href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif'>
June 3, 2008
Sharper Image Under Fire over Gift Card Policy
A customer of Sharper Image Corp. is seeking to lift the automatic stay
on litigation against the beleaguered home gadgetry store in order to
bring a class action challenging the company's revised policy on
redemption of its gift cards, Bankruptcy Law360 reported today.
The proposed suit seeks to “determine the rights” of
customers who have yet to redeem their gift cards since the court issued
an order in early March authorizing Sharper Image to modify its gift
card program by requiring customers to buy items worth more than the
value of the card. According to the motion, Sharper Image's policy,
enacted in May, drastically reduces the value of the gift cards by
requiring cardholders to “purchase merchandise equal to twice the
current value of the card/certificate.”
href='http://bankruptcy.law360.com/secure/printview.aspx?id=58024'>Read
more. (Registration required.)
W.R. Grace's Asbestos Settlement Wins Approval
Bankruptcy Judge Judith Fitzgerald yesterday approved an agreement for
W.R. Grace to reimburse the federal government $250 million for the
investigation and cleanup of asbestos contamination in a Montana town,
the Associated Press reported. The Columbia, Md.-based chemical maker
agreed to the amount in March to settle a bankruptcy claim brought by
the government to recover money for the past and future cleanup of
contaminated schools, homes and businesses in Libby, Mont. According to
the order signed by Judge Fitzgerald during a hearing in Pittsburgh,
Grace must pay within 30 days.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/02/AR2008060202889_pf.html'>Read
more.
Commentary: Banks and Student Loans
The “Ensuring Continued Access to Student Loans Act” signed
last month will help lenders raise money to make new loans, but the
biggest banks in the country have closed their doors to students seeking
loans for community college, which are smaller than loans for the elite,
four-year colleges that the bankers covet, according to an editorial in
today's New York Times. Those loans are guaranteed by
taxpayers' dollars, and with more than 40 percent of the country's
undergraduates enrolled in community colleges, those students must be
served as fairly and as well as their counterparts in four-year
institutions. The community colleges that have been jilted by the
private lenders need to join the direct-loan system, which allows
students to borrow directly from the government through their schools.
The direct-lending program, which is much less costly, is better for the
taxpayers than the private-lending system, which requires a federal
subsidy. The ultimate goal of Congress should be to phase out the
subsidized system and handle all student loans directly.
href='http://www.nytimes.com/2008/06/03/opinion/03tue2.html?ref=opinion&pagewanted=print'>Read
more.
Linens 'n Things Financing from GE Is Approved
Linens 'n Things said yesterday that it had received bankruptcy court
approval on its $700 million debtor-in-posession financing by General
Electric Capital Corp., the Associated Press reported. The Clifton,
N.J., retailer said that its stores will continue to operate without
interruption and its relationships with vendors will continue ahead of
the crucial back-to-school season. Linens 'n Things filed for chapter 11
protection on May 2 and received interim approval of the
debtor-in-protection financing the same day.
href='http://biz.yahoo.com/ap/080602/linens_n_things_bankruptcy_protection.html?.v=1'>Read
more.
GMAC Boosts Size of ResCap Loan
GMAC LLC boosted the size of a loan to its Residential Capital LLC unit
to $1.2 billion as the ailing mortgage lender plans to draw about $450
million today, the Wall Street Journal reported. ResCap also
estimated it will need another $2 billion to meet near-term liquidity
needs as it hasn't been able to complete previously planned asset sales.
The firm also raised the prospect that it wouldn't be able to meet those
needs. To help head off a potential bankruptcy filing, GMAC and 51
percent owner Cerberus Capital Management have agreed to various steps
with GMAC buying ResCap's resort-finance business, currently valued at
about $340 million, and Cerberus buying $475 million in ResCap assets
for $225 million in cash plus a stake in a new Cerberus affiliate. GMAC
and ResCap agreed on April 18 to a deal under which it lent ResCap up to
$750 million in exchange for the unit's mortgage servicing rights. As
part of the deal, GMAC secured some of ResCap's higher-quality
collateral.
href='http://online.wsj.com/article/SB121249266434341099.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Transportation Group Says That Airlines Face 'Desperate'
Situation
Citing high oil prices and the slowing economy, the International Air
Transport Association yesterday sharply lowered its industry forecast
for 2008, saying it now expected a collective loss of at least $2.3
billion, the New York Times reported today. In March, the group
forecast a profit of $4.5 billion. The industry reported a profit of
$5.6 billion in 2007, the first since the Sept. 11, 2001, terrorist
attacks in the United States. If the price of oil, now just below $130 a
barrel, averages $107 over 2008, the industry will lose $2.3 billion for
the year, said IATA CEO Giovanni Bisignani, said. Should it trade at
$135 a barrel for the rest of the year, the industry will lose $6.1
billion, he added.
href='http://www.nytimes.com/2008/06/03/business/worldbusiness/03air.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Class-Action Lawyer Gets 30 Months in Prison for Concealing
Illegal Kickbacks
Class-action lawyer Melvyn I. Weiss was sentenced yesterday to 30 months
in prison by a Federal District Court judge in Los Angeles for his role
in concealing illegal kickbacks to plaintiffs, the New York
Times reported today. He was also ordered to pay $9.8 million in
forfeitures and $250,000 in fines. Weiss's former partner, William S.
Lerach, is serving a two-year sentence as a result of the same
investigation, and other lawyers have pleaded guilty for roles in what
prosecutors described as a criminal conspiracy that lasted for decades.
Lerach was also ordered to forfeit $7.75 million.
href='http://www.nytimes.com/2008/06/03/business/03legal.html?ref=business&pagewanted=print'>Read
more.
GM to Shutter Four Truck Plants
General Motors Corp announced North-American plant closures as it tries
to reduce bloated North-American production capacity of trucks and SUVs,
the Wall Street Journal reported today. The auto maker also
said it is conducting a 'strategic review' of its Hummer brand and that
the Chevy Volt, its electrically powered entry, 'is a go' for commercial
production. It is unclear how many jobs will be affected. GM's
announcement about the factories was coupled with additional news about
new fuel-efficient vehicles the auto maker has in the works to better
respond to consumer tastes that are shifting under the weight of
$4-per-gallon gasoline prices.
href='http://online.wsj.com/article/SB121248991309341065.html?mod=us_business_whats_news'>Read
more. (Registration required.)
International
GMAC-RFC Loan Delinquencies Rise Sharply, Putting Banks at
Risk
Delinquencies on loans originated by GMAC-RFC (U.K.) Ltd. rose sharply
this year, according to data from Moody's Investors Service, potentially
putting a host of U.S. and European banks at risk of losses on GMAC-RFC
loans that they have purchased, the Wall Street Journal
reported today. Bradford & Bingley PLC Monday said that 5 percent of
acquired loans it holds, which include those from GMAC-RFC, are three
months or more behind, leading it to take a £36 million ($70.7
million) impairment charge in the four months to April 30. Moody's data
shows that loans originated by GMAC-RFC in late 2006 and early 2007 have
deteriorated. More than 14 percent of loans in its most recent
securitization -- a £525 million transaction called RMAC 2007-NS2
transaction -- are more than 30 days in arrears, compared to 11.6
percent at Dec. 12 and 9.16 percent in mid-September.
href='http://online.wsj.com/article_print/SB121248968554041063.html'>Read
more. (Registration required.)
Japanese Condominium Developer's Shares Fall after
Subsidiary's Bankruptcy Filing
Japanese condominium developer Zephyr Co. fell for a third day on the
Tokyo Stock Exchange following the bankruptcy of a subsidiary, Bloomberg
News reported today. Tokyo-based Zephyr said on Friday that its Kondo
Sangyo unit filed for bankruptcy protection with the Osaka District
Court, reporting 32.3 billion yen ($309 million) in liabilities. Zephyr
said 11.9 billion yen in loans and loan guarantees to the unit, which
sells condominiums, may be unrecoverable. Zephyr has lost 24 percent of
its value over the past three sessions. The number of Japanese
construction companies filing for bankruptcy protection increased 41
percent to 274 in April from a year earlier, according to Databank
Ltd.
href='http://www.bloomberg.com/apps/news?pid=20601101&sid=ajE3zmLIM3YU'>Read
more.