href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
January 27, 2010
name='1'>Colonial BancGroup Cleared to Tap Cash
Collateral
Colonial BancGroup Inc. has won court
approval to use cash collateral to fund the costs of its bankruptcy
case, the Deal Pipeline reported yesterday. The cash collateral
consists of property of Colonial's bankrupt estate other than customer
deposits. The Alabama Department of Revenue, which court filings say is
owed about $7 million, has a tax lien on the collateral. Colonial
BancGroup, the parent of the largest bank (Colonial Bank) to fail last
year and the biggest casualty since Washington Mutual Inc. collapsed in
September 2008, filed for chapter 11 protection on Aug. 25. Colonial
filed for bankruptcy just weeks after the Alabama State Banking
Department shuttered its Colonial Bank unit on Aug. 14 and appointed the
Federal Deposit Insurance Corp. as receiver. After taking over Colonial,
the FDIC arranged for Winston-Salem, N.C.-based Branch Banking and Trust
Co. to assume Colonial Bank's deposits, which stood at $20 billion as of
June 30. BB&T acquired $22 billion of Colonial's $25 billion of
assets, while the FDIC retained the remainder.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005381855'>Read
more. (Subscription required.)
lang='RU'>s Basement Wins Court Approval of Liquidation
Plan
FB Liquidating Estate, the bankrupt company
previously known as Filene
lang='EN'>’s Basement Inc., won court
approval of a liquidation plan paying unsecured creditors about 75 cents
on the dollar from the sale of assets, Bloomberg News reported
yesterday. Filene’s
Basement sought bankruptcy protection May 4 for the second time in
almost a decade after sales slumped. A joint venture of Syms Corp. and
Vornado Realty Trust won court approval June 17 to buy virtually all of
Filene’s assets for
about $64.4 million, according to court filings. The company left in
bankruptcy changed its name to FB Liquidating Estate. Under
FB’s plan, general
unsecured creditors with about $57 million in claims will be paid from
the proceeds of the sale, for an estimated recovery of about 75 percent,
according to court documents. The case is In re
Filene’
lang='RU'>s Basement
Inc., 09-11525, U.S. Bankruptcy Court, District of Delaware
(Wilmington).
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ac.3UuHeiqko'>Read
more.
Two
Federal Reserve Officials Had Doubts Over Payout by
AIG
Weeks after rescuing the American International Group
with an $85 billion taxpayer loan in late 2008, Federal Reserve Board
officials rejected a proposal that would have forced the
insurer’s trading
partners to return $30 billion in cash that they had received from AIG
in the preceding months, the New York Times reported today. The
Fed chose instead to let the banks keep the cash and to receive
additional billions from taxpayers. This decision was made, internal
documents show, after two Fed governors, Donald L. Kohn and Kevin M.
Warsh, expressed concern that such a plan might be
face='Verdana' size='2'>“a gift
face='Verdana' size='2'>” to the
company’s trading
partners, including Goldman Sachs and Société
Générale, a major French bank. Lawyers for the Fed argued in
the documents that it did not have the legal authority to guarantee
AIG’s obligations.
A House Committee on Oversight and Government Reform Committee
hearing today is expected to focus on the Fed
lang='EN'>’s decision to pay billions to
the large banks doing business with AIG to unwind the insurance
contracts they had struck with the company.
href='http://www.nytimes.com/2010/01/27/business/27aig.html?ref=business&pagewanted=print'>Read
more.
href='http://oversight.house.gov/index.php?option=com_jcalpro&Itemid=2&extmode=day&date=2010-01-27'>Click
here to view a live Webcast of the House Oversight Committee's
hearing today scheduled for 10 a.m. titled 'Factors Affecting Efforts To
Limit Payments to AIG Counterparties.'
Autos
Old GM Sues BMW over $26 Million
Transmission Deal
Motors Liquidation Co. (MLC), the liquidating remnant of General
Motors Corp., has filed suit against BMW alleging that the German car
company reneged on a valuable contract to purchase at least 1.9 million
transmissions, Bankruptcy Law360 reported yesterday. BMW entered
a contract in 2004 for GMC to develop six-speed automatic transmissions
at its facility in Strasbourg, France, and supply at least 1.9 million
units at a cost of nearly $26 million to the German carmaker by December
2015. In November 2009, BMW notified Motors Liquidating Co. that it was
backing out of the agreement, claiming that the supplier failed to
satisfy the technical specifications for the transmissions. BMW said it
would terminate the contract this month and go with another supplier,
even though it was obligated to purchase an additional 1 million
transmissions from MLC, according to the complaint.
href='http://bankruptcy.law360.com/articles/145593'>Read more.
(Subscription required.)
General Motors Co. ended weeks of uncertainty about its Saab division
yesterday by announcing a deal to sell the Swedish auto company to Dutch
sports-car maker Spyker Cars NV, the Wall Street Journal reported
today. Spyker, which makes only a few dozen cars a year, agreed to pay
GM at least $74 million in cash while the European Investment Bank will
provide a €400 million ($566 million) loan guaranteed by the
Swedish government. As part of the deal, GM would retain redeemable
shares of $326 million in Saab.
href='http://online.wsj.com/article/SB10001424052748703906204575027182901630978.html?mod=WSJ_hps_LEFTWhatsNews'>Read
more. (Subscription required.)
Dallas Logistics Hub Developers File
for Bankruptcy
Developers of the 6,000-acre Dallas Logistics Hub (DLH) in south
Dallas County, Texas, have filed for chapter 11 protection, the Fort
Worth Star-Telegram reported today. DLH Master Land Holding and its
parent company, Allen Capital Partners, said that the filing will give
them time to extend debt maturities and improve their capital structure.
The filing comes nearly three years after the developers unveiled their
plans for the logistics park. The Allen Group bought land in Dallas,
Wilmer, Lancaster and Hutchins, Texas, for the project, a warehouse and
distribution center planned to be North America
lang='EN'>’s first inland port to be served
by two competing rail lines, Union Pacific and BNSF Railway Co. Allen
said that the collapse of the real estate and capital markets will make
it hard to continue with the project if they can
lang='EN'>’t restructure debt. A group of
Allen family investors is providing a debtor-in-possession loan to be
used to fund operating expenses during the bankruptcy
proceeding.
href='http://www.star-telegram.com/business/v-print/story/1924549.html'>Read
more.
St.
Vincent's Hospital on the Brink of Second Bankruptcy
size='2'>
Just two years after
emerging from bankruptcy, Saint Vincent Catholic Medical Centers may be
on the brink of a second bankruptcy filing,
size='2'>Crain’s New
York Business reported yesterday. The Greenwich Village,
N.Y.-based hospital has reached out to several hospitals at the urging
and guidance of state health department officials, with a goal of
brokering a deal that will keep it out of bankruptcy court. St.
Vincent's has operating debt of as much as $100 million, and its
crushing cash flow crunch has forced it into default on its chapter 11
reorganization plan.
size='2'>“Eight
separate budget cuts from New York state over the last two years and the
worst recession in many decades have combined to present St.
Vincent’
lang='RU'>s
with some serious financial challenges,
face='Verdana' size='2'>”
size='2'>said Henry J. Amoroso, chief executive of St. Vincent Catholic
Medical Centers. The hospital missed a $10 million payment to a trust
fund created to deal with medical malpractice cases. The chapter 11 plan
was filed on February 9, 2007, amended in later months and became
effective on August 30, 2007.
href='http://www.crainsnewyork.com/article/20100126/FREE/100129916'>Read
more.
Wall
Street Toughens Rules on Clawbacks
Banks and securities firms are toughening rules that
give them power to seize pay from employees whose bets or other actions
blow up later, the Wall Street Journal reported today. Known as
clawback provisions, such internal rules used to cover just top
executives or fraud. Last week, though, JPMorgan Chase & Co.'s board
expanded the provisions to include any employee at the New York bank who
gets company stock as compensation. In addition, JPMorgan can now grab
stock awards from employees found to have taken excessive risks or who
didn't blow the whistle on bad risk-taking. Bank of America Corp. and
Morgan Stanley also have recently sharpened their clawbacks as Wall
Street responds to relentless outside pressure to overhaul its pay
culture. Traders, investment bankers, and even some bank tellers will be
told details about the new rules as they get their bonuses for 2009. The
track record on clawbacks is mixed, according to experts. Many bets by
traders and bankers that backfired during the financial crisis likely
didn't violate company policies, partly because the bets didn't seem
risky when housing prices were rising and investors clamored for a piece
href='http://online.wsj.com/article/SB10001424052748704905604575027642341299732.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
Reader's Digest Wins
Approval of $555 Million Note Issue
Bankruptcy Judge Robert D. Drain approved
the Reader's Digest Association Inc.
lang='EN'>’s proposal to refinance about
$555 million in debt using a note offering, Bankruptcy Law360
reported yesterday. Proceeds from the notes, which would initially be
purchased by J.P. Morgan Securities Inc., Goldman Sachs & Co. and
Credit Suisse Securities Inc. and offered to institutional investors,
would be used to pay down the company
lang='EN'>’s chapter 11 exit financing
package. Reader's Digest's exit financing includes $150 million from a
debtor-in-possession facility, a European term loan of more than $105
million and a $300 million second-priority loan, according to a motion
filed in the case.
href='http://bankruptcy.law360.com/articles/145587'>Read more.
(Subscription required.)
Delta Air Lines reported a fourth-quarter loss yesterday that was
larger than expected as lower travel demand depressed revenue, Reuters
reported yesterday. However, Delta, which acquired Northwest Airlines in
2008 to become the world’s
largest airline, said that demand for business travel was improving and
that it expected revenue for available seat mile to grow in each month
of 2010. Delta said that it lost $25 million in the quarter, an
improvement from the loss of $1.44 billion a year earlier.Revenue in the
most recent quarter was $6.81 billion, a decline of 12 percent when
compared with the two airlines’
combined results in the year-earlier quarter. Airlines
have cut jobs and reduced capacity in the last two years in a bid to
offset declining revenue as the recession battered business and consumer
href='http://www.nytimes.com/2010/01/27/business/27air.html?ref=business&pagewanted=print'>Read
more.
International
Click here to review
today's global insolvency news from the GLOBAL INSOLvency site.