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July 19, 2007
id='1'>Fed Trims Forecast for Growth
Federal Reserve Chairman Ben S.
Bernanke said yesterday that the economy was poised for moderate growth
for the rest of this year, but that continuing problems in the housing
market had prompted the Fed to slightly reduce its growth forecast, the
New York
Times reported today. Separately, Bernanke acknowledged
that regulators needed to impose new rules on subprime mortgages, saying
that the explosion of exotic mortgages in recent years was accompanied
by lax underwriting standards, abusive lending practices and some cases
of outright fraud. Noting that the number of foreclosures has soared
among people who took out subprime mortgages, Bernanke predicted that
the problems “likely will get worse before they get
better.”
href='http://www.nytimes.com/2007/07/19/business/19fed.html?ref=business&pagewanted=print'>Read
more.
id='2'>Portrait Corp. Emerges from Chapter 11
Portrait Corp. of America Inc.
exited chapter 11 protection with the sale of its assets for $82.5
million, which will pave the way for it to complete the wind-down of its
business, Bankruptcy
Law360 reported yesterday. Pursuant to the plan and the
confirmation order, administrative claim holders must file notice of
their claims by Aug. 16. If they fail to do so, PCA will be discharged
from any liability, the order stated. In addition, professional fee
claims and holders of claims created by the rejection of an executory
contract and unexpired lease under the plan without prejudice to the
liquidating trustee’s rights to assert must be filed by the same
date, the order said. Under the terms of the effective plan, Ocean Ridge
Capital Advisors LLC will be the trustee during the wind-down of the
company's liquidation.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29821'>Read
more. (Registration required.)
size='3'>Autos
w:st='on'>
id='3'>Delphi
size='3'> Accepts New Plan for $2.55 Billion
Investment
Auto-parts maker Delphi
Corp. said it reached a $2.55 billion investment agreement with a group
led by hedge fund Appaloosa Management LP, a move that replaces a
previous $3.4 billion plan and keeps
face='Times New Roman' size='3'>Delphi
size='3'>on track to exit from bankruptcy proceedings by the end of the
year, the Wall Street
Journal reported today. The previous
investment plan was scrapped because private-equity firm Cerberus
Capital Management LP, which made a successful bid for DaimlerChrysler
AG's Chrysler Group, pulled out of the investor group. Compared with the
previous agreement, the new plan involves a shift in the cash and equity
mix paid to unsecured creditors and will see a smaller rights offering
for current shareholders. The Troy, Mich.-based supplier said that the
new deal has the support of its statutory committees and
size='3'>Detroit
Motors Corp., which is
size='3'>Delphi
href='http://online.wsj.com/article/SB118477195399970379.html?mod=us_business_whats_news'>Read
more. (Registration required.)
id='4'>Retirees’ Health Costs Loom over UAW
Talks
The issue of medical
costs will be at the center of the negotiations between the United
Automobile Workers union and
w:st='on'>
size='3'>Detroit
as they begin their contract negotiations tomorrow, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The UAW is entering the contract talks with
more retirees than active workers in its ranks the for first time in its
72-year history. Detroit automakers cover the health care expenses of
both current and former union members — more than 1.1 million of
them combined — and their dependents, which adds up to an annual
bill of about $12 billion. So even as the struggling car companies try
to restructure, announcing plans in the last two years to shed more than
80,000 workers, their health care bill continues to rise as those people
age. The retirees, roughly 600,000 of them, risk seeing an erosion of
benefits that they had assumed would be secure when their working days
ended.
href='http://www.nytimes.com/2007/07/19/business/19uaw.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
KPMG
under Fire for New Century Connection
KPMG LLP has come under
more heat for its work for New Century Financial Corp., with the
subprime lender's unsecured creditors asking the bankruptcy court to
force KPMG to hand over internal documents,
size='3'>Bankruptcy Law360 reported yesterday.
KPMG was the principal accountant and outside auditor for New Century
until the company resigned from its post in April 2007, the creditors
said. KPMG’s resignation came just after the subprime lender filed
for bankruptcy. The unsecured creditors join the examiner appointed to
New Century’s chapter 11 proceedings, Michael J. Missal, in their
quest to find out information about KPMG’s possible role in New
Century’s downturn. In their motion, the creditors explained that
they want to examine New Century’s “pre-petition acts,
conduct, property, liabilities and financial condition,” and
believe KPMG has in its possession documents that can shed light on
them.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29837'>Read
more. (Registration required.)
All
American's Creditors Want to Hold on to Leases
The unsecured creditors
of All American Semiconductor Inc. on Tuesday objected to the
company’s motions to reject certain real property and equipment
leases, arguing that holding on to the leases may benefit the
estate, Bankruptcy
Law360 reported yesterday. The Miami-based
electronic components distributor transferred its executory contracts
and leases to Rock River Capital LLC when the private equity firm
acquired All American’s operating assets on June 6. After
reviewing All American’s remaining contracts,
w:st='on'>Rock
River
on 243 unexpired contracts and leases of personal and real
property.
size='3'>Rock River
American to reject the agreements, and in late June the semiconductor
company asked for the bankruptcy court’s approval to do
so.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29853'>Read
more. (Registration required.)
Creditors Look to Recover $149 Million
A large number of
defendants sued by the Enron Creditors Recovery Corp. over commercial
paper transactions leading up to the defunct energy company's collapse
in 2001 have agreed to pay more than $149 million to settle the charges
against them, Bankruptcy
Law360 reported yesterday. The settling
defendants include Lehman Commercial Paper Inc., Aetna Inc., Allstate
Life Insurance Co., Merrill Lynch Investment Managers LP, Prudential
Life Insurance Company of
face='Times New Roman' size='3'>America
and UBS Global Asset Management
(
face='Times New Roman'
size='3'>Americas
size='3'>) Inc. Enron's motion says that between Oct. 26, 2001, and Nov.
6, 2001, Enron paid more than $1 billion on commercial paper prior to
those securities reaching maturity. Enron filed for bankruptcy
protection on Dec. 2,
size='3'>2001. In November 2003, Enron launched two adversary suits
against about 180 parties over these payments looking to recover
hundreds of millions of dollars, and “asserting claims for
avoidance and recovery of allegedly preferential or constructively
fraudulent transfers in connection with the transactions, and seeking
disallowance of defendants' claims against Enron,” said Tuesday's
motion.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=29808'>Read
more. (Registration required.)
id='8'>Conservatives Break with GOP Leaders on “Carried
Interest” Tax Proposal
Some prominent
conservatives are coming out in favor of a Democratic proposal to raise
taxes on the private equity and hedge fund industries, signaling a break
with anti-tax groups and Republican lawmakers on the issue,
The Hill
size='3'>reported yesterday. William A.
Niskanen, the chairman of the libertarian Cato Institute and a former
member of President Reagan’s Council of Economic Advisors, called
the share of investment profits, or “carried interest,”
earned by hedge fund and private-equity managers “basically fees
for managing other people’s money” and said it should be
taxed as ordinary income rather than as a capital gain. John Chapoton,
the Treasury’s former assistant secretary for tax policy under
Reagan, called the current treatment of carried interest “a policy
mistake”: “It was earned by the work of promoters [in the
private equity industry] and it should be taxed as compensation.”
A partisan fight erupted last month after Rep. Sandy Levin (D-Mich.)
introduced legislation to raise taxes on carried interest from the
capital gains rate of 15 percent to ordinary income rates of as high as
35 percent.
href='http://thehill.com/leading-the-news/conservatives-break-with-gop-leaders-on-a-tax-bill-2007-07-18.html'>Read
more.
SEC
Calls for More Disclosure of Municipal Bonds
Securities and Exchange
Commission Chairman Christopher Cox called for Congress to set new
disclosure rules for municipal borrowers, saying there is an 'urgent
need' to improve the information investors receive, Bloomberg News
reported today Cox also said yesterday that lawmakers bolster the
Governmental Accounting Standards Board, which sets accounting standards
for states and municipalities, by making its rules mandatory and giving
it an independent source of money.
w:st='on'>
size='3'>Texas
local governments there to ignore rules requiring them to disclose how
much they expect to pay for retired workers' health care. The SEC in
March said that it was evaluating whether state and local governments
should be forced to disclose more information to investors who buy the
$400 billion of municipal bonds sold each year for schools, sewers and
other projects. The review follows the agency's November sanction
against
face='Times New Roman' size='3'>San Diego
for inadequate disclosures made to buyers of its debt and
comes as cities, towns and school districts increase their use of
unregulated financial contracts such as interest rate swaps.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/07/18/AR2007071802398_pf.html'>Read
more.
id='10'>Lawmakers Pile up Personal Debt
Forty-eight members of
the House and three from the Senate had more than $10,000 in family
credit card debt last year, with some carrying balances totaling more
than $50,000, according to their personal financial disclosure reports,
the Politico
reported yesterday. The recent filings reflect both
one-time large charges paid off promptly and longstanding debts carried
on the same cards over years. In the latter cases, credit cards are
often a poor choice because of their high interest rates and hidden
fees, personal finance experts said. The average interest rate paid on
credit cards nationally in 2005 was 14 percent, according to
creditcards.com, well above the rate for other forms of personal
debt. Most of the
lawmakers with high card debt, though, denied they were poorly managing
their own finances, saying they were beating the prevailing rates and
avoiding the high fees. Although most said they were keeping a close eye
on their credit scores, some said that the rating was not a concern to
them because they weren't planning to borrow money soon.
href='http://dyn.politico.com/printstory.cfm?uuid=D64CB7D5-3048-5C12-00755D1CBB062CF2'>Read
more.
id='11'>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. For more of the latest business news
visit:
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size='3'>steve@creditnews.comor
call 800-407-9044—use
face='Times New Roman' size='3'>ABI
size='3'>Code 27
size='3'>ACR Group Inc., a Houston, Tx.
distributor of heating, ventilation and air-conditioning equipment,
reported its first quarter net income declined 51%–to $830,000.
Revenue declined 4%–to $59.5 million.
size='3'>Blockbuster Inc. is hoping that its
new CEO, James Keyes, can bring some of his magic to the
size='3'>Dallas
chain of video-rental stores. Mr. Keyes had great success at the
helm of the 7-Eleven convenience-store chain, leading it from bankruptcy
to thirty-six consecutive quarters of increased sales. He now
faces the daunting task of reversing the dismal results at Blockbuster,
which has lost money in nine of its last ten years, partly due to
competition from Netflix Inc., the
w:st='on'>Los
Gatos, Ca. online
DVD-rental concern. Mr. Keyes hasn’t detailed his strategy
for Blockbuster yet, but he does hope to reduce the size of an average
Blockbuster store and customize titles according to local demand, just
as he localized product offerings at 7-Eleven locations. But besides
battling rival Netflix, Blockbuster must compete with video-on-demand
services that are eating into the movie-rental market. It’s
thought that Blockbuster, which has shuttered hundreds of stores, will
continue trimming down by closing another 240 locations this year.
In its first quarter, Blockbuster lost $46.6 million, compared to a $1.9
million loss in the year-earlier first quarter.
size='3'>Champion Enterprises Inc., an Auburn
Hills, Mi. maker of manufactured homes, reported its second quarter net
income tumbled 93%–to $7.5 million. Revenue declined 11%–to
$330 million.
size='3'>Florida Rock Industries Inc.
w:st='on'>
size='3'>Jack
size='3'>sonville
by
size='3'>Florida
cease operations at a quarry in
w:st='on'>
size='3'>Miami
concerns about possible bacterial and chemical contamination of the
local water supply. Florida Rock, which said that it will appeal the
ruling, is currently in the process of being acquired by Vulcan
Materials Co. of Birmingham, Al. for $4.6 billion.
size='3'>Ford Motor Co., while continuing to
face the task of remaking its North American operations, has at least
one bright spot in its business, in the rapidly-growing Russian car
market. For the first six months of 2007, Ford’s sales
in
size='3'>Russia
with its Ford Focus becoming
w:st='on'>
size='3'>Russia
size='3'>’s top-selling foreign sedan as of last
year.
size='3'>HEI Inc., a
w:st='on'>
size='3'>Victoria
custom-manufacturer of small electronic components for a variety of
industries, reported a third quarter net loss of $1.7 million on a 26%
sales decline–to $9.8 million.
size='3'>Metabasis Therapeutics Inc.’s
stock price plummeted more than 50% after one of its partners, drug
giant Schering-Plough Corp. of
w:st='on'>
size='3'>Kenilworth
w:st='on'>
size='3'>N.J.
of a hepatitis drug project that it was developing with Metabasis and
another firm, Valeant Pharmaceuticals. Metabasis is headquartered
in
Jolla
size='3'>Palm Harbor Homes Inc., an Addison,
Tx. firm which is a leading maker of manufactured homes, reported a
first quarter net loss of $4.2 million on a 26% sales decline–to
$143.3 million.
size='3'>Pulte Homes Inc., a Bloomfield Hills,
Hi. homebuilder, warned that it anticipates an operating loss in the
second quarter as a result of the sagging housing market and
restructuring charges.
size='3'>Southwest Airlines Co., in a bid to
trim costs amid slowing growth, will offer buyouts to about a quarter of
its employees. About 9,000 workers will be eligible for the
buyouts, although the
w:st='on'>
size='3'>Dallas
discount carrier didn’t specify exactly how many job reductions it
hopes to achieve.
href='http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/07/17/ninsolvent117.xml'>