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May 12, 2009
Senators Cut
Deal on Credit Card Bill
The top senators on the Senate
Banking Committee reached a compromise on a bill that would protect
consumers from abusive credit card industry practices, increasing the
likelihood that the Senate will pass it as early as this week,
the Washington Post
reported today. Debate on the bill began on the Senate
floor yesterday afternoon. The compromise reached between Banking
Committee Chairman Sen. Christopher J. Dodd (D-Conn.) and Sen. Richard
C. Shelby (R-Ala.) was announced as the Senate began debating the credit
card reform measure.The House has passed a credit card reform measure
that mirrors new rules passed by the Federal Reserve in December, but do
not go into effect until July 2010. S. 414 offers stronger consumer
protections than the House bill and the Federal Reserve rules. The
Senate bill's protections would be enacted nine months after being
signed into law. Under the compromise Senate bill, card issuers would be
allowed to retroactively bump up rates for any borrower whose payments
are 60 days past due. However, if the borrower pays on time for six
months, the card issuer would have to restore the original rate. The
bill also prohibits card issuers from increasing rates during the first
year a credit card account is opened and requires them to get customers'
permission to set up accounts so that transactions over the limit can be
processed. Another provision would require card issuers to post credit
card agreements online.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/11/AR2009051103192_pf.html'>Click
here.
Hedge Funds Sound Off against White
House
Hedge fund managers are showing rare public outrage against the Obama
administration, saying that it has wrongly rebuked investors necessary
to salving the financial crisis, the Wall Street Journal
reported yesterday. Fund managers caught in a dispute over Chrysler LLC
with the government 'generally have been anonymous for fear of going on
the record against a powerful president,' said one recent letter from
Cliff Asness, who runs the $20 billion asset-management firm AQR
Capital. Asness's remarks capture what many fund managers say they feel
but would never say publicly: They have been disappointed by the Obama
administration, left detached from a leader to whose party they gave 70
percent of their overall campaign donations during the 2008 election,
according to data compiled by the Center for Responsive Politics. That
has made them say they are less willing to support government
initiatives aimed at luring private capital back into the economy. The
effort by hedge funds to be heard was on display Friday in Washington,
D.C., when the Managed Funds Association and the Coalition of Private
Investment Companies, the two biggest U.S. hedge-fund lobbying groups,
were among those who met with Treasury Secretary Timothy Geithner to
talk about financial regulation.
href='http://online.wsj.com/article/SB124200087733205123.html'>Read
more. (Subscription required.)
Click
here to read the letter by AQR Capital's Cliff Asness.
President
Obama Proposes Expanding FDIC's Borrowing Power
President Barack Obama yesterday
proposed increasing the borrowing authority of the Federal Deposit
Insurance Corp.with the Treasury Department to $100 billion from the
current $30 billion, according to a Reuters report yesterday. With an
expected increase in bank failures, the authority would give the FDIC
the ability to finance expenses for resolving failed FDIC-insured
institutions, including guaranteeing up to $250,000 per depositor. In
the meantime, Congress is considering legislation aimed at giving the
FDIC a similar increase, but lawmakers also want to give the agency
temporary borrowing ability for up to $500 billion in the event of an
emergency.
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Companies Freeze Pensions
The number of companies that have
frozen their traditional pension plans has accelerated sharply this
year, a trend that will likely continue as companies wrestle with
declining profits and poor investment returns,
face='Cambria' size='3'>USA Today reported
today. At least 16 companies have announced plans to freeze their
pensions so far this year versus 18 for all of 2008. Severe investment
losses in 2008 shrank the assets of the nation's largest pension plans
to 79 percent of projected liabilities, down from 109 percent at the end
of 2007, according to an analysis by Watson Wyatt. More companies will
freeze their pension plans unless Congress temporarily relaxes the
funding requirements, says Dena Battle, director of tax policy for the
National Association of Manufacturers. Pension-rights advocates and some
lawmakers support giving relief only to companies that agree not to
freeze their plans. Rep. Earl Pomeroy (D-N.D.) is currently drafting
pension relief legislation to address this issue. Read
more.
Judge Rules
for NRG to Pay Retiree Benefits Despite Chapter 11 Plan
Provisions
A federal court has ordered NRG
Energy Inc. to recalculate pension benefits for retired employees
despite the power generator's claim that a chapter 11 plan confirmed in
2003 precludes any responsibility to the retirees,
face='Cambria' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In an order signed Friday in the U.S.
District Court for the Northern District of New York, Judge Glenn T.
Suddaby denied summary judgment to NRG in a suit brought by Local Union
No. 97 of the International Brotherhood of Electrical Workers alleging
that the company failed to comply with the terms of an arbitration
ruling. The union filed its suit in September 2005, claiming that the
company must recalculate pension benefits for all bargaining unit
employees who retired between June 1, 2001, and Sept. 30, 2003, using
“covered earnings” at $16,500 and paying all affected
retirees the difference between the recalculated benefits and those
actually paid to them. Read more. (Subscription
required.)
Autos
GM,
Chrysler Prepare Lists of Dealers to Cut
Thousands of General Motors
Corp.and Chrysler LLC dealers in the U.S. may learn their fate in the
next few days as both automakers complete lists of dealerships they plan
to eliminate, the Wall Street
Journal reported today. GM dealers will be
notified this week whether they will continue to receive new cars and
trucks from the company, GM Chief Executive Officer Fritz Henderson said
yesterday. Henderson said that he expects to 'wind down' most of the
targeted dealerships during the year. Chrysler is expected to produce a
list by May 14 of the dealers it would like to keep in its retail
network.Chrysler intends to keep about 2,400 of its dealers, and drop at
least 800, they said. In court filings, Chrysler said 50 percent of its
dealers account for about 90 percent of its vehicle sales.
href='http://online.wsj.com/article/SB124205080838706773.html'>Read
more. (Subscription required.)
Wheel
Maker Files Prepackaged Chapter 11 Plan
Wheel maker Hayes Lemmerz International
Inc. filed for chapter 11 protection yesterday with a prepackaged
restructuring plan that has the approval of most of its senior lenders,
the Associated Press reported today. The company's secured lenders
agreed to loan the company an additional $100 million to fund operations
while it is in bankruptcy, giving the company nearly $138 million in
liquidity while it works through the proceeding. Under the
pre-negotiated plan, lenders would convert certain loans into equity, so
that they would own the company outright once it emerges from court
protection.
href='http://www.forbes.com/feeds/ap/2009/05/12/ap6409707.html'>Read
more.
Bankruptcy
Judge Approves Payments to MLN Workers
A federal bankruptcy judge yesterday
approved a $2.7 million settlement to workers of Mortgage Lenders
Network (MLN), a defunct Connecticut mortgage company that shut down in
2007, the Associated Press reported today. About 1,600 people who worked
for the Middletown, Conn.-based company are to split the payment
approved yesterday. The employees had filed a class-action lawsuit,
claiming MLN didn't comply with federal regulations requiring employers
to give 60 days notice before shutting down a company. MLN filed for
bankruptcy in February 2007 after regulators in Connecticut and other
states issued cease-and-desist orders. They accused the company of not
providing funding after closing on mortgages totaling millions of
dollars.Monday's settlement covers the 60 day period and there is a
separate civil lawsuit seeking unpaid wages and compensation.
Alliance
Trustee Wins Access to Union Bank Records
Bankruptcy Judge
face='Cambria' size='3'>Christopher S. Sontchi
size='3'>has ordered Union Bank of California to produce Alliance
Bancorp's account records for the months leading up to the failed
mortgage lender's chapter 7 filing, granting a motion by the trustee
overseeing the case, Bankruptcy
Law360 reported yesterday. Judge Sontchi ruled
Friday that Union Bank, where Alliance had an account, must produce the
documents for the trustee's counsel by May 29.Tracy L. Klestadt,
Alliance's permanent trustee, filed a motion April 13 asking the judge
to order Union Bank to produce records of the opening of Alliance's
account and of its transactions, wire transfers and canceled checks
beginning March 1, 2007. Klestadt's original motion also sought
documents from Morgan Stanley, where Alliance had another account, but
Morgan Stanley reached an agreement with the trustee over its records
several days later.
href='http://bankruptcy.law360.com/articles/100750'>Read more.
(Subscription required.)
name='10'>Stalking-horse Bid for Pilgrim's Plant Receives
Approval
The bankruptcy judge overseeing
the chapter 11 proceedings of poultry producer Pilgrim's Pride Corp.has
authorized an $80 million stalking-horse agreement with Foster Poultry
Farms for a chicken processing plant and approved bidding procedures
associated with the sale,
size='3'>Bankruptcy Law360 reported yesterday.
The order signed on Friday also approves the payment of stalking-horse
protections and sets a sale approval hearing for May 19. Pilgrim's Pride
and Foster signed a definitive asset purchase agreement on
Thursday.
href='http://bankruptcy.law360.com/print_article/100759'>Read more.
(Subscription required.)
Frontier
Seeks Extension to File Chapter 11 Plan
Frontier Airlines has asked the
U.S. Bankruptcy Court for the Southern District of New York for more
time to submit a chapter 11 reorganization plan, the
face='Cambria' size='3'>Denver Post reported
today. Frontier, which filed for bankruptcy protection in April 2008,
asked for the June 4 reorganization plan deadline to be moved to Oct. 9.
Frontier needs a plan sponsor to invest $125 million to $150 million to
emerge from bankruptcy, which Frontier CEO Sean Menke said should occur
by late summer.
Lawyer
Pleads Guilty in $400 Million Fraud
Marc S. Dreier pleaded guilty
yesterday to leading what the authorities have called a fraud scheme
that bilked hedge funds and other investors out of at least $400
million, the New York
Times reported today. A federal indictment
charged that Dreier sold $700 million worth of bogus promissory notes to
investors and then used the proceeds to maintain a lavish lifestyle.
Dreier decided to plead guilty to all eight charges in the indictment
against him, which included conspiracy, securities and wire fraud and
money laundering.
href='http://www.nytimes.com/2009/05/12/nyregion/12dreier.html?_r=1&ref=business&pagewanted=print'>Read
more.
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