September 172009

 

FDIC Sells Failed Franklin
Bank’s Troubled Mortgages to Private Investor

The Federal Deposit Insurance Corp. announced
yesterday that they had reached a deal to sell $1.3 billion in troubled
mortgages from Franklin Bank, a Houston-based lender that failed last
November and was taken over by the FDIC, the

face='Times New Roman' size='3'>New York Times
size='3'>reported today. Under the deal, the FDIC will create a joint
venture with Residential Credit Solutions of Fort Worth, a
three-year-old company founded by Dennis Stowe, a veteran of the
subprime mortgage industry. Residential Credit will put up $64 million
of its own money to obtain a 50 percent stake in the venture, which will

hold and manage the $1.3 billion pool of mortgages from Franklin Bank.
The FDIC will own the other 50 percent stake in exchange for providing
the loans as well as the bulk of the financing. Instead of taking cash
for the loans, the FDIC will accept a government-guaranteed note for
$727.8 million with an interest rate of 4.25 percent. 

href='http://www.nytimes.com/2009/09/17/business/17loans.html?ref=business&pagewanted=print'>Read

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Cuomo to Issue Subpoenas in
Merrill Case

Capping a week of scrutiny for Bank of America, New
York Attorney General Andrew M. Cuomo issued subpoenas to five current
and former directors of the bank as part of his continuing inquiry into
its hastily arranged takeover of Merrill Lynch, the
face='Times New Roman'>New York

Times reported today. Cuomo’s office
wants to know whether Bank of America’s board knew of additional
losses discovered at Merrill after the merger was signed, as well as
billions of dollars in bonus payments made to Merrill executives before
the deal closed. Based on earlier interviews with the bank’s
executives, investigators believe the bank’s audit committee and
other directors might have known about losses and bonus payments before
shareholders voted to approve the deal in early December. 

href='http://www.nytimes.com/2009/09/17/business/17cuomo.html?ref=business&pagewanted=print'>Read

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Congressman Considers
Expediting Implementation of Credit Card Rules

House Financial Services Chairman Barney Frank
(D-Mass.) is considering introducing a bill to advance the
implementation date to Dec. 1 for new regulations limiting credit card
interest rates and fees, Reuters reported yesterday. Currently set to
take full effect in February 2010, the regulations were approved by
Congress and signed into law earlier this year by President Barack
Obama. 'We are not happy about what we are hearing on what banks and
credit card companies are doing in advance of the effective date,' said
Frank aide Steven Adamske. The new rules will sharply restrict credit
card issuers' powers to raise interest rates on cardholders' existing
balances, charge some fees and slap cardholders with unreasonable
penalties. 

href='http://news.yahoo.com/s/nm/20090916/pl_nm/us_creditcards_frank_1/print'>Read

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U.S., Canadian Judges
Approve Nortel Bankruptcy Sale

Nortel Networks Inc. won approval yesterday from
judges in Delaware and Ontario for the $900 million sale of a Nortel
unit that makes communications systems for businesses, the Associated
Press reported yesterday. In a joint hearing involving a video link
between courtrooms in Wilmington, Del., and Toronto, where Nortel
Networks Corp. is based, Bankruptcy Judge

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size='3'>Kevin Gross and Canadian Justice
Geoffrey Morawetz approved the sale of Nortel Enterprise Solutions to
New Jersey-based Avaya Inc. for $900 million in cash and a $15 million
contribution to a Nortel employee retention program. The hearing
followed an auction that concluded early Monday and resulted in
privately held Avaya agreeing to pay almost double the amount of its
'stalking horse' bid of $475 million for the Nortel unit, which supplies

phone systems and other communications equipment to businesses and large

organizations, including government agencies. 

href='http://www.google.com/hostednews/ap/article/ALeqM5gSVu7pGPw0_2GpQjspJCw70DR66gD9AOM48O0'>Read

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Autos

American Axle Works to
Avoid Bankruptcy

American Axle & Manufacturing Holdings Inc. has
until today to reach a deal with its lenders in a bid to avoid filing
for bankruptcy, the Detroit News reported yesterday. According
to a regulatory filing, the Detroit-based supplier has been granted a
fourth waiver extension that changes the termination date of its
revolving credit facility to Thursday from Tuesday. Under this
extension, the supplier must meet certain liquidity tests, including
having $75 million for four consecutive business days. The short
extension suggests American Axle is close to reaching an agreement on
better terms with its lenders, led by JPMorgan and Bank of America
Securities during what have been trying times for the auto industry. The

supplier breached its loan agreement when debt and interest payments
exceeded set levels and the company lacked the revenue to make the
necessary payments. 

href='http://www.detnews.com/article/20090916/AUTO01/909160400/1148/AUTO01/American+Axle+works+to+avoid+bankruptcy'>Read

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Court Pushes Back
Deadline on Old GM's Exit Plan

The company holding the unsold assets of bankrupt auto

giant General Motors Corp. won a request to push back the deadline on
its exclusive chapter 11 plan filing period to January,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.

Bankruptcy Judge
face='Times New Roman' size='3'>Robert E. Gerber
size='3'>entered an order on Monday granting Motors Liquidation Co.'s
motion to push back its exclusive chapter 11 plan filing and
solicitation period deadlines to Jan. 27, 2010, and March 29, 2010,
respectively. The court has recognized the Motors Liquidation Co.
estate's need for flexibility and twice extended the time frame for the
debtor to file its schedules. Deadlines on plan and solicitation
exclusivity periods originally were set to expire 120 and 180 days after

the bankruptcy filing — Sept. 29 and Nov. 28,
respectively. 
href='http://bankruptcy.law360.com/articles/122474'>Read
more. (Subscription required.)

Wells Fargo CEO Sees Bad
Loans Rising

Wells Fargo & Co. Chief Executive John Stumpf
reiterated yesterday that he expects the San Francisco bank's
nonperforming assets, or troubled loans, to increase next quarter,
the
size='3'>Wall Street Journal reported today.
Stumpf said that Wells Fargo has used $2.2 billion of an available $10.4

billion in credits for losses from the most troubled of Wachovia's
commercial and foreign loans. Wells Fargo has a remaining $8.2 billion
to cover future losses from the loans, which include mortgages tied to
commercial properties like office buildings and housing developments. Of

the $40.9 billion in credits for Wachovia losses, Wells Fargo said
yesterday that it has used $3.8 billion thus far to offset losses on
Pick-A-Pay loans, a risky type of home mortgage. Wachovia issued more
than $120 billion of the risky home loans, which offered borrowers the
option of four monthly payments, including a minimum payment that
increased the loan's balance. Wells Fargo expects the most troubled
Pick-A-Pay loans, whose losses can be covered by the credits, to
generate another $22.7 billion in losses. 
href='http://online.wsj.com/article/SB125312018580716543.html'>Read
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Bankruptcy Judge Approves
Tronox Bidding Plan

Bankruptcy Judge

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size='3'>Allan Gropper approved bidding
procedures for bankrupt chemicals maker Tronox Inc., including a
break-up fee if rival Huntsman Corp. is not able to buy part of the
company as it has proposed, Reuters reported yesterday. Huntsman has
offered to buy some Tronox assets for $415 million with a stalking-horse

bid. Judge Gropper did not approve a request that Huntsman receive a
break-up fee if another bidder made a bid, even if the other bid did not

result in a transaction. The Tronox bankruptcy case is
In

re Tronox Inc., U.S. Bankruptcy Court,
Southern District of New York, No. 09-10156. 

href='http://www.reuters.com/article/innovationNews/idUSTRE58F59B20090916'>Read

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Sunwest Agrees to Sell
Senior Living Centers to Blackstone

Sunwest Management has reached a tentative agreement
to sell most of what's left of its senior assisted living chain to
private equity giant Blackstone, the

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size='3'>Oregonian reported yesterday.
Blackstone's offer to buy up to 148 senior living properties controlled
and managed by Sunwest is contingent on a restructuring pending before
U.S. District Judge Michael Hogan. The restructuring got under way last
spring after the U.S. Securities and Exchange Commission sued Sunwest
and former CEO Jon Harder, alleging that they misled investors. The
court will consider the plan at the end of this month. If it approves
that plan, the court would subsequently consider the Blackstone
transaction in conjunction with Sunwest's reorganization in chapter 11
toward the end of this year. 

href='http://www.oregonlive.com/business/index.ssf/2009/09/sunwst_agrees_to_sell_senior_l.html'>Read

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Citing Risks, U.S. Seeks
New Rules for Niche Banks

The Obama administration argues that industrial banks
pose a threat to the economy because their parent companies can engage
in risky practices but are often exempt from routine scrutiny by the
Federal Reserve, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Treasury officials want to require the
corporate owners of the nation’s 41 industrial banks to accept
more rigorous regulation or be forced to sell or shut them down.
Defending the institutions as safe and profitable, Louise P. Kelly,
president of EnerBankUSA in Salt Lake City, and other industrial banks
have mounted a campaign to not only block the administration’s
plan, but to expand the number of such banks. The industry is deploying
lobbyists, jawboning lawmakers, doling out campaign contributions and
trying to persuade Treasury and banking officials. So far, they appear
to be winning some concessions. Sheila Bair, the chairwoman of the
Federal Deposit Insurance Corp., and Barney Frank, the chairman of the
House Financial Services Committee, have both said they would favor
allowing owners of existing industrial banks to maintain their banking
operations. 

href='http://www.nytimes.com/2009/09/17/business/economy/17industrial.html?_r=1&ref=business&pagewanted=print'>Read

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Graphics Properties
Disclosure Statement Approved

Bankruptcy Judge

face='Times
















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size='3'>Martin Glenn signed off on an order
approving Graphics Properties Holdings' (formerly known as Silicon
Graphics Inc.) disclosure statement and solicitation procedures, setting

the stage for a plan confirmation hearing scheduled for Oct.
29,

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size='3'>Bankruptcy Law360 reported yesterday.

Under its proposed plan, the reorganized Graphics Properties Holdings
will issue 100,000 shares of new common stock. A liquidating trust will
also be set up to prosecute certain avoidance actions and deal with
certain disputed claims, and continue in existence for three years or
until all of its property is distributed. 
href='http://bankruptcy.law360.com/print_article/122712'>Read
more. (Subscription required.)

JBS Buys Pilgrim's Pride
Stake for $800 Million

Brazilian meat company JBS SA is set to snap up a 64
percent stake in Pilgrim's Pride Corp. for $800 million, a deal that the

companies said would allow the bankrupt chicken producer to emerge from
bankruptcy and fully pay back its lenders and bondholders,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported today. The

transaction — which represents an enterprise value of
approximately $2.8 billion — was announced Wednesday in tandem
with a joint reorganization plan and disclosure statement filed by
Pilgrim's Pride in the U.S. Bankruptcy Court for the Northern District
of Texas. Proceeds from the sale of the new common stock of the
reorganized Pilgrim's Pride to JBS — one of the world's largest
beef producers and exporters — will be used to fund cash
distributions to allowed claims under the plan. Under the terms of the
plan, all Pilgrim's Pride creditors holding allowed claims will be paid
in full, either in cash or by issuance of a new note. 
href='http://bankruptcy.law360.com/print_article/122511'>Read more.
(Subscription required.)

name='13'>Sun-TimesUnion Rejects
Pay Cuts Sought for Sale

Unionized workers in the

face='Times
















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size='3'>Chicago Sun-Times' newsroom have
rejected demands for deep pay cuts and work-rule changes, putting at
risk a planned sale of the financially struggling newspaper to an
investment group, the Associated Press reported yesterday. STMG Holdings

LLC, led by Chicago banker Jim Tyree, wants several concessions from the

Sun-Times Media Group Inc.'s 18 unions, without which it will not go
through with the deal to bid for the company in a bankruptcy auction.
Members of the Chicago Newspaper Guild were asked to lock in for at
least three years the temporary 15 percent wage cuts imposed this
spring. Other demands included wiping out seniority rules and reducing
severance guarantees. The union rejected those demands 83-22 on
Tuesday. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/16/AR2009091601442_pf.html'>Read

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