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August 14, 2009
CFTC
Proposes New OTC Derivatives Class
The U.S. Commodity
Futures Trading Commission (CFTC) yesterday proposed creating a separate
account class for over-the-counter derivatives, a move it said would
permit the extension of certain protections in bankruptcy
proceedings, Bankruptcy
Law360 reported yesterday. The CFTC said that
the new class would include derivatives that a futures commission
merchant carries for a customer and submits for clearing through a
derivatives clearing organization. The creation of this class would
allow protections to be extended during bankruptcy to the positions that
customers of a futures commission merchant hold in cleared OTC
derivatives, as well as the collateral those customers deposit to secure
such positions. Interested parties can file comments on the proposal 30
days after the notice has been printed in the
face='Times New Roman' size='3'>Federal Register
size='3'>.
href='http://www.cftc.gov/newsroom/generalpressreleases/2009/pr5693-09.html'>Click
here to read the CFTC’s release on the
proposal.
name='2'>Carrington's Loan Modifications Draw Regulator
Scrutiny
While Carrington Capital
Management LLC became one of the leaders in modifying troubled
mortgages, some government officials and investors are now criticizing
Carrington's loan modifications, saying they do little to help borrowers
and benefit the firm at the expense of other investors in the mortgages,
the Wall Street
Journal reported today. Ohio Attorney General
Richard Cordray filed a lawsuit last month in common pleas court in
Franklin County, Ohio, alleging that Carrington Mortgage Services failed
to offer reasonable loan modifications to borrowers. 'If you put
together poorly conceived loan modifications, they are going to fail,'
Mr. Cordray said. The lawsuit comes as some bond investors have been
questioning whether Carrington has been acting in its best interest and
not in the interest of all bondholders. Carrington is modifying too many
loans and not doing enough to dispose of foreclosed properties, said
James Shallcross, an executive vice president with Declaration
Management & Research in McLean, Va., a unit of Manulife Financial
Corp., whose clients hold higher-rated slices of bonds backed by
mortgages that Carrington services. Through June, Carrington's mortgage
unit, which services $17.3 billion in mostly subprime loans, had
modified on average 4.2 percent of its loans per month, more than twice
as many as eight other subprime-mortgage servicers, according to Amherst
Securities Group.
href='http://online.wsj.com/article/SB125020904729330831.html'>Read
more. (Subscription required.)
name='3'>Washington Mutual Protests $7.6 Million Madison Sq. Garden
Claim
Washington Mutual Inc.
has fired back in its dispute with a unit of Madison Square Garden LP
over a $7.6 million claim that the arena says it is owed under a
sponsorship agreement for a New York City theater,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday.The court granted MSG limited relief from
the automatic stay in May so it could terminate the May 2007 agreement
after learning JPMorgan Chase & Co. did not intend to continue the
deal, which covers naming rights, signage and other sponsorship
benefits.The arena had continued to give WaMu the naming rights even
after the bank entered receivership and its parent company, WMI, filed
for chapter 11, according to court records.
href='http://bankruptcy.law360.com/print_article/116466'>Read
more. (Subscription required.)
Autos
name='4'>GM’s Unit for Investing Attracts Pay
Scrutiny
A group of employees in
General Motor’s investment management division in New York, where
top earners make $2 million to $3 million a year, are coming under sharp
scrutiny by Obama administration “pay czar” Kenneth
Feinberg, the New York
Times reported today. The division, Promark
Global Advisors, includes some of GM’s most highly paid employees
and will figure prominently in Feinberg’s review of compensation
at the automaker. GM and six other companies that have received
substantial federal aid are due to submit compensation plans to the
Treasury Department on Friday. Promark oversees $102 billion of pension
money for GM and its affiliates, but its traders and money managers also
invest $18 billion on behalf of other institutions.
href='http://www.nytimes.com/2009/08/14/business/14pay.html?_r=1&ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/08/14/business/14pay.html?_r=1&ref=business&pagewanted=print'>
name='5'>Chrysler Creditors Win Right to Sue Daimler over
Sale
Chrysler’s
unsecured creditors’ committee has received permission to pursue
claims against Daimler AG and four former Chrysler directors related to
the 2007 sale,
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge Arthur
Gonzalez signed off on the creditors' motion
to pursue claims, casting aside the objections raised by Daimler and its
U.S. affiliates over the proposed suit. Though Judge Gonzalez ultimately
rejected Daimler's protests, he did stipulate that the committee is not
allowed to use Treasury’s cash collateral in connection with the
prosecution of the suit. The unsecured creditors’ committee on
Aug. 4 asked for permission to file a complaint against Daimler and four
former Chrysler directors on behalf of Chrysler's estate, claiming that
the defendants “stripped Chrysler of its most valuable assets for
grossly inadequate consideration” in the 2007 sale.
href='http://bankruptcy.law360.com/print_article/116432'>Read
more. (Subscription required.)
name='6'>Remy Seeks Probe of GM Debtors' Asbestos
Liability
Remy International Inc.,
the Indiana-based auto parts maker that spun off from General Motors
Corp. in 1994, has asked a bankruptcy judge to allow it to conduct an
examination of the GM debtors' asbestos liability, related insurance
coverage and legal actions,
size='3'>Bankruptcy Law360 reported yesterday.
The application for a Rule 2004 examination, filed on Wednesday, seeks
documents and the go-ahead to subpoena GM employees with knowledge of
such information and ask them questions. Remy's motion relates to a 1994
asset purchase agreement between the parties in which Remy purchased
certain assets of GM and GM agreed to retain certain liabilities
relating, among other things, to product liability claims. Since that
agreement, according to the motion, GM has been defending Remy in
lawsuits filed by persons alleging injury from products GM manufactured.
However, the motion says that on July 16, about a week after the
automaker emerged from bankruptcy as General Motors Co., GM informed
Remy that it did not intend to continue to honor the agreement.
href='http://bankruptcy.law360.com/print_article/116424'>Read
more. (Subscription required.)
name='7'>Visteon Seeks to End Retiree Benefits
Auto parts supplier Visteon
Corp. is asking a Delaware bankruptcy judge for permission to terminate
retiree health care and life insurance benefits for thousands of current
and former workers, the Associated Press reported yesterday. At a
hearing yesterday, Visteon representatives said that the retiree
benefits are one of the company's largest liabilities and a significant
obstacle to a successful reorganization. The company says that the
retiree benefits represent a $310 million liability, with projected cash
costs of $31 million this year alone. Visteon, the top auto parts
supplier and former subsidiary of Ford Motor Co., filed for bankruptcy
protection in May.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/08/13/AR2009081303175_pf.html'>Read
more.
name='8'>“Clunkers” Plan Receives Another
Tune-up
The Obama administration
eased the rules of its 'cash for clunkers' program yesterday saying that
it would let consumers order autos that dealers don't have in stock,
the Wall Street
Journal reported today. Yesterday's efforts
represent the administration's latest on-the-fly fixes to its month-old
Car Allowance Rebate System, which gives consumers who trade in
low-gas-mileage cars a $3,500 or $4,500 credit on a new one. The
Department of Transportation, which runs the program through its
National Highway Traffic Safety Administration, indicated to auto
dealers Thursday that it would add staff to address the backlog of
unpaid applications for clunker vouchers.
href='http://online.wsj.com/article/SB125019621566330159.html'>Read
more. (Subscription required.)
name='9'>California Fights LandAmerica Stay Bid in Property
Spat
The state of California
is seeking to continue court battles with bankrupt LandAmerica Financial
Group Inc. over about $9.1 million in unclaimed property, despite an
attempt by the real estate and title insurer to halt proceedings by
invoking the automatic stay imposed by its chapter 11 filing,
Bankruptcy Law360
reported yesterday.John Chiang, controller of the State
of California, filed an objection on Wednesday to LandAmerica’s
motion to enforce the automatic stay on two lawsuits filed over the
property, which California argues is unclaimed and should be turned over
to the custody of the state.The enforcement filed by the controller
should be exempt from the automatic stay altogether because the
controller qualifies as a governmental unit acting to enforce police or
regulatory power, and is not merely attempting to seek proceeds from
litigation or to handle private property matters, according to the
filing. Read more. The case is
size='3'>In re LandAmerica Financial Group Inc.
size='3'>, case number 08-35994, in the U.S. Bankruptcy Court for the
Eastern District of Virginia.
href='http://bankruptcy.law360.com/articles/116414'>Read more.
(Subscription required.)
name='10'>Federal Reserve Pressures CIT for Survival
Plans
The U.S. Federal Reserve
is stepping up pressure on CIT Group Inc. to come up with a viable plan
for survival, the Wall
Street Journal reported today. CIT agreed to
submit two separate plans to the Fed in the coming weeks, the company
said yesterday. One would provide a roadmap for maintaining sufficient
capital and another would outline ways CIT plans to improve its overall
financial condition. Additionally, the commercial lender has also agreed
to give the Fed a say over dividend payments, debt and stock purchases.
CIT, which became a bank-holding company in December, has been working
in recent weeks to avoid filing for chapter 11 after finding itself shut
out of the capital markets and unable to persuade the government to
stand behind its debt. The lender got more breathing room last month
when it received a $3 billion emergency loan from a group of its six
largest bondholders. Still, the company has said more than once that a
host of issues have left 'substantial doubt' about its ability to
continue.
href='http://online.wsj.com/article/SB125017094421229051.html'>Read
more. (Subscription required.)
name='11'>Judge Tells Colonial to Keep Loans
Bank of America Corp. won
a temporary restraining order to freeze $1 billion of Colonial BancGroup
Inc. assets, with a federal judge in Miami concluding that the move was
needed because Colonial 'is on the brink of collapse,' the
Wall Street Journal
reported today. Yesterday's ruling by U.S. District Judge
Adalberto Jordan came one day after Bank of America filed a lawsuit
against the Montgomery, Ala., bank-holding company to protect its claim
on Colonial loans. Bank of America, based in Charlotte, N.C., acted as
trustee for parties that provided funding for Colonial's mortgage
business, which is deeply entangled with Taylor, Bean & Whitaker
Mortgage Corp, which ceased most operations last week. If Colonial
doesn't survive, it would be the fifth-largest bank failure in U.S.
history and the biggest federally insured financial institution to fail
since Washington Mutual Inc.'s banking operations were seized in
September and sold to J.P. Morgan Chase & Co. A failure also could
cost the government's deposit-insurance fund billions of
dollars.
href='http://online.wsj.com/article/SB125020389109830541.html'>Read
more. (Subscription required.)
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