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June 2, 2009
name='1'>Court Approves GM Asset Sale
General Motors Corp. won court
approval of its first-day motions to sell assets as soon as next month
after collapsing under $172.8 billion in debt, Bloomberg News reported
today. The automaker, the largest manufacturer to seek
protection from creditors, also won permission yesterday from Bankruptcy
Judge Robert
Gerber in Manhattan to draw $15 billion from a $33.3
billion bankruptcy loan. Detroit-based GM plans to form a new company in
60 to 90 days built around its Cadillac, Chevrolet, Buick and GMC brands
in the U.S. The lead bidder for the assets is the U.S. Treasury, which
will provide the 100-year-old company with billions in loans that would
be converted into a 60 percent equity stake. GM said today that it has
an agreement with a buyer for its Hummer sport-utility vehicle unit, but
did not provide the name of the prospective buyer or the financial terms
of the deal. GM’s Saab unit is reorganizing in Sweden and the
German government picked Magna International Inc., a Canadian car-parts
maker, as the preferred bidder to buy GM’s Opel unit.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ayuOHl_sWSt8&refer=home'>Read
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ayuOHl_sWSt8&refer=home'>
In related news, Bankruptcy Judge
size='3'>Robert Gerber's experience in handling chapter 11
cases such as Adelphia Communications Corp. and Lyondell Chemical Co.
may come in handy when trying to split up GM, the biggest U.S.
manufacturer ever to file for protection from creditors, Bloomberg News
reported yesterday. Judge Gerber will preside as creditors challenge the
government’s allocation of $82.3 billion of GM assets and $172.8
billion of debt, owed to more than 100,000 creditors. At stake are the
jobs, health and retirement benefits of about 90,000 U.S. workers and
their families, the economic viability of their communities and about
$50 billion in loans from U.S. taxpayers. The carmaker plans to launch a
new company, 60 percent owned by taxpayers, in 60 to 90 days to sell
Cadillacs, Chevrolets, Buicks and GMC trucks in the U.S. Judge Gerber
will likely use the example of Chrysler LLC, which won court approval
last weekend to sell most of its assets to a group led by Italy’s
Fiat SpA, as a model during deliberations.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kVJnqfkIQI&refer=home'>Read
more.
Analysis: Obama Administration Faces
Challenges in Restoring GM with Limited U.S. Role
Over the next few months, President Obama and his auto task force
will face many tests as they try to restore General Motors back to
financial health, according to an analysis in today’s
face='Times New Roman'>New York Times. While Obama will most
likely come under extraordinary pressure to sell the government’s
60 percent stake in the “new GM,” his own auto task force
has warned him that the exit strategy could be messy: The faster the
government sells its stake to private investors, the less it is likely
to recover its investment of more than $50 billion in the company.
However, the longer the government holds on to its stake, the greater
the pressures will build, from Congress and elsewhere, to intervene in
the company’s business. That process has started
already as Obama has made it clear that he wants GM to produce small,
fuel-efficient cars with a modest carbon footprint. However, what role
the government will play in pressing GM beyond the regulations it sets
for the entire industry was left unclear yesterday.
href='http://www.nytimes.com/2009/06/02/business/02assess.html?ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/06/02/business/02assess.html?ref=business&pagewanted=print'>
Delphi Reaches Accords to Emerge from
Chapter 11
Just as former parent General Motors Corp. entered bankruptcy
proceedings, Delphi Corp. reached agreements allowing it to emerge from
bankruptcy protection ahead of its deadline today, the Wall
Street Journal reported today. In May, a judge ordered mediation to
help the auto supplier and key players resolve the case. That order came
after Delphi had been negotiating for nearly two months with GM, lenders
and the Treasury Department's auto task force. The auto supplier will
emerge from its reorganization via a sale of assets to a Platinum Equity
LLC affiliate and with the support of a GM affiliate, which will buy
some of Delphi's plants. GM will provide $250 million of pre-emergence
liquidity through July 31. The plan is similar to the previously
confirmed one, but with Delphi agreeing to allow Parnassus Holdings II
LLC, the Platinum Equity affiliate, to operate its businesses with
capital and commitments of $3.6 billion. In addition, the business will
operate without the labor-related legacy costs tied to the North
American sites being acquired by the GM affiliate. The final approval
hearing is set for July 23.
href='http://online.wsj.com/article/SB124387353759072615.html?mg=com-wsj'>Read
more. (Subscription required.)
Commentary: Government Plan Shows Little
Evidence of Curbing Foreclosures
There’s little evidence so far that the Obama
administration’s anti-foreclosure plan will be able to stop a new
wave of foreclosures brought on by the continued drop in home prices
combined with rising unemployment, according to a New
York Times editorial today. The plan offers up to $75 billion in
incentives to lenders to reduce loan payments for troubled borrowers.
Since it went into effect in March, some 100,000 homeowners have been
offered a modification, according to the Treasury Department, though a
tally is not yet available on how many offers have been accepted.
That’s a slow start given the administration’s goal of
preventing up to four million foreclosures. It is even more worrisome
when one considers the size of the problem and the speed at which it is
spreading. The Mortgage Bankers Association reported last week that in
the first three months of the year, about 5.4 million mortgages were
delinquent or in some stage of foreclosure. One of the biggest problems
is that the plan focuses almost entirely on lowering monthly payments.
However, overly onerous payments are only part of the problem as a lack
of home equity for nearly 15.4 million “underwater”
borrowers puts them at risk of default, even if their monthly payments
have been reduced. They have no cushion to fall back on in the event of
a setback, like job loss or illness.
href='http://www.nytimes.com/2009/06/02/opinion/02tue1.html?ref=opinion&pagewanted=print'>Read
more.
Administration Looks to Complete Finance
Overhaul Plan
The Obama administration is close to unveiling a plan to overhaul the
financial regulatory apparatus that failed to prevent the gravest
economic crisis since the Depression, the New York
Times reported today. Under consideration is a new agency to
regulate mortgages and credit cards, as well as tighter federal
oversight of hedge funds and insurance. One possibility is creating a
regulator to watch over companies that might put the financial system in
peril again should they run into trouble. The Treasury Department aims
to complete the effort by mid-June, and senior Democrats in the House
and Senate have vowed to complete legislation by the end of this year.
One radical proposal — combining the four federal agencies
overseeing banks and savings and loans into a single, super-regulator
— already seems to be losing favor, lawmakers and policy makers
said. However, there is a growing consensus that one of the four, the
Office of Thrift Supervision, which was responsible for oversight of the
American International Group, should be eliminated as part of an effort
to streamline oversight.
href='http://www.nytimes.com/2009/06/02/business/02regulate.html?ref=business&pagewanted=print'>Read
more.
Banks May Soon Get Approval to Leave the
Bailout Program
Since the government pressed billions of dollars in taxpayer support
on the nation’s banks, several strong institutions have been
pushing to give it back and now a few of them may get the go-ahead next
week to extract themselves from the lending program, the
face='Times New Roman'>New York Times reported today. If federal
regulators approve the plans, it would pave the way for a group of large
institutions, among them JPMorgan Chase, to leave the bailout program
far earlier than many had envisioned. It would also signal that the
bankers and regulators believe that the worst is over for these banks,
even though confidence in the broader financial industry remains
fragile. JPMorgan Chase said yesterday that it expected to reimburse its
$25 billion taxpayer investment this month. The bank plans to raise $5
billion of common stock today to prove to regulators that it is healthy
enough to obtain capital without government support. Goldman Sachs also
said it aims to repay $10 billion in bailout funds this month.
href='http://www.nytimes.com/2009/06/02/business/02bank.html?ref=business&pagewanted=print'>Read
more.
Fremont’s $10 Million Settlement with
Massachusetts Approved
Fremont General Corp. has received court approval for its $10 million
settlement with the state of Massachusetts over allegations that the
bankrupt subprime lender had engaged in deceptive lending practices,
Bankruptcy Law360 reported
yesterday. Bankruptcy Judge
size='3'>Erithe A. Smith signed off on the deal Friday after
agreeing that the settlement would likely save the debtor substantial
discovery, litigation and possible damages costs in the long run. The
deal, disclosed in a regulatory filing in late April, requires Fremont
to pay as much as $10 million and submit to a permanent injunction
barring the lender from foreclosing on any Massachusetts borrower
without first notifying the state Attorney General's Office and
potentially following certain resolution procedures. The Massachusetts
attorney general filed suit against the lender in October 2007 in the
Superior Court of Suffolk County, alleging that the company, as well as
a subsidiary formerly known as Fremont Investment & Loan, unfairly
and deceptively provided adjustable-rate subprime loans to
consumers.
href='http://bankruptcy.law360.com/articles/104108'>Read more.
(Subscription required.)
Masonite Looks to Emerge from Chapter
11 after Courts Approve Reorganization Plan
Doormaker Masonite International Inc. said that it plans to emerge
from bankruptcy protection in the next few weeks and its reorganization
plan was approved by a U.S. bankruptcy court and the Ontario Superior
Court of Justice, Reuters reported yesterday. The company said that its
term lenders chose to convert 99 percent of their holdings to equity,
slashing the long-term debt on its balance sheet to about $11.3 million.
The company, 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 hit
hard by the slide in the housing and construction markets. Masonite said
that it had more than $163 million in cash at the end of the first
quarter of 2009 and expects to close on an asset-backed, revolving line
of credit facility of up to $150 million shortly after exiting
bankruptcy.
href='http://rds.yahoo.com/_ylt=A0WTTkhCKyVK30gA8i3QtDMD;_ylu=X3oDMTBjMHZkMjZyBHBvcwMxBHNlYwNzcg--/SIG=14k578jve/EXP=1244036290/**http%3a//www.globeinvestor.com/servlet/story/ROC.20090601.2009-06-01T173627Z_01_TRE5505L6_RTROPTT_0_CBUSINESS-US-MASONITE/GIStory/'>Read
more.
Caraustar Enters Chapter 11 as $190
Million in Debt Looms
Caraustar Industries Inc., a manufacturer of paperboard products,
filed for chapter 11 protection on Sunday citing a constrained lending
environment and the company's need to reduce the majority of $190
million in long-term debt scheduled to mature yesterday,
face='Times New Roman'>Bankruptcy Law360 reported yesterday. The
Austell, Ga.-based company and 18 subsidiaries announced yesterday that
they filed voluntary petitions and a prenegotiated reorganization plan
after reaching a restructuring agreement with certain noteholders that
would reduce the company's debt obligations by approximately $135
million. Under the reorganization plan, holders of outstanding shares of
Caraustar common stock will receive their pro rata share of $2.9
million, or approximately $0.10 per share. In addition, the plan calls
for the exchange of the company's existing 7.38 percent and 7.25 percent
senior notes for an aggregate of $85 million in new senior secured notes
and 100 percent of the common stock of the reorganized company, which is
expected to emerge as a private entity with Wayzata Investment Partners
LLC becoming the company's controlling shareholder. The case is In re
Caraustar Industries Inc. et al., case number 09-73830, in the U.S.
Bankruptcy Court for the Northern District of Georgia.
href='http://bankruptcy.law360.com/articles/104163'>Read more.
(Subscription required.)
MetLife Wants 10 General Growth Chapter
11 Cases Dismissed
Metropolitan Life Insurance Co. has asked a judge to dismiss 10 cases
from General Growth Property Inc.'s chapter 11 proceedings, arguing that
the properties do not need bankruptcy protection and are using their
filings to gain leverage in refinancing existing loans,
Bankruptcy Law360
reported yesterday. The chapter 11 petitions at issue were filed by
Providence Place Holdings LLC, Rouse Providence LLC, White Marsh Mall
LLC, White Marsh Mall Associates, White Marsh Phase II Associates, White
Marsh General Partnership, Howard Hughes Properties LP, 10000 West
Charleston Boulevard LLC, 9901-9921 Covington Cross LLC and 1120/1140
Town Center Drive LLC. The debtors were current on all their obligations
and “were not experiencing any immediate or imminent financial
problems” when their chapter 11 cases were filed, MetLife claims,
adding that none of the debtors approached the insurer about refinancing
or extending their loans before they filed for bankruptcy.
href='http://bankruptcy.law360.com/articles/104081'>Read
more. (Subscription required.)
Tensions Build in Financial Services
Industry on Derivative Regulation
Tensions are building between large banks and money managers over
their response to the government's proposals to tighten regulatory
oversight of the over-the-counter derivatives markets, the
face='Times New Roman'>Wall Street Journal reported today. Major
participants in the market for credit-default swaps are looking to
release a letter to global regulators today detailing their commitments
to reduce risk and boost transparency in trading. The industry's
response is expected to include commitments to expand central clearing
of credit derivatives to customers of banks by year end and to report
customized trades to a central repository. While market participants
agree on the goals of the reforms, some money managers feel derivative
dealers are limiting the options of investment firms that want to reduce
risk by having a central clearinghouse guarantee their
credit-default-swap trades. They say banks want to protect trading
profits by limiting clearing to a single clearinghouse called ICE Trust,
which will share revenue with the banks.
href='http://online.wsj.com/article/SB124390301244674747.html'>Read
more. (Subscription required.)
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