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March 17, 2008
Fed
Acts to Rescue Financial Markets
Hoping to avoid a
systemic meltdown in financial markets, the Federal Reserve yesterday
approved a $30 billion credit line to engineer the takeover of Bear
Stearns and announced an open-ended lending program for the biggest
investment firms on Wall Street, the
size='3'>New York Times reported today. In a
third move aimed at helping banks and thrifts, the Fed also lowered the
rate for borrowing from its so-called discount window by a quarter of a
percentage point, to 3.25 percent. After a weekend of intense
negotiations, the Federal Reserve approved a $30 billion credit line to
help JPMorgan Chase acquire Bear Stearns, one of the biggest firms on
Wall Street, which had been teetering near collapse because of its
deepening losses in the mortgage market. The Federal Reserve also
announced its new lending program that would make money available to the
20 large investment banks that serve as “primary dealers”
and trade Treasury securities directly with the Fed. Much like the $200
billion loan program the Fed announced last Tuesday, this program will
essentially allow the government to hold as collateral a wide variety of
investments that include hard-to-sell securities backed by mortgages.
However, Fed officials said that the new program would have no limit on
the amount of money that can be borrowed.
href='http://www.nytimes.com/2008/03/17/business/17fed.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
name='2'>JPMorgan Purchases Bear Stearns
Pushed to the brink of
collapse by the mortgage crisis, Bear Stearns Cos. agreed to be sold to
JPMorgan Chase & Co. for the sale price of $2 a share in stock, or
about $236 million, the
size='3'>Wall Street Journal reported today.
Bear Stearns had a stock-market value of about $3.5 billion as of Friday
-- and was worth $20 billion in January 2007. However, the crisis of
confidence that swept the firm and fueled a customer exodus in recent
days left Bear Stearns with a choice of selling the firm to a big bank
willing to assume its trading obligations or file for bankruptcy. To
help facilitate the deal, the Federal Reserve is taking the
extraordinary step of providing as much as $30 billion in financing for
Bear Stearns's less-liquid assets, such as mortgage securities that the
firm has been unable to sell, in what is believed to be the largest Fed
advance on record to a single company.
href='http://online.wsj.com/article_print/SB120569598608739825.html'>Read
more. (Registration required.)
name='3'>Carlyle Capital to Liquidate Remaining
Assets
Carlyle Capital Corp.
announced late yesterday that it would wind down operations and
liquidate the remaining assets in its mortgage fund, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The news comes less than two weeks after its
lenders began to pull support for the fund, which owned about $22
billion in highly rated mortgage-backed securities issued by Fannie Mae
and Freddie Mac. Carlyle Capital, which started in 2006, had to postpone
its initial public offering in June just as the credit crisis was first
taking hold. A month after its IPO, Carlyle Group extended $200
million to the fund to meet margin calls.
href='http://online.wsj.com/article_print/SB120572975692141167.html'>Read
more. (Registration required.)
More
in Foreclosure Choose to Walk Away
As the subprime lending
crisis sweeps up millions of borrowers nationwide, some are deliberately
choosing foreclosure as their mortgages climb and property values
plummet, the San
Francisco Chronicle reported on Sunday.
Walk-aways represent a profound shift in American attitudes toward
homeownership - a shift that may have begun with the no-money-down
subprime loans. In
w:st='on'>
size='3'>California
purchase mortgages on residences are 'nonrecourse,' which means lenders
cannot pursue foreclosed homeowners for additional money. Many borrowers
cede their homes without asking their lender for a break; more than half
of foreclosures involve people who never spoke to their bank, studies
show.
href='http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/03/16/MNFFVI036.DTL&type=printable'>Read
more.
name='5'>Business Bankruptcies Increase in
w:st='on'>
size='3'>Washington
w:st='on'>
size='3'>D.C.
size='3'>Area
Court records show that
the number of corporations that have filed for chapter 11 protection so
far this year in Maryland, Eastern Virginia and Washington, D.C., has
more than doubled compared with the same time period last year,
the Washington
Post reported today. The number of mostly
smaller firms filing to liquidate under chapter 7 increased even
more during that time frame, growing more than
12-fold. Small
businesses are especially affected by economic swings, according to a
2007 report by the Board of Governors of the Federal Reserve System,
which said that about a third of all small businesses with employees
fail in the first two years, and 56 percent fail within four years. Many
of the companies to file for bankruptcy so far this year appear to be
smaller, less-experienced or overly leveraged businesses. Concurrently,
the number of expedited loans issued by the Small Business
Administration has declined 48 percent over this time last year.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/16/AR2008031602207_pf.html'>Read
more.
name='6'>Bankruptcy Filings Increase in
w:st='on'>Southern
Florida
The economy's tailspin
could mean that a lot more South Florida consumers and companies will
sink into bankruptcy over the next year, bankruptcy trustees and
attorneys predict, according to a report in Sunday’s
Miami Herald
size='3'>. Last year, nearly 11,000
face='Times New Roman' size='3'>South Floridians
filed for personal bankruptcy - well below the
record of nearly 36,000 in 2005 when filers flooded the court
to beat changes in the bankruptcy laws. Yet many observers anticipate
that this year will mark a return to pre-2005 levels, when consumer
filings numbered in the high 20,000s to low 30,000s. The number of
businesses going bankrupt more than doubled in
w:st='on'>South
Florida
chapter 11 filings exceeded the previous two years combined.
href='http://www.miamiherald.com/154/story/457405.html'>Read
more.
name='7'>Two
face='Times New Roman' size='3'>Las Vegas
Projects in Default Dog Big Home
Builders
Two massive housing
developments in Las Vegas, involving several of the nation's largest
home builders, have received default notices on about $765 million in
debt, according to one of the partners in the projects, the
Wall Street Journal
reported on Saturday. John Ritter, CEO of Las Vegas-based
Focus Property Group, said that two joint ventures -- involving Focus as
well as builders Toll Brothers Inc., KB Home and Lennar Corp. among
others -- have each missed an interest payment in recent weeks and are
in negotiations with lenders. The default notices renew concerns about
the risks that joint ventures pose to home builders. Many companies
created these arrangements in order to spread the cost of buying land
during the housing boom. But builders disclose very little about such
ventures, stoking investors' fears that these deals could hurt builders
in unanticipated ways. Toll Brothers last week said that it could suffer
'significant' losses if its joint venture partners failed to meet
certain obligations, but it would not go into detail about which
projects or partners were in trouble.
href='http://online.wsj.com/article_print/SB120553684871238089.html'>Read
more. (Registration required.)
Pope
& Talbot Wins Chapter 11 Extension
Bankruptcy Judge
size='3'>Chris
size='3'>topher S. Sontchi extended lumber and
pulp producer Pope & Talbot Inc.'s exclusive right to file a chapter
11 liquidation plan through June 2, the Associated Press reported on
Friday. The Portland, Ore.-based company said it needs the added time to
close the sale of its operating units and negotiate terms of a
liquidating plan with its creditors. International Forest Products Ltd.
(Interfor) won court permission Jan. 7 to buy three of the company's
lumber mills and related assets for $69 million. On Feb. 12, the court
approved the $105 million purchase of Pope & Talbot's paper business
by
face='Times New










Roman'
size='3'>Indonesia
size='3'>'s PT Pindo Deli Pulp & Paper Mills, an affiliate of Sinar
Mas Group. The
company has said that it expects the sales to close by April 4.
href='http://www.forbes.com/feeds/ap/2008/03/12/ap4765613.html'>Read
more.
name='9'>Citigroup Asks Court to Stay Enron Megaclaims
Trial
Citigroup Corp. has
continued its fight against the Enron megaclaims litigation, asking a
bankruptcy court to push back the trial until a
w:st='on'>
York district court
considers its merits,
size='3'>Bankruptcy Law360 reported on Friday.
The bank also claimed that it would “suffer irreparable
harm” if the court did not grant the stay. Furthermore, Citigroup
said that granting the stay would serve the public interest without
harming the Enron creditors.
size='3'>Enron Creditors Recovery Corp. responded with a letter of its
own, claiming that Citigroup was unlikely to prevail in its motion in
district court and that the bank would not suffer irreparable harm if
the stay was not granted.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=50151'>Read
more. (Registration required.)
w:st='on'>
name='10'>U.S.
face='Times New Roman' size='3'> Trustee Objects to
PricewaterhouseCoopers’ Fees in Federal-Mogul
Case
U.S. Trustee
Kelly Beaudin
Stapleton asked a court to deny auditor
PricewaterhouseCoopers Plc's final fee request of about $16.2 million in
the bankruptcy case of Federal-Mogul Global Inc., saying that the firm
has not provided enough information about its services,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. She also said that the firm may have had
highly-paid professionals do routine, ministerial work at premium
rates. Stapleton indicated that PWC
seemed to have billed meetings or conference calls involving multiple
employees at the combined hourly fee of all involved.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=50109'>Read
more. (Registration required.)
name='11'>Plastech Looks to Emerge from Bankruptcy in Six
Months
Plastech Engineered
Products Inc. said that it is looking to exit chapter 11 protection by
Aug. 31, the Detroit
Free Press reported yesterday. Key to
Plastech's reorganization is determining its future business with its
customers, particularly Johnson Controls Inc., which accounts for more
than half of Plastech's sales. Plastech filed for chapter 11 on
Feb. 1, in part to keep Chrysler LLC from taking back its tools. Before
the filing, the supplier had been struggling with lower production
volumes and rising material prices.
href='http://www.freep.com/apps/pbcs.dll/article?AID=/20080315/BUSINESS01/803150357'>Read
more.
name='12'>Broken Financing Deal to Cost Interstate Bakeries $5
Million
With Interstate Bakeries
Corp.'s exit financing agreement due to expire, the bakery giant is
preparing to assume a $5.3 million charge in relation to the broken
deal, Bankruptcy
Law360 reported on Friday. Interstate
disclosed Thursday in a filing with the U.S. Securities and Exchange
Commission that it will almost certainly be forced to break its
agreement with Silver Point Finance LLC after failing to meet the
conditions associated with the $400 million pledge. The agreement hinged
on Interstate confirming its reorganization plan by Friday. However,
Interstate recently asked the bankruptcy court for its reorganization
hearing to be postponed to April 23. The company indicated that it had
begun talks with a new investor recently and was also contemplating
selling the company piecemeal.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=50145'>Read
more. (Registration required.)
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=50145'>