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September 24,
2008
Federal Bailout
Package
Lack of Help Aimed at Homeowners
The White House waged a multifront campaign yesterday to persuade
Congress to accept its vast economic bailout plan, though many in
Congress, still unhappy with what they were hearing, continued to push
for changes that would provide stronger protection for taxpayers and
impose tougher terms on financial institutions, the New York
Times reported today. President Bush told world leaders that
the United States had taken “bold steps” to deal with the
financial crisis, while Vice President Dick Cheney and other top
officials went to Capitol Hill to address lawmakers. Federal Reserve
Chairman Ben S. Bernanke warned the Senate Banking Committee, along with
U.S. Treasury Secretary Henry Paulson, that if they failed to pass the
$700 billion plan, they risked causing a recession, increasing
joblessness and pushing more homes into foreclosure. The lawmakers
objected strenuously to the broad authority Paulson was requesting, the
lack of additional steps to help homeowners avoid foreclosure and the
absence of any demands for ownership stakes in the banks that would be
helped.
href='http://www.nytimes.com/2008/09/24/business/24cong.html?ref=business&pagewanted=print'>Read
more.
The House Financial Services Committee will hold a hearing today
entitled, 'The Future of Financial Services: Exploring Solutions for the
Market Crisis.' The hearing will take place 12:00 p.m. ET in room 2128
of the Rayburn House Office Building.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr092408.shtml'>Click
here to watch the live Webcast.
Experts: Even with
Bailout, Bankruptcy Boom Far from Over
Three days after the U.S. Treasury Department proposed a $700 billion
bailout plan to restore liquidity to the nation's financial markets,
questions have emerged over how the plan would impact the number and
rate of chapter 11 bankruptcy filings, Bankruptcy
Law360 reported yesterday. As congressional leaders met
yesterday to mull the details of the plan, speculation increased among
bankruptcy experts and attorneys who say the bailout will not free up
the amount of capital that is required to restore market confidence and
the funding necessary to keep corporations afloat. Peter Goodman, a
bankruptcy partner at Andrews Kurth LLP, said that even with the
government's help, banks may remain guarded as they analyze whether to
extend corporate loans that are due for refinancing. For Michael Torkin,
partner at Shearman & Sterling LLP, the issue is more about the fact
that there is little correlation between the establishment of a fund to
deal with bad mortgages and the ability of banks to issue high-yield
corporate loans now that the traditional investment banking business
model will be dramatically changed as a result of its
de-leveraging.
href='http://bankruptcy.law360.com/articles/70245'>Read
more. (Subscription required.)
FBI Investigates Four
Firms Seen at the Center of the Credit Turmoil
Federal investigators have opened preliminary probes into the financial
troubles of four high-profile companies that are at the center of the
current financial turmoil that the Bush administration says requires an
unprecedented proposed taxpayer-funded bailout to clean up, the Wall
Street Journal reported today. The Federal Bureau of
Investigation's preliminary inquiries are focusing on whether fraud
helped cause some of the troubles at Fannie Mae, Freddie Mac, Lehman
Brothers Holdings Inc. and American International Group Inc. The FBI
says it now has 26 companies under investigation, in addition to
pursuing more than 1,400 mortgage-fraud cases nationwide.
href='http://online.wsj.com/article/SB122221103979869021.html'>Read
more. (Subscription required.)
Delphi to Freeze Pension Contributions
Delphi Corp. won court approval yesterday to freeze contributions to its
pension plans for hourly and salaried workers as part of its plan to
exit bankruptcy protection, the Wall Street
Journal reported today. Bankruptcy Judge Robert
Drain signed off on Delphi's request in which the auto supplier
will provide workers with replacement plans based on defined
contributions by Delphi. Delphi is also planning to ask Judge Drain to
shift $3.4 billion in pension liabilities to GM.
href='http://online.wsj.com/article/SB122220048628068239.html'>Read
more. (Subscription required.)
Creditors to Vote on
Asarco Bankruptcy Exit Plans
Bankruptcy Judge Richard S. Schmidt cleared the way for creditors of
bankrupt copper miner Asarco LLC to vote on competing plans filed by two
suitors to restructure the company and allow it to exit bankruptcy
protection, Reuters reported yesterday. Judge Schmidt approved a plan
filed by Asarco and sponsored by a $2.6 billion bid for the company from
Sterlite, as well as a competing plan from its Mexican parent company
Grupo Mexico. Asarco, which owns three copper mines in Arizona, filed
for chapter 11 protection in 2005 after it was sued for more than a $1
billion in environmental clean-up costs. Grupo Mexico, which lost
control of Asarco's board due to the bankruptcy, is trying to stop
Sterlite Industries Ltd.'s bid for the U.S. mining company.
href='http://www.reuters.com/article/marketsNews/idUSN2341074520080924'>Read
more.
Judge Upholds Dana
Corp. Asbestos Deals
U.S. District Judge John G. Koeltl rejected a challenge to a bankruptcy
court's approval of four settlements covering about 7,500 parties who
asserted asbestos-related personal injury claims against auto parts
maker Dana Corp., Bankruptcy Law360 reported yesterday.
The appeal was lodged by an ad hoc committee of five asbestos personal
injury claimants who argued that the bankruptcy court made a mistake in
approving the settlement agreements because they were not filed as part
of the public record in Dana's jointly administered bankruptcy cases. In
October 2007, the U.S. Bankruptcy Court for the Southern District of New
York gave Dana permission to file the settlement agreements under seal.
Dana then asked for court approval of the deals, which involved a total
payment from Dana of $2 million, or about $267 per claimant, according
to Judge Koeltl's ruling.
href='http://bankruptcy.law360.com/articles/70173'>Read
more. (Subscription required.)
Mortgage Lending
Mortgages Ltd.
Investors Ask to Form Committee
Investors who contributed to a fund that bankrupt Mortgages Ltd. used to
fulfill loan obligations to another fund have asked the judge overseeing
the chapter 11 proceedings to form an official committee to represent
their interests, Bankruptcy Law360 reported today. The
group of 44 investors put money into Mortgages Ltd.'s Value-To-Loan
Opportunity Fund I LLC, which is believed to have extended about $7.7
million worth of loans to the mortgage lender's investor opportunity
funds or pools, known as MP funds, it claimed on Monday. Each of the VTL
Fund investors contributed about $175,000, the group said.
href='http://bankruptcy.law360.com/articles/70182'>Read
more. (Subscription required.)
GMAC to Sell Home
Services Unit to Brookfield Asset
GMAC, the home and auto lender, will sell its home services unit to
Brookfield Asset Management of Canada as it expands efforts to raise
cash, Bloomberg News reported yesterday. The transaction, which will
stretch Brookfield's Residential Property Services unit into the United
States, will most likely be completed in the fourth quarter this year,
Brookfield said. Terms were not disclosed. GMAC is trimming mortgage
operations after seven consecutive losing quarters at its Residential
Capital business.
href='http://www.nytimes.com/2008/09/24/business/24gmac.html?ref=business&pagewanted=print'>Read
more.
New York Homebuilder
Files for Bankruptcy
Upstate New York homebuilder Lincoln Logs Ltd. filed for chapter 11
protection, citing a weak real estate market and losses incurred from a
failed acquisition, the Wall Street Journal reported
today. The Chestertown, N.Y.-based manufacturer of log home-building
kits has between $1 million and $10 million in assets and between $10
million and $50 million in debts, according to papers filed Friday with
the U.S. Bankruptcy Court in Albany, N.Y. Lincoln's sales have declined
36 percent since the spring of 2006, and many customers have asked that
shipments of their homes be delayed due to the housing slump.
href='http://online.wsj.com/article/SB122222827641770559.html#printMode'>Read
more. (Subscription required.)
Diamond Glass Files
Amended Liquidation Plan
Bankrupt automotive glass replacement and repair services provider
Diamond Glass Inc. has filed its second amended liquidation plan, which
provides for the liquidation of any remaining assets for the purpose of
repaying claims, Bankruptcy Law360 reported yesterday. The
revisions in the amended plan include protections for officers,
attorneys, accountants and others responsible for Diamond Glass from any
claims or charges of misconduct in the period stretching from the date
the company filed for chapter 11 protection through the confirmation of
the liquidation plan. Diamond Glass sold its assets for roughly $54.6
million at a bankruptcy auction in June to Belron US, a glass repair
subsidiary of Belron SA of Luxembourg.
href='http://bankruptcy.law360.com/articles/70144'>Read more.
(Subscription required.)
Boscov's Bankruptcy
File Sealed
In secret sessions with the judge overseeing its bankruptcy case,
Boscov's Inc. earlier this month won permission to seal court documents
in advance of a Thursday hearing where it will start the process of
putting itself on the chapter 11 auction block, the Wall
Street Journal reported today. The regional
department-store operator filed for protection in August and took a stab
at restructuring, but agreed to sell itself to Versa Capital Management,
a Philadelphia private-equity fund. One day after unveiling Versa's
offer, Boscov's went behind closed doors with Judge Kevin
Gross and emerged with an order authorizing it to file
documents out of public view.
href='http://online.wsj.com/article/SB122222827747070561.html#printMode'>Read
more. (Subscription required.)
Analysis: Holiday
Season Shaping Up to Be Tense Time for Retailers
For many of the nation's retailers, the end of the year is
shaping up to be the most critical holiday season since the recession of
the early 1980s, the New York Times reported yesterday.
Not only are retailers grappling with a sputtering economy and
tight-fisted consumers, but the credit crisis is making it harder for
them to finance their operations. Most retailers that are not already
bankrupt have managed to buy their winter inventories, but that happened
before Wall Street was brought to its knees. With credit continuing to
tighten, industry professionals now think any weak retail chain that
turns in a below-average Christmas performance will be a candidate for
bankruptcy early in the new year.
href='http://www.nytimes.com/2008/09/23/business/23retail.html?sq=bankruptcy&st=cse&scp=4&pagewanted=print'>Read
more.
href='http://www.abiworld.org/webinars/2008/retail_distress/index.html'>Click
here to listen to ABI's media teleconference looking at
distress in the retail sector.
Buffett Deal with
Goldman Sachs Is Seen as a Sign of Confidence
Renowned investor Warren E. Buffett announced yesterday that he would
invest $5 billion in Goldman Sachs, the embattled Wall Street titan, in
a move that could bolster confidence in the financial markets, the
New York Times reported today. Until now, Buffett has
largely refrained from investing in the stricken financial industry,
saying repeatedly that things could get worse. Buffett's conglomerate,
Berkshire Hathaway, unveiled the move only days after Goldman, long the
premier investment house on Wall Street, embarked on a radical plan to
transform itself into a traditional bank to ensure its survival.
Goldman, which examined various options over the last week as its shares
tumbled and some clients abandoned the firm, also said yesterday that it
would sell at least $2.5 billion of common stock to the public.
href='http://www.nytimes.com/2008/09/24/business/24goldman.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
North Carolina
Ministry Files for Bankruptcy
A Charlotte, N.C.-based ministry has filed for bankruptcy protection for
the second time this year, the Charlotte Observer reported
today. A Gift of Love Ministry Inc. filed for bankruptcy protection last
Thursday in U.S. Bankruptcy Court. The ministry first filed for
bankruptcy protection in March, but the case was dismissed after its
attorney withdrew. According to the court filing, the ministry owes
money to between one and 49 creditors and has debts from $100,000 to
$500,000.
href='http://www.charlotteobserver.com/business/story/210133.html'>Read
more.
Regulators Warn
Agents on Poaching from AIG
State insurance regulators are warning agents against trying to frighten
customers into replacing policies from troubled American International
Group Inc. (AIG), the Wall Street Journal reported today.
New York state and Kentucky insurance commissioners said that they had
received complaints about agents representing other companies using
improper sales practices, including an attempt to persuade an elderly
annuity owner to surrender an AIG policy with only three years until
maturity. Meanwhile, some large U.S. banks have suspended sales of AIG
annuities amid the ratings downgrade last week of some of AIG's more
than 70 state-regulated insurance subsidiaries, although the ratings
generally remain strong. J.P. Morgan Chase & Co. has confirmed that
it suspended sales of AIG insurance products as of Sept. 15 and hasn't
set a date for resuming sales. The downgrades occurred before the
federal government agreed to lend the parent holding company $85
billion.
href='http://online.wsj.com/article/SB122221708443269603.html'>Read
more. (Subscription required.)