href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
April 26, 2010
Democrats Unite on Derivatives Portions of
Proposed Finance Bill
Senate Democrats said yesterday that they had bridged internal party
differences and coalesced around a plan to tighten regulation of
derivatives, the complex financial instruments that were a major factor
in the 2008 economic crisis, the New York Times reported today.
The proposed derivatives rules are an important part of the effort to
strengthen regulation of the nation?s financial system. The agreement
among Democrats would combine overlapping proposals on derivatives by
the banking and agriculture committees, and it raised the pressure on
Senate Republicans, who said that they were still fighting for changes
to the bill and planned to block the start of floor debate in a first
procedural vote today.
href='http://www.nytimes.com/2010/04/26/business/26regulate.html?hp=&pagewanted=print'>Read
more.
Seven Falls LLC, which owns a golf course and residential
development, is looking for $5 million to $12 million in DIP financing,
the Deal Pipeline reported on Friday. The company was saved from
liquidation on April 21 after Bankruptcy Judge George R. Hodges
denied a request to convert the debtor's case from a chapter 11 to a
chapter 7 proceeding. U.S. Bankruptcy Administrator Linda W.
Simpson, who oversees cases in the Western District of North
Carolina, asked that the case be converted because 'it is unlikely the
debtors can propose a feasible plan,' the request said. Seven Falls
secured creditor National Bank of South Carolina, owed $18 million,
agreed that the case should be converted.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005418881'>Read
more. (Subscription required.)
Analysis: Investors Lost, Goldman Won on
WaMu Deal
Washington Mutual Inc. and its Long Beach Mortgage Co.
subprime-lending unit rang up one of the worst failures in U.S. history
and left in the wake were billions of dollars of soured loans and
questionable lending practices, according to an analysis in today's
Wall Street Journal. However, when times were better, the two
companies had a powerful partner on Wall Street: Goldman Sachs Group
Inc. Recently released emails and other documents, including securities
filings, show how Goldman built its mortgage business by closely working
with lenders such as Washington Mutual and Long Beach, two firms that
'polluted the financial system' with souring loans, according to a
Senate review of Washington Mutual on April 13. Goldman was one of
several Wall Street firms that helped sell bonds backed by Washington
Mutual loans. Over the weekend, the Senate subcommittee released
internal Goldman emails, including one showing that the firm made a $5
million trading profit by betting against securities Goldman sold in a
Long Beach bond offering that lost money for its investors, raising a
potential conflict with its clients. On Tuesday, the panel plans to
question Goldman executives in a separate hearing.
title='Read more.'
href='http://online.wsj.com/article/SB10001424052748703441404575206590456581382.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Commentary: Taxpayers and the Financial
Overhaul Bill
Last week, the Congressional Budget Office reviewed the costs of
Senate Banking Committee Chairman Christopher Dodd's (D-Conn.) proposed
financial regualtory overhaul bill and the budgetary effects of the
bill's $50 billion resolution fund for the large nonbank financial
firms?insurance companies, securities firms, hedge funds, bank holding
companies, finance companies and others?that are considered
'systemically important' and thus too big to fail, according to a
commentary in today's Wall Street Journal by American Enterprise
Institute senior fellow Peter J. Wallison. These firms, among others,
would be assessed for the $50 billion fund, which President Obama
apparently believes will not be a cost to the taxpayers. However, in a
footnote the CBO reported that 'such assessments would become an
additional business expense for the companies required to pay them.'
This means the assessments will be tax deductible, and place additional
costs on other U.S. taxpayers to make up the difference in government
revenue, according to the commentary. The footnote goes on to say that
'those additional expenses would result in decreases in taxable income
somewhere in the economy, which would produce a loss of government
revenue from income and payroll taxes.' The report, according to the
commentary doesn't even account for the jobs that will be lost if large
U.S. financial firms are priced out of foreign markets because of the
costs of the resolution fund. Nor does it include the added costs that
will be built into the products that taxpayers - as consumers - will
buy. Thus the $50 billion resolution fund is not cost-free to the
taxpayers, according to the commentary.
href='http://online.wsj.com/article/SB10001424052748704627704575204160601292590.html?mod=WSJ_business_LeadStoryRotator'>Read
more. (Subscription required.)
Judge Approves Lyondell's Plan to Exit
Bankruptcy
Bankruptcy Judge Robert Gerber on Friday approved Lyondell
Chemical Co.'s plan to exit bankruptcy, signaling the near-end of a
15-month process during which the chemical maker fended off a takeover
and settled hundreds of environmental claims and a creditor lawsuit,
Reuters reported today. Apollo Management, Ares Management and Access
Industries will provide financing for the chemical maker's exit.
Lyondell filed for bankruptcy in January of 2009 under the weight of
about $24 billion in debt. Lyondell presented the creditor-backed plan
last month when it rejected a takeover bid from India's Reliance
Industries Ltd., which valued the company at $14.5 billion, saying it
was not high enough. Court documents show that the company's investment
bankers value Lyondell at $14.2 billion to $16.2 billion.
title='Read more.'
href='http://www.reuters.com/article/idUSN239640920100423'>Read
more.
General Growth Creditors Balk at Warrants
for Brookfield
General Growth Properties Inc.'s unsecured creditors are objecting to
the company's bid to grant irrevocable warrants that could be worth as
much as $900 million to a group of investors led by Brookfield Asset
Management Inc. in return for sponsoring the company's bankruptcy-exit
plan, Dow Jones Daily Bankruptcy Review reported today. In papers
filed on Thursday, unsecured creditors' committee took aim at a proposed
investment agreement, which includes the issuance of warrants to buy 120
million shares of General Growth stock, saying that the deal would give
Brookfield, a Canadian property investor, and its partners an unfair
advantage in the battle to acquire the mall owner. If the proposed
agreement becomes the lead bid in a court-supervised auction for the
right to sponsor General Growth's chapter 11 plan, as the company is
seeking, the Brookfield-led investors will likely receive the warrants
even if they ultimately fail to acquire the company, the creditors said.
General Growth values the warrants at $590 million, but the unsecured
creditors say that they could be worth more than $900 million.
Lehman Seeks to Wipe Out More Than $1
Billion in Nomura Claims
Lehman Brothers Holdings Inc.'s bankruptcy estate sued three arms of
Japanese investment bank Nomura Holdings Inc. in an attempt to wipe out
more than $1 billion of claims related to derivatives contracts, Dow
Jones Daily Bankruptcy Review reported today. In each complaint,
Lehman said that the Nomura claims 'are premised on purported valuations
and calculations that are commercially unreasonable, divorced from
economic reality, and bear no relation to any actual damages or losses
suffered by' the companies. While filing the legal complaints against
Nomura companies, Lehman suggested other large financial institutions
could be next. At the time of its collapse in 2008, Lehman was a party
to or had guaranteed more than 10,000 derivative contracts representing
more than 1.7 million transactions, according to bankruptcy court
documents. The team working on unwinding the deals has recovered more
than $8 billion in cash for the benefit of creditors.
Vegas Monorail Seeks More Time on
Bankruptcy Plan
The Las Vegas Monorail is asking a bankruptcy judge for three more
months to file a chapter 11 reorganization plan, the Associated Press
reported on Saturday. The monorail, working under a current deadline of
May 19, wants to file its reorganization plan by Aug. 17. Bankruptcy
Judge Bruce Markell is also due to consider a request to set an
Oct. 18 deadline to approve the plan. The monorail filed for bankruptcy
protection in January, saying that it has debts between $500 million and
$1 billion. However, monorail officials said that the system makes
enough money to keep operating on a 3.9-mile route linking several
hotels and the Las Vegas Convention Center.
href='http://www.nevadaappeal.com/article/20100424/NEWS/100429737/1058/RSS'>Read
more.
Report: Two More Companies Default,
Bringing 2010 Tally to 31
Standard & Poor's Ratings Services reported on Friday that two
more companies defaulted last week, bringing the total for the year to
31, Dow Jones Daily Bankruptcy Review reported today. The latest
defaulters were both from the media and entertainment sector: Green
Valley Ranch Gaming LLC of the U.S. and HIT Entertainment PLC of the
United Kingdom. Defaults continue this year but at a much slower pace
than in 2009, when they totaled 265, the highest number since S&P
began keeping track in 1981. The U.S. continues to have the highest
number of defaults this year, totaling 22. S&P expects the U.S.
corporate speculative-grade default rate to fall to 5 percent by the end
of 2010, but the firm warned that their view doesn't mean that default
risks are permanently lower. The ranks of surviving low-rate companies
'remain large' by historical standards, S&P said.
International
Click here to review
today's global insolvency news from the GLOBAL INSOLvency site.