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August 20,
2009
Countrywide Loses Ruling in Loan
Suit
U.S. District Court Judge Richard J. Holwell has
rejected an argument by Countrywide Financial seeking certain
protections from investor lawsuits under new legislation intended to
encourage modifications of home loans, the New York
Times reported today. Countrywide had argued
that the legislation automatically voided its pledges to buy back loans
from investors if those loans were modified for troubled borrowers. The
ruling is a win for holders of mortgage-backed securities who sued
Countrywide in December after the company, now a unit of Bank of
America, agreed to modify thousands of loans in a settlement with state
attorneys general. Bank of America, which took over servicing of the
investors’ loans when it bought Countrywide in 2008, argued that
the matter belonged in federal court and that any contractual
obligations to repurchase modified loans were trumped by the Helping
Families Save Their Homes Act of 2009. Under that law, servicing
companies that agree to modify loans receive some protection from
liability arising from the loan changes. Judge Holwell ruled that the
immunity granted under the legislation did not prevent
Countrywide’s investors from trying to enforce their rights under
the mortgage securities contracts. The investors must prove that
Countrywide’s pooling and servicing agreement covering their loans
does indeed require it to repurchase mortgages the bank modifies, the
judge said, ruling that the case belongs in state court.
href='http://www.nytimes.com/2009/08/20/business/20bofa.html?ref=business&pagewanted=print'>Read
more.
CFTC’s Gensler Seeks to Toughen Obama’s
Derivatives Legislation
U.S. Commodity Futures Trading Commission (CTFC)
Chairman Gary Gensler is asking Congress to strengthen the Obama
administration’s legislative proposal for regulating the
over-the-counter derivatives market, Bloomberg News reported today. In a
letter to House and Senate committee leaders, Gensler requested revising
the bill to get rid of exemptions for small derivatives dealers, repeal
parts of the Federal Deposit Insurance Corporation Improvement Act, and
impose requirements to set aside money to back up trades. Obama’s
attempt to rein in the $592 trillion over-the-counter derivatives
markets is part of a wider financial regulatory overhaul meant to
prevent a repeat of last year, when the collapse of Lehman Brothers
Holdings Inc. and American International Group Inc. froze credit
markets. The derivatives legislation asks Congress to impose higher
capital and margin requirements, move most derivatives to regulated
exchanges and clearinghouses and impose supervision over all dealers. It
also includes a provision to “better protect” small
municipalities and “unsophisticated investors” by limiting
their eligibility to trade derivatives.
href='http://www.bloomberg.com/apps/news?pid=20601110&sid=aVYkKFbTozaU'>Read
more.
Judge Approves Bally Total Fitness’
Reorganization Plan
Bankruptcy Judge Burton
Lifland yesterday approved Bally Total Fitness
Holding Corp.'s reorganization plan, clearing the way for the U.S.
health club operator to emerge from chapter 11 by early September,
Reuters reported yesterday. According to court papers filed last month,
JPMorgan Chase & Co was to get 50.5 percent of the common stock of a
reorganized company, while Anchorage Advisors LLC, a New York-based
hedge fund, was to get 33.7 percent. The plan would also reduce Bally's
debt by at least $660 million. Bally's latest reorganization calls for
equity interests to be wiped out and for unsecured creditors to recover
no more than 1.54 cents on the dollar, court papers show.
href='http://www.reuters.com/article/bondsNews/idUSN1947893820090819'>Read
more.
NHL Tries to Force a Turnover in Coyotes
Case
The National Hockey League is pressing forward with
its bid to take control of the Phoenix Coyotes' bankruptcy proceedings
or, alternatively, have a chapter 11 trustee appointed due to its fears
that the sale process might be corrupted, Bankruptcy
Law360 reported yesterday. The NHL on Tuesday
presented the U.S. Bankruptcy Court for the District of Arizona with a
renewed motion for determination of authority to manage the business and
affairs of the debtor, seeking for its designee, William Daly, to be
appointed the official representative of the estate. From the outset of
the team's bankruptcy, the NHL has voiced concern over the direction of
the case, in particular regarding the intentions of owner Jerry Moyes.
The league filed an authority motion in May to manage the team under the
consent agreement previously agreed to by Moyes, but the court opted for
more mediation for the parties rather than taking a stand at that
time.Read
more. (Subscription required.)
Movie Producers File for Chapter 11
Protection
Three companies belonging to Derek Anderson and Victor
Kubicek, owners of the 'Terminator' franchise rights and producers of
May's 'Terminator Salvation,' filed for chapter 11 reorganization on
Monday, the same day that the two producers sued their primary investor
and one of its former employees, the Los Angeles
Times reported today. Although 'Terminator
Salvation' has sold a healthy $370 million worth of tickets around the
world and has yet to be released on DVD, Anderson and Kubicek didn't
make a payment demanded by Santa Barbara hedge fund Pacificor, which
financed their $30-million purchase of the 'Terminator' rights in 2007
and made two subsequent loans to their Halcyon Co. production firm worth
$9 million. In a lawsuit Monday, Anderson and Kubicek said they couldn't
make the payment because of a lien that Pacificor placed on Dominion
Holdings, a company through which they earned their producing fees on
the movie.
href='http://www.latimes.com/business/la-fi-ct-terminator20-2009aug20,0,4747619,print.story'>Read
more.
WL Homes Product Liability Suits to
Proceed
Two groups of plaintiffs who sued WL Homes LLC over
alleged design/construction defects in their houses got a green light
from the court overseeing the homebuilder's chapter 7 proceedings to
pursue their suits in the hopes of collecting any potential settlement
or judgment from American International Group Inc.,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge
face='Times New Roman' size='3'>Brendan Shannon
size='3'>signed off on two orders on Tuesday modifying the automatic
stay protecting the debtors to allow the lawsuits, which are in
California Superior Court in Los Angeles and Ventura counties, to
proceed, but only so that the plaintiffs can liquidate their claims and
collect any judgment from AIG. Allegedly unaware that WL Homes had
sought bankruptcy protection, Henry and Georgina Basaldua lodged their
product liability suit in the Superior Court of the State of California,
County of Ventura, on May 1. The plaintiffs in that case — who
said they bought houses developed by the debtor in Oxnard, Calif.
— claimed that those houses were defectively constructed/designed,
which resulted in the homes' values diminishing and more than $50,000 in
damages per house for repairs and restoration. According to the
Basalduas’ July 22 motion for relief from the automatic stay, the
claims in their suit are covered by insurance policies issued by AIG and
Steadfast Insurance Co.
href='http://bankruptcy.law360.com/print_article/117387'>Read
more. (Subscription required.)
General Growth Heir Sues Law Firm,
Trustee
Mary BucksbaumScanlan, the daughter of one of General
Growth Properties Inc.'s co-founders, has sued the company's long-term
counsel, Neal Gerber & Eisenberg LLP, alleging that it and its
attorneys committed malpractice and breached their fiduciary duties to
her, causing her trusts to lose more than $300 million as the mall giant
spiraled into bankruptcy,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Scanlan is the only child of Martin
Bucksbaum, who with his brother Matthew created a real estate empire
that culminated in General Growth, according to the complaint. Neal
Gerber & Eisenberg simultaneously represented General Growth and its
affiliates; Scanlan's trusts, which were heavily invested in GGP;
entities created by the firm as investment vehicles for Scanlan's
trusts; and trusts established for the benefit of other family members,
the complaint alleges. The firm also established General Trust Co. to
serve as trustee for Scanlan's trusts and other Bucksbaum family trusts,
and it acts as counsel for GTC, the complaint says. GTC now acts as sole
corporate trustee for Scanlan's trusts and controls the vast majority of
her assets, the complaint says.
href='http://bankruptcy.law360.com/print_article/117482'>Read
more. (Subscription required.)
UBS Reaches Deal to Turn over Tax
Evaders
UBS, one of Switzerland’s largest banks, agreed
yesterday to turn over information on more than 4,400 American clients
suspected by the Internal Revenue Service of using Swiss accounts for
tax evasion, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The 4,450 accounts at UBS that are covered
under the new agreement held over $18 billion at one point, according to
the IRS commissioner Douglas Shulman. UBS will give the names to the
Swiss tax authority, which will forward them to the IRS. Under a new tax
treaty with Switzerland, it could take more than a year for most of the
names to be disclosed. In coming weeks the bank will start to notify
clients, who can appeal the disclosure in Swiss courts.
href='http://www.nytimes.com/2009/08/20/business/global/20ubs.html?_r=1&ref=business&pagewanted=print'>Read
more.
Dealers Reassured on Clunker Rebates
Transportation Secretary Ray LaHood yesterday promised
improvements to the “Cash for Clunkers” program in response
to dealer complaints about not being reimbursed for credits they have
given customers, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The Transportation Department is tripling the
number of workers handling reimbursement claims for the program, which
started July 24 and exhausted its initial $1 billion in financing in a
little more than a week. By week’s end, 1,100 people are scheduled
to be reviewing the 13-page applications from buyers. Under the program,
dealers give a credit to customers and then file for reimbursement.
However, the backlog has already pushed some dealers to refuse more
trade-ins under the program.
href='http://www.nytimes.com/2009/08/20/business/20clunkers.html?ref=business&pagewanted=print'>Read
more.
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