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July 5, 2007
Subprime
Mortgages
name='1'>Subprime Lender Seeks
Bankruptcy Protection
Subprime mortgage lender
MILA Inc. filed for
bankruptcy on Monday, and asked the court to appoint a chapter 11
trustee to oversee the
sale of software the company owns,
size='3'>Bankruptcy Law360 reported on
Tuesday. One of MILA's
remaining assets is the company's proprietary
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size='3'>AccessPoint loan origination software, which allows brokers to
submit loans to MILA
for approval over the Internet. Potential buyers include MILA CEO Layne
Sapp and a company
called NEXT Online Mortgage Technology Inc. MILA's motion asked the
bankruptcy court to
schedule an emergency hearing on the matter for tomorrow. The Mountlake
Terrace, Wash.-based
company, which also goes by the name Mortgage Investment Lending
Associates, listed assets
of $7.9 million and debts of $174.7 million. The case is
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size='3'>In re MILA
Inc., case number 07-13059, in the U.S.
District Court for the
Western District of Washington.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28621'>Read
more.
(Registration required.)
name='2'>Funds Accelerate
Subprime Exit Strategy
Two hedge funds that
invest in subprime
mortgages have run into trouble, with one shutting down and a second
stopping investors from
withdrawing their cash, the
size='3'>Wall Street
Journal reported today. Investors received a
letter earlier this
week from Braddock Financial Corp. of Denver, saying that it was closing
its Galena Street
Fund, which mainly invests in bonds backed by subprime mortgages and
suspending redemptions
until it can sell assets in the roughly $300 million fund. A year ago,
the fund held about
$400 million, but about $100 million seeped out as the value of
subprime-related investments
deteriorated and investors withdrew money, Braddock said. Another
high-profile hedge fund,
United Capital Asset Management LLC in Key Biscayne,
w:st='on'>
w:st='on'>
size='3'>Fla.
size='3'>, has also stopped letting investors withdraw money from four
hedge funds. It has
some $500 million in assets, heavily tied to subprime mortgages, and had
suffered losses and
received a deluge of withdrawal requests.
href='http://online.wsj.com/article/SB118348498811956805.html?mod=us_business_whats_news'>Re
ad more. (Registration required.)
name='3'>Commentary: Hedge Funds
Mystify Markets, Regulators
Hedge funds hold
unparalleled sway over the
financial markets, as confirmed by the recent unraveling of $20 billion
in Bear Stearns
funds, prompting lawmakers and regulators in
w:st='on'>
w:st='on'>
size='3'>Washington
size='3'>,
size='3'>D.C., to take a
closer look to find
out more about the industry, the
size='3'>Washington Post reported yesterday.
The Bear Stearns
funds were on the cutting edge of the hedge-fund world, which reaps
billions of dollars from
slicing up corporate loans, mortgages and other kinds of debt into
pieces that can be traded
like shares on the stock market. This process is considered by many
bankers and regulators
to be one of the great advances in finance over the past five years.
With hedge funds acting
like shock absorbers, investment banks and lenders have been able to
make massive loans to
borrowers and feel less impact from the risk. Yet the trouble at Bear
Stearns is revealing
that the system may not be as crash-proof as once thought. Part of the
problem is that most
hedge funds do not reveal much about their trading activities. Many
operate offshore, and
even the ones that are based in the
w:st='on'>
w:st='on'>United
States have no
federal agency
empowered to regulate or watch their activities.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/07/03/AR2007070302240_pf.htm
l'>Read more.
name='4'>Breast Implant Co. Files
for Chapter 11
Las Vegas-based MediCor
Ltd., one of the
world's largest breast implant companies, has filed for bankruptcy after
at least three
straight years of massive losses,
size='3'>Bankruptcy
Law360 reported on Tuesday. MediCor filed its
chapter 11 petition
on Friday listing assets of $120,354,097 and debts of $121,439,609.
Though it controls about
17 percent of the world's breast implant market, excluding the
w:st='on'>
size='3'>United
States, the
company said it would
sell all of its assets. In the meantime, it secured a $1.5 million
debtor-in-possession loan
from a group of creditors led by Silver Oak Capital LLC. The company
reported net losses of
$17.3 million in fiscal year 2005, $18.5 million in fiscal year 2006 and
$12.8 million in
the first quarter of fiscal year 2007. The case is
face='Times New Roman'
size='3'>MediCor Ltd., case number 07-10877,
in the U.S.
Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28566'>Read
more. (Registration required.)
name='5'>Le-Nature's Trustee Seeks
Court Approval of Asset
w:st='on'>Sale
The U.S. Trustee
overseeing the bankruptcy
proceedings of Le-Nature's Inc. has asked for court approval of sale
procedures in
connection with supermarket chain Giant Eagle Inc.'s $20 million
stalking-horse bid to
acquire the beleaguered drink maker's
w:st='on'>
face='Times New Roman' size='3'>Latrobe
size='3'>,
w:st='on'>
size='3'>Pa.,
size='3'>plant assets,
size='3'>Bankruptcy
Law360 reported on Tuesday. U.S.
Trustee
face='Times New Roman' size='3'>R. Todd Neilson
size='3'>said in court
documents filed Friday that the U.S. Bankruptcy Court for the Western
District of
Pennsylvania should give approval to sale procedures and overbid
protections relating to the
proposed sell-off of Le-Nature's bottling operations and warehouse
facilities at the Latrobe
plant to Giant Eagle. Neilson and Giant Eagle entered into an
asset-purchase agreement over
the proposed sale on Thursday amid negotiations with other potential
buyers, according to
Neilson's motion. Neilson said that while he is continuing efforts to
obtain higher bids,
the Giant Eagle agreement is “the only firm and fully documented
proposal and the best
offer received by the trustee to date.”
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28565'>Read
more. (Registration required.)
name='6'>Drought Saps the
Southeast and Its Farmers
The drought in the
Southeast is causing
watering restrictions and curtailed crops in
w:st='on'>
face='Times New Roman' size='3'>Georgia
size='3'>,
premature cattle sales in
size='3'>Mississippi and
w:st='on'>
size='3'>Tennessee, and
financial distress
across many sectors of the region’s economy, the
face='Times New
Roman' size='3'>New York Times reported
yesterday. Struggling to
pay their bills, farmers here in the
w:st='on'>
w:st='on'>
size='3'>Tennessee
size='3'>Valley say
they are burning
through cash reserves and staring at bankruptcy, as last year’s
dry weather turned
into a singeing drought this year. Gleaming steel grain bins that should
be full of corn
ready to become ethanol are virtually empty. Harvest day’s
expected small returns will
be make-or-break time, farmers here say. There is also a drought in
Southern California and
much of the Southwest, but the one in the Southeast, encompassing more
than a dozen
farm-reliant states as far north as
face='Times New Roman'
size='3'>Ohio and
w:st='on'>
face='Times New Roman' size='3'>Indiana
size='3'>, is more unusual,
producing conditions not seen in more than 50 years in some places, and
longer in
northern
face='Times New Roman'
href='http://www.nytimes.com/2007/07/04/us/04drought.html?pagewanted=print'>Read
more.
Autos
name='7'>Tower Automotive
Reaches Settlement with Three Funds
Tower Automotive Inc.
reached a settlement on
the value of bankruptcy claims held by three funds, including a unit of
Goldman Sachs Group
Inc., the largest
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size='3'>U.S.
size='3'>securities firm by
market value, Bloomberg News reported yesterday. Goldman Sachs Credit
Partners LP, along
with Wayzata Opportunities Fund LLC and Wayzata Recovery Fund LLC,
approved Tower's chapter
11 plan as part of the accord. The funds are among the Novi, Mich.-based
company's largest
unsecured creditors, according to papers filed Tuesday with the U.S.
Bankruptcy Court
in
size='3'>New York. Tower,
the world's largest
maker of auto frames, agreed to pay $3 million of the funds' claims,
mainly related to
equipment leases, as administrative expenses under its bankruptcy plan.
Separately, it
granted Goldman Sachs Credit Partners $64.9 million in unsecured claims,
Wayzata Recovery
Fund will have $51.2 million in unsecured claims, and Wayzata
Opportunities Fund will get
$13.1 million in unsecured claims against Tower's various
subsidiaries.
href='http://www.tennessean.com/apps/pbcs.dll/article?AID=/20070705/BUSINESS01/707050355'>Re
ad more.
name='8'>Collins & Aikman
Continue Operations amid Plans to Liquidate
Collins & Aikman Corp. has
received bankruptcy
court approval to continue supplying parts to DaimlerChrysler Corp. and
General Motors Corp.
despite plans to liquidate, made shortly after the company entered
chapter 11 over a year
and a half ago.
size='3'>Bankruptcy Law360 reported on
Tuesday. The deal arose out
of talks Collins & Aikman held with DaimlerChrysler, GM, Ford Motor
Co. and Auto
Alliance International Inc. to address “numerous issues that
benefited the
debtors’ estates,” according to court documents. While the
supplier is currently
trying to sell off its assets, the customer group and Collins &
Aikman agreed upon the
deal, provided that both sides felt the need for continued parts
production after June
30.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=28459'>Read
more. (Registration required.)
name='9'>Japanese Auto
Makers Keep Pressure on
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size='3'>U.S.
size='3'>Rivals
The June auto-sales
figures for the
size='3'>United States
size='3'>released
Tuesday show a 21 percent sales drop at General Motors Corp. for that
month and stemmed in
part from the pricing advantage a weak yen gives the Japanese companies,
the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported
today. The results could provoke stepped-up complaints about trade
from
w:st='on'>
size='3'>Detroit's auto
makers, the United Auto
Workers union and their allies in Congress. June's surge in
w:st='on'>
size='3'>U.S.
size='3'>sales by Toyota Motor
Corp., Honda Motor Co. and Nissan Motor Co. will exacerbate anxiety at
GM, Ford Motor Co.
and Chrysler Group, soon to be independent from DaimlerChrysler AG. All
three are
unprofitable in their
face='Times New Roman'
size='3'>U.S. auto operations
and face
potentially huge costs to retool their fleets to meet tougher
fuel-economy requirements and
overhaul their high-cost
w:st='on'>
face='Times New Roman'
size='3'>U.S.
href='http://online.wsj.com/article/SB118357829622757416.html?mod=home_whats_news_us'>Read
more. (Registration required.)
w:st='on'>
face='Times New Roman' size='3'>
name='10'>Wyoming
face='Times

&
#13;
New
Roman' size='3'>Builder
Files for
Bankruptcy
Scott McDonald of
McDonald Homes owes nearly
$6 million to businesses and individuals in
w:st='on'>Wyoming
w:st='on'>
size='3'>Colorado
size='3'>,
size='3'>Arizona and elsewhere,
according to his 140-page
chapter 7 filing in U.S. Bankruptcy Court in
w:st='on'>Colorado
Friday, the
size='3'>Casper
size='3'>(
w:st='on'>
size='3'>Wyo.)
Star-Tribune
size='3'>reported today. About two-thirds of the creditors holding
unsecured nonpriority
claims have 'unknown' amounts listed, which means McDonald's total debt
could far exceed the
nearly $6 million listed in the chapter 7 filing. Under assets, McDonald
listed $2,068,000
in real property holdings: three in
face='Times New Roman'
size='3'>Kingman,
w:st='on'>
face='Times New Roman' size='3'>Ariz.,
one in
size='3'>Casper
size='3'>, and two in
w:st='on'>Fort Collins
size='3'>including a $1.1
href='http://www.casperstartribune.net/articles/2007/07/05/news/casper/ef45dd60d60cbabd87257
30e000223ab.txt'>Read more.
name='11'>TROUBLED COMPANIES
IN THE NEWS
1000’s of companies lose
money or experience
some form of difficulty each quarter.
The business news articles
below are excerpts taken
from the most recent Weekly Summary of Troubled U.S. Companies and Other
Business News
published by Bastien Financial Publications.
To begin receiving this
news, each morning,
through Bastien Financial Publication’s
size='3'>DAILY e-Summary,
that emails you information on over 70 such companies each morning,
email
steve@creditnews.com your name, company name, address, phone and
fax.
size='3'>We’ll set you up within 24 hours.
The
face='Times New Roman' size='3'>ABI
size='3'>member discount
rate is only $250 for an annual subscription.
size='3'>Indicate
“
size='3'>ABI CODE 27” in
your
email.
size='3'>Blockbuster
Inc.’s stock price bumped up 3.5% after
the
size='3'>Dallas, Tx.-based
chain of
video-rental stores, named James W. Keyes, a former chief at
convenience-store chain
7-Eleven, as its new chief executive officer. He will replace John
Antioco, who
resigned amid a dispute with the board over his $51 million compensation
package. Mr.
Antioco was also criticized for dragging his feet on the need to align
Blockbuster’s
costs and dumping nonstrategic assets. Mr. Keyes helped lead
7-Eleven to 36-straight
quarters of gains in same-store sales. Blockbuster has lost money
in nine of the last
ten years as it battles rivals such as Netflix Inc. and Wal-Mart Stores
Inc.
size='3'>Ford Motor
Co. reported that its June car sales declined
25% as the sale of
its light cars and trucks fell 8% in the
w:st='on'>
w:st='on'>
size='3'>U.S.
size='3'>Handleman
Co., a
w:st='on'>
face='Times New Roman' size='3'>Troy
size='3'>, Mi. music
distributor, reported a fourth quarter net loss of $37.5 million.
Revenue declined
6%–to nearly $269 million. For the year, it lost $53.4
million while revenue
edged up nearly 1%–to $1.3 billion.
size='3'>Lancaster Colony
Corp., Columbus, Oh., sold its floor-mat
business to an unnamed
buyer for an undisclosed amount. The sale of the floor-mat unit,
with sales last year
of $76 million, reduces
w:st='on'>Lancaster
size='3'>’s
automotive accessories division down to a single operation, aluminum
accessories.
size='3'>Lancaster, which
earlier sold off is
bed mats and splash guards business in Wapakoneta, Oh. and said it will
shutter its
industrial glassmaking facility by the end of the year, has been
divesting assets to focus
on its specialty-foods segment. The foods business, which has salad
dressings, frozen rolls
and other products, chalked up sales last year of $708 million, out
of
w:st='on'>
size='3'>Lancaster’s
total sales last
year of $1.2 billion.
size='3'>Micronetics
Inc., a
w:st='on'>
face='Times New Roman' size='3'>Hudson
size='3'>,
w:st='on'>
size='3'>N.H.
size='3'>designer of radio-frequency components and test equipment,
reported its fourth
quarter net income sank 64%–to $340,000. Revenue declined
27%–to $6.3 million.
For the year, its net income fell 59%–to $1 million, on a 12%
decline in
revenue–to $23.7 million.
size='3'>Movie Gallery
Inc.’s stock price plummeted 56% after
the
w:st='on'>
size='3'>Dothan, Al.-based
video-rental chain,
warned that it will fail to meet covenants of a senior credit facility
and that it is now
looking into strategic options, including the possibility of putting
itself up for sale.
Movie Gallery, which is looking for ways to get around its default
through an amendment or
waiver, has completely drawn down a credit revolver and has about $50
million in cash
remaining. With its stock price now below $1 a share, the company
is capitalized at
only $27 million and faces liabilities of $1.4 billion. Movie Gallery,
which added that it
will speed up the pace of its store closings, has been hammered by the
ailing in-store
DVD-rental market due to competition from online-based rental
companies.
size='3'>Office Depot
Inc., a
w:st='on'>
face='Times New Roman' size='3'>Delray
Beach,
Fl.-based operator of office-supply superstores, warned that its sales
and earnings will
drop in the second quarter, as a result of what it called “soft
economic
conditions”. In a filing with the Securities and Exchange
Commission, the
retailer warned that same-store sales in
w:st='on'>
size='3'>North America will fall by
between 4% and 5% in
the quarter. That would follow a 3% same-store sales decline in
the first quarter,
although total sales in
size='3'>North America during the
first quarter were up
3%–to $4.1 billion.
size='3'>Raining Data
Corp., an
w:st='on'>
face='Times New Roman'
size='3'>Irvine, Ca.
provider of applications software, reported a fiscal net loss of nearly
$3 million. Revenue
declined 8%–to $18.7 million.
size='3'>Rand Logistics
Inc.,
w:st='on'>
face='Times New Roman' size='3'>Manhattan
size='3'>,
size='3'>N.Y., reported a
fiscal net loss of
$3.3 million on revenue of $79.2 million.
size='3'>Sears Holdings
Corp.,
face='Times New Roman'
size='3'>Hoffman Estates, Il., is
implementing some sales
strategies that seem to be leaning in the direction of a true merger
with Kmart. Over the
past year, Sears has been moving some of its Sears-branded products into
Kmart stores in an
effort to revive sagging sales. The strategy began with
Sears’s Craftsman tools
and DieHard batteries but now one out of ten Kmarts has begun
selling
w:st='on'>
size='3'>Kenmore
size='3'>appliances as well. The next move could be to put
freestanding Sears stores
inside Kmart locations. When Kmart acquired Sears, Roebuck and Co.
more than two years
ago, the two retailing entities kept fairly distinct identities and many
investors doubted
that a full merger would ever take place. But with same-store
sales sinking at both
Kmart and Sears, the firm is looking for ways to minimize the rivalry
between the chains
that could be eating into sales.
href='http://today.reuters.co.uk/news/articlebusiness.aspx?type=businessNews&storyid=200
7-07-03T091221Z_01_L03304062_RTRUKOC_0_UK-FSA-SUBPRIME.xml'>