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December 17,
2008
Obama Readying Financial
Initiatives
The incoming Obama administration is considering a series of initiatives
to combat the financial crisis, including injecting more capital into
banks, creating a market for illiquid assets clogging the books of
financial institutions and helping borrowers who are having trouble
making their mortgage payments, the Wall Street Journal
reported today. While Treasury Secretary Henry Paulson seized on equity
investments in banks as Treasury's primary mechanism to help resolve the
financial crisis, the Obama team is developing a broader approach that
would likely incorporate multiple remedies. One key distinction will be
in the approach to helping homeowners facing foreclosure. Paulson and
the White House have resisted calls to embark on a government rescue of
homeowners. The Obama team, by contrast, sees that as a critical leg of
its financial-crisis rescue plan. While his foreclosure plan is still
being developed, Democratic lawmakers are pushing for Obama to take
steps quickly to help at-risk borrowers.
href='http://online.wsj.com/article/SB122947278692012293.html'>Read
more. (Subscription required.)
Autos
Judges Change Rules to Lure
Automakers to Detroit's Court
The federal bankruptcy court in Detroit, intending to make the venue
more attractive for GM Corp., Chrysler Corp. or Ford Motor Co. if they
seek to reorganize, has changed some of its rules, Bloomberg News
reported today. Detroit judges hope efforts to make their jurisdiction
more business-friendly will prompt the automakers to seek court
protection in their Michigan home, rather than in the traditional,
big-business venues of New York and Delaware. Among the changes the
court is making is the ability for the chief judge to choose which
bankruptcy judge handles the main case, according to an administrative
order signed Dec. 10.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=awUV5ZhfrB1c&refer=home'>Read
more.
Key Plastics Files for Chapter
11
Northville, Mich.-based auto supplier Key Plastics LLC filed a
pre-packaged chapter 11 bankruptcy petition in a Delaware bankruptcy
court late Monday, Crain's Detroit Business reported yesterday.
The pre-packaged reorganization plan, approved by 90 percent of the
company's bond holders, will convert $115 million of its senior secured
notes into company common stock, flipping debt into equity. Wayzata
Investment Partners LLC, a Minnesota-based investment bank, owns the
majority of the company's bonds and will be the controlling shareholder
after the bonds are converted to common stock. Wayzata will provide $20
million in debtor-in-possession financing to bankroll the company's
operations while under court protection as well as an additional $20
million for the company after the plan is approved by the court. Key
Plastics said that it expects its plan to be approved in late
January.
href='http://www.crainsdetroit.com/article/20081216/FREE/812169975/-1'>Read
more.
Auto Supplier Precision Parts Seeks
Chapter 11
Precision Parts International LLC, a supplier of precision
metal formed components to the automotive, aviation and industrial
sectors, has filed for chapter 11 protection, citing the beleaguered
automotive industry and the increased price of steel, Bankruptcy
Law360 reported yesterday. In a voluntary petition filed Friday in
the U.S. Bankruptcy Court for the District of Delaware, the privately
held Rochester Hills, Mich.-based company and eight affiliates listed
assets between $100 and $500 million and liabilities of approximately
$184.5 million. The case is In re PPI Holdings Inc. et al.,
case number: 08-123289, in the U.S. Bankruptcy Court for the District of
Delaware.
href='http://bankruptcy.law360.com/articles/80243'>Read
more. (Subscription required.)
Law Firm to Seek
Bankruptcy
Dreier LLP, scandalized by charges that its founder masterminded a
massive fraud, will seek bankruptcy protection, the Associated Press
reported. Mark Pomerantz, the receiver appointed to run the firm, warned
of the filing in a letter to the Securities and Exchange Commission and
that the firm's founder, Marc Dreier, would likely seek protection too.
The mid-size firm, Dreier LLP, has represented celebrities including
retired football star Michael Strahan and former News Corp. publishing
executive Judith Regan. Dreier's lawyer has said his client would
cooperate fully with the court-appointed receiver overseeing his assets.
Prosecutors accused Dreier of posing as if he were peddling heavily
discounted investments in a New York City real estate development
company because original investors, damaged by the world's financial
crisis, were backing out. The SEC said that Dreier created an elaborate
charade to convince three hedge funds that the investments were real.
One hedge fund sent $13.5 million to Dreier while another wired $100
million, authorities said.
href='http://news.yahoo.com/s/ap/20081216/ap_on_bi_ge/lawyer_arrested/print'>Read
more.
Pierre Foods Exits Chapter 11
Protection
Pierre Foods Inc. has officially emerged from chapter 11 protection
after it said that its reorganization plan was confirmed and it closed
on a $95 million exit financing strategy to fund ongoing operations and
pay obligations under the plan, Bankruptcy Law360 reported
yesterday. The company previously had said it expected to draw less than
$60 million at exit. The company also announced that William Toler,
former president of Campbell Sales Co., has taken over as Pierre Foods'
CEO. Pierre Foods' reorganization plan was approved just days after the
convenience foods manufacturer lodged a second amended plan of
reorganization with some technical modifications, as well as a plan
supplement, in response to a number of objections filed last week by the
U.S. Trustee and one of Pierre's creditors. Under the plan, Oaktree
Capital Management LP, Pierre Foods' largest creditor and
debtor-in-possession credit facility, became the majority owner of the
company. Read
more. (Subscription required.)
Fed Cuts Key Rate to a Record
Low
The Federal Reserve yesterday lowered its benchmark interest rate
virtually to zero and declared that it would now fight the recession by
pumping vast amounts of money to businesses and consumers through an
expanding array of new lending programs, the New York Times reported
today. The Fed cut its target for the overnight federal funds rate to a
range of zero to 0.25 percent and brought the United States to the
zero-rate policies that Japan used for years in its own fight against
deflation. The Fed also announced that it would print as much money as
necessary to revive the frozen credit markets and fight what is shaping
up as the nation's worst economic downturn since World War II. In
effect, the Fed is stepping in as a substitute for banks and other
lenders and acting more like a bank itself. “The Federal Reserve
will employ all available tools to promote the resumption of sustainable
economic growth,” it said. Those tools include buying “large
quantities” of mortgage-related bonds, longer-term Treasury bonds,
corporate debt and even consumer loans.
href='http://www.nytimes.com/2008/12/17/business/economy/17fed.html?_r=1&ref=business&pagewanted=print'>Read
more.
SEC to Probe Ties to Madoff
Scandal
The Securities and Exchange Commission will examine the relationship
between a former official at the agency and a niece of financier Bernard
L. Madoff after the SEC's chief admitted 'apparent multiple failures' to
oversee the firm at the center of an alleged $50 billion Ponzi scheme,
the Wall Street Journal reported today. In an extraordinary
admission that the SEC was aware of numerous red flags raised about
Bernard L. Madoff Investment Securities LLC, but failed to take them
seriously enough, SEC Chairman Christopher Cox ordered a review of the
agency's oversight of the New York securities-trading and
investment-management firm. The review will include whether
relationships between SEC officials and Madoff or his family members had
any impact on the agency's oversight.
href='http://online.wsj.com/article/SB122947343148212337.html'>Read
more. (Subscription required.)
GMAC Again Extends Deadline for Debt
Exchange
GMAC LLC has again extended the deadline for a crucial debt
restructuring offer, reflecting demands by investors for more time to
tender their securities, the Wall Street Journal reported
today. The latest extension of Dec. 19 at 5:00 p.m. ET was announced
yesterday after GMAC's previous deadline passed. It's the fourth time
GMAC has revised the deadline and many GMAC investors have yet to tender
their debt holdings in the wake of last week's agreement to amended
terms of the $38 billion debt exchange. As of yesterday, the lender had
received 58 percent of existing, eligible GMAC debt securities, and 37
percent of outstanding debt securities of Residential Capital LLC,
GMAC's ailing mortgage unit. Some 75 percent of the selected securities
must be tendered for the proposed debt restructuring to go
through.
href='http://online.wsj.com/article/SB122949609590213871.html'>Read
more. (Subscription required.)
Report: $107 Billion in Commercial
Property in Financial Distress
Research company Real Capital Analytics has compiled data showing that
at least $107 billion worth of income-producing property - including
hotels, offices, apartment complexes and warehouses - is already in
distress or is headed in that direction, the New York Times
reported today. The distress is occurring all across the country, but
New York tops the list because of the number of costly high-profile
transactions that occurred during the boom years. Real Capital
Analytics' list includes a total of 268 properties in the New York area,
with a value of $12 billion, as already or potentially in trouble.
Standing on the precipice of distress are more than 3,700 properties
nationally, valued at $80.9 billion, Real Capital Analytics said. This
category includes $40 billion worth of properties whose owners are
suffering financially. It also covers $26 billion worth of buildings
with loans maturing next year, when credit is expected to remain tight
and borrowers will probably be unable to refinance their properties
unless they accept much more onerous terms.
href='http://www.nytimes.com/2008/12/17/business/17distress.html?ref=business&pagewanted=print'>Read
more.
One in Five Households Behind on
Utility Bills
One in five U.S. households was behind on its utility bills coming out
of last winter, a new survey concludes, raising fears that the current
heating season could be even worse, the Wall Street Journal
reported today. One in 20 households had its utility service terminated
in 2007. Electric customers who were overdue owed an average of $157 in
May 2008, when prohibitions on most wintertime service shutoffs ended,
while overdue natural-gas customers owed an average of $360. The survey,
to be released today, was conducted by the National Association of
Regulatory Utility Commissioners that has become increasingly concerned
about a worsening trend of payment delinquencies and service shutoffs.
Results were gleaned from statistics submitted by utility commissions in
41 states and the District of Columbia, the largest sample size ever
analyzed by the organization.
href='http://online.wsj.com/article/SB122947913590112885.html'>Read
more. (Subscription required.)
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