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May 14, 2007
name='1'>Chrysler Group to Be Sold for $7.4 Billion
DaimlerChrysler confirmed
today that it will sell a controlling interest in its struggling
Chrysler Group to Cerberus Capital Management of New York, a private
equity firm that specializes in restructuring troubled companies, for
$7.4 billion, theNew
York Times reported today. The deal unwinds a
1998 merger that was meant to create a trans-Atlantic automotive
powerhouse. The agreement will leave DaimlerChrysler, of
size='3'>Stuttgart
size='3'>Germany
with a 19.9 percent stake in Chrysler. DaimlerChrysler will change its
name to Daimler AG. It will be freed of a great amount of pension and
health care liabilities in the new Chrysler company.
size='3'>Cerberus will take an 80.1 percent stake in the new company, to
be known as Chrysler Holding. Though the prospect of private ownership
initially alarmed Chrysler’s labor unions, United Automobile
Workers (UAW) president Ron Gettelfinger said today that the deal
“was in the best interests of our UAW members, the Chrysler Group
and Daimler.” Of the $7.4 billion, Cerberus agreed to invest $5
billion in the new Chrysler and $1.05 billion in Chrysler’s
financial arm. The remaining $1.35 billion will go to
DaimlerChrysler.
href='http://www.nytimes.com/2007/05/14/automobiles/14cnd-chrysler.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
w:st='on'>
name='2'>Idaho
w:st='on'>
size='3'> Town
face='Times New
Roman' size='3'> Might File for Bankruptcy
Officials in the resort
town of
size='3'>McCall
w:st='on'>
size='3'>Idaho
announce today whether they plan to file for bankruptcy protection after
a series of losing court battles involving the construction of a
wastewater treatment facility, the Associated Press reported today. U.S.
District Judge B. Lynn Winmill late last month ordered the city to
immediately pay $6 million. 'We don't have the cash,' Mayor Bill
Robertson said. 'What the judge is trying to extract is three times more
than our tax revenue.' In 1995, the U.S. Environmental Protection Agency
ordered the city to stop pumping its treated wastewater into the
size='3'>Payette
face='Times New Roman'
size='3'>River
getting financing, the city in 2000 chose St. Clair Contractors, Inc.,
to build a storage facility for the city's treated wastewater. Employers
Insurance of Wausau provided bonding to St. Clair on the project. The
city decided to hold St. Clair in default in 2001, saying the facility
wasn't complete under terms of the contract.
w:st='on'>
size='3'>Wausau
the project but challenged the city's decision to hold St. Clair in
default. The city decided to hold
w:st='on'>
size='3'>Wausau
of the contract and refused to accept the facility. The city then hired
Contractors Northwest, Inc., to complete the facility, and it has been
operating since 2002. Lawsuits started in 2001, with
w:st='on'>
size='3'>Wausau
and
size='3'>St.
McCall. The city filed counterclaims against both companies.
href='http://biz.yahoo.com/ap/070511/id_mccall_bankruptcy.html?.v=1'>Read
more.
name='3'>Delta Disputes Wells
w:st='on'>Fargo
size='3'>’s $445 Million Claims
Delta Air Lines is
disputing Wells Fargo’s attempt to compel Delta to make
distributions on $445 million in claims related to aircraft
leases, Bankruptcy
Law360 reported on Friday. Wells Fargo serves
as trustee for various funds managed by Trilogy Capital LLC, which is on
the ad hoc senior secured-holders’ committee in the Delta case,
court papers say. Delta’s motion argues that the claims Trilogy is
seeking recoveries for are rejection damage claims based on leases
Trilogy says Delta has rejected, but that Delta hasn’t actually
rejected the leases, the airline says. Trilogy’s motion is
essentially asking the court for a different deal than the one Trilogy
negotiated with Delta, Delta’s opposition papers say. The dispute
stems from 19 aircraft leases that Trilogy agreed to restructure,
Delta says, and numerous conditions remain that need to be
satisfied before Delta can actually reject those leases.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=24574'>Read
more. (Registration required.)
w:st='on'>
name='4'>New York
face='Times New Roman' size='3'> Malpractice Suit Proceeds Against
Firms
A
w:st='on'>
York state judge has
permitted a legal malpractice suit to proceed against plaintiffs'
lawyers who allegedly failed to seek a bankruptcy extension for their
client, causing her medical malpractice case to be thrown out as
untimely, the New York
Law Journal reported today. In denying a
motion to dismiss the action against law firms Morelli Ratner and
Schapiro & Reich, Manhattan Supreme Court Justice Emily Jane Goodman
said a combination of equitable estoppel and the U.S. Bankruptcy Code's
tolling of statutes of limitations might have saved the underlying
lawsuit, even though the medical malpractice at issue took place over a
decade ago. Victoria Kremen underwent a double mastectomy in 1995 after
receiving a cancer diagnosis from two doctors. However, she claimed she
found out on April 14, 1999, that the cancer had been misdiagnosed and
that the surgery was unnecessary. In October 1999, she filed for
personal bankruptcy. A medical malpractice suit was not filed in the
case until July 2001, a month after Kremen retained the law firm now
known as Morelli Ratner. The suit was originally filed on behalf of
Kremen and her bankruptcy trustee, but her lawyers took steps to have
the trustee removed from the case. The trial court dismissed the suit as
untimely and rejected the plaintiff's argument that the misdiagnosis had
been fraudulently concealed from her. The Appellate Division, 1st
Department, upheld the ruling in 2005, finding that Kremen's 25-month
delay in bringing an action even after learning of the alleged
malpractice in 1999 was 'unreasonable as a matter of law.' But Justice
Goodman, in Kremen v.
Morelli & Associates, 101739/06, said the
delay may not have been unreasonable in light of §108 (a) of the
Bankruptcy Code, which grants debtors an additional two years to file
claims that 'applicable nonbankruptcy' laws would otherwise require them
to file in the midst of bankruptcy.
href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1178874298273'>Read
more.
Warns of Growing Debt by Low-Income Consumers
While many low-income U.S.
consumers were routinely denied credit a generation ago, the Brookings
Institution released a study on Friday said that these same people now
have easy access to debt as demonstrated by the current subprime
mortgage crisis, Reuters reported on Friday. 'Where 40 years ago lenders
were being accused of 'redlining' lower income markets, now they are
awash in credit,' said Matt Fellowes of the Brookings Institution.
Increased delinquencies and foreclosures among subprime borrowers with
damaged credit illustrate the problem, he said. The study, which draws
on regulator data and credit rating reports, finds that about a third of
lower income borrowers falls behind on bill payments in a typical year
and a quarter pays more than 40 percent of their income every year on
debt payments, including mortgage payments.
href='http://www.reuters.com/article/domesticNews/idUSN1019651020070511'>Read
more.
name='6'>Commentary: A Better Bankruptcy Picture for
w:st='on'>
w:st='on'>Utah
w:st='on'>
size='3'>Utah
economy is credited with reducing the number of Utahns filing for
personal bankruptcy, according to a
size='3'>Salt Lake City Deseret Morning News
size='3'>editorial today. In the not-so-distant past,
w:st='on'>
size='3'>Utah
nation in its rate of personal bankruptcy filings. While
size='3'>Utah
status has markedly improved, its bankruptcy rate still exceeds the
national average. According to one expert, the state likely will always
exceed the national average in filings because of it has 50 percent more
children per adult than the rest of the nation, stretching incomes for
young families even further.
href='http://deseretnews.com/dn/view/0,1249,660219938,00.html'>Read
more.
name='7'>Allied Shareholders Fail to Delay Confirmation
Hearing
The confirmation hearing
for bankrupt trucking company Allied Holdings will proceed on schedule,
despite the efforts to delay it by two of the company’s
shareholders, Bankruptcy Law360 reported on
Friday. Bankruptcy Judge
size='3'>C. Ray Mullins of the U.S. Bankruptcy
Court for the Northern District of Georgia on Thursday denied an
objection filed by Virtus Capital LP and Hawk Opportunity Fund L.P that
would have postponed the hearing, scheduled for May 16. Virtus and Hawk
own a combined 742,000 shares—slightly more than 8
percent—of Allied’s issued and outstanding common stock.
Judge Mullins also ruled that Yucaipa Cos., the cosponsor of the plan,
did not have to hand over information to the shareholders. The two funds
had asked the court to push back the hearing until
w:st='on'>
size='3'>Yucaipa
requested documents.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=24545'>Read
more. (Registration required.)
CEO
Indicted for ERISA Embezzlement
The owner of a bankrupt
company that administered employee benefit plans has been indicted for
embezzling $15 million in retirement funds, which prosecutors say he
used to buy real estate and art, pay company overhead costs and throw
lavish fundraising parties,
size='3'>Bankruptcy Law360 reported on Friday.
Barry Stokes, one-time owner and chief executive of the bankrupt 1 Point
Solutions LLC, was indicted on 78 counts, including 21 counts of mail
fraud, 11 counts of wire fraud, 11 counts of money laundering and four
counts of criminal contempt. He was also indicted on six counts of
embezzling Employee Retirement Income Security Act funds last November
and charged for attempting to hide some of his assets and property from
the bankruptcy court. 1 Point Solutions administered a number of
different types of employee benefit plans and acted as an investment
advisor for more than 55 companies and 35,000 account-holders,
the
face='Times New Roman'
size='3'>U.S.
size='3'>attorney’s office said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=24595'>Read
more. (Registration required.)
Real Estate
name='9'>House Set to Debate GSE Oversight
Legislation
The House will start
debate Thursday on legislation to revamp oversight at
government-sponsored enterprises (GSE) such as Fannie Mae and Freddie
Mac and distribute $2.24 billion to states in affordable housing funds
over the next five years,
size='3'>CongressDaily reported today. H.R.
1427, sponsored by Financial Services Chairman Barney Frank (D-Mass.),
represents a compromise between Democrats who want to siphon part of
Fannie's and Freddie's portfolios for an affordable housing fund, and
the Bush administration, which wants to place greater restrictions on
the GSEs, which hold about 40 percent of outstanding mortgage debt
combined. GOP conservatives are expected to offer an amendment to scrap
the affordable housing fund, which is authorized for only five years.
They contend the fund would drive up mortgage costs for consumers and
such funds would go to groups that might not have sufficient experience
in homebuilding. The Senate does not yet have a companion bill.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h1427rh.txt.pdf'>Click
here to read the text of H.R. 1427, the “Federal Housing
Finance Reform Act of 2007.”
name='10'>HUD Proposal Looks to End Home Down Payment
Gifts
In what could be a
crippling blow to down-payment assistance programs, the Department of
Housing and Urban Development (HUD) is proposing that homebuyers using
certain government-insured loans be prohibited from accepting
down-payment gifts that are indirectly funded by the home seller,
the Wall Street
Journal reported today. HUD's proposed rule
threatens dozens of nonprofit groups, including Nehemiah Corp. of
Sacramento, Calif., that have doled out hundreds of millions of dollars
of payment assistance to mostly low-income home buyers across the
country. Such groups have been controversial because many provide
down-payment gifts to buyers and are then reimbursed by individual home
sellers and homebuilders. Critics say some builders have included the
cost of the gift into the price of the house, which inflates values.
Critics also say these gifts lead to higher-than-normal foreclosure
rates. The rule comes one year after the Internal Revenue Service said
many seller-funded gifts benefit profit-driven sellers and may not
qualify as a charitable activity. In fiscal 2006, HUD estimated that
about a third of borrowers using FHA loans to buy single-family homes,
or about 103,000 borrowers, used down-payment gifts from nonprofit
groups.
href='http://online.wsj.com/article/SB117910136251501470.html?mod=us_business_whats_news'>Re
ad more. (Registration required.)
name='11'>Mortgage Woes Force Banks to Take Hits to Sell
Homes
As a surge of
foreclosures over the past year or so has left lenders struggling to
sell a growing backlog of homes, some lenders are turning to large-scale
auctions to speed up the sale process rather than relying on the usual
practice of using real-estate agents, the Wall Street Journal reported
today. At a recent auction in
w:st='on'>San
Diego
typically sold for about 30 percent below the previous sale or appraisal
prices. Jeffrey Frieden, CEO of Irvine, Calif.-based Real Estate
Disposition Corp., said that about 90 percent of the homes offered at
the
size='3'>auction were sold. Some deals fell through because buyers
couldn't qualify for financing. Ramsey Su, a
w:st='on'>
size='3'>San Diego
and former real-estate broker specializing in foreclosed properties,
said prices were surprisingly low on some homes and the auction showed
that 'demand is not that strong.'
href='http://online.wsj.com/article/SB117910010258001458.html?mod=home_whats_news_us'>Read
more. (Registration required.)
International
name='12'>Russian Company Purchases Yukos' HQ
A little-known Russian
company, OOO Prana, on Friday bought the last remaining assets of the
bankrupt Yukos oil company, including its headquarters building, for
100.092 billion rubles ($3.87 billion), the Associated Press reported on
Friday. Once Russia's largest oil producer and regarded as one of the
country's best-run and most transparent enterprises, Yukos was
dismantled in a series of legal actions that some observers saw as
political revenge by the Kremlin. Prana outbid state-controlled oil
company OAO Rosneft in an auction that exceeded the opening price by
more than fourfold. The starting price was 22 billion rubles ($852
million), which had been seen as a reasonable price for the bundle of
assets that included the 22-story headquarters building in
downtown
face='Times New Roman' size='3'>Moscow
and an array of subsidiary operations.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/05/11/AR2007051100360_pf.html'>Read
more.
name='13'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
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size='3'>your name, company name, address, phone and fax.
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size='3'>California Coastal Communities Inc.,
an
size='3'>Irvine, Ca.
land-development firm, reported a first quarter net loss of $3 million,
including an impairment charge of $4 million. That compares with a $1.9
million profit in the year-earlier period. Revenue tumbled
56%–to $12.2 million.
size='3'>Daimler Chrysler AG will sell an 80%
interest in its
size='3'>Chrysler Group unit, including
Chrysler’s financial-services operations, to private-equity firm
Cerberus Capital Management for $7.4 billion. While the sale price is a
far cry from the $36 billion that the German carmaker paid for
the
face='Times New Roman'
size='3'>U.S.
size='3'>unit in 1998, DaimlerChrysler will at least pass on some $18
billion in pension and other liabilities to the new
owner.
size='3'>Dana Corp., the bankrupt automotive
supplier, reported a net loss for the three months ended 3/31 of $92
million, down from a $126 million loss in the year-earlier period.
Revenue was flat at $2.2 billion.
size='3'>Lending Tree, which is owned by
IAC/InterActive Corp. of
20% of its workforce nationwide, or 400 employees, at locations
including
size='3'>Irvine
and
size='3'>, Fl. The online lending and realty-services firm said
that the layoffs come amid the ongoing slowdown in the mortgage
industry.
size='3'>Maxim Integrated Products Inc.
of
size='3'>Sunnyvale, Ca.,
which reported its most recent quarterly results would be delayed while
it conducts an internal review of its stock options practices, received
another warning from Nasdaq that it may be delisted. Maxim, which
received a delisting warning last November, hopes to file its financial
reports and restatements as soon as possible.
size='3'>Movie Gallery Inc., a
size='3'>Dothan
video-rental chain, reported a first quarter net loss of $14.9 million,
including a debt-issuance writeoff charge of $17.5 million. That
compares with net income of $40.3 million in the year-earlier
period. Revenue in the quarter fell nearly 7%–to $648
million.
size='3'>Tweeter Home Entertainment Group Inc.
size='3'>’s stock price plunged 70% after the
w:st='on'>
size='3'>Canton
retailer of high-end audio and video products warned that it lacks
sufficient working capital for the short term and that it may have to
file for bankruptcy protection. At the same time, Tweeter reported
a second quarter net loss of $35.2 million. The results included charges
of $28.9 million related mostly to restructuring. Sales fell
13%–to $163 million. Earlier, the retailer said it would
shutter forty stores and let go a fifth of its workforce as part of a
restructuring.