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January 12, 2010
name='1'>Senators Mull Creation of a Special Bankruptcy Court for
'Too-Big-to-Fail' Banks
Key members of the Senate Banking Committee
are in discussions to create a special bankruptcy court for
'too-big-to-fail' banks, MarketWatch.com reported yesterday. The court
would work in tandem with a process to dismantle a Lehman-like failing
super-sized bank in a way that doesn't cause collateral damage to the
markets. Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) have been
charged by the Senate Banking Committee with reaching a bipartisan deal
on systemic risk issues. In November, Senate Banking Committee Chair
Christopher Dodd (D-Conn.) introduced a draft bank reform bill that
would create a mechanism for the Federal Deposit Insurance Corp. to
dismantle a failing systemic bank in a way that it does not result in
the failure of other financial institutions and the expansion of a
financial crisis. The process would allow the FDIC to use taxpayer funds
to make payouts to counterparties and creditors of the failing
institution so that they don't fail as well. After that, the costs of
those payouts would be recouped by fees charged to financial
institutions with more than $10 billion in assets. However, Corker and
Warner are looking at creating a special bankruptcy court that could
decide whether the institution should go through a traditional
bankruptcy process or be subjected to the FDIC's dismantling approach,
also known as a 'resolution process.
size='3'>”
href='http://www.marketwatch.com/story/story/print?guid=8211A465-7B67-4040-A908-EEA257FC5F6A'>Read
more.
American Airlines Lifts Aid
Offer for JAL
American Airlines Inc. and TPG increased their offer
of direct financial support for Japan Airines Corp. to $1.4 billion as
shares in the struggling carrier plunged 45 percent on expectation that
it was preparing to file for bankruptcy, the
Deal Pipeline reported today. The offer includes
$300 million of investment from the U.S. carrier and partners in its
Oneworld alliance. The remaining $1.1 billion will be put up by buyout
shop TPG. The investment package is nearly three times the size of the
$500 million package offered by rival Delta Air Lines Inc., which would
also provide about $500 million in loans and income guarantees in a bid
to lure the Japanese carrier, known as JAL, to its Skyteam alliance.
Reports in Japan on Monday claimed that the Enterprise Turnaround
Initiative Corp., a quasi-government fund that has been tapped to lead
the airline's restructuring, will opt for a bankruptcy turnaround that
will not require foreign investment in JAL.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005375609'>Read
more. (Subscription required.)
Obama Weighs Fee to Recoup
Bank Bailout and Cut Deficit
President Obama is likely to propose a fee on
financial institutions to help reduce the federal deficit when he
releases his budget plans in February, although the details remain
unresolved, the New York Times reported today. The bank
fee would recover some of the money that taxpayers put up to bail out
the financial system after its near collapse in the fall of 2008, a
rescue effort that has contributed to the largest annual budget deficits
since World War II. Separately, the Federal Deposit Insurance
Corporation, which traditionally has collected fees from the banks it
regulates to cover the costs of insuring depositors at failed
institutions, is considering changes to its formula. The changes would
be aimed at increasing levies on banks engaged in risky activities and
those that set executive compensation in ways that reward
risk-taking.
href='http://www.nytimes.com/2010/01/12/business/economy/12bailout.html?hp=&pagewanted=print'>Read
more.
Bank of America in Talks to
Settle New York AG Claims over Merrill Merger
Bank of America is negotiating with the
staff of New York Attorney General Andrew M. Cuomo to settle claims that
the bank failed to adequately disclose the risks of the takeover of
Merrill Lynch to its shareholders, the New York Times reported
today. Cuomo has also focused on the bonuses that Merrill paid despite
its perilous financial condition. While no settlement has been reached
and the talks are continuing, Bank of America CEO Brian T. Moynihan is
interested in bringing an end to the myriad legal troubles plaguing the
bank. The two sides met last Friday to discuss a possible deal. With
talks with Cuomo’s
office gathering force, Bank of America claimed a crucial legal victory
in a separate federal case yesterday. Federal Judge Jed S. Rakoff
rejected a request by the Securities and Exchange Commission to broaden
its claims against the bank, which center on the Merrill bonuses. The
SEC also said it did not plan to bring claims against individual
executives at the bank.
href='http://www.nytimes.com/2010/01/12/business/12bank.html?ref=business&pagewanted=print'>Read
more.
Analysis: Federal Reserve Earned $45
billion in 2009
The Federal Reserve made record profits in 2009, as its
unconventional efforts to prop up the economy created a windfall for the
government, the Washington Post reported today. The Fed will
return about $45 billion to the U.S. Treasury for 2009, according to
calculations by the Washington Post based on public documents.
That reflects the highest earnings in the 96-year history of the central
bank. Much of the higher earnings came about because of the Fed's
aggressive program of buying bonds, aiming to push interest rates down
across the economy and thus stimulate growth. By the end of 2009, the
Fed owned $1.8 trillion in U.S. government debt and mortgage-related
securities, up from $497 billion a year earlier. The interest income on
those investments was a major source of Fed profits -- though that
income comes with risks, as the central bank could lose money if it
later sells those securities to reduce the money supply.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/11/AR2010011103892_pf.html'>Read
more.
name='6'>Stronach Settles Magna Entertainment Case
The controlling shareholder of horse track owner Magna
Entertainment Corp. will pay at least $96.5 million to settle
allegations that he looted the company's assets prior to its bankruptcy
filing, Reuters reported yesterday. The unsecured creditors
lang='EN'>’ committee filed in mid-2009
over what it said was the fraudulent transfer of more than $125 million
to companies controlled by Canadian billionaire Frank Stronach before
Magna's bankruptcy, according to court documents. Stronach, a horse
enthusiast, controls MI Developments Inc., which is the majority
shareholder of Magna. Lawyers for the unsecured creditors
lang='EN'>’ committee said that MI
Developments will pay unsecured creditors $76.5 million in cash and $20
million from the sale of Magna's Lone Star Park race track in Grand
Prairie, Texas. The unsecured creditors will receive additional payments
if the sales of other Magna tracks yield proceeds above certain
thresholds.
href='http://www.reuters.com/article/idUSN1114116620100111'>Read
more.
Haights Cross Files Pre-packaged Chapter
11
U.S. educational publishing group Haights Cross Communications Inc.
filed a pre-packaged chapter 11 petition yesterday, Reuters reported.
Under the plan, the company said lenders and debtholders have agreed to
reduce its debt obligations by about $200 million, and extend the
maturity date of its debt for at least three years. Haights would be
left with just $180 million in debt, and its unsecured creditors and
trade creditors are expected to be repaid in full, it said. In its
bankruptcy filing, the company said its core markets had been hurt by
reductions in federal, state and local government funding available to
schools in libraries, where it sells its books. Haights said that it
expects to complete the chapter 11 process within 60 days. The case is
In re Haights Cross Communications, U.S. Bankruptcy Court,
District of Delaware, No. 10-10062.
href='http://www.reuters.com/article/idUSN1114656420100111'>Read
more.
Circuit City WARN Claims to Be Considered in
Bankruptcy Court
Bankruptcy Judge Kevin R. Huennekens on
Thursday ruled that Circuit City Stores Inc. employees alleging
violations of the Worker Adjustment and Retraining Notification (WARN)
Act should have their claims adjudicated through the claims
administration process, Bankruptcy Law360 reported yesterday. In
March, Marlon Mondragon filed a proposed class action on behalf of all
non-union employees who were terminated as a result of a mass layoff
announced by Circuit City on or about Nov. 2, 2008. The company filed
for bankruptcy on Nov. 10, 2008 and many of the workers were employed
through store closeout sales, which lasted through December. Circuit
City argued that even if Mondragon adequately alleged a claim for relief
for back pay and benefits under the WARN Act, the claim alleged is a
pre-petition claim. Therefore, the claim should be handled not as an
adversary proceeding but through the claims administration process.
Mondragon argued that the claim is a postpetition liability of the
bankruptcy estate and is properly asserted as an adversary
proceeding.
href='http://bankruptcy.law360.com/print_article/142625'>Read more.
(Subscription required.)
Merisant Emerges from
Bankruptcy
Merisant Co., the maker of low-calorie tabletop
sweeteners such as Equal and PureVia, said yesterday that it had cut
debt by 74 percent and emerged from chapter 11 one year after it filed
for bankruptcy, Reuters reported yesterday. A bankruptcy judge approved
the company's restructuring plan, which included reducing debt to about
$147 million. Private investment funds managed by Wayzata Investment
Partners LLC have become the majority shareholders and appointed five of
the seven members of the new board. Under the plan, the company will cut
its annual cash interest expense to $11 million from about $36
million.
href='http://www.reuters.com/article/idUSN1115112020100111'>Read
more.
name='10'>Feds Want More Corporate Data
The U.S. Treasury and
Justice departments want to require states to collect more information
about the owners of corporations and limited liability companies to help
crack down on domestic shell companies that launder money and help
finance terrorists, the American Law Journal reported yesterday.
That effort is putting law enforcement officials at loggerheads with
state treasurers, the business community and the American Bar
Association. Besides imposing new duties on the states, legislation
introduced in the Senate also could bring lawyers and others who are
compensated for helping to form corporations and LLCs under federal
anti-money laundering requirements as well as potential criminal
penalties for providing false information. About 2 million corporations
and LLCs are formed each year in this country, according to various
official estimates, and the states generally do not obtain the names of
the people who will control or benefit from those companies. Sen. Carl
Levin (D-Mich.) has spearheaded the Incorporation Transparency and Law
Enforcement Assistance Act, along with co-sponsors Sens. Charles
Grassley (R-Iowa) and Claire McCaskill (D-Mo.).
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202437813540'>Read
more.
Tronox, Arco Near
Settlement in Oklahoma Oil Pollution Suit
Bankrupt titanium dioxide pigment manufacturer Tronox
Worldwide LLC and BP PLC subsidiary Atlantic Richfield Co. have asked a
federal judge to stay a pollution cleanup suit brought by Tronox while
the parties try to reach a settlement, Bankruptcy Law360 reported
yesterday. Tronox and Arco filed the joint motion to stay on Friday in
the U.S. District Court for the Western District of Oklahoma, saying
that they are very close to a settlement and that talks are ongoing. The
plaintiff sued Arco in September 2007, saying that it had already
spent $1.5 million cleaning hazardous materials that had migrated onto
its property in central Oklahoma from a former oil refinery operated by
Sinclair Oil and Refining Corp., Arco's predecessor. Tronox, which
entered into a consent order with the Oklahoma Department of Health to
start cleaning the property, sought to be reimbursed by Arco through the
Comprehensive Environmental Response, Compensation and Liability
Act.
href='http://bankruptcy.law360.com/print_article/142744'>Read more.
(Subscription required.)
Each of the three Detroit-based car makers said
yesterday that it may soon begin hiring U.S. factory workers, the
Wall Street Journal reported today. General Motors Co., Ford
Motor Co. and Chrysler Group LLC are considering hiring plans in
expectation that U.S. vehicle demand will begin to recover from last
year's anemic levels. Such moves would help reverse a dramatic decline
in U.S. auto manufacturing jobs that accelerated last year as vehicle
sales sank to a 47-year low. The hiring plans, however, wouldn't make a
dent in the job loss of last year, when the industry cut 126,000 U.S.
factory positions. The companies also must deal with workers who have
been laid off but are still receiving some of their pay under union
agreements. GM has about 6,700 laid-off workers; Ford and Chrysler
haven't released their figures.
href='http://online.wsj.com/article/SB10001424052748704081704574652830152961434.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
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