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February 9, 2009
Autos
Analysis: Government May
have to Force GM, Chrysler into Bankruptcy to Protect U.S.
Loans
General Motors Corp. and Chrysler LLC may have to be
forced into bankruptcy by the U.S. government to assure repayment of
$17.4 billion in federal bailout loans, a course of action the
automakers claim would destroy them, Bloomberg News reported today. The
government has hired a law firm to help establish its place at the front
of the line for repayment. U.S. taxpayers currently take a backseat to
prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and
Goldman Sachs Group Inc., according to loan agreements posted on the
U.S. Treasury’s Web site. If federal officials fail to get a
consensual agreement to change their place in line for repayment, they
have the option to force the companies into bankruptcy as a condition of
more bailout aid. The government would finance the bankruptcy with a DIP
loan, said Don
Workman, a partner at Baker & Hostetler
LLP.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY#'>Read
more.
GM in Talks to Take Back
Part of Delphi
General Motors Corp. is in talks to take back large
portions of Delphi Corp., the parts supplier spun off by the auto maker
a decade ago, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The move is part of a strategy to qualify for
additional government loans. GM executives have been in negotiations
over the Delphi plants since December. Delphi and its lenders have asked
for at least $2 billion. However, GM hopes to pay little or nothing
because of previous agreements with Delphi. At the heart of the talks
are up to five Delphi plants that produce exclusive parts for GM,
including steering systems, radios and air conditioners for models such
as the Cadillac CTS and Chevrolet Silverado. The Delphi discussions are
part of GM's strategy to line up additional bailout funds from the U.S.
government, which has already committed $13.4 billion to the car
company.
href='http://online.wsj.com/article/SB123415386607962525.html'>Read
more. (Subscription required.)
Part on Private Money
As the Obama administration prepares to unveil a
revised bailout plan for the banking system, policy makers hope Wall
Street can be part of the solution, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. Administration officials said that the plan, to
be announced tomorrow, was likely to depend in part on the willingness
of private investors other than banks — like hedge funds, private
equity funds and perhaps even insurance companies — to buy the
contaminating assets that wiped out the capital of many banks. The
officials say they are counting on the profit motive to create a market
for those assets. The government would guarantee a floor value,
officials say, as a way to overcome investors’ reluctance to buy
them.
href='http://www.nytimes.com/2009/02/09/business/09bailout.html?_r=1&hp=&pagewanted=print'>Read
more.
Congressional Hearings to
Examine Federal Reserve’s Liquidity Efforts, TARP Oversight and
Strengthening Credit Card Protection
The House Financial Services and Senate Banking
Committees will hold hearings this week that look at the efforts of the
Federal Reserve to provide liquidity to the financial system, TARP
oversight and proposals ot strengthen credit card protections. The House
Financial Services Committee tomorrow will hold a hearing at 1 p.m. ET
titled 'An Examination of the Extraordinary Efforts by the Federal
Reserve Bank to Provide Liquidity in the Current Financial Crisis.' The
committee will also hold a hearing on Wednesday at 10 a.m. ET titled
'TARP Accountability: Use of Federal Assistance by the First TARP
Recipients.'
href='http://financialservices.house.gov/schedule.html'>Click
here for more information on the House Financial Service
Committee hearings.
The Senate Banking Committee is scheduled to hold a
hearing on Thursday at 10 a.m. ET titled “Modernizing Consumer
Protection in the Financial Regulatory System: Strengthening Credit Card
href='http://banking.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=d8561426-8765-479e-9f0d-00c069cb3544'>Click
here for hearing details.
$235 Million DIP Loan
Bankruptcy Judge
face='Times New Roman' size='3'>Ronald B. King
size='3'>signed off on a number of first-day motions for Spectrum Brands
Inc., including preliminary approval of up to $235 million in
debtor-in-possession financing,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. In addition, the bankruptcy court approved
the debtors' motions to provide employee compensation, benefits and
expense reimbursements without interruption; honor customer obligations
and continue certain customer programs; and facilitate the continuation
of the company's cash-management system and other business operations. A
hearing for final court approval of the DIP financing and first-day
motions is scheduled for March 4.
href='http://bankruptcy.law360.com/articles/86289'>Read
more. (Subscription required.)
Amended Chapter 11 Plan
Bankrupt American Home Mortgage Holdings Inc. has put
forward an amended liquidation plan, addressing widespread objections
including those of the U.S. Securities and Exchange Commission and the
Internal Revenue Service,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. A plan trustee, to be appointed by the
creditors' committee, would settle disputes related to claims and other
proceedings in the case. The unsecured creditors also addressed various
objections to the plan, including those from the borrowers' committee,
which has called for the recovery of preferential transfers made in the
90 days prior to the filing.
href='http://bankruptcy.law360.com/articles/86353'>Read
more. (Subscription required.)
Satellite Mogul Continues
Attempt to Take Over Struggling Sirius XM
Despite being rebuffed last year after a similar offer
was made, Satellite mogul Charles Ergen has proposed for one of his
satellite companies -- EchoStar Corp. or Dish Network Corp. -- to inject
enough capital into Sirius for it to meet its debt obligations and avoid
a bankruptcy filing, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Ergen isn't seeking to force Sirius into
bankruptcy proceedings in order to acquire its assets more cheaply. He
believes that satellite radio would complement his television operation.
Both are subscriber-based programming businesses that rely on similar
technology. Even if Ergen succeeds in acquiring control of Sirius,
however, it is far from certain that federal regulators, whose approval
would be required, would welcome the union of satellite television and
radio.
href='http://online.wsj.com/article/SB123413823508461499.html?mod=testMod'>Read
more. (Subscription required.)
New York Attorney Convicted
of Mortgage Fraud
Alexander M. Kaplan, an attorney who built a
profitable business on title insurance while earning high fees on real
estate closings, was convicted by a federal jury in a subprime mortgage
scam, the
face='Times New Roman' size='3'>New York Law Journal
size='3'>reported today. Kaplan was found guilty on all 18 counts in an
indictment charging him with conspiracy and bank, mail and wire fraud.
The U.S. attorney’s office had alleged that Kaplan was involved in
a scheme to keep lenders in the dark by representing the bank, the buyer
and the seller in transactions where mortgage brokers would use the
identities of innocent straw buyers to obtain huge loans on properties.
The accusation states that sometimes they would flip the properties
within weeks using even more phony documents. Kaplan was one of 27
people indicted in the conspiracy. All of the other defendants except
one have pleaded guilty.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202428098409'>Read
more.
Senate Nears Vote on
Stimulus Bill
Senate Democrats are confident they can push for a
final vote on a revamped, $827 billion economic-stimulus package early
this week, the
size='3'>Wall Street Journal reported today.
After cutting deals Friday with three moderate Republicans to pare the
cost of the package, Senate Democrats, who control the chamber with a
58-41 majority, are confident of attracting the 60 votes needed to close
off debate Monday. If approved as expected, the package would go to a
vote Tuesday. The Senate plan and the $819 billion House plan are now
roughly the same size and contain similar mixes of business and
individual tax cuts, including proposals to help businesses claim new
tax refunds by carrying back losses into prior tax years. The plans also
provide for increasing government spending, raising funding for
unemployment benefits, food assistance for the poor, and job-creating
investments in bridge and highway construction, among other
things.
href='http://online.wsj.com/article/SB123412571754261087.html'>Read
more. (Subscription required.)
Obama Names Volcker-Led
Economic Advisory Board
President Obama on Friday unveiled a board led by
former Federal Reserve Chairman Paul Volcker tasked with helping the
president guide the economy out of a deepening recession, Bankruptcy
Law360 reported on Friday. Obama intends to have the 15-member
Economic Recovery Advisory Board provide independent advice from
individuals outside Washington, as well as from widely divergent areas
of the economy. Along with Volcker, who led the Fed from 1979 to 1987
under Presidents Carter and Reagan, the board includes economist Austan
Goolsbee, an Obama adviser from his election campaign, former U.S.
Securities and Exchange Commission Chairman William Donaldson and
Richard Trumka, the secretary-treasurer of the AFL-CIO. Also on the
board are UBS Group Americas Chairman and CEO Robert Wolf, General
Electric Co. CEO Jeffrey Immelt, TIAA-CREF President and CEO Roger W.
Ferguson Jr., John Doerr, a partner at venture capital firm Kleiner
Perkins Caufield & Byers and Anna Burger, chairwoman of the Change
to Win coalition.
href='http://bankruptcy.law360.com/articles/86423'>Read
more. (Subscription required.)
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