August 212008

 

FDIC Establishes Plan for IndyMac
Mortgages
Thousands of troubled home borrowers with loans from IndyMac Federal
Bank will be able to

switch to fixed-rate mortgages under a new plan from federal regulators,

who seized the bank

last month after it became the largest regulated thrift to fail, the
Associated Press reported

yesterday. The Federal Deposit Insurance Corp. (FDIC) said yesterday
that most IndyMac

borrowers who are delinquent or in default on their mortgages and can
document their situation

will be able to switch into loans capped at an interest rate around 6.5
percent. The FDIC has

been operating the Pasadena, Calif.-based bank, which was called IndyMac

Bank, under a

conservatorship since July 11. More than 60,000 of the bank's home
borrowers are 60 or more

days behind on their payments, according to the FDIC. 

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In a related analysis, the Federal Deposit Insurance Corp. (FDIC) is
under pressure to

decide how to replenish the fund that insures consumer deposits, the
Wall Street

Journal reported today. The fund is stocked mostly by fees levied
on U.S. banks. If the

FDIC raises the fees, that would siphon more money from already
cash-strapped financial

institutions and could also deplete funds that banks would otherwise use

to make loans.

However, if the FDIC moves too cautiously, the fund could run dry at a
crucial time. The agency

could split the difference by raising premiums faster than most banks
would like but slow

enough so that the rebuilding of the fund takes years, not months. The
FDIC is likely to unveil

its intentions in October. 

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Fannie Mae and Freddie Mac Look to
Refinance $225 Billion by

End of September
Fannie Mae and Freddie Mac are looking for ways to refinance $225
billion worth of debt by the

end of September as investors are remaining cautious about the two
government-sponsored

enterprises, the Wall Street Journal reported today. Shares of
both companies have

been hammered for weeks by fears they would no longer be able to
function, a problem that would

likely cripple the U.S. housing market. Last month, Congress gave the
Treasury Department the

authority to lend money to the firms or take an equity stake. Because
investors have little

idea how Treasury would intervene, they have become less enthusiastic
about adding Fannie or

Freddie debt to their portfolios, creating a potentially self-fulfilling

spiral. 

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Deterioration of Residential
Mortgage-Backed Securities

Causes S&P to Cut Ratings on CDOs
Standard & Poor's cut its ratings on $4.44 billion of U.S.
collateralized debt obligations

(CDOs) because of credit deterioration and recent ratings cuts on
residential mortgage-backed

securities, the Wall Street Journal reported today. The rating
agency lowered ratings

on 49 tranches from 11 U.S. cash flow and hybrid CDOs and removed 24 of
them from watch for

possible downgrade. Ten of the 11 affected transactions are
mezzanine-structured finance CDOs

of asset-backed securities, collateralized in large part by mezzanine
tranches of residential

mortgage-backed securities and other structured-finance
securities. 

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New York Attorney General Continues
Probe of Auction-Rate

Securities
The New York Attorney General Andrew Cuomo's office is stepping up its
probe of three banks:

Bank of America Corp., Goldman Sachs Group Inc. and Deutsche Bank AG,
which underwrote and sold

the securities, issued by municipalities and others, the Wall Street

Journal reported

today. Cuomo's office also cast doubt on protests from brokers like
Fidelity Investments and

Oppenheimer & Co., which asserted recently that as merely sellers of

these securities and

not dealers in the auctions themselves, they were unaware of the
market's problems and

shouldn't be forced to buy back billions of dollars of securities from
their clients. In the

widened probe targeting the three firms, Cuomo's office has been
gathering more documents,

conducting witness interviews and assigning more lawyers to investigate
the companies'

auction-rate operations. 

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Judge Approves $8.3 Million Settlement

in Charys Chapter 11

Case
The judge overseeing the chapter 11 proceedings of Charys Holding Co.
Inc. signed off on an

agreement allowing the telecommunications company to use $8.3 million in

cash collateral to pay

back some of its noteholders' expired claims, Bankruptcy Law360

reported yesterday.

According to the agreement, Charys will use proceeds from the sale of
several cell phone towers

in order to pay off expired promissory notes to Imperium Master Fund
Ltd., Jed Family Trust and

John Michaelson. Charys' subsidiary, Ayin Tower Management Services
Inc., sold the cell phone

towers and related assets to Crown Communications Inc. for approximately

$14 million. According

to the agreement, $5.39 million of that sale that was placed into escrow

will be used to pay

Imperium and the other noteholders. The bankrupt company agreed to pay
back the remainder of

those noteholder debts by Nov. 15., according to the agreement. 

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Delta Financial Wins Extension to
Finalize Plan

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Bankruptcy Judge Christopher S. Sontchi extended the
exclusivity period for

bankrupt lender Delta Financial Corp., which said last month that it is
close to reaching an

agreement with its creditors, Bankruptcy Law360 reported
yesterday. Judge Sontchi's

order filed Monday said that Delta will have until Sept. 15 to file a
plan, and until Nov. 17

to solicit acceptances. In its motion for the extension, filed July 25,
Delta said it had made

significant progress in negotiations with its creditors, and had reached

agreement on

“the majority of the terms” of a liquidation plan. However,
the company said, it

needed more time to work out certain details and to continue evaluating
the validity of the

roughly 400 claims, amounting to about $520 million, against its
estate. 

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Buyer Found for Steve &
Barry's
Bay Harbour Management LC plans to purchase the assets of bankrupt
retailer Steve & Barry's

for $168 million, the Wall Street Journal reported today. While

the deal is subject to

bankruptcy court approval, the New York-based investment firm plans to
keep open about 150 of

the chain's 276 stores. The company's founders, Steven Shore and Barry
Prevor, will invest

alongside Bay Harbour and sit on the company's board. Bay Harbour has
been negotiating around

to win concessions on the company's leases and said that the purchase
was contingent upon

negotiating favorable terms from key landlords. 

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Bombay Co. Expects Bankruptcy Plan
Approval Soon

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Bombay Co. has obtained a commitment from the judge overseeing the
home-furnishing retailer's

bankruptcy case to sign a confirmation order approving the company's
chapter 11 plan, Bloomberg

News reported today. According to Bombay's disclosure statement,
unsecured creditors would

receive 16.4 to 28.9 percent on their claims while holders of gift cards

are in a separate

class and are to receive 25 percent. Bombay's counsel, John Penn of
Haynes and Boone LLP,

said that all objections to the plan were resolved prior yesterday's
confirmation hearing. The

chapter 11 plan was proposed by the company together with the creditors'

committee. 

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Airlines Plan Big Job Cuts after Labor

Day
The airline industry is set to suffer its biggest wave of job losses
since 2001, as carriers

prepare to shed tens of thousands of jobs after the Labor Day holiday to

cope with high fuel

prices, the Wall Street Journal reported today. Airlines have
collectively announced

plans this year to cut more than 36,000 jobs, according to the Air
Transport Association of

America, an industry trade group. By year's end, the work force, which
numbered 414,600

full-time equivalent employees in June, is projected to have been
slashed by between 12 to 15

percent, according to U.S. Bureau of Transportation Statistics
officials. That would be the

biggest wave of job losses in the industry since 25 percent of jobs were

lost immediately after

the Sept. 11, 2001, terror attacks. 

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