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December 24,
2009
Centro Studies Restructuring Moves
Centro Properties Group, an Australian operator of about 660 U.S. shopping malls, said on Thursday it had appointed advisers to assess restructuring options as it grapples with huge losses and a collapse in the value of its real estate portfolio, The Deal Pipeline reported today. J.P. Morgan Australia Ltd. and Moelis & Company LLC will undertake a study of Centro's operations, while UBS will advise on the restructuring of Centro Retail Trust, or CER, the principal holding vehicle for Centro's property portfolio. The study is due to complete during the second quarter of 2010. Centro was one of Australia's highest profile victims of the credit crunch and global downturn, which battered valuations of its real estate portfolio and lead to a loss of A$3.54 billion ($43.11 billion) for the 2009 financial year. The company teetered on the brink of bankruptcy a year ago before agreeing on a deal to restructure about A$4.95 billion of debt. The refinancing left shareholders with less than 10 percent of the company. Centro faces a class action brought by investors who claim they were misled with regards to the company's debt position, while two of its directors are being investigated by the Australian Securities and Investments Commission.
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Analysis: Bailout's Big Mistake - Loans to Small Banks
The last of the big banks have returned their bailout funds, but uncorking the champagne would be premature: Taxpayers still have a lot of skin in the game, and getting paid back only gets more difficult from here on out, CNNMoney.com reported today. There are still 663 banks that have received a total of $58.6 billion in loans from the Troubled Asset Relief Program and have yet to pay the Treasury Department back. Most of those banks won't pay back their bailout funds for years, if at all. One went bankrupt. Two of those banks have failed. Dozens are subject to government sanctions, and 56 were unable to pay their quarterly dividends or interest payments last month. While the larger banks have been eager to be rid of TARP because of the negative stigma associated with the bailout and the associated executive pay restrictions, most smaller banks have little incentive to quickly pay back their funds. The law stipulates that banks who pay back their funds early must replace them with another source of capital, and the big banks have been able to go to the market and issue stock to grow their capital reserves. Small banks, however, don't have the luxury of issuing more stocks, as investors largely remain weary of small banks who haven't yet proven their health. The White House last month estimated total losses from the $700 billion bailout will amount to $141 billion, and the Congressional Budget Office lowered its estimate to $159 billion. But experts say that loss could be higher if more small banks fall into trouble.
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Grassley Puts Pressure on Treasury in Tax Dispute
Sen. Charles E. Grassley (R-Iowa) on Wednesday criticized a Treasury Department ruling that let Citigroup keep billions of dollars in tax breaks and threatened to prevent the confirmation of several nominees for senior Treasury posts until the department suspended efforts to collect a tax penalty from hundreds of small businesses, the Washington Post reported today. Hours later, the Internal Revenue Service, an arm of Treasury, announced that it would extend a moratorium on collecting the penalty. Grassley's office, in turn, said the senator would allow the nominations to move forward, but that he still planned to investigate the Citigroup ruling. Grassley, the ranking Republican on the Senate Finance Committee, which oversees tax policy, had said he was troubled that Treasury hurried to help Citigroup while negotiations over the tax penalty dragged on for months. Grassley's attack linked two issues that have emerged as political vulnerabilities for the Obama administration: the public perceptions that big banks are getting special treatment and that the government is not doing enough to help small businesses weather the recession. The IRS ruled earlier this month that Citigroup could keep $38 billion in tax breaks that otherwise would decline in value as the government sells its stake in the company. Federal law lets companies avoid taxes on profits based on the amount of losses in previous years. But the law restricts the use of past losses if a company changes hands, to discourage profitable companies from buying unprofitable firms as a tax dodge. Without the IRS ruling, the sale of the government's 27 percent stake in Citigroup would have qualified as an ownership change under the law.
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Three CEOs Among First to Testify at Crisis Panel
The chief executive officers of JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley will headline the inaugural hearing of a congressional panel investigating Wall Street's financial crisis, Bloomberg reported today. JPMorgan's Jamie Dimon, Goldman's Lloyd Blankfein and Morgan Stanley's John Mack will testify next month in Washington, D.C. Bank of America Corp.'s incoming CEO, Brian Moynihan, has been invited and is expected to appear as well. The hearing on Jan. 13 and 14 will kick off the public work of the crisis commission, which was appointed by Congress in July. Privately, the 10-member panel has been meeting with administration officials including Treasury Secretary Timothy Geithner and Securities and Exchange Commission Chairwoman Mary Schapiro. Publicly, it has taken criticism over the pace of its work. The commission was created by Congress to examine the causes of a collapse that roiled global markets and led to a $700 billion U.S. government bailout of the nation's banks. Issues to be examined include subprime lending, the activities of credit-rating companies and executive pay. The Obama administration has directed regulators to cooperate with its requests for information, and the commission has vowed a thorough inquiry.
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Ford Settles Details in Volvo Sale
Ford Motor Co. on Wednesday moved a step closer to offloading its Volvo division after working out a framework to sell the money-losing Swedish brand to a privately held Chinese auto maker, the Wall Street Journal reported today. Ford said it has settled 'substantial commercial terms' of the proposed sale to Zhejiang Geely Holding Group Co., but financing of the deal and government approvals have yet to be completed, though Ford expects a definitive agreement to be signed in the first quarter of 2010 and the sale finished by midyear. Geely plans to finance the Volvo bid of around $2 billion with a combination of cash, bank loans and funds from a small number of investors. Investors include a government-owned fund based in Tianjin, China. It is unclear how long it could take Geely to secure the financing and government approvals. Earlier this year General Motors Co. worked out a deal to sell its Hummer unit to a Chinese company, but the sale is still pending. The proposed sale highlights the increasing efforts by Chinese car makers to expand beyond their booming home market and gain access to advanced automotive technology needed to compete with the world's leading car companies. For Ford, selling Volvo would complete the dismantling of Ford's international acquisitions after the earlier sales of luxury brands Jaguar, Land Rover and Aston Martin.
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Congress Raises Debt Ceiling to $12.4 Trillion
The Senate voted early this morning to raise the ceiling on the government debt to $12.4 trillion, a massive increase over the current limit and a political problem that President Obama has promised to address next year, the Associated Press reported today. The Senate's rare Christmas Eve vote, 60-39, follows House passage last week and raises the debt ceiling by $290 billion. The bill permits the Treasury Department to issue enough bonds to fund the government's operations and programs until mid-February. The Senate will vote again on the issue on Jan. 20. Obama must sign the measure into law to prevent a market-rattling, first-ever default on U.S. obligations. The government piled up a record $1.4 trillion deficit in 2009 to counter a meltdown in financial markets and help bring the nation out of its worst recession in seven decades.
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LB Somerset Latest Lehman Unit to File for Chapter 11
LB Somerset LLC has filed for chapter 11 bankruptcy protection, becoming the latest unit of the failed investment bank to file for court-ordered protection, Bankruptcy Law360 reported yesterday. In a petition filed Monday in the U.S. Bankruptcy Court for the Southern District of New York, LB Somerset listed assets and liabilities of more than $1 billion each. The Lehman Brothers unit also listed more than 100,000 creditors and said in its filing that the list is the same as the creditors in its parent company's bankruptcy proceedings. According to its bankruptcy petition, LB Somerset is entirely owned by an entity called PAMI LLC, which is run by Jeffrey Fitts. PAMI LLC's business also was not listed in court filings. LB Somerset has asked to have its bankruptcy proceedings consolidated with the larger Lehman Brothers bankruptcy. On Tuesday Bankruptcy Judge James M. Peck granted LB Somerset an extension to file additional documents with the court. The bankruptcy is LB Somerset LLC, case number 09-17503, in the U.S. Bankruptcy Court for the Southern District of New York. The consolidated bankruptcy is In re Lehman Brothers Holdings Inc., case number 08-13555, in the U.S. Bankruptcy Court for the Southern District of New York.
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name='8'>Lyondell Creditors Seek to Expand Examiner's Probe
Creditors of bankrupt Lyondell Chemical Co. asked a U.S. judge on Wednesday to expand an investigation by a court-appointed examiner to ensure the petrochemicals company is fairly evaluating proposals from potential suitors, Reuters reported yesterday. Lyondell's unsecured creditors' committee said the examiner should ensure that potential bidders like India's Reliance Industries have a chance to compete against a reorganization plan offered by a group of the company's senior creditors, which includes current owner Access Industries and private investment firms Ares Management and Apollo Management LP. Reliance Industries has offered up to $12 billion to acquire Lyondell, according to sources. Lyondell's unsecured creditors said in court papers they believe Reliance's offer is superior to the one proposed by Access, Ares and Apollo. In the court document, the creditors said senior lenders Access, Ares and Apollo have 'threatened to block' confirmation of any reorganization plan that does not meet their requirements, and were using their 'influence to deter proposals from strategic investors.' The court is expected to hear the creditors' request on Jan. 12. The case is In re Lyondell Chemical Co., U.S. Bankruptcy Court for the Southern District of New York, No. 09-10023.
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name='9'>Chemtura Gets Conditional $45 Million Bid for Additives Biz
Chemtura Corp. said Wednesday that it has entered into a $45 million stalking-horse agreement with SK Capital Partners in which the New York-based private-equity firm will buy the bankrupt chemical maker's global PVC additives business pending a higher bid, Bankruptcy Law360 reported yesterday. The bid is subject to approval by the U.S. Bankruptcy Court for the Southern District of New York and an auction process during which other parties will have the opportunity to submit better offers. Chemtura said Wednesday that the business had revenues of $374 million in the 2008 calendar year and $177 million for the nine months ended Sept. 30, 2009. The company sees the auction as a preferable alternative to shutting the business down. Court papers show that the SK Capital bid includes a $2 million initial cash payment as well as other payments and that the 'vast majority of the purchase price' consists of the buyer's assumption of tens of millions of dollars in environmental liabilities. The total value of the purchase is set at $45 million. A hearing on the auction procedure is set for Jan. 14, and a hearing to approve the sale is set for Feb. 23. The bankruptcy is In re Chemtura Corp., case number 09-11233, in the U.S. Bankruptcy Court for the Southern District of New York.
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name='10'>Redwood Capital Wins Erickson Retirement Auction
Erickson Retirement Communities LLC, a bankrupt U.S. retirement community developer, said on Wednesday that Redwood Capital Investments won an auction to acquire substantially all of its assets, Reuters reported yesterday. Terms were not disclosed. The company had filed for bankruptcy protection in October, as tight credit markets and falling home prices took a toll on potential new residents. It held a bankruptcy auction for its assets in New York on Monday. Redwood beat out a competing offer from a group led by private equity firm Kohlberg Kravis Roberts & Co. The company's initial bankruptcy filing had contemplated a sale to Redwood, which acted as the lead bidder at the auction and would have gotten a break-up fee if the deal didn't close. Erickson and Redwood will submit the final deal for court approval as part of its reorganization plan, it said in a statement. The case is In re Erickson Retirement Communities LLC, U.S. Bankruptcy Court for the District of Northern Texas, No 09-37010.
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name='11'>Wells Fargo Repays $25 Billion in Bailout Funds
Wells Fargo & Co. said Wednesday that it repaid the $25 billion in bailout funds it received from the Treasury Department under the Troubled Asset Relief Program, the Associated Press reported yesterday. The company said in a statement that it redeemed the series D preferred stock issued to the Treasury under TARP in October of last year. As part of the redemption of the preferred stock, Wells Fargo said it also paid accrued dividends of $131.9 million, bringing the total dividends paid to the Treasury Department to $1.44 billion since the stock was issued. The repayment was made possible in part through Wells Fargo's recent public stock offering, which raised $12.25 billion. The bank sold 489.9 million shares of common stock at $25 per share. The offering was completed Dec. 18. Wells Fargo noted that the Treasury Department still holds warrants to buy approximately 110 million shares of its common stock at a price of $34.01 per share.
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