href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
September 30,
2009
Fifth Circuit Revises
Pacific Lumber Bankruptcy
Following an appeal by the Bank of New York and
certain noteholders, the U.S. Court of Appeals for the Fifth Circuit
yesterday partially reversed and remanded a bankruptcy judge's
confirmation of Pacific Lumber Co.'s chapter 11 reorganization,
size='3'>Bankruptcy Law360 reported yesterday.
In an appeal from the U.S. Bankruptcy Court for the Southern District of
Texas, the Bank of New York and the noteholders argued against the
legality of Pacific Lumber's chapter 11 reorganization plan and sought
about $740 million in principal and interest on debts owed by the
redwood lumber company. After a year passed without sufficient progress
toward a reorganization plan, the bankruptcy court terminated the
debtors' exclusivity period and allowed the filing of five competing
proposed plans. All but two of those plans were withdrawn, according to
the appeals court's ruling. The bankruptcy court favored a proposed plan
to dissolve all six Pacific Lumber entities, cancel intercompany debts
and create two new entities. However, in order to confirm the
arrangement, proponents had to “cram down” the plan on the
dissenting classes of debtors, the Fifth Circuit said.
href='http://bankruptcy.law360.com/print_article/125274'>Read more.
(Subscription required.)
More Homeowners Seek Relief
from WL Homes Stay
Another group of Nevada homeowners is asking a federal
bankruptcy judge for permission to pursue a lawsuit against bankrupt
homebuilder WL Homes LLC for constructing defective houses,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported
yesterday.Robert Branksy and several dozen owners of homes in WL Homes'
Whisper Creek and Four Winds subdivisions filed a motion for relief from
the automatic bankruptcy stay Sept. 28 in the U.S. Bankruptcy Court for
the District of Delaware, saying the company's insurer, American
International Group Inc., would be liable for any damages arising from
their suit.The homeowners told the court they would collect any judgment
from the insurance company and waived their rights to recover any
settlement from WL Homes. The original lawsuit was filed in state court
Dec. 31, several months before WL Homes declared bankruptcy in
April.
href='http://bankruptcy.law360.com/print_article/125135'>Read
more. (Subscription required.)
The fate of CIT Group Inc. was hanging in the balance
yesterday as the large commercial lender readied a plan that would
likely hand control of the company to its bondholders, the
face='Times New Roman'>Wall
Street Journal reported today. CIT is
preparing a sweeping exchange offer that would eliminate 30-40 percent
of its more than $30 billion outstanding debts. The plan would offer
bondholders new debt secured by CIT assets, as well as nearly all of the
equity in a restructured firm. The new debt would mature later than
current debt, the impending maturity of which has posed a problem for
CIT. The plan sets up a potential showdown between bondholders with debt
coming due soon and those whose debt does not come due for years. If the
company doesn't receive enough bondholder support, it plans to execute
the restructuring in bankruptcy court.
href='http://online.wsj.com/article/SB125426707418850927.html?mod=WSJ_hpp_LEFTWhatsNewsCollection'>Read
more. (Subscription required.)
Analysis: FDIC Insurance
Fund Faces Years in Red
The government said that the fund that protects
consumer bank deposits has fallen into the red and will remain there
into 2012, the Wall Street Journal reported today. The Federal
Deposit Insurance Corp. yesterday proposed the unprecedented step of
having the banking industry prepay $45 billion in fees by the end of the
year to give the government more breathing room to handle future
failures. The prepayment proposal was met with unexpected support from
banks. Some saw it as preferable to another option the FDIC seriously
considered -- an emergency charge of $5.6 billion on top of the regular
fees. This would have likely come directly out of the capital reserves
at thousands of banks. The only other time the
fund fell into the red was in 1991, during the savings-and-loan crisis,
and it shows how U.S. officials underestimated the impact of this crisis
on the government's cash needs.
href='http://online.wsj.com/article/SB125423323602549299.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Moody's Ex-Compliance Head
to Testify at Hearing Examining Credit-Rating Firms
Scott McCleskey, a former head of compliance at
Moody's Investors Service, is set to testify today at a congressional
hearing about concerns that he flagged earlier this year to the
Securities and Exchange Commission regarding practices at the New York
credit-ratings firm, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. McCleskey, who left Moody's about a year ago,
wrote to the SEC in March to complain that Moody's Corp.'s Moody's
Investors Service doesn't adequately monitor credit ratings it assigned
to tens of thousands of municipal bonds. In the letter, he also said
that in 2008, the company replaced a number of experienced compliance
officers with analysts and executives from its structured-finance
department. The appearance by McCleskey comes a week after a former
Moody's managing director, Eric Kolchinsky, went public with allegations
that the rating firm continues to issue inflated ratings on complex debt
href='http://online.wsj.com/article/SB125426055962950527.html?mod=WSJ_hps_sections_markets'>Read
more.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/presskanj_092509.shtml'>Click
here to read the prepared witness testimony for the House Financial
Services Subcommittee on Capital Markets, Insurance, and Government
Sponsored Enterprises hearing today at 2 p.m. ET titled 'Reforming
Credit Rating Agencies.' Also, click here to read more about
Subcommittee Chairman Paul E. Kanjorski’s
(D-Pa.) discussion draft of legislation looking to regulate
credit-rating agencies.
Banking Industry and
Consumer Groups to Provide Views on Consumer Financial Protection Agency
at House Hearing
The House Financial Services Committee resumes
hearings today examining the proposed Consumer Financial Protection
Agency. Banking and consumer group representatives will testify at a
hearing, scheduled to start at 10 a.m. ET and will include two
panels.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr_092309.shtml'>Click
here to view the prepared witness testimony.
Congressman to Facilitate
Meeting Between Car Makers, Dealers
U.S. House Majority Leader Steny Hoyer (D-Md.) will
host a meeting today between auto dealers and representatives of General
Motors Co. and Chrysler Group LLC aimed at reaching an 'equitable
agreement' for the thousands of dealers forced to close when the two
carmakers declared bankruptcy, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The meeting will be the first formal sit-down
between the dealers and the two car companies. Dealers have been pushing
for greater compensation from the carmakers. The House overwhelmingly
agreed to legislation in the summer that would have required dealers to
respect state franchise laws that provided some protections for dealers.
However, the Senate has shown no indication that it plans to take up the
House legislation, and the Obama administration's position has been that
the dealers were among the inevitable cuts to be made in the two firms'
bankruptcy proceedings.
href='http://online.wsj.com/article/SB125424422401349913.html'>Read
more. (Subscription required.)
IMF Calls for Overhaul of
Financial System
The International Monetary Fund said today that
“the global economy has turned a corner” after the harrowing
start to 2009 but that only a thorough restructuring of the financial
system could prevent a return to crisis and pave the way for solid
growth within the next 18 months, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. In its Global Financial Stability Report, the
IMF praised the mixture of bank rescue and stimulus packages, but it
said that the policies had not changed the fundamental dynamic by which
debt-burdened banks and consumers drag on economic growth. To head off a
new chapter in the crisis, the IMF called on governments to strengthen
bank capital and establish effective policies to clear bad loans off
bank balance sheets. It also called for “great care” in
winding down crisis-driven rescue policies to avoid bringing on a new
crisis.
href='http://www.nytimes.com/2009/10/01/business/global/01imf.html?_r=1&ref=business&pagewanted=print'>Read
more.
Judge to Consider
Fontainebleau Liquidation
A federal bankruptcy court in Miami will hear a motion
Oct. 28 by lenders of the Fontainebleau Las Vegas seeking to convert the
resort's bankruptcy case to a liquidation, the Associated Press reported
yesterday. Fontainebleau developers have told the court they are
negotiating to sell the 24-acre project to an unnamed buyer. However,
analysts say that the buyer would need $1.5 billion to finish the
resort; Fontainebleau already owes $1.6 billion. Bank lawyers say no
progress has been made in Fontainebleau's reorganization.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/29/AR2009092902894_pf.html'>Read
more.
International
Click here to review
today's global insolvency news from the GLOBAL INSOLvency site.