April 22, 2010

House Panel to Examine Legislation Addressing Student Loans in Bankruptcy

The House Judiciary Subcommittee on Commercial and Administrative Law will hold a hearing today at 9:30 a.m. ET to examine H.R. 5043, the 'Private Student Loan Bankruptcy Fairness Act of 2010.' Click here to view the witness list and more information on the hearing.

Click here to view a copy of H.R. 5043.

Chrysler Liquidation Plan Confirmed

Bankruptcy Judge Arthur Gonzalez on Tuesday confirmed the liquidation plan for the bankrupt estate of Chrysler LLC, which gives unsecured creditors proceeds from litigation, the Deal Pipeline reported yesterday. According to debtor counsel David Heiman at Jones Day, the liquidation plan will become effective on April 30. The debtor's modified second amended plan, filed on April 13, did not change creditor's recoveries, Heiman said. Under the plan, Old Carco LLC, which is the entity surviving from the old Chrysler, will wipe out $4 billion owed to the federal government and a $2 billion claim held by its former private equity owner, Cerberus Capital Management LP. Chrysler received the $4 billion in Troubled Asset Relief Program funds before its April 30, 2009, Chapter 11 filing. Once in bankruptcy, the carmaker then got a $4.96 billion debtor-in-possession loan, with the U.S. Treasury providing $3.8 billion and Export Development Canada, a financing arm of the Canadian government, covering the remaining $1.16 billion. While the TARP loan will be wiped out, the DIP lenders will be paid certain collateral proceeds but are not expected to be repaid in full. The DIP lenders are funding the wind-down of the estate through the use of cash collateral. Read more. (Subscription required.)

Senate Panel Approves Tough Derivatives Measure

The Senate Agriculture Committee yesterday approved legislation to bring greater regulation of the over-the-counter derivatives market to correct the mistakes that led to the banking crisis, most notably in the downfall of American International Group, CongressDaily reported yesterday. The panel passed the measure 13-8, with Sen. Chuck Grassley (R-Iowa) joining all Democrats in approving Agriculture Chairwoman Blanche Lincoln's (D-Ark.) bill. The bill will force most transactions to go through a third-party clearinghouse to guarantee the deal and set margin requirements. Those trades would then have to be placed on exchanges. The Lincoln measure will be combined with broader legislation by Senate Banking Chairman Christopher Dodd (D-Conn.)revamping the nation's financial regulatory system, with floor debate coming as early as this week. The biggest potential sticking point in merging both bills will be whether standardized trades that are cleared must go through an exchange.

White House Advances Schedule to Sell GM, Chrysler Stakes

The White House yesterday accelerated the schedule for selling the U.S. government's stakes in General Motors Co. and Chrysler Group LLC, after both companies reported what they declared positive financial developments, Dow Jones Daily Bankruptcy Review reported today. However, the Obama administration reiterated that the government is unlikely to recover all of the bailout funds extended to the auto industry. The U.S. owns about 60 percent of GM and nearly 10 percent of Chrysler. The Obama administration has not specified when it plans to sell the auto-company stakes, saying only that a sale would occur in segments and as soon as is practicable. The next step would be for the companies to undergo an initial public offering of stock, which, at least for GM, officials have said could happen as early as the second half of this year.

Obama Sets Timetable for Supreme Court Pick

President Obama said yesterday that he would nominate someone to the Supreme Court by the end of May, a timetable that he hopes will allow Senate confirmation by the start of the August congressional recess, CongressDaily reported yesterday. That timetable would have a replacement for retiring Justice John Paul Stevens on the bench for the start of the court's new term in October. Both Obama and Senate Judiciary Chairman Patrick Leahy (D-Vt.) said that they hoped the process plays out along the same timeline for his first nominee, Justice Sonia Sotomayor. She was nominated in late May last year and confirmed in early August.

Fuddruckers' Parent Company Files for Bankruptcy, to Be Sold

Magic Brands LLC, the parent of the Fuddruckers and Koo Koo Roo restaurant chains, filed for bankruptcy protection yesterday and said that it had agreed to sell most of its assets to Tavistock Group for $40 million, Reuters reported yesterday. The Austin, Texas-based company said that it planned to close 24 Fuddruckers restaurants it operates by April 30 as part of the chapter 11 process. It said that more than 200 Fuddruckers restaurants, including 135 operated by franchisees, will remain open. The company also operates 13 Koo Koo Roo restaurants in California. Read more.

Extended Stay Creditors Seek Examiner to Oversee Auction

Extended Stay Inc.'s creditors are asking that an examiner already appointed in the company's chapter 11 case be charged with overseeing the hotel chain's bankruptcy auction, Dow Jones Daily Bankruptcy Review reported today. In court papers filed on Tuesday, the creditors said that they would drop a request for their financial adviser to market the company's assets, as long as the independent examiner can look over the shoulder of Extended Stay's investment banker, Lazard Freres & Co. The unsecured creditors' committee said in the filing that it 'continues to have serious concerns' about the ability of Extended Stay's professionals 'to act independently' because Lazard answers only to the company's board of directors, led by David Lichtenstein. Extended Stay struck a deal earlier this month for Paulson & Co. and Centerbridge Partners to invest $905 million to take control of the company. The Wall Street Journal reported that former Extended Stay owner Blackstone Group LP is also joining the investor group. The proposal from the investors is slated to serve as the lead bid at May 27 auction for the 680-hotel chain.

Philly Papers to Revise Bid for Inquirer Publisher

Philadelphia Newspapers LLC said yesterday that the lead bidder in next week's auction of the bankrupt publisher of the Philadelphia Inquirer and Daily News will enter a revised bid by Friday's deadline, Reuters reported yesterday. The group, known as the Philly Papers, is led by real estate developer Bruce Toll. It proposed a bid in August that it said was worth $67 million for the publisher of the Philadelphia Inquirer and Daily News. Bids must be submitted by 5 pm ET on Friday. If more than one qualifying bid is received, an auction will be held on Tuesday. Read more.

Simon to Present Offer to General Growth Board

Simon Property Group Inc. is expected to make a presentation about its offer to recapitalize General Growth Properties Inc. before the rival company's board of directors today, Reuters reported yesterday. Simon would make a pitch to persuade General Growth's board to choose it over Brookfield Asset Management as the key investor in a plan to exit bankruptcy protection. The meeting comes on the same day as a court deadline to object to the Brookfield-backed offer and just a week ahead of a hearing on that plan. The two sides already have been in talks over Simon's offer last week to invest $2.5 billion in General Growth in exchange for roughly a quarter of the company. Read more.

Redwood Trust Deal Shows Shifts in Mortgage Market

Redwood Trust Inc. disclosed that it plans to issue about $222 million of bonds backed by home-mortgage loans made by a unit of Citigroup Inc. over the past 11 months, the Wall Street Journal reported today. The market for new issues of such 'private label' mortgage securities?ones that aren't guaranteed by Fannie Mae, Freddie Mac or any other government-related entity?has been virtually dead for the past two years since a surge in defaults caused investors to flee. A comparison of the latest deal to a similar security sold by Redwood in 2007 shows just how much the market has changed. The new offering contains very high quality loans and more details about the mortgages underlying the securities and the borrowers. The minimum credit score for borrowers taking out mortgages is 702, out of possible 850. The lowest credit score on the 2007 deal was 547. The mortgages backing the new deal account for no more than 80 percent of the properties' estimated values, compared with as much as 100 percent for the 2007 offering. Read more. (Subscription required.)

International

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