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January 29, 2008
Housing
Downturn
w:st='on'>
name='1'>Florida
face='Times New Roman' size='3'> Homebuilder Files for
Bankruptcy
Tousa Inc., the
size='3'>Florida
size='3'>homebuilder that lost 98 percent of its market value in the
past year, sought bankruptcy protection from creditors and proposed a
plan for exchanging bond and unsecured debt for new stock, Bloomberg
News reported today. The company, based in
w:st='on'>
size='3'>Hollywood
w:st='on'>
size='3'>Fla.
billion and debt of $1.8 billion in a chapter 11 petition filed today in
the U.S. Bankruptcy Court in
w:st='on'>Ft.
Lauderdale
w:st='on'>
size='3'>Fla.
the largest builder in bankruptcy and at least the 14th to file since
June, missed three interest payments this month as purchases of new
homes in the United States fell to a 12-year low in December,
ending the worst sales year since records began in 1963 and signaling
little prospect for a recovery. Foreclosures almost doubled last month
from a year earlier.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=ao7n4pmpJLDY'>Read
more.
name='2'>Commentary: A Mortgage 'Tweak' We Don't
Need
If the Emergency Home
Ownership and Mortgage Equity Protection Act (H.R. 3609) becomes law, a
mortgage would no longer be a matter between a borrower and a lender,
but rather, between a borrower, a lender and a judge, according to a
commentary by former House Majority Leader Dick Armey in
today’s Wall
Street Journal. Rather than interpreting
private contracts, according to Armey, judges would suddenly be able to
rewrite them. Armey wrote that current bankruptcy law was designed to
promote homeownership by making mortgages secure from outside meddling.
Strong contracts make for a vibrant mortgage industry and weakening
mortgage contracts would endanger the future of American homeownership
by making it harder for homebuyers to obtain a loan.
href='http://online.wsj.com/article_print/SB120156746465123881.html'>Read
more. (Registration required.)
name='3'>New Home Sales Fell 26 Percent in 2007
The Commerce Department
reported yesterday that the sale of new homes fell last year by 26
percent, the steepest drop since records began in 1963, the New York
Times reported today. Last week, the National Association of
Realtors reported that sales of previously owned single-family homes, a
large portion of the overall housing market, dropped the most on an
annual basis in 25 years, and the median price of those homes fell for
the first time in at least four decades. December capped a painful year
for home builders, who watched demand dry up as buyers abandoned
contracts or stayed on the sidelines with the expectation that prices
would fall further. For the year, the median price of new homes rose
just 0.2 percent to $246,900.
href='http://www.nytimes.com/2008/01/29/business/29econ.html?ref=business&pag…'>Read
more.
name='4'>Senate to Offer Own Stimulus Package
Senate Finance Committee
Chairman Max Baucus (D-Mont.) yesterday unveiled a rival plan to
stimulate the economy, offering a $500 check to virtually every American
-- including low-income seniors and rich financiers -- in a direct
challenge to the bipartisan deal reached last week by President Bush and
House leaders, the
size='3'>Washington Post reported today. The
$156 billion measure, which will be drafted by the committee tomorrow,
also would extend unemployment benefits for the long-term jobless by 13
weeks, a proposal that had been rejected by Bush and House Republican
leaders as they crafted their $150 billion stimulus package. That
delicate compromise, unveiled last week, proposed to cap eligibility for
somewhat larger tax rebates at $75,000 for individuals and $150,000 for
couples. With the strong backing of Senate Majority Leader Harry M. Reid
(D-Nev.), the package that emerges from the Finance Committee is likely
to pass the Senate, forcing House-Senate negotiations that Bush and
House leaders had hoped to avoid. The House is expected to approve its
stimulus plan today.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/28/AR20080…'>Read
more.
name='5'>Interstate Bakeries Amends Plan
Interstate Bakeries Corp., the
maker of Hostess Twinkies and Wonder Bread, has submitted a revised
reorganization plan that pays unsecured creditors about 30 percent of
what they're owed and without any distributions to shareholders, the
Associated Press reported yesterday. Secured creditors and the company's
lenders will receive the full value of their claims through the issuance
of new stock, Interstate Bakeries said in bankruptcy court documents
filed late Friday and disclosed in a securities filing Monday.
Kansas City, Mo.-based
Interstate Bakeries has been in bankruptcy since September 2004.
Bankruptcy Judge Jerry
Venters is scheduled to consider the company's
plan at a hearing today and decide whether to allow the company to begin
seeking creditor approval.
href='http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2008/01/28/financia…'>Read
more.
Fire
Engine Maker Files for Chapter 11
Fire engine maker
American LaFrance on Monday filed for chapter 11 protection, citing
inventory problems and a depressed market for emergency equipment, the
Associated Press reported yesterday. In a filing submitted to the U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Delaware
South Carolina-based company said it had problems changing from a unit
of Freightliner, which ran the company from 1995 through the end of
2005, to its new owners. Freightliner provided accounting, inventory and
payroll services to American LaFrance through June, the court documents
said. When American LaFrance went to a new system, there were inventory
and customer data problems. The company was also unable to finish many
vehicles on order, according to documents filed in bankruptcy court. The
documents also cited new emission standards that the company said will
require vehicle design changes.
href='http://www.chron.com/disp/story.mpl/ap/fn/5491965.html'>Read
more.
name='7'>Landlords Oppose Movie Gallery Plan
More than 20 landlords of
Movie Gallery Inc. stores oppose the video rental chain's plan to repay
creditors because they say it improperly limits their claims, the
Associated Press reported yesterday. The 24 landlords from across the
country last week told the U.S. Bankruptcy Court in
w:st='on'>
size='3'>Richmond
w:st='on'>
size='3'>Va.
took issue with a provision in Movie Gallery's chapter 11 plan that
limits to six months' rent the amount that landlords may claim in
damages if the video rental chain decides to reject their leases. They
said that the Bankruptcy Code requires that if a company rejects leases
before its chapter 11 plan is confirmed, landlords be reimbursed for at
least 12 months of rent plus other expenses.
face='Times New





Roman'>
size='3'>Bankruptcy Judge
size='3'>Douglas O. Tice Jr. is set to
consider Movie Gallery's disclosure statement at a hearing set on Feb.
5.
href='http://biz.yahoo.com/ap/080128/movie_gallery_bankruptcy.html?.v=1'>Read
more.
name='8'>Former Telecom CEO Ordered to Repay $12 Million
Loan
A former AT&T Corp.
president has been ordered by Bankruptcy Judge
face='Times New Roman' size='3'>Stuart M. Bernstein
size='3'>to pay more than $12 million as a result of allegedly
preferential and fraudulent transfers made to him after he left
now-bankrupt telecommunications company Teligent Inc.,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Alex Mandl was president and CEO of
AT&T before joining Teligent's predecessor, Associated
Communications LLC, as board chairman and CEO in September 1996. As part
of his employment agreement, Teligent's original shareholders, Microwave
Services Inc. and Digital Services Corp., loaned Mandl $15 million.
Under the deal, the loan would be automatically forgiven after five
years if Teligent terminated Mandl's employment for reasons “other
than for cause” or if Mandl terminated his employment for
“good reason.” Mandl's separation agreement, which became
effective on April 27, 2001, said that the reason for Mandl's
termination was “other than for cause.” However, Mandl said
months later in an interview with
size='3'>Washington Business Forward magazine
that he had left Teligent after he couldn't convince the board to adopt
a $700 million recapitalization plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=45273'>Read
more. (Registration required.)
name='9'>Bankruptcy Court OKs Fraud Suit against
Lawyers
Bankruptcy Judge
Martin Glenn
size='3'>approved a lawsuit alleging that the former lawyers of a failed
Dunkin' Donuts-franchise-owning family aided in a scam by the
franchisees to secretly buy back the collapsed business, Bankruptcy
Law360 reported today. The
Rattet, Pasternak & Gordon Oliver LLP defendants were among 16
initially named in the complaint brought by U.S. Trustee Janice
B. Grubin, who is overseeing the chapter 11 case of Food
Management Group LLC. The suit alleges that the firm knew but failed to
alert the bankruptcy court to a scheme by the principals of FMG to bid
for the assets of the company. FMG, which managed 24 Dunkin' Donuts
stores, filed for bankruptcy on June 1, 2004. The debtors appointed New
York-based Rattet Pasternak to act as their legal representative in the
chapter 11 case, but the firm was ousted in September 2005, when Grubin
ordered them removed from the case.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=45377'>Read
more. (Registration required.)
SEC
Unhappy with Answers on Executive Pay
The Securities and Exchange
Commission sent letters to 350 companies last summer and fall critiquing
the way they described the pay of their top executives, but the federal
watchdog isn't happy with most of the answers it received, the Wall
Street Journal reported today. A majority of the companies have now
received second letters, according to an SEC official, and of 26
companies whose cases were closed, 21 were chided for not giving enough
information about the role of individual performance in their pay
decisions. The increasing SEC scrutiny could spur changes in how
companies calculate compensation, including moving away from individual
performance as a measure of success -- one of the areas the SEC focused
on as particularly weak -- in favor of companywide financial targets,
such as earnings or stock prices.
href='http://online.wsj.com/article_print/SB120156732373223843.html'>Read
more. (Registration required.)
name='11'>Deal to Buy Credit Card Processor Is in
Peril
The turbulence on Wall
Street threatened to claim another victim on Monday as the Alliance Data
Systems Corporation, the big credit card processor, warned that its
proposed $6.4 billion buyout might unravel, the New York Times
reported today. The Blackstone Group, which agreed to buy Alliance Data
last May, told the company on Friday that bank regulators had placed
“unprecedented and unacceptable requirements” on the
acquisition, Alliance Data said. The news
sent shares of Alliance Data plummeting 35 percent and heightened fears
that other pending deals could run into trouble. Several other buyouts
have already collapsed since the credit markets seized up last
summer. Blackstone said in a statement on
Monday that the Office of the Comptroller of the Currency, a federal
banking regulator, had placed onerous requirements on the deal but that
the firm would continue to work with Alliance Data to win the approval
of the comptroller. Many investors had
feared that the deal would fall through, as happened with other proposed
buyouts, including those of Sallie Mae, the student loan giant, and
Harman International Industries, the maker of audio speakers.
href='http://www.nytimes.com/2008/01/29/business/29data.html?ref=business&pag…'>Read
more.
International
name='12'>French Inquiry into Bank’s Inaction Grows over
Trader’s Fraud
The credibility of
Société Générale’s management came under fresh
scrutiny Monday after Jérôme Kerviel told French prosecutors
that his fictitious trading started as far back as 2005 — a year
earlier than the bank had acknowledged, the New York Times
reported today. At the same time, the prosecutors said Kerviel disclosed
that at least one of his trades raised a red flag about two months ago
at Eurex, the pan-European derivatives market, but that he headed off
concerns at the bank by producing a false document. Kerviel’s
account is almost certain to raise fresh questions about why
Société Générale’s auditors did not notice
anything amiss sooner. Even as French
politicians stepped up their pressure on the bank, they sought to head
off any efforts by foreign banks to acquire Société
Générale while it is under duress. Finance Minister
size='3'>Chris
that the bank was under “no constraints” to merge with
another financial institution.
href='http://www.nytimes.com/2008/01/29/business/worldbusiness/29bank.html?_r…'>Read
more.
href='http://www.nytimes.com/2008/01/29/business/worldbusiness/29bank.html?_r…'>