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June 24, 2009
House Panel Continues
Examination of Financial Overhaul Plan
The House Financial Services Committee will hold a
hearing today at 10 a.m. ET titled “Regulatory Restructuring:
Enhancing Consumer Financial Products Regulation.” This will be
the second hearing the committee has held on regulatory restructuring
since President Obama unveiled his proposal earlier this month.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_062409.shtml'>Click
here to view the witness list for the hearing and a link to the
live webcast.
In related news, the National Association of Federal
Credit Unions (NAFCU) has put forward a compromise to President Obama's
controversial plan to create a Consumer Financial Protection
Agency,
size='3'>CongressDaily reported today. NAFCU
called for a new, independent consumer agency for those industries that
do not have oversight by federal regulators and proposed new
consumer-protection offices for existing regulatory agencies.The
financial services industry is opposed to the proposed agency, but
Obama's endorsement will make it harder to stop as part of the
legislation that would revamp the nation's financial regulatory
system.
Housing Recovery
The backlog of seriously delinquent mortgages, which
so far affects about 1 million borrowers, is a shadow over hopes for a
rebound in the nation's housing markets, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. It is also masking the full extent of the
foreclosure crisis and threatens to depress prices even further just as
some parts of the country are hinting at recovery. While a delayed
foreclosure can be a blessing for some troubled homeowners, for others
it simply prolongs the financial distress, leaving them on the hook for
the condition of the property. During the first quarter of this year,
the share of all homeowners seriously delinquent on their mortgage but
not yet facing foreclosure more than doubled to 3.04 percent, or about
$227 billion in loans. There was a total of $97 billion in such loans
during the same period in 2008, according to
face='Times New Roman'>Inside
Mortgage Finance.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303500_pf.html'>Read
more.
Analysis: Extended Stay
Bankruptcy Presents Challenges for CMBS
David Lichtenstein is facing challenges to the plan
that took his Extended Stay Hotels chain into bankruptcy protection as
he tries to avoid triggering $100 million in personal liability payments
for the company’s failure, the
face='Times








New


Roman'
size='3'>Wall Street Journal reported today.
The controversy over the bankruptcy filing and Lichtenstein's potential
liability has thrown the commercial-property world into an uproar,
because the filing also is laying bare many of the technical features of
commercial mortgage-backed securities (CMBS) that have never before been
tested on a large scale. As the Extended Stay case is showing, the
protections for investors may be less solid than expected, according to
CMBS lawyers and bankers. Without clarity on their rights and
recoveries, hundreds of billions of dollars in CMBS loans could be
caught in legal limbo. This could, in turn, hamper banks' ability to
clear bad paper off their books and jump-start this $700 billion
securitization market, market participants said. Under a reorganization
proposal endorsed by some creditors, including Cerberus Capital
Management LP and Centerbridge Partners LP, Extended Stay would wipe out
$4.8 billion in existing debt. This stands to benefit holders of the
four most-senior slices of Extended Stay CMBS bonds, which were divided
into 18 different components. The deal also helps Lichtenstein because
it would indemnify him from making $100 million in 'bad-boy' payments.
Such payments are supposed to incentivize borrowers to avoid bankruptcy,
by making them personally liable for debts owed.
href='http://online.wsj.com/article/SB124580008339544463.html'>Read
more. (Subscription required.)
Autos
Judge Rejects GM
Bondholder Group Plea
Bankruptcy Judge
face='Times








New


Roman'
size='3'>Robert E. Gerber yesterday denied a
request by a group of dissident General Motors bondholders for special
status in the case, which would have required the automaker to pay their
legal expenses as they contest the company's proposed restructuring,
the Washington Post reported
today. GM's dissident bondholders -- who say they represent about 2,000
individuals with $500 million of the $27 billion in GM bonds -- argued
during a two-hour hearing in Lower Manhattan that they are not being
adequately represented by the official unsecured creditors’
committee. Judge Gerber disagreed, noting in part that the official
unsecured creditors’ committee included two trustees who have a
duty to all bondholders.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303436_pf.html'>Read
more.
Lenders Challenge Delphi
Over Plan to Exit Bankruptcy
Delphi’s lenders, including hedge funds that
provided bankruptcy financing, have accused the company of striking what
they call a 'sweetheart deal' with Platinum to emerge from bankruptcy,
the
size='3'>New York Times reported today. Many
of these firms have also complained that they will get only 20 cents on
the dollar for the $2.55 billion in debtor-in-possession loans they gave
Delphi. According to the terms of the Platinum deal, which was announced
June 1, the private-equity firm will provide $250 million in cash and a
$250 million credit line to acquire the bulk of the company. GM, a
onetime owner of Delphi and still a big customer, is taking back four
plants and its steering business. GM will also provide the rest of the
$3.6 billion exit financing package. Now some of Delphi’s lenders
are considering whether to make their own bids for the company.
Bankruptcy Judge
face='Times New Roman' size='3'>Robert D. Drain
size='3'>earlier this month ordered Delphi to open formal bidding,
setting July 10 as a deadline for proposals.
href='http://www.nytimes.com/2009/06/24/business/24delphi.html?_r=1&pagewanted=print'>Read
more.
U.S. Trustee Objects to
Fees for GM Advisers
In a pair of objections filed Monday, U.S.
Trustee
size='3'>Diana Adams filed an objection to the
fee requests by Evercore Partners and AlixParnters, arguing that the
firms are performing many of the same tasks for General Motors,
the
size='3'>New York Times reported today.
Evercore and AlixPartners are seeking more than $130 million, in total,
for work done over the past year for GM. Both Evercore and AlixPartners
began working for GM well before it filed for bankruptcy on June 1,
advising the company on its various restructuring options. Before the
actual chapter 11 filing, according to court documents, the two firms
pulled in more than $85 million.
href='http://dealbook.blogs.nytimes.com/2009/06/23/trustee-objects-to-gm-fees-for-evercore-alixpartners/?pagemode=print'>Click
here to read more.
Jones Day Submits $12.4
Million Bill for Chrysler Case
Jones Day, the law firm that engineered Chrysler's
chapter 11 reorganization submitted an invoice for $12.4 million late
Monday for Bankruptcy Judge
face='Times New Roman' size='3'>Arthur Gonzalez's
size='3'>approval the Detroit Free Press reported today. The
fees cover the period from April 30, the day the automaker filed for
bankruptcy, until May 31, when Judge Gonzalez approved the sale of
Chrysler's assets to Italy's Fiat. Jones Day will continue to represent
'Old Carco LLC,' as it tries to sell the remaining seven factories,
equipment, real estate and other assets that were not sold to Chrysler
Group LLC. The law firm performed some of the most intense legal work in
the first week of June, when three Indiana state funds appealed Judge
Gonzalez's ruling.
href='http://www.freep.com/article/20090624/BUSINESS01/906240313'>Read
more.
Ford Among First to Get
Loans for More Efficient Cars
Three automakers, including the Ford Motor Co., will
get the first $8 billion from a $25 billion loan program intended to
accelerate development of more fuel-efficient vehicles, the
face='Times New Roman'>New York
Times reported today. Ford, the only Detroit
automaker that did not receive emergency government loans this year,
will get $5.9 billion to help it retool 11 factories in the Midwest. The
money, about half as much as Ford had requested, will help it make 13 of
its models more fuel-efficient. Ford plans to start selling four models
of electric vehicles by 2012. Japanese carmaker Nissan will receive $1.6
billion to overhaul its factory in Smyrna, Tenn., where it plans to
build electric vehicles. Tesla Motors, a 6-year-old company based in
California, will get $465 million to make electric vehicles and drive
trains. General Motors and Chrysler are among the dozens of other
applicants seeking financing from the Advanced Technology Vehicles
Manufacturing Loan Program, which Congress created in 2007 to help
carmakers meet fuel-economy standards. The two companies’
bankruptcies made them ineligible for the first round of loans but they
are expected to be approved in later rounds.
href='http://www.nytimes.com/2009/06/24/business/24auto.html?ref=business&pagewanted=print'>Read
more.
Republic Offers to Buy
Frontier for $108.8 Million
Republic Airways Holdings said Monday that it is
offering to buy Frontier Airlines for $108.8 million and take it out of
bankruptcy, the Associated Press reported yesterday. Indianapolis-based
Republic supplied a $40 million debtor-in-possession loan to Frontier
and held a $150 million unsecured claim in Frontier’s bankruptcy
proceeding. The plan calls for Republic to own all the equity in the
newly reorganized Frontier. Republic operates a regional airline under
its own name as well as Chautauqua Airlines and Shuttle America. The
plan would give unsecured creditors $28.8 million in cash. An additional
$40 million of the sale proceeds would repay Republic's loan. The deal
is subject to court approval and Republic said that Frontier will seek
court approval for the deal on July 13 and expects to finish the process
and emerge from chapter 11 protection in the fall.
href='http://www.chicagotribune.com/news/local/wire/chi-ap-us-frontier-bankrupt,0,1024976.story'>Read
more.
on Money-Market Funds
The Securities and Exchange Commission plans to
propose tighter restrictions today for money-market mutual funds,
the
size='3'>Washington Post reported today.
However, the agency is not expected to take more dramatic action that
would have made these funds act more like traditional investment
products that rise and fall in value, rather than glorified savings
accounts. The SEC proposals would come after the nearly $4 trillion
market for money-market mutual funds faced a run last fall when the
Reserve Primary Fund, one of the nation's largest money-market mutual
funds, 'broke the buck' -- meaning investors wouldn't get back what they
put in. The SEC plans to propose that funds follow several stricter
rules to make them less vulnerable to financial crises, with one
proposal requiring that funds maintain 5 percent of their assets in cash
or bonds that could be sold within a day.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303349_pf.html'>Read
more.
Casino to Lenders
Burdened by debt obligations and an unprofitable
greyhound racetrack, the owners of Rhode Island’s Twin River
casino filed for chapter 11 protection with a plan to hand over the
casino to their secured lenders in exchange for extinguishing $290
million in liabilities,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. UTGR Inc., doing business as Twin River,
and its parent companies BLB Management Services Inc. and BLB Worldwide
Holdings Inc., filed the chapter 11 petitions yesterday estimating $100
million to $500 million in assets and $500 million to $1 billion in
liabilities.The case is
face='Times








New


Roman'
size='3'>In re UTGR Inc. d/b/a Twin River,
case number 1:09-bk-12418, in the U.S. Bankruptcy Court for the District
of Rhode Island.
href='http://bankruptcy.law360.com/articles/107802'>Read
more. (Subscription required.)
size='3'>The Boston Globe
After months of bitter struggle that included a threat
to shut down the
face='Times New Roman' size='3'>Boston Globe,
the New York Times Co. and the paper’s largest union reached a
tentative contract settlement yesterday, with employees agreeing to
significant cuts in wages, benefits and job security, the
size='3'>New York Times reported today. The
deal with the Boston Newspaper Guild, finalized around 11 p.m., includes
a cut in weekly salary and a five-day unpaid furlough, for a total wage
reduction of almost 8 percent for some 670 guild members, plus
reductions in retirement, health and other benefits. The package will
save the
size='3'>Globe $10 million a year. In
addition, the company won the elimination of lifetime job guarantees
covering about 190 guild members.
href='http://www.nytimes.com/2009/06/24/business/media/24globe.html?ref=business&pagewanted=print'>Read
more.
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