December 30,
2008
Three Private Investors Seek to Purchase IndyMac
The Associated Press reported today that a trio of private
investors—J.C. Flowers & Co., Dune Capital Management and
Paulson & Co.—have teamed up in an effort to buy failed thrift
IndyMac. The two private-equity firms and hedge-fund Paulson have
applied for a federal holding company charter, according to an
unidentified source, who asked not to be named because the deal has not
been completed. The investors want to convert IndyMac Federal Bank,
which was seized by the Federal Deposit Insurance Corp. in July in the
second-largest bank failure of the year, to a stock-held institution.
The FDIC is considering selling IndyMac to a company named HoldCo LLC.
The FDIC has discussed a closing date of late January or early February.
An IndyMac spokesman declined to comment on any potential buyers, but
reiterated that the company expects 'to announce a deal before the end
of the year.'
href='http://news.yahoo.com/s/ap/20081230/ap_on_bi_ge/indymac_sale'>Read
more.
DHP Holdings Files for Chapter 11 Protection
DHP Holdings II Corp., a maker of heating appliances based in Bowling
Green, Ky., filed for chapter 11 bankruptcy protection in Wilmington,
Del., with a plan to go out of business because of slowing U.S. sales
and difficulty in obtaining credit, according to a Bloomberg report
Monday. DHP sought court protection with DESA Heating LLC and four other
U.S. units, listing $126.8 million in debt and $132.5 million in assets.
The closely-held company's brand names include Reddy Heater, Master,
Vanguard, All-Pro, Outdoor Leisure, GloWarm and Comfort Glow. DHP has
fired 331 employees as of Dec. 21 and a financing proposal was rejected
on Dec. 5, freezing the company's accounts, including payroll and health
href='http://www.bloomberg.com/apps/news?pid=20601127&sid=aR9.4a2E7QZo'>Read
more.
Analysis: Charter's Chance of Bankruptcy Grows
The likelihood of bankruptcy at Charter Communications Inc. in the next
year has increased from 20 percent to 75 percent, a Citigroup analyst
said in a report Monday from the St. Louis Business Journal.
Citi analyst David Hamburger also downgraded Charter from buy to sell
and reduced the price target from $1 to 5 cents. Charter, headed by CEO
Neil Smit and based in St. Louis, has never made a profit since it went
public in 1999, mainly because of its $24 billion debt, and has seen its
stock price plummet, dropping to its 52-week low Monday to 9 cents a
share. Earlier this month, Charter asked its financial adviser, Lazard
LLC, to initiate discussions with the company's bondholders about
financial alternatives to improve Charter's balance sheet.
href='http://www.bizjournals.com/stlouis/stories/2008/12/29/daily2.html?ana=from_rss'>Read
more.
Obama Tax Cuts Likely Soon
President-elect Barack Obama's economic stimulus plan will include an
immediate tax cut for middle-class families, and the incoming
administration hopes to enact permanent tax cuts soon thereafter, a
senior adviser to Obama said Sunday, the Washington Post reported
yesterday. David Axelrod said the stimulus package will be implemented
soon, given the worsening economy, and could cost $675 billion to $775
billion. The massive recovery plan will seek to create or save 3 million
jobs, he said. Giving people more spending money will 'help get our
economy going again,' Axelrod said. He also said he is hopeful that the
recovery plan will be ready for Obama to sign soon after his Jan. 20
inauguration.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/28/AR2008122801851.html'>Read
more (free subscription required).
Billionaire Sells off Ford Shares
The billionaire investor Kirk Kerkorian has sold his remaining
shares of automaker Ford Motor Co., according to his investment firm,
the Tracinda Corp., Reuters reported yesterday. Tracinda, which briefly
ranked as Ford's largest outside investor earlier this year, said in a
regulatory filing in October that it had begun working with bankers to
sell the 133.5 million shares of the automaker that it still held at
that time. Mr. Kerkorian's final pullout from Ford completed a costly
retreat for the activist investor, who has a mixed track record with
investments at all three Detroit-based automakers. Mr. Kerkorian, 91,
previously held a nearly 10-percent stake in the General Motors
Corporation and made a failed bid for Chrysler LLC. He surprised
analysts and investors in April when he began buying Ford shares and
spent over $1 billion to take a stake in Ford at an average price per
share of $7.10.
href='http://www.nytimes.com/2008/12/30/business/30ford.html?_r=1&ref=business'>Read
more.
Holiday Sales Drop to Force Bankruptcies,
Closings
U.S. retailers face a wave of store closings, bankruptcies and takeovers
starting next month as holiday sales are shaping up to be the worst in
40 years, Bloomberg News reported yesterday. Retailers may close 73,000
stores in the first half of 2009, according to the International Council
of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among
chains shuttering underperforming locations. More than a dozen
retailers, including Circuit City Stores Inc., Linens 'n Things Inc.,
Sharper Image Corp. and Steve & Barry's LLC, have sought bankruptcy
protection this year as the credit squeeze and recession drained sales.
Investors will start seeing a wide variety of chains seeking bankruptcy
protection in February when they file financial reports. Sales at stores
open at least a year probably dropped as much as 2 percent in November
and December, the ICSC said last week, more than the previously
projected 1 percent decline. That would be the largest drop since at
least 1969, when the New York-based trade group started tracking data.
Gap Inc. and Macy's Inc. are among retailers that will report December
results on Jan. 8.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aOVg4pkw229o&refer=home'>Read
more.
Freddie Mac Names Chief Credit Officer
Freddie Mac, the second-largest U.S. home funding company, named Raymond
G. Romano as the company's chief credit officer, Reuters reported
yesterday. Romano will be responsible for credit risk management
activities for the government-sponsored enterprise, which was placed in
conservatorship in September. Romano has served as senior vice president
of credit risk oversight since he joined the McLean, Va.-based company
in 2004. In September 2008 he also assumed the role of acting chief
credit officer while the company conducted a nationwide search for the
position. 'Managing credit effectively is the cornerstone of this
company, particularly in a turbulent economy,' Freddie Mac CEO David
Moffett said in a statement. Romano will report to Moffett. His
responsibilities will include credit policy, counterparty credit risk
management and loss forecasting. The U.S. government seized control of
Freddie Mac and its larger sibling, Fannie Mae, in early September. The
takeover came amid heightened worries about shrinking capital at the
congressionally chartered companies, which have lost billions of dollars
as the worst housing market downturn since the Great Depression brought
on a wave of mortgage defaults.
Ballast Point's Westshore Cove Acquisition Files
Bankruptcy
The Ballast Point Group, a limited liability company redeveloping a
South Westshore, Fla., apartment complex is seeking chapter 11
protection, the Tampa Bay Business Journal reported Monday. Westshore
Cove Acquisition Group LLC's petition was filed Monday in the Tampa,
Fla., bankruptcy court. The company listed assets and debts between $50
million and $100 million. It owns The Cove, a 52-building apartment
complex in Tampa. It is the second bankruptcy in three months connected
to the Ballast Point Group, a residential development firm located
in Petersburg, Fla. The entities were forced into bankruptcy when
Wachovia Bank declared that two loans totaling $22.7 million were in
default, court records state. Since then the court has consolidated the
bankruptcies into one case.
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more.
Superior Offshore Founder Seeks Chapter 7
Conversion
Claiming that bankrupt Superior Offshore International Inc. has no
substantial likelihood of rehabilitating itself and that professional
fees are eating away its remaining value, the man who founded the
undersea oil services company filed a motion last week to convert the
case to chapter 7, BankruptcyLaw360.com reported yesterday.
According to Louis E. Schaefer Jr.'s motion, filed Dec. 23 in the U.S.
Bankruptcy Court for the Southern District of Texas, there is a
continuing diminution of the estate because of a substantial amount of
professional fees that are being incurred unnecessarily. Nearly all of
the debtor's tangible assets have already been liquidated, the motion
says, adding that the case is currently burdened with several sets of
professionals-including the creditors' committee, the equity committee
and their respective lawyers-that can be eliminated in chapter
7. Read more
(subscription required).
Early Motions in Madoff Case to Be Heard Tomorrow
Beginning tomorrow, the federal court in Manhattan will be the
forum for three important issues affecting investors caught in the
widening scandal surrounding Bernard L. Madoff, accused of operating a
$50 billion Ponzi scheme, the New York Times reported today.
Judge Louis L. Stanton of U.S. District Court, who is handling the civil
case against Mr. Madoff, is being urged to consider broadening the
protections normally available to investors in failed Wall Street firms
to allow for the “devastating” circumstances of the Madoff
scandal. Judge Stanton has also established Wednesday as the deadline
for Mr. Madoff to provide federal securities regulators with a full
accounting of his and his New York firm's assets-from real estate to art
works to bank accounts. Because Mr. Madoff operated a brokerage firm,
some of his direct investors may be covered under the Securities
Investor Protection Corporation, a federal fund created to cover fraud
losses in brokerage accounts. But many of the victims in the fraud
scheme were not direct customers of the Madoff brokerage firm, Bernard
L. Madoff Investment Securities. Rather, they had invested in various
“feeder funds,” some of them operated by well-known Wall
Street figures, which in turn invested with Mr. Madoff.
href='http://www.nytimes.com/2008/12/30/business/30madoff.html?ref=business'>Read
more.
In related news, investors looking to recoup some of the $50 billion
they lost in Bernard Madoff's alleged Ponzi scheme may get a better idea
of what the New York financial adviser has left when he is forced to
reveal his assets to regulators this week, according to the Bloomberg
News report on Monday. Madoff must provide a detailed list of all
investments, loans, lines of credit, business interests, brokerage
accounts and other holdings to the Securities and Exchange Commission by
New Year's Eve, a federal judge ruled earlier this month. Madoff's
foreign business units were given until Jan. 26 to provide a similar
accounting. A catalog of Madoff's assets may reveal targets for angry
investors, including hedge funds and charities seeking the return of
their funds. New York-based Bernard L. Madoff Investment Securities
began liquidating after his Dec. 11 arrest for securities fraud. Madoff,
under house arrest in his Manhattan apartment, faces as much as 10 years
in prison and a $5 million fine if convicted. Several investors have
filed suits against Madoff and his firm following FBI allegations that
he admitted the business was 'one big lie.' Investment firms that did
business with Madoff also have been sued. Madoff, who hasn't formally
responded to the securities fraud charge, is due in court Jan. 12,
unless he is indicted before then. Prosecutors and defense lawyers also
may agree to postpone the court date.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/12/27/AR2008122700064.html'>Read
more.
U.S. Agrees to a Stake in GMAC
The Treasury Department injected $5 billion into GMAC as part of a deal
announced Monday night that will let the automobile finance company
convert itself into a bank holding company to reduce its borrowing costs
and thus borrow money at low rates from the Federal Reserve, according
to a New York Times article today. The deal came as the
Treasury was also preparing to provide General Motors and Chrysler with
$4 billion each in the first part of a bailout plan for the car
companies. The Treasury will buy $5 billion worth of preferred equity
shares in GMAC, which used to be the financing subsidiary of General
Motors and is now owned jointly by GM and Cerberus Capital Management,
the private equity firm that owns Chrysler. A Treasury official said
that the deal had already closed and that GMAC already had the money. In
addition, the Treasury said it would lend General Motors $1 billion so
that it could purchase additional equity offered by GMAC.
href='http://www.nytimes.com/2008/12/30/business/30auto.html?_r=1&ref=business'>Read
more.
Chesapeake Corp. Files for Bankruptcy Protection
Specialty packaging company Chesapeake Corp. has filed for chapter 11
bankruptcy protection in the Eastern District of Virginia in Richmond
and plans to sell itself to a group of investors for about $485 million,
the Associated Press reported today. Chesapeake, which makes paper
cartons and plastic containers for the health care, beverage and food
markets, has cut jobs and realigned operations in an effort to foster
growth and reduce costs. The company struggled earlier this year to
complete a $250 million credit line with a group led by GE Commercial
Finance Ltd. and General Electric Capital Corp. to refinance prior debt.
The group of investors buying Chesapeake include Irving Place Capital
Management LP and Oaktree Capital Management LP, which say they plan to
continue operations. All of Chesapeake's manufacturing and distribution
facilities are fulfilling customer orders as usual, the company
said.
href='http://news.yahoo.com/s/ap/20081230/ap_on_bi_ge/chesapeake_corp_bankruptcy_1'>Read
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Banks, Landlord Blamed in Heller Bankruptcy
Heller Ehrman's attorney blames bank intransigence and a
landlord's 'ridiculous' move for the firm's chapter 11 bankruptcy
decision on Sunday, according to a BankruptcyLaw360.com report
today. Two banks are short $6 million, and a San Francisco landlord is
looking at $30 million less than a court said it was owed. The latest
filing puts a stay on at least five suits filed against the firm since
it announced on Sept. 26 that it would dissolve. According to a memo
sent from the firm's dissolution committee to former Heller employees,
the decision to file for bankruptcy protection was driven by its San
Francisco landlord, 333 Bush Associates, which sought and received a
writ of attachment on Dec. 19, making it a secured creditor owed
approximately $48 million. A lack of cooperation from the firm's banks,
Bank of America and Citibank, was also blamed.
href='http://biz.yahoo.com/law/081230/d2ad5096815a53c9a345dc5e4e9f4eb8.html?.v=1'>Read
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New Jersey Jewelry Chain Files Chapter 7
Christian Bernard Jewelers, a 30-year old jewelry chain that operates 15
stores, abruptly filed for chapter 7 on Dec. 26, JCKOnline.com reported
today. In a corporate resolution accompanying its chapter 7 filing, the
Secaucus, N.J.-based company noted that “due to a precipitous fall
in consumer spending, the company's shops are underperforming” and
“the Corporation's existing lender has informed it that it may not
renew the company's current lines of credit” and
“alternative credit facilities appear to be unavailable.”
Christian Bernard Jewelers operated 15 stores in Long Island,
Connecticut, Pennsylvania, Maryland, Virginia, Washington, D.C., North
Carolina, Chicago and St. Louis.
Ginn Co. Affiliates File for Bankruptcy
Several Ginn Co. affiliates that were behind two of the company's
Florida housing developments filed for bankruptcy last week, according
to the Palm Beach Post yesterday. The developments, along with
a third in the Bahamas and a fourth in North Carolina, were covered by a
$675 million Credit Suisse loan that the Celebration, Fla.-based company
defaulted on earlier this year. The North Carolina property, Laurelmor,
has been sold, and Ginn entered into a joint venture with the lender to
complete Ginn sur Mer in the Bahamas. Ryan Julison, vice president of
communications, said that the company's local real estate projects were
not affected by last week's bankruptcy filings.