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September 6,
2007
name='1'>Consumer Bankruptcy Filings Increase 17 Percent in
August
w:st='on'>
size='3'>U.S.
size='3'>consumer bankruptcy filings increased 17.3 percent nationwide
in August from the previous month, according to the
size='3'>ABI
provided by the National Bankruptcy Research Center (NBKRC), overall
consumer filings totaled 74,607 in August, up from 63,600 filings in
July. The figure was also up 31.2 percent from August 2006. Chapter 13
filings constituted 39.6 percent of all consumer cases in August, down
slightly from last month. 'The uptick in August bankruptcies continues
the trend we've seen all year,' observed
w:st='on'>
size='3'>ABI
Director Samuel J.
Gerdano. 'Families facing heavy household
debts are increasingly turning to bankruptcy as a short-term
fix.'
href='http://www.abiworld.org/AM/Template.cfm?Section=Monthly_Bankruptcy_Statistics&Template=/MembersOnly.cfm&NavMenuID=3716&ContentID=46994&DirectListComboInd=D'>Click
here to view the August consumer filings charts.
Hearing Explores Labor Law and Bankruptcy
The House Judiciary
Committee’s Subcommittee on Commercial and Administrative Law will
hold an oversight hearing today titled “American Workers in
Crisis: Does the Chapter 11 Business Bankruptcy Law Treat Employees and
Retirees Fairly?” Tentative witnesses include Richard L. Trumka,
Secretary-Treasurer of the AFL-CIO; John Porter, President of the Air
Line Pilots Association; and others representing the United
Steelworkers, United Auto Workers and Flight Attendants
Association. Michael
Bernstein of Arnold & Porter is also
scheduled to testify.
href='http://judiciary.house.gov/oversight.aspx?ID=369'>Click
here to view the witness list for the hearing, scheduled for 10
a.m. ET.
name='3'>Congressional Hearings Renew Examination of 'Carried
Interest'
The Senate Finance
and
face='Times New Roman' size='3'>House
Ways
Committees are holding hearings today looking at the issue of carried
interest by hedge fund managers. The Senate hearing is the third on the
issue of carried interest, with today's panel focusing on pension
issues. Meanwhile, the issue of carried interest is likely to be brought
up on one of the three panels scheduled in the House Ways and Means
Committee hearing titled 'Fair and Equitable Tax Policy for
America’s Working Families.'
href='http://finance.senate.gov/sitepages/hearing090607.htm'>Click
here to view the witness list for the Senate Finance Committee
hearing scheduled for 10 a.m. ET.
href='http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=584'>Click
here to view the witness list for the
w:st='on'>
size='3'>House Ways
Means Committee hearing, also scheduled for 10 a.m.
ET.
Mortgage
Lending
name='4'>Sen. Dodd Unveils Subprime Legislation to Protect
Borrowers
Senate Banking
Chairman
size='3'>Chris
introduced legislation yesterday designed to curb lending abuses that
have roiled the subprime mortgage market,
size='3'>CongressDaily reported yesterday. The
bill would place requirements on mortgage brokers by clarifying their
fiduciary duty to borrowers. The measure also would expand the
protection for those who assume a high-cost loan under the 1994 Home
Ownership and Equity Protection Act (HOEPA). Dodd argues that many
brokers and lenders have avoided HOEPA triggers that have allowed them
to continue to offer questionable products to borrowers. Under his bill,
HOEPA loans would include a practice known as yield spread premium in
determining whether the mortgage is a high-cost loan. The bill would
prohibit a loan originator from steering a borrower to a costlier loan.
For example, if a borrower qualifies for a prime loan, a broker or
lender could not give them a subprime loan. Loans that do not qualify
for HOEPA but are not considered prime would receive new protections
that include no prepayment penalties, yield spread premiums and
mandatory requirement of documentation of the borrower's income.
href='http://dodd.senate.gov/index.php?q=node/4027'>Click
here to read Dodd’s press release on the
legislation.
name='5'>Democrats on House Panel Call for New Regulations in
Response to Subprime Downturn
The House Financial Services
Committee divided along partisan lines at a hearing yesterday in
response to the credit crunch that has dried up funding for the subprime
mortgage market, with Democrats advocating tougher regulation for those
who sell mortgage-backed securities and Republicans calling for a more
limited approach, CongressDaily reported yesterday. House
Financial Services Chairman Barney Frank (D-Mass.) noted that federally
regulated banks behave more responsibly than financial institutions
unfettered by stringent oversight such as nonbank lenders, mortgage
brokers and hedge funds. 'It does seem clear that we have a set of
financial markets today that are very different than it was 10 years
ago, but our regulatory structure is essentially the same as it was 10
years ago,' Frank said. But Republicans argued against any response that
could further dry up funding for borrowers, especially lower- and
middle-income individuals wanting to buy their first home. Financial
Services ranking member Spencer Bachus (R-Ala.) said only a small
percentage of mortgages were problematic and advocated a more narrow
approach. Bachus touted a measure he sponsored that would place a
national standard to prevent intimidation of appraisers and require
simplified loan documents and verification of income for borrowers.
Treasury Undersecretary Robert Steel said that the administration is
continuing to monitor the credit crunch that has spread to other
markets, for example, with private equity firms facing a greater
difficulty in obtaining financing for leveraged buyouts. He added that
the credit crunch impact outside the mortgage market was 'faster and
swifter' than he expected.
name='6'>Countrywide Financial Cuts 900 More Jobs
Countrywide Financial
announced an additional 900 job cuts yesterday as the home-mortgage
lender reduces costs in the face of a drop in lending volumes and rising
defaults, the Wall
Street Journal reported. The job reductions
are in addition to 500 announced last month in the company's Full
Spectrum division, which handles loans below prime quality, and in the
unit that deals with loans originated through brokers.
Countrywide said that the 900
layoffs were mainly in its mortgage-production divisions. Countrywide's
work force totals around 60,000. In recent months, Countrywide has been
hiring loan officers from lenders that have been forced to close down.
But a squeeze on credit available to mortgage lenders in general has
forced the company to eliminate many types of home loans now deemed too
risky by investors.
href='http://online.wsj.com/article/SB118903069842818612.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='7'>Software Co. Refutes New Century's Call for
Sanctions
Positive Software
Solutions Inc. denied claims that a fraud lawsuit aimed at former
executives and attorneys for New Century Holdings Inc. was a thinly
veiled attempt to violate the automatic stay shielding the bankrupt
lender, Bankruptcy
Law360 reported yesterday. Already reeling
from court-imposed sanctions for what were deemed earlier
breaches of the stay, the software
company has come out in defense of calls for a second round of
sanctions, arguing the suit has nothing to do with the battered lender.
New Century had successfully argued early last month that Positive
Software's moves to pursue fraud claims directly against it constituted
a violation worthy of sanctions. On Aug. 24, the collapsed mortgage
lender took issue again, claiming that a suit against everyone but the
lender constituted further violations by sleight of hand. In its
objection, filed Tuesday in the U.S. Bankruptcy Court for the District
of Delaware, Positive Software argued that the automatic litigation ban
protecting companies in chapter 11 proceedings did not automatically
extend to nondebtors linked to the lender.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33982'>Read
more. (Registration required.)
name='8'>Conventional Mortgage Market Experiencing Healthy
Competition
While subprime and jumbo
mortgage loans are drying up, there is plenty of cash flowing to
borrowers with stellar credit who want conventional fixed-rate
mortgages, the Wall
Street Journal reported today. Banks and
credit unions are battling for these customers with fee waivers,
competitive interest rates and a willingness to negotiate on rates that
have dropped in the past three months. Even consumers with solid credit
scores and high incomes are now finding it more difficult and more
expensive to find jumbo mortgage loans, which are loans of more than
$417,000. But individuals with good credit and a down payment are in the
driver's seat at a time when the average 30-year fixed rate mortgage on
a loan of less than $417,000 was 6.5 percent yesterday, according to
Bankrate.com's benchmark 30-year fixed rate. One reason for the current
strong market for conventional, or 'conforming,' mortgages is that there
is plenty of cash to lend because 'investors are willing to invest in
these sectors,' says Joe Rogers, executive vice president at Wells Fargo
href='http://online.wsj.com/article/SB118903545011118650.html?mod=us_business_whats_news'>Read
more. (Registration required.)
name='9'>Consumers to See Credit Term Changes
While credit card issuers
and other companies that lend to consumers have escaped the barrage of
defaults that mortgage lenders have suffered, some card issuers are
raising interest rates, while others are cutting back offers to less
creditworthy customers or lowering credit limits, the Associated Press
reported yesterday. James Chessen, chief economist with the American
Bankers Association trade group in
w:st='on'>
size='3'>Washington,
w:st='on'>
size='3'>D.C.
lenders, 'We've also heard they're taking a more careful look at people
with less-than-stellar credit. There's the feeling that the risk may
have been underpriced in the past.' Because credit cards have not seen
substantial increases in delinquencies, 'we haven't seen deterioration
in the performance in credit card asset-backed securities,' said Cynthia
Ullrich, a senior director in Fitch Ratings asset-backed securities
group. Still, Wall Street analysts said that investors concerned about
mortgage problems have demanded a slightly higher return on securities
backed by credit card receivables in recent weeks to make up for a
higher perceived risk.
href='http://biz.yahoo.com/ap/070905/consumer_credit.html?.v=1'>Read
more.
name='10'>Hedge Fund Manager to Buy Quality Home
Loans
Bankrupt lender Quality
Home Loans will be acquired by entrepreneur and hedge fund manager
Michael B. Klein, Bankruptcy Law360 reported yesterday. Quality
Home Loans, which bills itself as the largest residential hard money
lender in the
w:st='on'>
size='3'>U.S.
distinct from typical floundering subprime lenders because Quality's
loans are protected by “ample equity” in the underlying real
estate, according to the company. Quality Home Loan's business is
“surging” because of the dearth of alternatives currently
available to borrowers, says Quality. On Aug. 23, two days after filing
for bankruptcy, Quality Home Loans laid off 158 of its 191 employees,
and as of July 31 the debtors had about $222 million in assets and about
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=34053'>Read
more. (Registration required.)
Looking for Strains in Investment Banks
The Securities and
Exchange Commission is looking at whether unwinding financing vehicles
like conduits could strain the balance sheets of major investment banks,
Reuters reported yesterday. Commercial and investment banks globally
have packaged billions of dollars of debt into vehicles that sell
short-term bonds to investors. But if investors stop buying the
short-term debt, banks may have to step in, essentially to buy back
assets from the vehicles. Erik R. Sirri, market regulation director for
the SEC, said that the commission was monitoring situations that might
put a strain on the balance sheets of broker-dealers. “We take a
look at the parent level, make sure that there are no liquidity issues,
and at this juncture we are satisfied that that’s the case,”
said SEC chairman
href='http://www.nytimes.com/2007/09/06/business/06balance.html?ref=business&pagewanted=print'>Read
more.
Report Shows Economy Did Well in August, but Faces Challenges in Months
Ahead
The Federal Reserve
reported that
w:st='on'>
size='3'>U.S.
size='3'>businesses suffered little immediate damage from the problems
in financial markets in August, but there are hints that may change in
the months ahead, the
size='3'>Washington Post reported today. The
Federal Reserve's 'beige book,” which includes survey research
conducted before Aug. 27, indicated that the economy continued to grow
in most parts of the country and in most industries. 'Outside of real
estate, reports that the turmoil in financial markets had affected
economic activity during the survey period were limited,' the report
said. The report, however, gave hints of the risks facing the economy
because of the problems that have roiled the markets for home mortgages
and other debt since early August. The Fed said that many auto dealers
were anxious about future sales in relation to tighter household credit,
and many retailers reported that they were discounting merchandise
because of too much inventory.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/05/AR2007090501319_pf.html'>Read
more.
w:st='on'>
name='13'>Battle
face='Times


















New






Roman'
size='3'> Escalates over Fees in Werner
Bankruptcy
A feud over compensation
sought by the financial advisers of bankrupt Werner Holding Co. led
investor Levine Leichtman Capital Partners opposing Rothschild Inc.'s
application for $169,000 in legal fees accrued by its counsel during a
dispute over fees,
size='3'>Bankruptcy Law360 reported yesterday.
Levine Leichtman argued that reimbursement for work performed justifying
a previous fee application was “not within the scope” of
applicable provisions in the retention agreement signed between the
bankrupt ladder company and its adviser. Pennsylvania-based Werner
retained Rothschild to serve as its financial adviser and investment
banker throughout the chapter 11 proceedings upon entering bankruptcy in
June 2006. The two sides have been sparring over fees since the
financial adviser made its first monthly application for compensation
and expenses a year ago.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=34008'>Read
more. (Registration required.)
International
name='14'>New Concerns in
face='Times New Roman' size='3'>Europe
size='3'>about Credit Fallout
The European Central Bank
said yesterday that volatility in credit markets appeared to be
returning after a brief period of stability, and a leading group of
advanced economic nations warned of “ominous” new risks to
the global economic outlook, the
size='3'>New York Times reported yesterday.
The instability in money markets that worried the central bank pushed
European stock markets down nearly 2 percent, breaking a five-session
run of advances. The Bank of England offered extra funds to banks
yesterday, its first attempt to lower the cost of credit, and the
European bank said that it stood ready to do the same should conditions
worsen today, whenthe bank is expected to announce that it will keep
borrowing costs stable. The Organization for Economic Cooperation and
Development, a Paris-based group of 30 industrial nations, issued a
report warning that the credit crisis had dimmed prospects for economic
growth, especially in the
w:st='on'>
size='3'>United States
size='3'>.
href='http://www.nytimes.com/2007/09/06/business/06oecd.html?ref=business&pagewanted=print'>Read
more.
name='15'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
37
size='3'>Acacia Technologies Group, a
size='3'>Newport Beach
firm which licenses technology-related patent rights, reported a second
quarter net loss of $3.6 million, on a 59% revenue decline–to $5.8
million. In addition, the firm’s
size='3'>Acacia Research Corp. unit has
settled a pending patent lawsuit between Acacia’s Disk Link Corp.
unit and Oracle Corp., the
w:st='on'>Redwood
City
manufacturer. Terms of the settlement were not disclosed.
This follows a settlement last month between Acacia’s
Financial Systems Innovation LLC unit and SAP Ag, a Germany-based
software firm as well as a settlement earlier in 2007 with McAfee Inc.
of
size='3'>Santa Clara
face='Times New
&#13;&#13;&#10;&amp;#13;&amp;#10;&amp;#13;&amp;#13;&amp;#10;Roman'>
size='3'>, Ca. related to patents.
Angelica
Corp., a
w:st='on'>
size='3'>Chesterfield,
size='3'>Mo.
size='3'>laundry and linen services firm, reported a second quarter net
loss of $1.4 million, on a 2% revenue increase–to $107.6
million.
Champps Entertainment
Inc., the
w:st='on'>
size='3'>Littleton
size='3'>, Oh. firm which franchises and operates more than sixty
casual-dining restaurants, reported a fourth quarter net loss of
$724,000, down from a loss of nearly $2 million in the year-earlier
period. Revenue declined 5%–to $47 million. The
results included special charges of $167,000. For the year, the
firm reported a net loss of $7.9 million, on a 4% revenue
decline–to $198 million. The results included special
charges of $1.2 million for the year.
Chrysler
LLC, the
Auburn Hills, Mi. automaker which is now 80% owned by Cerberus Capital
Management LP of New York, reported that its sales declined 6% in its
first month since the transaction.
Diamond Tool and
Die, an
face='Times New Roman' size='3'>East
Dayton
size='3'>, Oh. maker of molds for appliance manufacturers, is shutting
its doors, cutting twenty-three jobs and looking to sell its assets. The
firm said that it has suffered from competition from Chinese rivals.
First American
Corp., a
w:st='on'>Santa
Ana
size='3'>, Ca. provider of business information, said that it will slash
its payroll by the equivalent of 1,300 jobs during the third quarter.
Including 600 other job cuts that the firm announced for the
second quarter, First American hopes to achieve $108 million in cost
savings.
Ford Motor
Co., the
w:st='on'>
size='3'>Dearborn
size='3'>, Mi. automaker which recently reported a 14% drop in its
August sales, reported that sales of its F-Series pick-up trucks were
nearly 10% short of expectations, possibly due to the decline in
activity in the home construction market.
General Motors
Corp.,
w:st='on'>
size='3'>Detroit
size='3'>, Mi., reduced its fourth quarter production schedule by 10%,
which means it will make 107,000 vehicles fewer than it did in the
fourth quarter of last year. The planned cutback is in response to
the tightening credit market. In contrast to some other carmakers,
however, GM experienced sales growth in August, with vehicle sales up
5.3% in the month, thanks to discounts on pickup trucks and other
autos.
NCI Building Systems
Inc., a Houston,
Tx. manufacturer of metal components and engineered buildings, reported
its third quarter net declined 1.6%–to $21.3 million, on a 3.5%
revenue decline–to $434 million.
Neurobiological Technologies
Inc., Emeryville,
Ca., was warned by Nasdaq that its stock could be delisted from trading
because of it falling short of market-value listing requirements.
NovaStar Financial
Inc.,
w:st='on'>Kansas
City
face='Times New Roman' size='3'>Mo.
size='3'>, will shutter a dozen of its sixteen offices and slash 275
jobs at its retail-lending unit as it reduces originations of new
mortgages and focuses on managing its securitized-loans portfolio.
A month ago, NovaStar said it would cut 500 jobs and close
wholesale-loan operations in
face='Times New Roman' size='3'>Ohio
size='3'>and
face='Times New Roman'
size='3'>California
face='Times New Roman'>. The company, which has called
off a planned $100 million stock sale, added that its auditor expressed
worries about the company’s ability to continue doing business.
/>
Tyson Foods
Inc., the
w:st='on'>
size='3'>Springdale
chicken, beef and pork producer, has lowered its earnings estimates for
fiscal 2007 from as much as 92 cents a share to no more than 80 cents a
share. The firm stated its pork business was affected by higher
prices from worries over pork imported from
w:st='on'>
size='3'>China
and its beef business was hurt by troubles in the South Korean beef
trade. Tyson plans to initiate a turnaround plan while also
stating it has already cut costs substantially.