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September 21,
2009
House Panel to Examine
Discharging Student Debt in Bankruptcy
The House Judiciary Subcommittee on Commercial and
Administrative Law has scheduled a hearing on Wednesday titled,
“Undue Hardship? Discharging Educational Debt in
Bankruptcy.” Witnesses to be announced. The hearing will take
place at 1 p.m. ET in room 2141 of the Rayburn House Office
Building.
href='http://judiciary.house.gov/hearings/hear_090923_1.html'>Read
more.
size='3'>Targets Bank Overdraft Charges
A backlash is brewing on Capitol Hill against banks
that charge large fees for overdrafts without asking or telling
customers, the
size='3'>Washington Post reported today. Banks
struggling to survive have become increasingly reliant on the fees,
which could total $38.5 billion this year. Senate Banking Committee
Chairman Christopher J. Dodd (D-Conn.) plans to introduce legislation
requiring banks to get permission from customers, rather than allowing
overdrafts automatically. If customers decline and then try to
overspend, the transaction would be rejected. A similar bill is pending
in the House. Even as the debate over a fundamental overhaul of
financial regulation unfolds in Congress, some members see a need for
more immediate action in specific areas, such as credit cards and
overdraft fees. There is outrage that some banks have raised fees,
squeezing consumers even as the government is investing vast sums to
rescue the industry. Average overdraft fees at large banks have
increased 4 percent this year, according to Moebs Services, a financial
research firm.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/20/AR2009092002879_pf.html'>Read
more.
In related news, the House Financial Services
Committee will hold a series of hearings beginning this week to consider
President Obama’s plan to overhaul the nation’s financial
regulatory structure. The CFPA hearing is set for Sept. 30.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/press_091509.sh'>Click
here to view the schedule of hearings on the
proposal.
BofA Objects to Agreement
Between FDIC and Taylor Bean
Bank of America Corp. has asked a bankruptcy court to
reject a mortgage loan agreement between Taylor Bean & Whitaker
Mortgage Corp. and the Federal Deposit Insurance Corp. in its role as
the receiver for Colonial BancGroup Inc., saying that the stipulation
violates an injunction Bank of America secured in a separate case
against Colonial,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Last month, Bank of America secured a
restraining order barring Colonial from disposing of over $1 billion in
loans and cash it held for the financial giant. Bank of America held the
loans at issue — which belong to Ocala Funding LLC, a subsidiary
of Taylor Bean — as the collateral agent for 'various secured
parties' that entered into swap transactions with Ocala in mid-2008. The
banking giant then signed a series of bailee letters with Colonial,
which promised to hold the loans and any proceeds from those loans if
sold in a segregated account, according to the complaint.
href='http://bankruptcy.law360.com/print_article/123248'>Read
more. (Subscription required.)
Merrill Seeks to Stop Probe
of $8.3 Billion Tribune Buyout
Merrill Lynch Capital Corp. has asked a bankruptcy
judge to prevent a Tribune Co. bondholder from investigating Merrill's
role in an $8.3 billion leveraged buyout with the now-bankrupt Tribune,
arguing that it had already offered to provide the documents being
sought outside of court,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Merrill, which helped finance the leveraged
buyout, filed a partial objection to Law Debenture Trust Co. of New
York's Rule 2004 motion for leave to conduct discovery in the U.S.
Bankruptcy Court for the District of Delaware on Thursday, asking the
judge to deny Law Debenture's request. A group of Tribune Co.
bondholders including Law Debenture had filed a motion in August
requesting an order for a probe into whether the Tribune's LBO
transaction was fraudulent under the U.S. Bankruptcy Code.
href='http://bankruptcy.law360.com/articles/123144'>Read
more. (Subscription required.)
from Bank of America on Talks
Bank of America is now facing questions over its
merger with Merrill Lynch from a House Oversight and Government Reform
Committee Chairman Edolphus Towns (D-N.Y.), who has told the bank that
it cannot use attorney-client privilege when dealing with Congress,
the
size='3'>New York Times reported today. In a
sternly worded letter sent to Bank of America on Friday, Towns said that
the bank must divulge when it became aware of the enormous losses at
Merrill last year, when it received a commitment from the federal
government for a second round of bailout money and what legal advice its
management received about whether it had to disclose those developments
to the bank’s shareholders. Towns gave the bank until noon today
to provide answers and relevant legal documents. The bank is asking
Towns to delay that request until after Tuesday, when Towns meets with
Anne Finucane, the bank’s chief strategy and marketing officer,
who oversees public policy at the bank.
href='http://www.nytimes.com/2009/09/21/business/21bank.html?_r=1&ref=business&pagewanted=print'>Read
more.
Change Pay Policies
A group of blue-chip companies is lining up behind
efforts to voluntarily change their pay practices, in part to head off
potentially more onerous restrictions coming from the government,
the
size='3'>Wall Street Journal reported today.
The Conference Board, a nonprofit business-research group, is set to
announce today that companies including AT&T Inc., Cisco Systems
Inc., Hewlett-Packard Co. and Tyco International Ltd. are endorsing a
set of principles that come close to what the Obama administration is
pushing, including tying pay to performance and reducing short-term
financial incentives. Another signatory to the report is the California
State Teachers' Retirement System, which invests in many large
corporations. The Federal Reserve is preparing a proposal that would
give it extensive power over pay practices at the nation's biggest
banks. The Obama administration has installed a pay czar to vet
compensation at seven firms receiving significant government aid. The
administration hopes other firms will voluntarily adopt pay structures
similar to those that the pay czar approves.
href='http://online.wsj.com/article/SB125349404970426617.html'>Read
more. (Subscription required.)
Wachovia Fails to Escape
RICO Suit in Le-Nature's Inc. Case
U.S. District Judge Donetta W. Ambrose on Wednesday
refused to release Wachovia Corp. from a racketeering lawsuit filed by
the liquidation trustee for bankrupt beverage company Le-Nature's Inc.,
alleging that the bank and others aided a fraudulent scheme piloted by
Le-Nature's former CEO,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. While tossing
size='3'>a breach-of-fiduciary-duty allegation from the suit, Judge
Ambrose allowed all other fraud-related claims to stand, including
claims that Wachovia had violated U.S. racketeering laws, leaving the
bank exposed for up to $1.5 billion in trebled damages. Other decisions
issue by the court Wednesday also refused similar bids by other
defendants, including German manufacturer Krones AG, to be released from
the racketeering suit.
href='http://bankruptcy.law360.com/print_article/123165'>Read
more. (Subscription required.)
Modern Continental
Liquidation Plan Approved
Modern Continental Co. Inc., which was a major
contractor in Boston's Big Dig highway construction project and sought
bankruptcy protection after federal prosecutors brought charges against
the company, had its plan of liquidation confirmed by the court
overseeing its chapter 11 proceedings,
face='Times






New
Roman'
size='3'>Bankruptcy Law360 reported on Friday.
The plan calls for a liquidating supervisor to be appointed to manage,
collect, liquidate and administer the debtor's remaining assets and
distribute cash from sold assets to creditors. The reorganized debtor
will be deemed dissolved after the completion of all the assets pursuant
to the liquidation plan, according to the plan. Cambridge, Mass.-based
Modern Continental, which reportedly earned over $3.2 billion in
contracts related to the Big Dig, pled guilty to 39 federal charges in
May. Modern Continental was slated for sentencing in August, but that
was postponed. The company faces a possible $19.5 million in
fines.
href='http://bankruptcy.law360.com/print_article/123058'>Read more.
(Subscription required.)
Lehman Unit Receives
Approval to Take over Swap Deal
Bankruptcy Judge
face='Times






New
Roman'
size='3'>James M. Peck on Thursday approved a
subsidiary of bankrupt investment firm Lehman Brothers Holdings Inc. to
assume a nearly $9.8 million interest rate swap deal with MEG Energy
Corp.,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. Under a master agreement in 2006, the
companies entered into four interest rate swap transactions in which
Lehman Bros. Special Financing Inc. (LBSF) paid a floating three-month
interest rate on the transaction amounts and MEG paid a fixed rate of
interest. LBSF noted in court papers in late August that MEG missed four
payments for each of the transactions since Lehman Brothers filed for
chapter 11 and owed the Lehman unit nearly $9.7 million, in addition to
default interest accrued on the missed payments. The case
is
face='Times






New
Roman'
size='3'>In re Lehman Bros. Holdings Inc.,
case number 1:08-bk-13555, in the U.S. Bankruptcy Court for the Southern
District of New York.
href='http://bankruptcy.law360.com/print_article/123164'>Read
more. (Subscription required.)
Visteon Looks to Strike
$30.6 Million Deal with GM
Bankrupt auto parts supplier Visteon Corp. has asked a
judge to approve a deal that would infuse it with $30.6 million from
General Motors Corp. and help it wind down unprofitable businesses in
exchange for providing GM with component parts,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. To ensure its continued supply of Visteon
parts, GM will pay $8 million more than the purchase order price for
Visteon parts in its interior and fuel tank groups. GM will pay $10
million to fund the consolidation of Visteon's InterAmerican and
Carplastic facilities; $4.4 million to reimburse Visteon for developing
GM's climate component parts; and an $8.2 million cure payment in
connection with the GM chapter 11 case.In turn, Visteon will make
component parts for GM as well as assist GM in finding other suppliers
to produce GM component parts. In the event of a default on the deal, GM
has the right to enter Visteon facilities and manufacture the parts it
needs until it can find another parts supplier.
href='http://bankruptcy.law360.com/print_article/123187'>Read
more. (Subscription required.)
SBA, After Backlash, to
Ease Limits on Loans for Buyouts
The Small Business Administration, after enduring a
backlash from lenders and business appraisers, plans Oct. 1 to modify a
restriction it had placed on loans used to finance acquisitions of small
companies, the
size='3'>Wall Street Journal reported today.
In March, the SBA capped the guarantee it was willing to extend on
'goodwill' financing, which is the amount of a loan used to purchase an
existing business's intangible assets, such as an established name,
brand or customer base. For years, lenders were free to administer
SBA-guaranteed loans with any amount of goodwill financing. But in
March, the SBA changed its rules so that guarantees for goodwill
financing would be capped at $250,000, or 50 percent of the loan amount,
whichever was lower. The rules were designed in part to prevent sellers
from inflating companies' intangible assets.Starting in October, the SBA
is raising the cap on its guarantee of goodwill financing to $500,000.
If the goodwill financing exceeds that amount, the SBA will recommend
that lenders consider requiring more equity from the borrower or
seller.
href='http://online.wsj.com/article/SB125348578905126173.html'>Read
more. (Subscription required.)
Pilgrim's Pride Files
Reorganization Plan
Chicken producer Pilgrim's Pride Corp. said that it
filed its reorganization plan, the first step to seeking bankruptcy
court approval for a sale of the company to Brazilian beef producer JBS
SA, the Associated Press reported on Friday. Under the plan, Pilgrim's
Pride proposes selling a 64 percent stake in the reorganized company to
JBS for $800 million in cash. The proceeds would be used to pay back in
full the creditors holding valid claims. The company also proposes
taking a bankruptcy exit loan of $1.65 billion as part of its emergence
plan.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/18/AR2009091802648_pf.html'>Read
more.
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