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May 23, 2008
House Chairman Continues Push for
Higher Loan Limits for Fannie Mae and Freddie Mac
Already looking ahead to conference negotiations with the Senate, House
Financial Services Chairman Barney Frank (D-Mass.) yesterday made his
bid to keep loan limits for mortgage giants Fannie Mae and Freddie Mac
at a maximum of $729,750 in some high-cost areas, CongressDaily
reported yesterday. During a hearing on the issue, panel members were
mostly enthusiastic about retaining the current limit, which was
established under the economic stimulus package enacted this winter, up
from $417,000. The loan-limit increase for the jumbo market, however,
only extends through Dec. 31 as part of a deal Frank struck with
Treasury Secretary Henry Paulson. The issue comes into play again as
Congress prepares to hammer out a major housing bill that would include
tighter oversight at Fannie and Freddie, an overhaul of the Federal
Housing Administration's mortgage insurance program, language permitting
the FHA to guarantee up to $300 billion in new loans for struggling
borrowers and some housing-related tax breaks. A Senate package that is
expected on the floor after the Memorial Day break would increase the
loan limits to $550,000 at the behest of Senate Banking Committee
ranking member Richard Shelby (D-Ala.), who opposes allowing the
government-sponsored enterprises to enter a market that had been
previously served by private lenders.
Congresswoman's Houses in Foreclosure
Rep. Laura Richardson (D-Calif.) owes more than $600,000 in
loans and late fees on her $535,000 Sacramento home after she loaned
more than $60,000 to her campaign last year in the tight election to
replace the late Rep. Juanita Millender-McDonald last year, The
Politico reported yesterday. Richardson has slowly begun to pay
herself back, and she did not vote on legislation that would pour more
than $2.7 billion in government funds into helping homeowners who are on
the brink of foreclosure. She also skipped out on another vote that
would give local governments $15 billion to purchase foreclosed homes
and then resell them.
Mesa Air Says It May Seek Bankruptcy Protection
Mesa Air Group Inc., which provides regional flights for major airlines,
said yesterday that it might be forced to file for bankruptcy protection
if it loses a legal fight with Delta Air Lines Inc., Reuters reported
yesterday. If it files for bankruptcy, Mesa would be the eighth airline
to seek chapter 11 protection or close down operations in the past five
months, following Frontier Airlines Holdings Inc., Skybus Airlines Inc.,
ATA Airlines and others, as they grapple with record fuel prices. Mesa,
which operates regional flights for Delta, UAL Corp.'s United Airlines
and US Airways, has been in dispute with Delta since March, when Delta
told Mesa that it planned to terminate their partnership, accusing Mesa
of failing to complete a specified number of flights.
href='http://www.reuters.com/article/marketsNews/idUSN2248510120080522'>Read
more.
Investment Companies Reduce Borrowing of Emergency Fed
Loans
Wall Street investment companies are reducing their borrowing from the
Federal Reserve's emergency lending program, the Associated Press
reported yesterday. The Federal Reserve said in a report yesterday that
those companies averaged $14.2 billion in daily borrowing over the past
week. That compares with $16.6 billion in the previous week. The
program, which began March 17, is one of several steps the Fed has taken
to help industry and the economy overcome the fallout from housing,
credit and financial troubles. The program, similar to one the Fed long
has had for commercial banks, will continue for at least six
months.
href='http://http://www.washingtonpost.com/wp-dyn/content/article/2008/05/22/AR2008052202358_pf.html'>Read
more.
Grupo Mexico Steps Up Fight to Retain Asarco as Bankruptcy
Sale Nears Resolution
Grupo Mexico has accused Asarco and Lehman Brothers of
deliberately blocking its efforts to gather information that the Mexican
mega-miner needs for its own proposed reorganization plan to fully repay
Asarco's creditors, Mineweb.com reported today. Asarco announced
Thursday that it has completed its final step to select a plan sponsor
to successfully emerge from chapter 11. Parent company Grupo Mexico said
it believes 'the reluctance of Asarco and Lehman Brothers to provide
information underscores the concerted effort during the past several
months to keep Grupo Mexico from re-establishing control of Asarco. It
also believes it is further evidence that Asarco intends to pursue its
own agenda of selling the company's assets over the objections of Grupo
Mexico, which is the only party that offered to fund a 100-percent
payment plan to make the company's creditors whole.' The company
insisted that it needs information on allowed claims related to Asarco's
environmental liabilities and other bids for company assets that Lehman
Brothers has received, and details about how the auction process will
proceed. U.S. Bankruptcy Judge Richard Schmidt signed an order to pay up
to $28.5 million to settle claims that Asarco polluted Montana's
Blackfoot River. Government consultants had estimated the United States
and the State of Montana were owed $105 million in cleanup costs. Last
month Asarco agreed to pay Montana $8 million and give the state a $19.8
million unsecured claim in its bankruptcy case. Asarco also will pay
$500,000 to the United States and grant the federal government a
$228,000 claim.
href='hhttp://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=53489&sn=Detailttp://'>Read
more.
San Francisco Financier May Bail Out City of Vallejo
Vallejo, Calif., officials, who are expected to file for
bankruptcy today, have been quietly discussing a bailout plan with
Calvin Grigsby, the politically connected San Francisco financier who
was linked a decade ago to municipal bond scandals in Alameda County and
Florida, The San Francisco Chronicle reported today. The City
Council met in closed session this week to discuss a financial plan that
Grigsby proposed; any bailout deal likely would be contingent on further
cuts to salaries and benefits paid to the city's police officers and
firefighters, whose compensation makes up three-quarters of the city's
general fund. The Solano County city of 117,000 residents faces a $16
million budget shortfall in fiscal year 2008-09, which begins July 1,
and has no money in reserve. The seven-member City Council voted
unanimously on May 6 to direct the city attorney to declare chapter 9
bankruptcy. Grigsby's plan is one of several options the city is looking
at, and does not preclude bankruptcy, city spokeswoman Joann West said
Thursday. Vallejo's financial troubles stem from soaring police and fire
employee contracts coupled with plunging tax revenues that are a result
of the weak housing market and economy. Grigsby, 61, owns the oldest
minority-owned investment banking company in the United States. His firm
manages billions in bonds for governments throughout the nation, and it
has handled several government bond deals in California.
href='http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/23/BAN410R4CC.DTL'>Read
more.
Delaware, New York Still Attract Biggest Bankruptcies
In the newest wave of U.S. corporate bankruptcies, courts in
New York City and Delaware are still proving to be the most attractive
places for companies to wade through troubling times, Reuters reported
yesterday. Half of all public company bankruptcy cases this year have
been filed in Delaware and the Southern District of New York, as tougher
bankruptcy rules and tight credit markets have put a premium on getting
through the bankruptcy process more quickly, lawyers say. The two courts
have been increasingly popular for most of the last two decades, and
while some courts in other regions have tried to attract more cases,
most attorneys find they would still rather rely on the experience of
judges in New York and Delaware, where they have better expectations of
what kind of decisions will be made. In addition, the credit crisis has
made it more difficult to get bankruptcy exit financing and the
bankruptcy law reforms that took effect at the end of 2004 have pushed
companies to get out of court sooner, making it crucial for lawyers to
find judges used to handling complex cases. 'There is a sense that
processes will go smoother in New York and Delaware,' said Stephen
Lubben, a bankruptcy law professor at Seton Hall Law School in New
Jersey. While efficiency is often important in a bankruptcy case, there
are some who would like to see bankruptcy filings in courts closer to
where companies do most of their business.
href='http://www.guardian.co.uk/business/feedarticle/7534195'>Read
more.
Motorola Settles Iridium Bankruptcy Claims
Motorola announced that it won approval of a settlement plan with
Iridium, ending a nine-year bankruptcy suit for the handset maker and
satellite phone provider, WirelessWeek reported yesterday. The
settlement, approved by U.S. Bankruptcy Judge James Peck, requires no
out-of-pocket money from Motorola, instead calling for Iridium to
distribute a 1 percent recovery rate to unsecured creditors on claims up
to $1.6 billion. Iridium, founded in 1992, began launching satellites
for its mobile phone service in 1997. In 1998, Motorola backed the
satellite phone system, but less than a year later Iridium filed for
bankruptcy, failing to attract customers willing to pay up to $10 a
minute for service.
NRG's Calpine Bid Shows Sector Adapting
NRG Energy Inc.'s proposed $10.7 billion acquisition of Calpine
Corp. shows how the rebounding independent power sector is positioning
itself to face the next set of problems rolling in: a spike in the cost
of fuel and construction materials, greenhouse-gas restrictions and
energy-market upheaval, the Wall Street Journal reported today.
Yesterday, it became public that NRG on May 14 made an unsolicited
stock-for-stock offer for Calpine, offering 0.534 share of its stock for
each share of Calpine. A combined company would have a market
capitalization of about $22 billion. Calpine hasn't responded to the
offer.
href='http://online.wsj.com/article/SB121150348459216107.html'>Read
more. (Subscription required).
Quaker Fabric Plan Filed
Quaker Fabric announced it has filed a chapter 11 plan and disclosure
statement, BankruptcyData.com reported today. On and after the effective
date,
the debtors will continue to operate, but their respective estate assets
will be managed through a liquidating agent. Under the plan, all
equity
interests in the debtors will be cancelled; and the holders will not be
entitled to any distribution.
Dura Automotive Systems Confirmation Appealed
James Korth, a creditor and equity security holder of Dura
Automotive Systems, filed a notice of appeal with the bankruptcy court
related to
the May 13, 2008, court order confirming the company's reorganization
plan, BankruptcyData.com reported today. Separately, Korth also filed
with the court a motion seeking automatic stay pending this appeal of
the confirmation order. According to the motion, Korth and other
bondholders may be irreparably harmed if the debtor exits bankruptcy
without an investigation of the objections. Korth asserted, 'My
objections are salient and deserve proper discovery and discovery has
been improperly denied.' A hearing has been scheduled for June 5 to
consider the motion.