as their image has been transformed by ubiquitous ad campaigns
from banks, according to a commentary in today's New York
Times. Since the early 1980s, the value of home equity loans
outstanding has ballooned to more than $1 trillion from $1 billion, and
nearly a quarter of Americans with first mortgages have them. Banks'
returns on fixed-rate home equity loans and lines of credit are 25
percent to 50 percent higher than returns on consumer loans over all,
with much of that premium coming from relatively high fees. However,
with the housing boom now over, the portion of people who have home
equity lines more than 30 days past due stands 55 percent above its
average since the American Bankers Association began tracking it around
1990; delinquencies on home equity loans are 45 percent higher. None of
this would have been possible without a conscious effort by lenders, who
have spent billions of dollars in advertising to change the language of
home loans, and with it, Americans' attitudes toward debt.
href='http://www.nytimes.com/2008/08/15/business/15sell.html?sq=bankruptcy&st=cse&scp=9&pagewanted=print'>Read
more.
Wachovia Unit Files for Chapter
15
Wachovia Corp's Bermuda-based financial guaranty reinsurer, BluePoint Re
Ltd., has filed for chapter 15 protection citing defaults on
mortgage-related products, Reuters reported yesterday. BluePoint filed
for bankruptcy protection on Aug. 7 in Bermuda and is seeking to have
those court proceedings recognized in the United States, according to
court papers filed in New York on Wednesday. The company is wholly owned
by Wachovia Corp., which formed it as a financial guaranty reinsurer in
late 2004. Wachovia wrote down substantially all of its $300 million
investment in BluePoint in February, according to a statement at the
time. The reinsurer has been battling concerns about its capital
adequacy since it booked an unrealized loss of about $370 million in
2007, mostly due to troubles in its credit default swaps portfolio,
according to an affidavit filed Wednesday by the company's Bermuda
court-appointed liquidator John McKenna.
href='http://www.businessinsurance.com/cgi-bin/news.pl?id=13680'>Read
more.
Chapter 11 Trustee Sought to Oversee
Michael Vick's Finances
U.S. Trustee W. Clarkson McDow Jr. filed a
motion in Michael Vick's bankruptcy case to have a chapter 11
trustee oversee the case of the former NFL quarterback, the Atlanta
Journal-Constitution reported yesterday. Vick originally sought to
have David Talbot serve as a financial adviser in the
case. However, Talbot was charged with securities fraud by the state of
New Jersey last Friday and Vick has since sought to have him dismissed
as an adviser. Bankruptcy Judge Frank Santoro has
ordered a hearing on the matter for Sept. 5.
href='http://www.ajc.com/search/content/sports/falcons/stories/2008/08/14/vick_bankruptcy_judge_trustee.html'>Read
more.
Judge Approves $35 Million DIP Loan for Pierre
Foods
Bankruptcy Judge Kevin Gross on Wednesday approved a
request by Pierre Foods Inc. to access $35 million in
debtor-in-possession funding, Bankruptcy Law360 reported
yesterday. Judge Gross authorized Pierre Foods to tap into the $35
million DIP loan from Oaktree Capital Management LP that is needed for
the meal and prepackaged baked goods manufacturer to continue normal
operations during its debt restructuring process. The order finalized a
July 16 interim order that permitted Pierre Foods to access $29 million
of the $35 million DIP loan in order to fund ongoing operations. The
Cincinatti-based company filed for chapter 11 protection on July 15,
citing the rising cost of raw materials as a key factor in the
decision.
href='http://bankruptcy.law360.com/articles/66201'>Read
more. (Subscription required.)
Two More Firms Settle Auction-Rate
Inquiry
J.P. Morgan Chase & Co. and Morgan Stanley agreed to buy back more
than $7 billion in auction-rate securities as part of an agreement to
end probes by regulators into how they marketed the complex securities,
the Wall Street Journal reported today. New York Attorney
General Andrew Cuomo yesterday said that J.P. Morgan would pay $25
million in civil penalties while $35 million in penalties will be paid
by Morgan Stanley. The penalties will be divided between New York, which
will get about $25 million, and members of the North American Securities
Administrators Association, which is made up of state securities
regulators.
href='http://online.wsj.com/article/SB121872953483941037.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Harlem Developers Near
Default
The owners of the 1,230-unit, rent-controlled Riverton Apartments in
Manhattan's Harlem neighborhood anticipate defaulting on the property's
$225 million mortgage by next month, marking one of the housing bust's
largest collapses of a New York City residential development, the
Wall Street Journal reported today. Developers Rockpoint Group
LLC and Stellar Management have told the mortgage's servicer that they
made minimal progress toward their goal of converting half of the
61-year-old complex's units to market-rate housing since obtaining the
mortgage in December 2006, according to Trepp LLC, a data-and-analytics
provider that tracks commercial-mortgage securities. The Riverton
mortgage, like many commercial loans in recent years, was sliced up and
sold to multiple investors as bonds. The market for such
commercial-mortgage-backed securities has been all but shut since the
credit crisis began last summer. Defaults on those bonds remain rare,
but mortgages on apartment-complex developments have gone into default
more than those on retail, office or warehouse properties.
href='http://online.wsj.com/article/SB121876812066243453.html?mod=us_business_whats_news'>Read
more. (Subscription required.)