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September 17,
2007
name='1'>Congress Plans Action on
Subprime Crisis this Week
The House will turn its
attention to
legislation boosting Federal Housing Administration loan limits in an
effort to address the
subprime mortgage crisis,
size='3'>CongressDaily reported today. The
House will vote this
week on legislation that would revamp the Federal Housing
Administration's mortgage
insurance program. Supporters hope to boost the mortgage market in the
wake of the subprime
turmoil with a floor amendment that would allow the agency to insure
more homes in pricier
markets. Under the measure, the FHA loan limit for single-family homes
would be raised from
$362,000 to $417,000, the current level for government-sponsored
enterprises Fannie Mae
and Freddie Mac. House Financial Services Chairman Barney Frank
(D-Mass.) is preparing an
amendment to raise the level to as much as $500,000 and allow the HUD
secretary the
discretion to bump up that level during periods of crisis in the
home-mortgage market.
Senate Banking Chairman
face='Times New
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size='3'>Chris Dodd (D-Conn.)
will mark up his
companion FHA bill in committee on Wednesday. The House Financial
Services Committee will
also hold a markup Tuesday on legislation that would give federal bank
regulators authority
to write rules against unfair and deceptive financial practices under
the Federal Trade
Commission Act. On Thursday, the committee will hold a Thursday
hearing with Treasury
Secretary Henry Paulson, HUD Secretary Alphonso
w:st='on'>
face='Times New Roman' size='3'>Jack
size='3'>son and Federal
Reserve Chairman Ben Bernanke on possible regulatory and legislative
solutions to rescuing
homeowners struggling in the subprime mortgage
meltdown.
name='2'>Dispute over
size='3'>Alliance
size='3'>Mortgage's Trustee
Resolved
Bankruptcy Judge
w:st='on'>
size='3'>Chris
face='Times New
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size='3'>topher S. Sontchi agreed to resolve
the ongoing dispute
over the election of a permanent trustee to oversee Alliance Mortgage
Investments
Inc.’s chapter 7 case, appointing as trustee the candidate
nominated by administrative
agent Wells Fargo Bank NA and other lenders,
size='3'>Bankruptcy Law360 reported on Friday.
Wells Fargo, which
is an administrative agent under a term loan agreement with AMI, sought
the election of a
permanent trustee before the first meeting of creditors on Aug. 15. At
the meeting, Wells
Fargo and two other lenders nominated and unanimously elected Klestadt
as permanent trustee.
However, U.S. Trustee
size='3'>Kelly Beaudin
Stapleton, who oversaw the election, filed a
report with the
bankruptcy court on Aug. 23 that declared the election in dispute.
Stapleton said that the
holders of secured claims or of administrative priority claims were not
among the claimants
who could either request the election of or vote for a chapter 7
trustee.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=34929'>Read
more. (Registration required.)
Talks Sour
General Motors workers at
plants around
the
face='Times New Roman'
size='3'>United States
size='3'>began
returning to their jobs this morning as bargainers for the United
Automobile Workers union
and the company took a break from negotiations that appeared close to
running aground on
Sunday night, the New York Times reported today. Auto plants
opened as scheduled,
although the UAW’s contracts with GM expired two days ago. Late
Sunday, it appeared
that negotiations between the two sides were in danger of collapse, with
union leaders
considering the possibility of recessing the negotiations and choosing
another automaker,
perhaps the Ford Motor Company, in an effort to reach a new contract.
The two sides were
said to be deadlocked over guarantees sought by the union’s
president, Ron
Gettelfinger, for workers who will remain at GM once it completes an
extensive restructuring
href='http://www.nytimes.com/2007/09/17/business/17cnd-gm.html?_r=1&oref=slogin&ref=
business&pagewanted=print'>Read more.
href='http://www.nytimes.com/2007/09/17/business/17cnd-gm.html?_r=1&oref=slogin&ref=
business&pagewanted=print'>
name='4'>Software Maker Files for
Bankruptcy
The SCO Group, the software
maker that sued
International Business Machines for copyright infringement, filed for
bankruptcy yesterday,
10 days after conceding that much of the case should be dropped,
Bloomberg News reported on
Saturday. The company
listed $14.8
million in assets and $7.5 million in debt in a petition filed in the
U.S. Bankruptcy Court
in Wilmington, Del. SCO, which had said that it owned the rights to
license the Unix
operating system, accused IBM of inserting Unix code into Linux, the
free operating system
that competes with Windows from Microsoft. SCO, based in
w:st='on'>
size='3'>Lindon,
w:st='on'>
face='Times New Roman' size='3'>Utah
size='3'>, sued IBM
for copyright infringement in 2003. SCO has been trying to collect
billions of dollars in
royalties from Linux users and was seeking more than $5 billion from
I.B.M.
href='http://www.nytimes.com/2007/09/15/technology/15sco.html?pagewanted=print'>Read
more.
name='5'>Musicland Seeks to
Recover Pre-petition Transfers
Bankrupt Musicland
Holdings Corp.’s
unsecured creditors have filed four adversary cases against companies
that have made claims
against Musicland in an effort to recover more than $1.2 million in
allegedly fraudulent
payments that went out in the days leading up to the company’s
chapter 11
filing, Bankruptcy
Law360
size='3'>reported on Friday. The complaints, which were filed Thursday
in the U.S.
Bankruptcy Court for the Southern District of New York, seek to recover
transfers that were
made to four companies, Quad/Graphics Inc., Afco Credit Corp., Giant
Merchandising Inc. and
Pro/Phase Marketing Inc., during the 90-day preferential period before
Musicland filed for
bankruptcy on Jan. 12, 2006. The transfers, which were made to pay off
an antecedent debt,
allowed the defendants to receive more than if the company had filed for
chapter 7, the
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=34870'>Read
more. (Registration required.)
Object to Calpine
Reorganization Plan
The largest creditors of
a Calpine Corp.
subsidiary are objecting to the power company's chapter 11 plan,
claiming that a proposal to
consolidate the subsidiary would result in unequal treatment for
creditors,
face='Times
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size='3'>Bankruptcy Law360 reported on Friday.
The banks claim
that Calpine Generating Co. LLC is a separate “highly solvent,
profitable and
valuable” corporate entity, and that diverting assets from
creditors of a solvent
estate to creditors of other estates would discriminate against CalGen's
stakeholders. In
support of their claim, the banks said that unlike other Calpine
subsidiaries, CalGen has
filed its own forms with the U.S. Securities and Exchange Commission.
Also, during Calpine's
chapter 11 cases, CalGen “has produced so much cash flow that it
has advanced more
than $500 million of 'excess cash flow' from its operations to Calpine
and other Calpine
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=34868'>Read
more. (Registration required.)
name='7'>Pacific Lumber Seeks to
Bar Whistleblower Claims
Pacific Lumber Co. asked
a bankruptcy court
to prohibit plaintiffs from seeking $1 billion in two
face='Times New Roman'
size='3'>qui tam suits against the bankrupt
logging company over
alleged federal and state violations of the False Claims Act,
Bankruptcy Law360
reported on Friday. The qui
tam
size='3'>suits claimed that Pacific Lumber should be held liable for
damages caused by the
alleged fraud in connection with a $380 million deal with
face='Times New Roman' size='3'>California
size='3'>and
the United States. The suits also
tie Pacific
Lumber’s nonbankrupt parent company Maxxam Inc. and Maxxam's
president and CEO Charles
Hurwitz into the allegations. Pacific Lumber alleged that any resulting
claim amount was
dischargeable under bankruptcy provisions because the plaintiffs had
missed the deadline to
file a complaint to determine whether the debt should be excepted from
discharge. The
company said that a complaint to determine dischargeability should have
been filed by July
2, but that plaintiffs did not file their complaint until July
17.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=34947'>Read
more.
(Registration required.)
name='8'>Commentary: Many Looking
to Fed to Spur Economy
The Fed's monetary
policies helped cause the
housing bubble and subprime mortgage crisis, and now it's being
asked to solve them by
lowering interest rates this week, according to an editorial in
today’s
size='3'>Wall Street Journal. The Fed was
watching its measure of
'core inflation,' which turns out to have been misleading in part
because it didn't include
an adequate account of housing prices. Though fear of deflation was gone
by the third
quarter of 2003, after the second round of Bush tax cuts had passed and
GDP growth
registered at 7.2 percent on an annual basis (later revised to 7.5
percent), the Fed
nonetheless maintained negative real interest rates for many more months
to come. The
current housing recession, fueled in part by the Fed’s low rates,
has caused the
overall economy to slow, and recession worries are rampant. Inflation
also remains near the
upper limit of the Fed's comfort level, the dollar is weak, gold is back
above $700 and oil
briefly popped above $80 a barrel last week.
href='http://online.wsj.com/article/SB118999120735229338.html?mod=opinion_main_review_and_ou
tlooks'>Read more. (Registration required.)
International
name='9'>British Withdraw
Billions in Bank Run
Shares in one of
w:st='on'>
size='3'>Britain
size='3'>'s largest lenders
tumbled another 30 percent Monday as customers, driven by fears of
insolvency, made
a run on the bank and withdrew billions, the Associated Press
reported today. Treasury
Secretary Alistair Darling sought to assure depositors that their money
was safe, even as
former U.S. Federal Reserve Board chairman Alan Greenspan warned of
difficulties ahead
in
face='Times New Roman'
size='3'>Britain
size='3'>'s booming housing
market. Northern
face='Times New
Roman' size='3'>Rock,
w:st='on'>
size='3'>Britain
size='3'>'s fifth-largest
mortgage lender, issued a profit warning Friday, and Bank of England
agreed to provide it
with emergency funding. The British Broadcasting Corp. reported Sunday
that customers had
withdrawn nearly 2 billion pounds ($4 billion) from Northern Rock
accounts, though CEO Adam
Applegarth refused to give a figure.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/17/AR2007091700413_pf.htm
l'>Read more.
name='10'>TROUBLED COMPANIES IN
THE NEWS
The business news
articles below are taken
from the U.S. Business Journal’s Daily Summary of Troubled &
Fast Growing U.S.
Companies which is published by Bastien Financial Publications.
size='3'>ABI Members receive a
50% discount off of
our regular subscription rate of $500 when subscribing to the complete
Daily
Summary.
To subscribe email
steve@creditnews.com
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Adept Technology
Inc., the
Livermore, Ca. firm
which sells robots used in the assembly process, reported a fourth
quarter net loss of $5.5
million, on sales of $12.2 million, down from sales of nearly $15
million for the same
period one year earlier. The company reported income for the
fourth quarter, one year
earlier, of just under $1 million.
Global Crossing
Ltd.
face='Times New Roman'>, a Florham Park, N.J.-based
Internet protocol
telecommunications carrier, reported a second quarter net loss of $100
million, compared to
a $76 million loss in the year-earlier second quarter. Revenue
rose nearly
19%–to $547 million.
Quantum Fuel Systems
Technologies Worldwide
Inc., an
w:st='on'>
face='Times New Roman'
size='3'>Irvine
t size='3'>, Ca. manufacturer of fuel storage and delivery devices and
control systems,
reported a first quarter net loss of $66.8 million, compared to a loss
of $13.4 million in
the year-earlier period. The recent results included an
asset-impairment charge of
$58.9 million. Sales fell 27%–to $30.4 million.
RedEnvelope
Inc.,
a
Francisco
size='3'>, Ca. catalog and Web seller of products wrapped in red boxes,
reported a first
quarter net loss of more than $3.5 million, nearly four times its loss
in the year-earlier
period. Revenue fell nearly 9%–to $24.5 million.
SCO
Group, a
Lindon,
face='Times New Roman'
size='3'>Ut. software
company that has been in
a copyright-infringement spat with International Business Machines,
filed for bankruptcy
protection ten days after it said that much of the infringement case
should be dropped.
SCO had sued other companies as well, seeking billions of dollars
in royalties,
including $5 billion that it wanted from IBM. As it filed the bankruptcy
petition, SCO
issued assurances to its customers that they can rely on its software
products and said that
it will use current cash flow to operate as it reorganizes. SCO’s
filing, in the U.S.
Bankruptcy Court in
w:st='on'>Delaware
face='Times
&a
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;#13; &#13;&#13;&#10;&amp
;#13;&amp;#10;&amp;#13;&amp;#10;&amp;#13;&amp;#10;&a
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amp;#10;&amp;#13;&amp;#13;&amp;#10;New
&#1
3;&#13;&#10;Roman'>, listed assets and
liabilities of $14.8
million and $7.5 million respectively.
Sonus Networks
Inc.
size='3'>, a
face='Times New Roman'
size='3'>Chelmsford
face='Times New Roman'>
size='3'>, Ma. communications software and hardware manufacturer,
reported a second quarter
net loss of $7 million, on a 17% revenue increase–to $75.5
million.
VaxGen
Inc.,
the
size='3'>South San Francisco
size='3'>, Ca. vaccine
maker, is cutting more than 50% of its staff as part of its efforts to
cut its monthly burn
rate to $1.4 million. The company has been trying to keep its head
above water since
it lost an $870 million anthrax vaccine contract with the federal
government last
year.