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April 8, 2008
Democrats to Offer Housing Stimulus Plan
House Democrats are
crafting a response to the nation's housing crisis that would offer tax
breaks to homeowners, first-time homebuyers and developers of low-income
housing but would not provide tax relief to the struggling homebuilding
industry, the Washington
Post reported today. The measure, which is
expected to be unveiled today, puts the House at odds with Senate
leaders, who last week agreed on a bipartisan housing plan that includes
billions of dollars in tax refunds for home builders, lenders and other
money-losing businesses. 'We need to provide relief to the buyers and
families themselves, not just the banks and builders,' House Ways and
Means Committee Chairman Charles B. Rangel (D-N.Y.) said yesterday. The
House proposal would create a temporary tax credit of as much as $8,000
for first-time buyers and would increase the availability of tax credits
for investors in low-income housing. Like the Senate bill, it would
create a standard deduction for property taxes that would assist more
than 28 million homeowners who do not itemize on their federal tax
returns. The House legislation would also expand the authority of state
and local housing finance agencies to use tax-exempt bonds to refinance
troubled mortgages.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/07/AR2008040702427_pf.html'>Read
more.
In related news, the Senate today will resume its consideration of
the housing stimulus package that Senate leadership crafted last
week.
name='2'>Student Loan Insurer Files for Bankruptcy
Defaults, delinquencies
and shrinking revenue have forced Education Resources Institute Inc.,
a
size='3'>Boston nonprofit
that insures more than $17 billion in privately issued student loans, to
file for chapter 11 protection, the
size='3'>Wall Street Journal reported today.
The organization, known as TERI, is linked to First Marblehead Corp., a
Boston bank that had been a leading player in packaging student loans
into complex asset-backed securities.
size='3'>First
face='Times New Roman' size='3'>Marblehead
had purchased loans from Bank of America Corp., JPMorgan
Chase & Co. and others, and arranged for TERI to insure them in
exchange for fees. The loans were then packaged into trusts that issued
notes to investors. However, that market dried up this past fall amid
the broader credit crisis and doubts about complicated asset-backed
securities in subprime mortgages and other kinds of debt.
href='http://online.wsj.com/article_print/SB120760970182496359.html'>Read
more. (Registration required.)
W.R.
Grace to Settle Asbestos Claims for $1.8 Billion
W.R. Grace & Co., the
chemical maker forced into bankruptcy seven years ago by more than
135,000 asbestos injury claims, agreed to settle the remainder of those
cases by paying as much as $1.8 billion, Bloomberg News reported
yesterday. The accord, disclosed yesterday in a regulatory filing, would
eliminate the last major hurdle to Grace's reorganization if it's
approved by a bankruptcy judge in
w:st='on'>
size='3'>Pittsburgh
the deal, Grace will no longer have liability for its asbestos products
and all future lawsuits would be settled through a trust fund. Under the
settlement, the company will pay as much as $1.8 billion into the trust
for victims of its asbestos-related products, including insulation. The
fund will first collect $250 million, then an additional $1.55 billion
from 2019 through 2034, guaranteed by 50.1 percent of Grace common
stock.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=au1uTdYS4iEY'>Read
more.
Critics Fear That
Market’s Watchdog May Be Losing Its Bite
Critics are worried that
the Securities and Exchange Commission is losing its bite amid the
recent financial crisis, the
size='3'>New York Times reported today. Wall
Street and the broader business community have pushed aggressively in
recent years to roll back regulation, arguing that the
size='3'>United States
size='3'>is losing its competitive edge. “There has been less
emphasis on investor protection and more on this issue of the
competitiveness of markets,” said Sen. Jack Reed
(
size='3'>D-
size='3'>R.I.). In March,
Reed and Senate Banking Committee Chair
w:st='on'>
size='3'>Chris
Conn.) asked the Government Accountability Office to look into the
penalties that the SEC has been levying recently. Penalties, together
with the return of ill-gotten gains, fell by half in the 2007 fiscal
year, to $1.6 billion. Staff lawyers in the SEC enforcement division say
high turnover, tight budgets and a new, looser attitude toward corporate
wrongdoing are sapping morale. The staffing and budget of the SEC have
lagged far behind the explosive growth of the markets the commission
must police.
href='http://www.nytimes.com/2008/04/08/business/08sec.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Gallery Creditors Approve Reorganization Plan
Movie Gallery
Inc.’s creditors endorsed the company's second amended
reorganization plan, which anticipates an exit from bankruptcy later
this year, Bankruptcy
Law360 reported yesterday. The results of the
vote on the reorganization plan filed Friday show that 95 of the 99
creditors collectively holding roughly $464 million – more than
two-thirds of the debt under the Movie Gallery's first lien credit
facilities – voted in support of the plan. Under the plan support
agreement, Sopris Capital Advisors LLC committed to backstop a $50
million rights offering under the plan and placed $50 million into
escrow in support of its backstop commitment, Movie Gallery announced
earlier this year. A confirmation hearing on Movie Gallery’s plan
is slated for April 9.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=52325'>Read
more. (Registration required.)
name='6'>Schwarzenegger Supports Plan in Pacific Lumber
Case
California Gov. Arnold
Schwarzenegger is supporting a reorganization plan proposed by
MRC/Marathon in the Pacific Lumber bankruptcy case, contending that the
group's outline best satisfies the goal of protecting the
size='3'>California
size='3'>timberlands,
size='3'>Bankruptcy Law360 reported yesterday.
Pacific Lumber creditors had three separate reorganization plans to
consider in the case. In addition to MRC/Marathon, the Bank of New York
Trust Company, Pacific Lumber's indenture trustee, and Pacific Lumber,
together with its parent company Maxxam Inc., have also submitted
proposals. In a letter of support filed on Friday, Schwarzenegger said
that the MRC/Marathon Structured Finance plan had met the five
public-interest principles needed to win his backing. “The
MRC/Marathon plan best satisfies the first and second principles —
compliance with federal and state laws, permits and agreements —
because it makes concrete pledges to abide by all environmental laws,
existing permits and agreements,” the letter said. A hearing to
consider the confirmation plans is set for today.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=52330'>Read
more. (Registration required.)
w:st='on'>
name='7'>U.S.
face='Times New Roman' size='3'> Energy Biogas Closes Bankruptcy
Case
Nearly a year after U.S.
Energy Biogas Corp. (USEB) emerged from bankruptcy protection,
Judge Robert
Drain closed the chapter 11 case, ruling on
Friday that the reorganized debtor had tied up all loose ends,
Bankruptcy Law360
reported yesterday. USEB filed for bankruptcy protection
on Nov. 30, 2006. During its six months in bankruptcy protection, USEB
saw liabilities of more than $200 million knocked down to less than $110
million. While USEB’s business was sound leading up to its
bankruptcy filing, its loan with Countryside Power Income Fund impaired
the company’s capital structure to the point where chapter 11
protection was the best option, USEB said after filing for bankruptcy.
USEB and Countryside came to terms in January, with Countryside
receiving a $99 million claim that will go to its Canadian
subsidiary.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=52329'>Read
more. (Registration required.)
Home
Loan Banks End Merger Talks
The Federal Home Loan
Banks of Dallas and Chicago called off their merger talks amid
uncertainty over the value of the Chicago bank's holdings of mortgage
securities, the Wall
Street Journal reported today. The failure of
the merger talks, which started in August, is the latest sign of the
strains on financial institutions resulting from turmoil in the mortgage
market, where rising defaults and falling home prices have slashed the
market value of home loans. The nation's 12 regional home-loan banks
have stepped up their lending to commercial banks and thrifts as other
sources of funding have dried up.
size='3'>However, the
w:st='on'>
size='3'>Chicago
bank faces losses that may call into question the adequacy of its
capital base, which stood at 4.9 percent of assets at the end of 2007.
Unlike its
face='Times New Roman' size='3'>Dallas
counterpart, the Chicago bank aggressively expanded its
purchases of home mortgages in the first half of this decade. Regulators
criticized the Chicago bank's risk controls in 2004 and since then have
imposed tighter restrictions on the bank.
href='http://online.wsj.com/article/SB120759838200395815.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='9'>Carlyle Fund to Target Distressed Assets
A month after suffering
the biggest embarrassment in its 20-year history, the Carlyle Group
closed late last week on a $1.35 billion fund to buy distressed assets,
the Wall Street
Journal reported yesterday. The new fund,
Carlyle Strategic Partners II, will do everything from investing in
publicly traded bonds and bank loans to purchasing ailing companies
outright. It is the first Carlyle vehicle to close since the collapse of
Carlyle Capital Corp., a fund also managed by Carlyle Group.
href='http://online.wsj.com/article/SB120753238767993945.html'>Read
more. (Registration required.)
name='10'>Big Three Automakers Look to Export More
w:st='on'>
size='3'>U.S.
size='3'>Cars
Last year's landmark
labor deals and the weak dollar are breathing new life into
size='3'>U.S.
leading
face='Times New Roman'
size='3'>Detroit
makers to plan sizable exports of U.S.-made vehicles to markets around
the world, the Wall
Street Journal reported today. General Motors
Corp. is looking to export U.S.-made vehicles to Europe as well as
to
size='3'>China
American markets such as
w:st='on'>
size='3'>Brazil.
Chrysler LLC, primarily spurred by exchange rates, has already started
shifting production from Europe to the United States
size='3'>to take advantage of lower costs and available plant capacity.
Ford Motor Co. said it is considering ramping up exports if it can
bring labor costs down.
href='http://online.wsj.com/article_print/SB120761191252596525.html'>Read
more. (Registration required.)
International
name='11'>Rules May Pressure
w:st='on'>
size='3'>U.K.
size='3'>Pension Funds
Pension plan advisor
Redington Partners said that the total deficit of
w:st='on'>
size='3'>U.K.
size='3'>pension funds could soar to more than £130 billion, or
roughly $260 billion, under proposed accounting standards that would
tighten rules on liability calculations, the
size='3'>Wall Street Journal reported today.
Pension plans have built a combined £21 billion surplus under
current accounting standards. Proposals to toughen longevity assumptions
would also add to pension funds' problems. Companies likely to be
affected are those whose plans are large in relation to their
stock-market value. British Airways PLC, Alcatel-Lucent SA, BT Group
PLC, Air France-KLM SA and Royal & Sun Alliance Insurance Group PLC
would be worst hit, according to Merrill Lynch & Co. Plans at
Deutsche Lufthansa AG, EADS and ThyssenKrupp AG have the largest
deficits compared with the market value of their sponsors.
href='http://online.wsj.com/article/SB120759902858995825.html?mod=googlenews_wsj'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB120759902858995825.html?mod=googlenews_wsj'>