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June 12, 2008
SEC
Proposes Rules for Bond Rating Industry
The Securities and Exchange Commission (SEC) recommended sweeping
changes to the bond-rating business, the latest moves by the federal
government to address the causes of the subprime meltdown, the Wall
Street Journal reported today. Among the proposals, the SEC would
require credit-rating firms to make more information about ratings
publicly available, would ban some practices and would require firms to
clearly distinguish between corporate or government debt and the more
complex structured products at the heart of the financial crisis. The
three largest rating firms, by market share, Moody's Corp., McGraw-Hill
Cos.' Standard & Poor's unit and Fimalac SA's Fitch Ratings broadly
welcomed the SEC's move. However, Wall Street firms and mortgage
associations are concerned that a new scale could cause investors to
dump structured debt at fire-sale prices. They also worry that demand
for those products, which are already hard to trade, would further
diminish.
href='http://online.wsj.com/article_print/SB121323614021066931.html'>Read
more. (Registration required.)
name='2'>Lawmakers Fight to Keep GSE Provisions in Housing
Bill
House members are lobbying their leaders to stand firm as they gear up
to enter into negotiations with the Senate over a wide-ranging
housing-rescue package that also would revamp oversight at mortgage
giants Fannie Mae and Freddie Mac, CongressDaily reported
yesterday. Reps. Melissa Bean (D-Ill.) and Randy Neugebauer (R-Texas)
sent a letter late Tuesday to Speaker Pelosi and Minority Leader Boehner
urging them to retain language in a House-passed bill that outlines the
powers a newly strengthened regulator will have over the $1.5 trillion
portfolio of the two government-sponsored enterprises (GSEs). The House
bill includes a Bean-Neugebauer amendment stating that the regulator
could take action to restrict or cap Fannie's and Freddie's portfolios
if there is a safety and soundness risk to the companies themselves, but
not to the overall economy. By contrast, a measure approved by the
Senate Banking Committee last month would allow the new regulator to set
limits on their portfolios based on safety and soundness reasons, like
the House version, but also require that the portfolios be backed with
'sufficient capital.'
ATA
Airlines Sues FedEx over Military Charter Deal
ATA Airlines is suing FedEx Corp. over its decision to end a military
charter business, a move the airline says forced it to seek bankruptcy
protection and left it financially destroyed, the Associated Press
reported today. ATA accused FedEx of breaking a written agreement when
it told the airline in January that it would no longer receive military
passenger service for the government fiscal year ending in 2009,
according to a lawsuit filed yesterday in U.S. District Court in
Indianapolis. The charter flights of military personnel and their
families generated more than $400 million in annual revenue and were
expected to remain a ''cornerstone'' of the airline's future business,
the lawsuit states. ATA filed for bankruptcy April 2 and abruptly ceased
href='http://www.nytimes.com/aponline/business/AP-ATA-FedEx-Lawsuit.html?sq=bankruptcy&st=nyt&scp=4&pagewanted=print'>Read
more.
Goody's
Receives Court Approval to Pay Workers, Vendors
Goody's Family Clothing, an apparel retailer that recently filed for
chapter 11 protection, said yesterday that it had received court
approval to honor gift cards and pay salaries as well as vendors for
goods and services delivered after its petition, Reuters reported. The
company has also received preliminary approval to hire an agent to
conduct liquidation sales at the 69 stores it intends to close as part
of its reorganization plan. Goody's has identified Hilco Merchant
Resources as the lead bidder for the rights to liquidate the stores. If
the court approves the agent, store-closing sales would begin as early
as the weekend, Goody's said.
href='http://www.reuters.com/article/bondsNews/idUSN1123454220080611'>Read
more.
Hancock Fabrics Files Reorganization
Plan
More than a year after filing for bankruptcy, fabric retailer Hancock
Fabrics has filed its chapter 11 reorganization plan with the U.S.
Bankruptcy Court for the District of Delaware, Bankruptcy Law360
reported yesterday. The plan, filed Tuesday, provides for payment in
full of all allowed claims against the company, including post-petition
interest for holders of secured claims, priority claims and general
unsecured claims from the date the company filed for bankruptcy until
the date it exits bankruptcy. In addition, the plan provides that
holders of the company's common stock will retain their interest after
the exit from bankruptcy, meaning stockholders will continue to hold an
equity interest in the company.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=58866'>Read
more. (Registration required.)
Trust Posts $3.31 Billion Loss
Thornburg Mortgage Inc. posted a first quarter net loss of $3.31 billion
as it booked unrealized market-value losses and financing-related
charges, the Wall Street Journal reported today. The latest
results include $1.54 billion in unrealized market-value losses at
Thornburg's mortgage-backed securities and securitized-loan portfolios,
as well as $949.1 million in charges related to a March 31 financing
deal that helped the real-estate investment trust avert bankruptcy. Loan
originations in the first quarter totaled $548.7 million. Thornburg had
to temporarily suspend funding new mortgages because of the margin
calls, but Chief Lending Officer Paul Decoff said that locked loans in
the pipeline have been completely funded. Since March 31 the company has
funded about $239 million in loans.
href='http://online.wsj.com/article_print/SB121326677856667629.html'>Read
more. (Registration required.)
House
Fails to Extend Jobless Benefits
The House yesterday narrowly failed to approve a proposal to give
jobless workers an extra three months of unemployment benefits, but
Democratic leaders said that they would bring back the bill for a second
vote today, the Washington Post reported today. Despite a White
House veto threat, 49 Republicans voted with a united Democratic caucus
in favor of the measure, which would provide an extra 13 weeks of
unemployment checks to all jobless workers and an extra 13 weeks on top
of that to job seekers in high-unemployment states such as Michigan,
California and Alaska.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/11/AR2008061101977_pf.html'>Read
more.
name='8'>Small-Business Agency's Problems Linger as Leader Moves on
to HUD
Steven C. Preston's signature accomplishment as head of the Small
Business Administration was overhauling the agency's disaster loan
assistance program, a program that was foundering under the crush of
Hurricane Katrina claims when he took over nearly two years ago, the
New York Times reported today. Preston, however, started this
week as secretary of Housing and Urban Development and many critics and
small-business groups said that there are a number of problem areas that
need to be addressed as the economy weakens. Critics say that the SBA
needs to broaden access to federally guaranteed loans, so that they are
more attainable for entrepreneurs and small-enterprise owners.
href='http://www.nytimes.com/2008/06/12/business/smallbusiness/12sba.html?ref=business&pagewanted=print'>Read
more.
International
European Airlines Reap Benefits of Oil
Hedging
As U.S. airlines reel from soaring oil prices and a sinking domestic
economy, most of their European rivals appear better placed to ride out
the storm, the New York Times reported today. While no airline
can avoid the oil price shock, analysts say, European operators are
benefiting from hedging their fuel prices years in advance to
offset the rising oil costs. European carriers also fly relatively newer
models of Boeing and Airbus planes, which burn 30 percent less fuel than
models from the 1970s and 1980s, many of which are still in use by many
U.S. airlines.
href='http://www.nytimes.com/2008/06/12/business/12air.html?ref=business&pagewanted=print'>Read
more.