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August 3, 2007
Mortgages
name='1'>Lenders Broaden Clampdown on Risky
Mortgages
Jittery home-mortgage
lenders are cutting off credit or raising interest rates for a growing
portion of Americans, extending well beyond the market for subprime
loans for people with the weakest credit records, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. 'Lenders say they are being forced to raise
interest rates and stop offering certain loans because mortgage-bond
investors have lost their appetite for a broad range of mortgages
considered risky,” said economist Thomas Lawler. The fright among
investors is forcing lenders to go back to more conservative practices
that were the norm before the housing boom of the first half of this
decade. Many now are focusing on loans to borrowers who are willing to
document their income, can make a down payment of at least 5 percent and
have a history of paying bills on time. Tom Lamalfa, managing director
of Wholesale Access, a mortgage-research firm in
w:st='on'>
size='3'>Columbia
w:st='on'>
size='3'>Md.
half or more of the market for no- and low-documentation loans will
disappear.
href='http://online.wsj.com/article/SB118609866621886776.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='2'>American Home Mortgage Says It Will
Close
American Home Mortgage
Investment, the troubled mortgage lender based in
w:st='on'>
size='3'>Melville
w:st='on'>
size='3'>N.Y.
today, making it the latest company to fail this year as loans made to
home buyers even with solid credit histories go bad, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today.
size='3'>“Conditions in both the secondary mortgage market as well
as the national real estate market have deteriorated to the point that
we have no realistic alternative,” American Home Mortgage CEO
Michael Strauss. Last Friday, the company halted its quarterly dividend
payment in a last-ditch effort to come up with capital. Several big
investment banks issued margin calls on the debt that the company used
to buy mortgage-backed securities, which included its loans and those
made by other lenders, and it said it was unable to finance
mortgages.
href='http://www.nytimes.com/2007/08/03/business/03lender.html?ref=business&pagewanted=print'>Read
more.
name='3'>Commentary: Mortgage Madness
The current troubles in
the housing and mortgage markets virtually guarantee that some
restructuring of the home-finance industry will occur under the next
president as there are already a number of legislative proposals on the
table, with important implications for consumers looking to purchase
homes and existing homebuyers to sell, according to a commentary in
today’s Wall
Street Journal. One leading proposal is called
S. 1299, sponsored by Sen. Charles Schumer (D- N.Y.) of
size='3'>New York
proposal represents a regulatory and litigious approach to
mortgage-market reform as it requires that each mortgage originator act
with 'reasonable skill, care and diligence' and in 'good faith and fair
dealing.' It also requires that all loans are 'reasonably advantageous
to the consumer.' Surely these are noble sentiments, but they are also
vague and ill-defined legal requirements that open up the mortgage
industry to endless litigation in an environment where juries comprised
of homeowners must decide between families in the process of losing
their homes and mortgage brokers, investment bankers and other financial
href='http://online.wsj.com/article_print/SB118610927005887046.html'>Read
more. (Registration required.)
name='4'>Global Credit Chill Freezes Leveraged Deals
The chill gripping global
credit markets has caused 46 leveraged financing deals around the world
to be pulled since June 22, representing more than $60 billion in
funding that companies had planned for mergers and acquisitions,
the Wall Street
Journal reported today. That figure is in
stark contrast to last year when there were no deals that were pulled
from receiving financing. The credit squeeze has slowed to a trickle the
flood of debt financing that has driven the buyout boom for the past
couple of years. None of the 46 pulled financings have led to the
cancellation of takeovers. However, with banks saddled with billions of
dollars of debt they can't sell to investors, it could make it harder
for other deals to get initial financing from banks.
href='http://online.wsj.com/article/SB118606585494786170.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Autos
name='5'>Tower Automotive Emerges from Chapter 11
Tower Automotive Inc.
exited chapter 11 bankruptcy on Tuesday after months of negotiation with
its creditors and a hefty infusion of outside capital,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company is back in business under the
leadership of Cerberus Capital Management LP, which acquired Tower in a
deal approved July 11.
size='3'>The Cerberus deal, which is valued at approximately $1 billion,
will allow Tower to pay off most of its debt. Tower has said that the
deal should allow for the full payment of its debtor-in-possession
credit facility, second-lien loan facility, assumption of the
company’s pensions and certain recovery for unsecured
creditors.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=31415'>Read
more. (Registration required.)
name='6'>Judge Approves Appaloosa Investment in
w:st='on'>Delphi
Delphi Corp. took a big
step on its road to recovery yesterday when a bankruptcy court agreed to
let Appaloosa Management LP and other investors inject up to $2.55
billion into the struggling auto-parts maker, the Associated Press
reported yesterday. The decision removes one of the last major obstacles
facing
size='3'>Delphi
from chapter 11 protection by the end of the year. Besides Appaloosa,
the investment group includes Harbinger Capital Partners Master Fund I
Ltd.; Merrill Lynch, Pierce, Fenner & Smith Inc.; UBS Securities
LLC; Goldman Sachs & Co.; and Pardus Capital Management L.P. Under
the terms of the agreement, Appaloosa and its partners will buy $800
million in convertible preferred shares and about $175 million of common
stock in
size='3'>Delphi
also agreed to buy any leftover shares after a $1.6 billion rights
offering to existing common stockholders.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/02/AR2007080201756_pf.html'>Read
more.
w:st='on'>
name='7'>California
face='Times New Roman' size='3'> Attacks Calpine Disclosure
Statement
The state of
size='3'>California
objected to Calpine Corp.’s disclosure statement in its chapter 11
case, saying that the utility did not provide enough information about
its projected claim amounts,
size='3'>Bankruptcy Law360 reported yesterday.
The
size='3'>California
includes the state Department of Water Resources, the state Electricity
Oversight Board and the
w:st='on'>
size='3'>California
size='3'>attorney general, criticized a number of gaping holes in
Calpine’s disclosure statement in the U.S. Bankruptcy Court for
the Southern District of New York on Wednesday. Calpine revealed in its
June 20 disclosure statement that it was sorting through thousands of
claims, including more than 1,400 secured claims worth $51.5 billion,
and more than 12,500 unsecured claims worth $25.3 billion.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=31368'>Read
more. (Registration required.)
name='8'>Northwest Bankruptcy Attorneys Seek Bonus
The lead lawyers in the
Northwest Airlines bankruptcy case are asking for a $3.5 million bonus
for shepherding the airline through chapter 11, the
face='Times New Roman' size='3'>Detroit News
size='3'>reported yesterday. The firm of Cadwalader, Wickersham &
Taft LLP in
face='Times New Roman' size='3'>New York
called the bonus a 'fee enhancement' in a court filing
this week, saying it deserves the extra money because unsecured
creditors will get back an average of 74 percent of their claims, more
than in other recent airline bankruptcies. The requested bonus works out
to about 10 percent of the $35.4 million Cadwalader has billed for
Northwest's chapter 11 case.
href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20070802/BIZ/708020331'>Read
more.
LID
Receives Extension to File Reorganization Plan
Diamond wholesaler LID
Ltd. received an extension until Dec. 15 to file its reorganization
plan, rebuffing creditors that had fought to file their own competing
plan, Bankruptcy
Law360 reported yesterday. The company will
now have until Jan. 24, 2008, to gain creditor support of the plan. LID
has been struggling in recent months to pull together a plan for its
future since it won court approval in April for using cash collateral on
an interim basis to keep operations afloat. The company's
lenders—among them ABN AMRO Bank NV, HSBC Bank
size='3'>USA
Leumi
face='Times New Roman'
size='3'>USA
Sovereign Bank—had objected to the move. They also protested the
company's request for an extension of time to file their plan and asked
for permission to file their own competing plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=31420'>Read
more. (Registration required.)
name='10'>Big
face='Times New Roman' size='3'>New York
Law Firm Embraces Bankruptcy
Practice
For the first time in its
history (parts of the firm date back to 1819), Cravath, Swaine &
Moore is forming a restructuring practice and has broken tradition by
hiring a partner from outside the firm, the
size='3'>New York Times reported today.
Cravath’s move is seen “a continental shift,” a
recognition by an old-line firm that bankruptcy has moved beyond the
days when it was the purview of collection lawyers chasing debtors to
the courthouse.
href='http://www.nytimes.com/2007/08/03/business/03bankrupt.html?ref=business&pagewanted=print'>Read
more.
href='http://www.nytimes.com/2007/08/03/business/03bankrupt.html?ref=business&pagewanted=print'>
name='11'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
To subscribe email steve@creditnews.com
title='mailto:steve@creditnews.com'
href='mailto:steve@creditnews.com'>
color='#0000ff'><mailto:steve@creditnews.com> or call
800-407-9044—use
Code 37
Brookfield Homes
Corp., a
w:st='on'>Del
second quarter net income sank 78%–to $9.5 million. Revenue
declined 30%–to $163 million.
Coachmen
Industries Inc., an
w:st='on'>Elkhart
reported a second quarter net loss of $10.1 million. Revenue declined
4%–to $150 million.
Getty Images
Inc., a
w:st='on'>Seattle
w:st='on'>Wa
will reduce its payroll by 100 workers (about 6% of its workforce) in a
move to cut annual costs by $20 million. For its second quarter Getty
reported net income of $33.6 million, which while up from last year fell
short of analysts’ expectations. Revenue rose to $218 million, up
from $205 million in the year-earlier period.
Hawaiian
Holdings Inc., a
w:st='on'>Honolulu
second quarter net loss of $3.9 million. Revenue increased 9%–to
$244 million.
Jones Apparel
Group Inc.’s stock price plummeted 12% after it
reported a second quarter net loss of $47.1 million, including charges
of $99.4 million for severance, restructuring and an ongoing review of
its business. Sales slipped 2%–to $904 million, including an 8%
drop in same-store sales. The
w:st='on'>Bristol
apparel company, which also reduced its earnings projections for the
year, announced that it favors the $900 million buyout offer for its
Barneys New York unit from Fast Retailing Co. Ltd. of
million bid from
w:st='on'>Dubai
Martha Stewart
Living Omnimedia Inc.,
w:st='on'>Manhattan
w:st='on'>N.Y.
quarter net loss of $6.7 million, compared to a $1.2 million loss in the
year-earlier second quarter. Sales were up 8%–to $73.4
million. The recent loss stemmed from expenses at its redesigned Web
business, where the company had an operating loss of $2.1 million.
Martha Stewart, which also faced a decline in sales of its products
through Kmart, further warned that it will incur a loss in the current
quarter.
Micron
Technology Inc., a
w:st='on'>Boise
w:st='on'>Id.
over the next year to year and a half it will reduce its payroll by
another 5%. That’s on top of 1,100 positions that Micron
last month said it would cut worldwide in order to contain expenses.
/>
Tronox
Inc., an
w:st='on'>Oklahoma City
dioxide, reported a second quarter net loss of $21.2 million. Revenue
declined 2.5%–to $366 million.
Vicor
Corp., an
w:st='on'>Andover
converters, reported a second quarter net loss of $520,000. Revenue
declined 3%–to $47.5 million.
href='http://search.news.yahoo.com/search/news?p=bankruptcy&n=20&c=news'>