December 31,
2008
Report: AIG Seeks Easing of Rules on Disposals
American International Group (AIG) said it is prepared to ask
the U.S. Federal Reserve to relax rules on its $60 billion-plus
disposals program to allow bidders to use a greater proportion of shares
to pay for its assets, Reuters reported today. AIG was looking at
installment payments and other flexible options to make it easier for
potential buyers to bid for assets and increase its chances of surviving
as an independent company. The moves, being considered by AIG's
management, are aimed at boosting competition for the disposals and
countering the perception that the company will be forced to sell units
at bargain prices to repay the government aid. AIG has several planned
asset sales to raise funds to repay a $150 billion U.S. government
bailout. Under the current deal with the Fed, AIG can sell assets only
to bidders paying at least 90 per cent of the price in cash.
href='http://www.reuters.com/article/ousiv/idUSTRE4BU17S20081231'>Read
more.
Fed Aims to Buy $500B in MBS by Mid-year
The U.S. Federal Reserve moved forward aggressively with an
effort to drive down mortgage costs, Reuters reported today, setting a
goal of buying $500 billion in mortgage-backed securities (MBS) by
mid-2009. The central bank said it would start buying the securities in
early January under a program announced last month. When it announced
the program, mortgage rates dropped in anticipation of the purchases.
The mortgage-buying program is part of a sustained government effort to
help the nation withstand a severe credit crunch and deep housing
downturn that have tipped the economy into recession and damaged
activity around the globe.
href='http://www.reuters.com/article/ousiv/idUSTRE4BT55Y20081230'>Read
more.
Goody's to Spend Over $7.5M to Chapter 11 Pros
Final fees and expenses have been approved in the Goody's
Family Clothing Inc. bankruptcy proceeding, with debtors' counsel
Skadden Arps Slate Meagher & Flom LLP taking home roughly $3.5
million and the other professionals involved in the case taking home
more than $4 million combined, BankruptcyLaw360.com reported
yesterday. Goody's, which currently operates 287 stores in 20 states
throughout the Southeast, emerged from chapter 11 bankruptcy protection
Oct. 20, less than two weeks after its reorganization plan was approved.
In conjunction with the plan taking effect, Goody's received a $175
million revolving credit facility from GE Commercial Finance Corporate
Lending and exit term loans of $10 million from GB Merchant Partners and
$35 million from PGDYS Lending LLC. The Knoxville, Tenn.-based retailer
filed for chapter 11 protection on June 9, listing assets of
approximately $313 million and liabilities of about $443
million. Read
more.
U.S. Court Closes Maxwell Communication Bankruptcy
A New York judge closed the bankruptcy case of Maxwell
Communication Corp. yesterday, more than 17 years after the British
media empire collapsed amid a string of frauds, Reuters reported
yesterday. U.S. Bankruptcy Judge Robert Gerber signed
an order closing the case yesterday, noting there were no further
contested matters or adversary proceedings in the case. The Maxwell
businesses were thrown into disarray after British publishing magnate
Robert Maxwell died in November 1991 and evidence grew of alleged
massive financial irregularities. Pension fund assets of the public
companies, Maxwell Communication Corp and Mirror Group Newspapers, had
allegedly been looted to prop up parts of the empire. Administrators and
liquidators were appointed in Britain and the United States to recover
sums for creditors. Many of Maxwell's key businesses were sold off at
auction.
SEC Elects to Keep Mark-to-Market Rules
The Securities and Exchange Commission (SEC) issued a report to
Congress that recommended maintaining so-called mark-to-market rules,
but suggested improvements to current accounting practices, according
to the Associated Press yesterday. Proponents of the rules argued
that suspending them would weaken transparency in companies' financial
statements, hurting investors and the capital markets. Critics said the
regulations mandated write-downs that failed to reflect the true value
of mortgage-linked assets and the prices they might fetch in the future.
The SEC's study of the practice, also known as fair value accounting,
was mandated by Congress as part of the $700 billion financial bailout
package passed in October. The law also affirmed the SEC's authority to
suspend mark-to-market accounting.
href='http://www.nytimes.com/2008/12/31/business/31sec.html?ref=business'>Read
more.
Judge Approves Transfer of $28M to Trustee Liquidating Madoff
Firm
A U.S. bankruptcy court judge approved the transfer of $28.1
million to cover expenses tied to the liquidation of Bernard Madoff's
investment firm because of the alleged Ponzi scheme that duped investors
out of potentionally $50 billion, the Associated Press reported
yesterday. Irving Picard, the trustee presiding over
the liquidation of Madoff's investment firm, said the money will cover
employee salaries and other costs. The transferred funds will not affect
any recovery for investors. The funds are being transferred from one
account that had already been frozen. Lawyers continue to investigate if
Madoff had any other accounts that have not yet been frozen. BNY Mellon
already transferred about $883,000 to cover costs tied to the
liquidation. Picard will oversee the liquidation of assets from Madoff's
investment firm as the Securities Investor Protection Corp. (SIPC)
attempts to help investors recoup their money. Reports indicate Madoff
was running the alleged scam for decades.
href='http://www.newsday.com/business/sns-ap-madoff-scandal,0,4201349.story?track=rss'>Read
more.
Scantek Medical Files for Chapter 11
Scantek Medical Inc. of Cedar Knolls, N.J., announced in a
press release yesterday that it filed for chapter 11 protection on Dec.
24. Scantek also announced that it has shipped 35,000 units of its
BreastCare/BreastAlert Differential Temperature Sensor product to a
medical equipment supplier for hospitals and doctors in Brazil. The
purchaser paid Scantek an aggregate of $100,000 to date, and will pay
the balance of the purchase price 180 days after its receipt of the
units.
href='http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/12-30-2008/0004947889&EDATE='>Read
more.
Trustee Named for Dreier LLP
U.S. Trustee Diana Adams sought to appoint
attorney Sheila Gowan as the bankruptcy trustee for law firm Dreier LLP
in its chapter 11 case, according to documents filed in U.S. bankruptcy
court in Manhattan, Reuters reported yesterday. Marc Dreier, who is the
sole equity partner of the law firm, was arrested in New York earlier
this month and accused of scheming to market fake debt from a New
York-based real estate developer to hedge funds and other institutional
investors. The law firm's court-appointed receiver placed the firm into
bankruptcy protection earlier this month. Gowan joined the the New York
office of law firm Diamond McCarthy in April.
Judge Refuses WaMu's Request to Keep Asset Sales
Confidential
The Associated Press reported yesterday that a federal
bankruptcy judge denied a request by Washington Mutual Inc. to keep
details of certain asset sales secret. WaMu, which filed for chapter 11
reorganization in September, wants to sell certain equity holdings and
interests in venture capital funds to generate value for the company and
its creditors. The Seattle-based thrift was the biggest bank to collapse
in U.S. history, with about $307 billion in assets. Washington Mutual
Co.'s attorneys have sought permission to redact details of asset
purchase prices from sale notices that would be sent to interested
parties. WaMu attorney David Berz said that disclosing pricing
details could hurt the value the company might receive and 'chill future
transactions.' He proposed pricing details be given only to WaMu's
creditors committee, bondholders and the U.S. Trustee, subject to
confidentiality agreements. But Joseph McMahon Jr., an
attorney for the U.S. Trustee, said that the assets to be sold are not
part of WaMu's core operations and do not meet the definition of
confidential commercial information whose disclosure could give WaMu's
competitors an unfair advantage. The judge agreed with McMahon, adding
that the court could not approve the sales without knowing the purchase
price.
href='http://www.startribune.com/business/36883384.html'>Read
more.
Home Prices Fell at Sharper Pace in October
Home values in 20 large metropolitan areas across the country
dropped at a record pace in October, the New York Times
reported yesterday, as the fallout from the financial collapse
reverberated throughout the housing market. The price of single-family
homes fell 18 percent in October from a year earlier, according to the
Standard & Poor's/Case Shiller Housing Index. All cities reported
annual price declines in October; prices in 14 of the 20 metropolitan
areas surveyed fell at a record rate as the financial crisis reached a
critical point. After increasing steadily through the first part of the
decade, home prices have fallen every month since January 2007. Prices
are falling at their fastest pace on record, a sign that the housing
market is a long way from recovery. Only 2.5 percent of Americans say
they plan to buy a home in the next six months, according to a December
survey of consumers by the Conference Board. Despite relief from high
gasoline prices, overall consumer confidence dropped to its lowest
levels on record this month after rising slightly in November, as
Americans braced for a long recession.
href='http://www.nytimes.com/2008/12/31/business/economy/31econ.html?ref=business'>Read
more.
Philadelphia Plastics Co. Files for Chapter 11
Constar International Inc. has filed for a prepackaged chapter
11 reorganization, hoping to shed $175 million in debt and reduce
interest expenses by about $19.3 million, the Philadelphia
Inquirer reported yesterday. The Philadelphia-based producer
of plastic containers for food and beverages said that holders of its
subordinated debt had agreed to a debt-for-equity exchange. Constar and
some of its subsidiaries filed the voluntary petitions in the U.S.
Bankruptcy Court in Wilmington, Del. Under the restructuring plan, which
the company expects will be completed by early spring, holders of the
subordinated notes will convert the face amount plus the full amount of
the interest payment due Dec. 1, 2008, which will not be paid, into
Constar common stock.
href='http://www.philly.com/inquirer/breaking/business_breaking/20081230_Constar_filed_for_Chapter_11_reorganization.html'>Read
more.
American Greetings Acquires Recycled Paper Greetings Inc.
American Greetings Corp. reached an agreement to acquire
bankrupt Chicago-based Recycled Paper Greetings Inc.,
TradingMarkets.com reported yesterday. The transaction is
subject to chapter 11 court approval and other closing conditions. The
prepackaged reorganization plan is supported by Recycled Paper's secured
creditors. Trade creditors are expected to be paid in full under the
plan.
href='http://www.tradingmarkets.com/.site/news/Stock%20News/2102768/'>Read
more.
Lehman Asks for More Time
Lehman Brothers Holdings Inc. has asked a U.S. bankruptcy court
for a six-month extension to file its chapter 11 bankruptcy plan, saying
that the case is large and complex and it would need more time, Reuters
reported yesterday. According to court documents filed late on Monday,
Lehman's initial 120-day exclusivity period will run out on Jan. 13, and
if the court does not grant the request, creditors or other parties
could propose competing plans. The company said that its limited
employees must recover and review 2,000 terabytes of data that would
completely fill 20,000 computers to the maximum and that it has also
faced challenges relating to at least 76 foreign insolvency proceedings
that have been initiated in more than 15 countries since it filed for
bankruptcy protection. An extension is 'absolutely necessary,' Lehman
said in the court papers, as it believes neither the company or any
other party of interest in the case could come up with a plan and build
consensus among the company's vast creditors for that plan in 120 days.
A court hearing on the request is set for Jan. 14.
Automaker Shares Rev Up
Shares of automakers got a jump-start early in yesterday's
trading session as investors anticipated a turnaround in the stalled
auto industry following news that the U.S. government agreed to bolster
the former financing arm of General Motors, Forbes.com reported
yesterday. Late Monday, the U.S. Treasury Department offered funds from
the Troubled Asset Relief Program to GMAC, the financing firm that is
still 49 percent owned by General Motors. Cerberus Capital Management
currently controls 51 percent of the company. The Treasury said that it
will buy a $5.0 billion stake in GMAC and will give GM up to $1.0
billion to invest in the financial firm, freeing up auto financing for
consumers and dashing fears of insolvency for a company that has
struggled under the global economic slowdown and tightened credit
conditions.
href='http://www.forbes.com/equities/2008/12/30/gmac-gm-automakers-markets-equity-cx_mp_1230markets09.html?partner=autos_newsletter'>Read
more.
Sidley Lawyers Request $1,100 Hourly for Tribune
Bankruptcy Work
Sidley Austin lawyers are asking as much as $1,100 an hour for
bankruptcy work on Tribune Co., surpassing the rates charged by Weil,
Gotshal & Manges in the Lehman Brothers Holdings Inc. case, the
largest in history, Bloomberg News reported yesterday. Tribune, the
Chicago-based newspaper publisher taken private by real-estate
billionaire Sam Zell, filed for bankruptcy on Dec. 8. The company sought
court approval in a Dec. 26 filing to pay Sidley's bankruptcy group
$575-$1,100 an hour for partners, $400-$875 an hour for counsel and
senior counsel, $240-$650 an hour for associates, and $95-$385 an hour
for paraprofessionals. “That's the highest hourly rate I have seen
or heard of for a bankruptcy lawyer,” said Prof. Lynn
LoPucki, who teaches bankruptcy law at the University of
California at Los Angeles. “For the past 11 years the fees of
bankruptcy professionals have been steadily rising-through good times
and bad.”
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aI62AiqtdCtQ'>Read
more.