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June 10, 2009
Autos
As Supreme Court Clears
Path, Chrysler Is Set to Exit Bankruptcy
Chrysler is poised to emerge from bankruptcy
today after the U.S. Supreme Court declined yesterday to hear a
challenge by three Indiana state funds and several consumer groups to
the sale of most of its assets to Fiat, the
face='Times






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size='3'>New York Times reported today. The
refusal by the Supreme Court to revisit the matter, after two lower
courts approved the sale, removes the uncertainty posed in a
decision by Justice Ruth Bader Ginsburg to halt the deal on Monday
temporarily pending further review. The decision by the Supreme Court,
disclosed in a two-page order, made it clear that the justices were not
ruling on the merits of the challenge by the Indiana funds, which had
protested the government’s treatment of Chrysler’s secured
lenders. Instead, according to the order, the Indiana funds “have
not carried the burden” of proving that the Supreme Court needed
to intervene.
href='http://www.nytimes.com/2009/06/10/business/global/10chrysler.html?_r=1&hp=&pagewanted=print'>Read
more.
In related news, Sen. Bob Corker (R-Tenn.) is asking
Congress to consider legislation that would force Chrysler LLC and
General Motors Corp. to use some of the U.S. Treasury funds they
received to reimburse the auto dealers that are slated for
closure, Bankruptcy
Law360 reported yesterday. The senator's
legislative move came Thursday in the form of an amendment to a major
tobacco bill. Corker said that the purpose of the Auto Dealers
Assistance Amendment was 'to apply pressure on the automakers to keep
their word to rejected dealerships and fully reimburse them for their
inventories of vehicles and parts.' Corker's amendment would require
Chrysler and GM to use any funding received from the U.S. Treasury while
in chapter 11 to fully reimburse all rejected dealers for the cost of
all parts and inventory in the dealer’s possession on the date of
the bankruptcy filing as well as any other obligations to dealers under
franchise agreements. The amendment would also give the dealerships a
minimum of 180 days to shut down their businesses and sell off their
inventories through the creation of a wind-down period.
href='http://bankruptcy.law360.com/print_article/105508'>Read
more. (Subscription required.)
Senate Panel to Examine
the Impact of Federal Assistance on the Domestic Automobile
Industry
The Senate Banking Committee will hold a hearing today
titled “The State of the Domestic Automobile Industry: Impact of
Federal Assistance.” The witnesses at the
hearing will be Ron Bloom, Senior Advisor on the Auto Industry, U.S.
Department of Treasury, and Edward Montgomery, White House Director of
Recovery for Auto Communities and Workers. The hearing will take place
at 2:30 p.m. ET.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=e4434686-9de0-4d73-99eb-b49b0ac31ee5'>Click
here for more information.
Former AT&T Chief to
Become GM Chairman
Edward Whitacre Jr., who turned AT&T Corp. into
the world's largest telecommunications company, will become chairman of
General Motors Corp. when the company leaves bankruptcy, the
size='3'>Wall Street Journal reported today.
Whitacre's selection, made by Treasury Department officials, comes as GM
and the government race to reshape GM's culture after it ran out of
money in December and entered bankruptcy protection last week. Whitacre
has never run a manufacturing company but is known as a straight-talking
executive with an aptitude for technology and a track record of working
closely with the government in the heavily regulated phone industry.
Those skills could prove critical as GM restructures under Treasury
scrutiny.
href='http://online.wsj.com/article/SB124455917011697805.html'>Read
more. (Subscription required.)
Cuomo Subpoenas Loan
Modification Companies
New York Attorney General Andrew M. Cuomo plans to sue
American Modification Agency and has subpoenaed information from 14
similar companies as part of a nationwide investigation, Reuters
reported today. Cuomo accused the company of charging upfront fees in
violation of state law, and falsely promoting a 90-100 percent success
rate in modifying mortgages. Cuomo also said that his subpoenas seek
information about loan modifiers’ fees, services and
communications, as well as their marketing practices, often through
television advertisements. Last month, the Federal Deposit Insurance
Corp. issued guidance about loan modifications, cautioning that
“scam artists will demand a large upfront fee, often thousands of
dollars, and they do very little to actually help.”
href='http://www.nytimes.com/2009/06/10/business/10loan.html?ref=business&pagewanted=print'>Read
more.
General Growth Fights
Lenders Attempts to Have Mall Subsidiaries Dismissed from Chapter
11
General Growth Properties Inc. (GGP) and its unsecured
creditors are pushing back against attempts by lenders to get some of
GGP's shopping mall subsidiaries dismissed from its chapter 11 case,
arguing that the malls will face insolvency in the long term if they do
not restructure,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In opposition briefs filed Monday, GGP and
its unsecured creditors’ committee denied allegations by ING
Clarion Capital Loan Services LLC and Wells Fargo & Co. that the
company placed some of the special purpose entities that operate its
shopping malls into bankruptcy in bad faith. GGP said that although the
shopping malls were not in immediate danger of becoming insolvent, they
faced massive debt that would mature in the next few years, which they
would not be able to pay. The company said that the subsidiaries likely
couldn't refinance the debt because their financing had come mostly from
the commercial mortgage-backed securities market, which collapsed last
year. Read
more. (Subscription required.)
WCI Communities Submits
Reorganization Plan
Bankrupt homebuilder WCI Communities Inc. on Monday
submitted its disclosure statement and chapter 11 reorganization plan to
emerge from court protection,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported yesterday.
Under the reorganization plan, holders of priority claims with WCI
Communities will be paid in full upon the distribution date, which is
proposed to be 10 days following the effective date of the plan.
Prepetition lenders will receive a pro rata share of New WCI
senior term notes as well as New WCI senior subordinated PIK notes and
95 percent of shares of New WCI common stock issued under the plan.
Secured claims holders, other than those holding prepetition or
debtor-in-possession claims, will receive a single cash payment equal to
the amount of the secured claim plus accrued post-petition interest
through the effective date, according to the proposed plan. Also under
the plan, New WCI will have a five-member board of directors, including
the CEO of the new iteration of the company, three individuals appointed
by prepetition lenders and one member appointed by the creditors
committee. The case is
face='Times New





Roman'
size='3'>WCI Communities Inc., case number
08-11643, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/105512'>Read
more. (Subscription required.)
Travelers Loses Bid for $33
Million from Bankrupt Builder
U.S. District Court Judge Lawrence K. Karlton on
Friday rejected Travelers Casualty and Surety Co. of America's bid for a
summary judgment to collect more than $33 million in paid and
future claims in connection with a bond guaranty issued to the owner of
bankrupt Dunmore Homes Inc., finding that the anticipated loss cannot
yet be calculated,
face='Times New









Roman'
size='3'>Bankruptcy Law360 reported yesterday.
Dunmore Homes filed for chapter 11 protection in November 2007.
Travelers, which guaranteed a range of bonds for Dunmore Homes and
related business entities, sought indemnification for around $8.2
million in claims and related costs it has disbursed to claimants under
certain payment bonds, and for an additional $25.2 million in collateral
security to guard against pending claims for payment and performance
bonds, according to the opinion. Judge Karlton declined to grant
Travelers' summary judgment on its claims, writing that the defendants
need the remaining 16 months scheduled for discovery in order to prove
that they owe the insurer less than $33 million.
href='http://bankruptcy.law360.com/articles/105464'>Read
more. (Subscription required.)
Obama Drops Tough Plan on
Bank Executive Compensation
The Obama administration is dropping its plan to cap
salaries at firms receiving government bailout money, leaving them
subject to congressionally imposed limits on bonuses, the
face='Times New Roman'>Wall
Street Journal reported today. In addition to
standing behind the restrictions passed by Congress in February, the
administration plans to push for broad changes in compensation practices
across the financial-services industry. It also will appoint a 'pay
czar' to monitor the firms receiving the most government aid. Treasury
Secretary Timothy Geithner is expected to push all firms - not just
those receiving funds from the government's Troubled Asset Relief
Program - to more closely tie incentive compensation to long-term
performance by paying employees in restricted stock, rather than
cash.
href='http://online.wsj.com/article/SB124460111423500951.html#mod=testMod'>Read
more. (Subscription required.)
Fontainebleau Las Vegas
files for Chapter 11
Casino-resort developer Fontainebleau Las Vegas LLC
said yesterday that it has filed for chapter 11 protection after failing
to get certain lenders to provide about $800 million in construction
funding to complete the company's $2.9 billion property on the Las Vegas
Strip, the Associated Press reported today. Fontainebleau Las Vegas had
filed a $3 billion lawsuit in April against Bank of America, JPMorgan
Chase Bank, Deutsche Bank Trust Company Americas and eight other lenders
in an effort to access the prearranged financing to pay its 3,000
construction workers and finish the project, which is 70 percent
complete and had eyed an October opening. The complaint alleged that the
lenders terminated their agreement to provide an $800 million revolver
loan due to one or more unspecified 'events of default' by
Fontainebleau. However, the developers said that they didn't default on
any part of their agreement.
href='http://www.google.com/hostednews/ap/article/ALeqM5hLD-0_7F63gvofj7hfColtXQLoVQD98NIT8O0'>Read
more.
Eddie Bauer May Be Headed
into Bankruptcy Court
Three-consecutive years of losses and a high debt load
may be too much for Eddie Bauer Holdings to overcome and the outdoor
clothing retailer may seek bankruptcy protection as soon as this week,
Bloomberg News reported today. Hilco Consumer Capital has expressed
interest in bidding on the company's assets, and CCMP Capital Advisors,
a private-equity firm based in New York, also may make an offer for the
retailer, which is being advised by Peter J. Solomon Co. In the
past year, Hilco Consumer Capital, which is based in Toronto, and
Boston's Gordon Bros. have purchased defunct retailers such as Sharper
Image and Linens 'n Things. Eddie Bauer had $188 million in long-term
borrowing and $2.6 million in cash in the quarter that ended April 4,
according to a company filing. The company reported a loss of $44.5
million in its fiscal first quarter on sales of about $180
million.
href='http://www.usatoday.com/money/industries/retail/2009-06-09-eddie-bauer_N.htm'>Read
more.
from Chapter 11
Canadian doormaker Masonite International Inc said
yesterday that it had completed a financial restructuring allowing it to
emerge from bankruptcy protection in both the United States and Canada,
Reuters reported today. The company had filed for protection under
chapter 11 protection on March 16. Masonite, one of the world's largest
doormakers, had been trying to restructure its operations since 2005
when it was acquired by private-equity firm Kohlberg Kravis Roberts
& Co., but had been slammed by the slide in the housing and
construction markets. Masonite said that it plans to immediately pay off
$11.3 million of term debt, leaving less than $2 million of debt on the
balance sheet. It also said it expects to shortly close on a revolving
line of credit of up to $150 million.
href='http://www.reuters.com/article/privateEquity/idUSN0940671420090609'>Read
more.
Senator Says Financial
Regs Bill to Be Held Until Fall
Senate Banking Chairman Christopher Dodd (D-Conn.)
said yesterday that he will not move legislation to revamp the nation's
financial services system until the fall because the health care debate
has become a greater priority, CongressDaily reported. Senate leaders
want to bring the regulatory revamp up after the August recess and that
is appropriate because 'health care is number one,' Dodd said. However,
Banking Committee members are continuing to work on the financial
regulatory overhaul, according to Dodd. The House Financial Services
Committee is also continuing to pursue the issue as they held a hearing
yesterday looking at the proposals to regulate the derivatives market.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrcm_0600909.shtml'>Click
here to read the prepared testimony from the House Financial
Services hearing yesterday.
size='3'>Boston Globe
The New York Times Co. has hired an investment bank to
manage the possible sale of
face='Times New Roman' size='3'>The Boston Globe
size='3'>, and the company plans to request bids for Boston's major
daily in the next couple of weeks, the
face='Times New Roman' size='3'>Globe reported
today. In recent weeks, Goldman Sachs representatives have told
interested parties that the Times Co. would begin accepting bids for
the
face='Times






New
Roman'
size='3'>Globe after June 8, no matter which
way the Boston Newspaper Guild, the
size='3'>Globe's largest union, voted on $10
million in pay and benefit cuts demanded by the company. Since early
April, when Times Co. executives threatened to shut down Boston's
137-year-old newspaper if
face='Times






New
Roman'
size='3'>Globe unions did not accept $20
million in concessions, many industry analysts believed that the company
was angling to shore up the
face='Times New





Roman'
size='3'>Globe for a sale. In the last two
weeks, three of the newspaper's four major unions - representing the
mailers, the pressmen, and the delivery truck drivers - ratified
concessions giving $10 million back to the Times Co. The Guild - the
paper's largest union representing nearly 700 editorial, advertising,
and business office staff -- fell 12 votes short of ratifying another
$10 million in concessions on Monday. However, the Times Co. said
yesterday that it will get the $10 million it needs from the Guild by
imposing a 23 percent across-the-board wage cut, effective Sunday, the
start of the next pay period.
href='http://www.boston.com/business/articles/2009/06/10/times_co_seeks_globe_bids?mode=PF'>Read
more.
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