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April 28, 2010

Republicans Reject Finance Bill Again, and
Offer a Plan of Their Own

Republicans thwarted the Democrats' efforts to overhaul financial
regulation for a second day yesterday and floated an alternative
proposal with some crucial differences in the regulation of consumer
lending, the New York Times reported today. The plan
would also tighten regulation of Fannie Mae and Freddie Mac, the
mortgage giants, provisions that were not included in the Democrats'
proposal. Senate Minority Leader Mitch McConnell (R-Ky.) warned that the
Democrats? bill would reach deep 'into every nook and cranny of American
business.' While the Republican alternative was intended to draw
contrast with the Democrats' approach, it also revealed many areas of
broad agreement, potentially bolstering the Democrats' argument that the
remaining differences could be worked out quickly and that there was no
reason for delay. Like the Democrats' bill, the Republican proposal
would provide for the liquidation of a troubled financial company, but
paid for by the company's creditors and its shareholders, rather than by
a resolution fund financed by the largest banks, which the Democrats'
bill would create. Like the Democrats, the Republicans would establish a
consumer protection agency to deal with financial companies, but they
would limit its powers to regulate smaller banks and non-financial
companies. 
href='http://www.nytimes.com/2010/04/28/business/28regulate.html?pagewanted=print'>Read
more.

Regent Communications Exits
Bankruptcy

Less than two months after filing for chapter 11 protection, radio
broadcaster Regent Communications Inc. has emerged from bankruptcy, the
Deal Pipeline reported yesterday. Regent's prearranged
reorganization plan took effect yesterday after Bankruptcy Judge
Kevin Gross had previously confirmed the plan on April 12. Before
Regent filed for chapter 11 on March 1, prepetition lenders holding 76.3
percent of the outstanding debt on a credit agreement and swap deals
agreed to support the company's plan, which cut Regent's debt by $87
million. All 33 first-lien lenders that voted on the plan accepted it,
court papers show. No other creditor classes were entitled to vote.
Under the prearranged plan, administrative, priority tax and other
priority claims will be paid in full in cash.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005419927'>Read
more. (Subscription required.)

House Panel Approves FHA Reform
Measure

A bill to crack down on fraudulent brokers and lenders moved out of
the House Financial Services Committee yesterday after a majority
Democrats warded off GOP amendments to require higher down payments and
tougher lending standards for Federal Housing Administration mortgages,
CongressDaily reported today. Rep. Ron Klein (D-Fla.), along with
co-sponsor Rep. Maxine Waters (D-Calif.), said that the bill also
creates a cash incentive for mortgage servicers to reach out to
financially troubled homeowners and advise them on options to avoid
foreclosure. The bill could be on the floor as early as next week.

Former Lehman President Said That There
Were No Secrets in Asset Valuation

Former Lehman Brothers president and CFO Herbert McDade said that
there were no secrets kept by those who scrambled to value Lehman
Brothers assets in the tumultuous hours before the collapsing U.S.
investment firm sold its core U.S. brokerage to British bank Barclays
Plc. in 2008, Reuters reported yesterday. Lehman filed the largest
bankruptcy in history on Sept. 15, 2008, and less than a week later sold
its flagship U.S. brokerage business to Barclays for about $1.85
billion. McDade, one of the chief architects of the hurried deal to sell
the business, testified that the deal was the best possible at the time,
but that he also understood then that the deal 'was not meant to have an
embedded gain' for Barclays on day one. Lehman is now asking Bankruptcy
Judge James Peck to make changes to the order that authorized the
deal. Lehman said a new investigation revealed that the sale described
to the court was not the sale actually executed. Specifically, Lehman
has said that Lehman employees, on instructions from Barclays, had
arranged for Barclays to get a $5 billion discount on Lehman's $70
billion book of securities -- secretly reducing the values of the assets
on Lehman's books, while their lawyers told the court that the markets
had forced the change.
href='http://www.reuters.com/article/idUSN2711447220100427'>Read
more.

Analysis: Goldman Trader's Testimony Raises
Legal Issues

Some legal experts said that Goldman Sachs Group Inc. trader Fabrice
Tourre's sworn testimony yesterday on Capitol Hill could strengthen the
Securities and Exchange Commission's civil-fraud case against him and
the securities firm, the Wall Street Journal reported today.
Tourre's responses to questions from lawmakers on the Senate Permanent
Subcommittee on Investigations were largely parallel with Goldman's
previous denials of any wrongdoing in the 2007 deal called Abacus
2007-AC1. Internal documents disclosed during the daylong hearing,
however, might weaken several arguments that Goldman has been using
since the suit was filed earlier this month, according to some legal
experts. Michael Perino, a law professor at St. John's University who
studies securities litigation, said that such internal documents and
emails could help the SEC if the case goes to trial. The SEC alleges
that Goldman failed to tell investors of the role of hedge-fund Paulson
& Co. in choosing mortgage securities underlying the Abacus deal.
Paulson hasn't been charged in the case.
href='http://online.wsj.com/article/SB10001424052748703832204575210610576774470.html?mod=WSJ_business_LeadStoryCollection'>Read
more. (Subscription required.)

Spansion Bondholders Appeal Chapter 11 Plan
Confirmation

Investors who lost a bankruptcy takeover battle for Spansion Inc.
have appealed the decision that cleared the way for the chip maker to
emerge from chapter 11, Dow Jones Daily Bankruptcy Review
reported today. A group of convertible-note holders and investors
including Phoenix Partners, Phaeton International BVI Ltd., The IBS
Turnaround Fund LP, Tejas Securities Group Inc. and the John Gorman
401(k) yesterday asked Bankruptcy Judge Kevin Carey to stay the
confirmation ruling he issued April 16. They don't want to hold up
Spansion's emergence from court protection, the investors say, but they
do want Spansion to refrain from distributing new common stock to the
creditors who won the chapter 11 plan fight.

Court Upholds Mayer Brown Dismissal in
Refco Fraud Lawsuit

A federal appeals court yesterday upheld a prior decision dismissing
claims that Refco Inc.'s outside law firm should be held liable for
false statements that one of the firm's lawyers allegedly drafted for
the defunct commodities broker, Dow Jones Daily Bankruptcy Review
reported today. In an order yesterday, a three-judge panel of the U.S.
Circuit Court of Appeals for the Second Circuit affirmed a lower court's
order dismissing securities fraud claims against Mayer Brown LLP and
Joseph P. Collins, a former Mayer Brown lawyer convicted on fraud
charges last year and sentenced to seven years in prison last year. 'We
hold that a secondary actor can be held liable for false statements in a
private damages action for securities fraud only if the statements are
attributed to the defendant at the time the statements are
disseminated,' Judge Jose A. Cabranes wrote. In a concurring opinion,
Judge Barrington D. Parker said the law in the circuit for secondary
actors' liability is 'far from a model of clarity' and suggested the
case could provide the full circuit or the U.S. Supreme Court a chance
to clarify the law.

SEC Probes 'Side Pocket'
Arrangements

Federal regulators are examining whether hedge-fund managers abused
tools known as 'side pockets' that helped prevent clients from
withdrawing billions of dollars of assets during the financial crisis,
the Wall Street Journal reported today. The issue is one of
several investigative priorities recently set by a newly organized
Securities and Exchange Commission enforcement unit focused on ferreting
out misbehavior by private-equity funds, hedge funds and other asset
managers. The unit is delving into a number of issues surrounding hedge
funds and asset managers, including whether the funds are assigning fair
values to assets and accurately disclosing information about investment
strategies, assets and performance to investors. Side pockets aren't a
new tool for hedge funds, but they grew more common and more
controversial in 2008. At the time, funds were inundated with withdrawal
requests amid market losses. Many fund managers barred clients from
exiting from their investments. Side pockets can protect investors by
confining new or long-held investments until markets improve,
potentially limiting losses. But during the crisis, clients complained
managers weren't disclosing reasons for creating side pockets, nor
disclosing which assets were being stashed there.
title='Read more.'
href='http://online.wsj.com/article/SB10001424052748703832204575210671819894474.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)

Lake Las Vegas Asks Court to Approve New
Water Supply Pacts

Lake Las Vegas is seeking court approval of a half-dozen new
agreements to keep the water flowing from Lake Mead to the struggling
resort's 320-acre man-made lake located about 20 miles from the Las
Vegas strip, Dow Jones Daily Bankruptcy Review reported today.
Lake Las Vegas, a massive 3600-acre resort community outside of Las
Vegas that hopes to exit bankruptcy protection later this year, is
asking the bankruptcy judge to sign off on the wide-ranging water-use
deals between the project's owners, the city of Henderson, Nev., and the
owner of one of the resort's three golf courses. In papers filed on
Friday, Lake Las Vegas says it needs to modify the agreements governing
the use of water at the development and on the golf courses. The deals
cover 'raw water,' or untreated Lake Mead water, and 'lake water' stored
in the development's man-made lake. The community's residents purchase
their drinking water separately from the city.

W Holding Co. Hires Advisers; FDIC
Takeover Predicted

W Holding Co Inc., a Puerto Rican bank already under the scrutiny of
regulators, hired advisers to assist in raising additional capital and
exploring other strategic alternatives, Reuters reported yesterday. U.S.
regulators may put the company's lending unit into receivership and in
such a case, it was 'highly likely' that the company would be required
to cease operations or seek bankruptcy protection, W Holding said.
Analysts said a takeover by regulator could be imminent for the company.
W Holding said that it needs significant sources of capital to continue
operations through 2010 and beyond.
href='http://www.reuters.com/article/idUSSGE63P0NU20100426'>Read
more.

Aleris Seeks Approval of Deal to Exit
Bankruptcy

Aleris International Inc. has asked a judge to allow it to enter into
an agreement with financial companies that would help fund the maker of
aluminum rolled products to exit bankruptcy, Reuters reported yesterday.
The so-called commitment letter would spell out the terms and fees for a
deal with parties that have agreed to provide a total of $500 million in
first-lien senior secured asset-based financing. Aleris would use the
financing to fund operations and pay expenses related to emerging from
bankruptcy. If the deal is approved, Bank of America would act as
administrative agent, while Bank of America Securities LLC and JPMorgan
Chase Securities Inc. would be the joint lead arrangers for the
financing deal.
href='http://www.reuters.com/article/idUSN268567320100426'>Read
more.

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