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January 22, 2010
Treasury Weighs Fixes to Foreclosures
Program
The Obama administration next week plans to revamp its $75 billion
program aimed at sparing homeowners from foreclosure, streamlining the
documents required of borrowers seeking lowered payments, the New
York Times reported today. The changes by the Treasury Department
are expected to include greater assistance for homeowners no longer able
to make mortgage payments because their paychecks have shrunk, said
banking industry representatives. The Treasury was still debating the
method of how to provide the assistance, looking at either direct cash
assistance or a grace period in which borrowers could postpone payments.
That component may not be announced next week, but would follow soon
after. Housing experts said the anticipated changes would probably cause
mortgage companies to move more quickly to lower payments for borrowers,
though perhaps at the cost of prolonging the foreclosure crisis.
Requiring less documentation of borrowers’
incomes carries a risk of lending to people who simply
cannot afford their homes, increasing the likelihood of subsequent
delinquency.
href='http://www.nytimes.com/2010/01/22/business/economy/22modify.html?ref=business&pagewanted=print'>Read
more.
Penn Traffic Cancels
Auction after Rival Bids Do Not Materialize
Supermarket chain operator Penn Traffic Co. indicated
that no one has come forth to post a qualified bid to compete with the
$85 million offer Tops Markets LLC made for all 79 of Penn Traffic
lang='EN'>’s outlets and that the auction
that was scheduled for yesterday was canceled, the Deal Pipeline
reported yesterday. Bankruptcy Judge Peter Walsh is set to rule
on Tops' offer at a Jan. 25 sale hearing. The only roadblock might be a
group of five employees that has expressed interest in purchasing Penn
Traffic through an employee stock ownership plan (ESOP). Fort
Lauderdale, Fla.-based financial management company Ameri-First
Enterprises Corp. would partner with the ESOP in the deal. In court
papers Tuesday, the group sought seven additional days to complete the
bid process. It was unclear whether Judge Walsh would consider such an
extension.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005379731'>Read
more. (Subscription required.)
House Financial Services Committee Hearing to
Examine Compensation in the Financial Industry
face='Times New Roman' size='2'>
The House Financial Services Committee will hold a hearing today at 10
a.m. ET to examine compensation in the financial industry.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fcher_01222010.shtml'>Click
here to view the witness list and to obtain a link to watch the
hearing live via Webcast.
id='4' name='4'>Chrysler Disclosure Statement Approved Despite
Protests
Chrysler LLC castoff Old Carco received bankruptcy
court approval of its disclosure statement despite a number of
objections from the U.S. Trustee, the Michigan environmental authority
and plaintiffs with millions in claims on the line, Bankruptcy
Law360 reported yesterday. Bankruptcy Judge Arthur J.
Gonzalez signed off on Old Carco's disclosure statement saying that
it contained “
size='2'>adequate information
size='2'>” and paves the way for creditors
to vote on the company's reorganization plan. Under the terms of Old
Carco's proposed liquidation plan, the company will not be on the hook
for $4 billion in financing the U.S. government extended to Chrysler in
January under the Troubled Asset Relief Program. In addition to the
losses incurred by the U.S. government, most other loan classes also
will end up with nothing. Some
size='2'>“other secured claims
face='Verdana' size='2'>” holders, however,
will receive a full recovery that will provide an estimated $20.6
million, Old Carco said. A confirmation hearing is scheduled for March
16. Read
more. (Subscription required.)
MGM Considers
Bankruptcy, Auction Alone Unlikely to Resolve Its Financial
Woes
The first round of bids for Metro-Goldwyn-Mayer, which
is considering a pre-packaged bankruptcy, turned out better than
expected, but the offers aren't close to covering the $3.7 billion that
is owed to lenders, the Wall Street Journal reported today. Bids
ranged between $1.5 billion and $2.5 billion and MGM received interest
from more than 10 suitors. MGM's current list of suitors includes Time
Warner Inc., Lions Gate Entertainment, Summit Entertainment, Liberty
Media Corp., News Corp. and India's Reliance ADA Group. Others signaling
interest included private-investment firms Elliott Management and Access
Industries, the investment arm of Russian-born industrialist Len
Blavatnik. The studio is owned by a group including private-equity firms
Providence Equity Partners and TPG Inc. and media companies Sony Corp.
and Comcast Corp., which acquired the studio in a $5 billion deal that
closed in 2005. Under almost any sale scenario, MGM will need approval
from all its lenders, a threshold that could prove difficult to achieve.
The studio's lending group, led by J.P. Morgan Chase & Co., includes
some 140 investors, many of them hedge funds.
href='http://online.wsj.com/article/SB10001424052748704423204575017482617956118.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
Air America Files for
Bankruptcy, Will Go Off the Air
Air America, the liberal talk-radio network that
helped boost the careers of Al Franken and Rachel Maddow, said yesterday
that it was declaring bankruptcy and going off the air,
the Washington Post reported today. The company,
founded in 2004 and based in New York, strove to provide left-leaning
commentary and call-in programs as an alternative to such popular
conservative radio talkers as Rush Limbaugh, Sean Hannity and Michael
Savage. However, the company had difficulty lining up affiliates and
attracting a sizable audience. It filed for chapter 11 protection just
30 months after its inception and was resold to an investor group in
early 2007 for $4.25 million.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/21/AR2010012103868_pf.html'>Read
more.
name='7'>Obama
lang='EN'>’s Move to Limit '
lang='RU'>Reckless Risks' Has
Skeptics
President Obama's vow yesterday to rewrite the rules of Wall Street
left many experts questions unanswered, including including whether the
proposal would really prevent another financial crisis, the New
York Times reported today. The president
lang='EN'>’s proposals to place new limits
on the size and activities of big banks rattled the stock market, but
banking executives were perplexed as to how his plan would work.
Moreover, it was unclear if the twin proposals
lang='EN'>— to ban banks with federally
insured deposits from casting risky bets in the markets, and to resist
further consolidation in the financial industry
lang='EN'>— would have done much if
anything to forestall the crisis that pushed the economic system to the
brink of collapse in 2008. The Obama administration said the new
proposals were in the
size='2'>“spirit of
Glass-Steagall”
lang='EN'>— a reference to the
Depression-era law that separated commercial and investment banking,
which was repealed in 1999. Economists have debated whether the repeal
of that act contributed to the crisis. The two big investment banks that
imploded, Bear Stearns and Lehman Brothers, were not commercial banks,
and Goldman Sachs and Morgan Stanley converted to bank holding companies
only after the system started to come unglued.
href='http://www.nytimes.com/2010/01/22/business/22banks.html?ref=business&pagewanted=print'>Read
more.
name='8'>Simmons Bedding Exits Bankruptcy under New Owners
Simmons Bedding Co. has exited bankruptcy
nearly three months after filing for chapter 11 and will emerge under
the ownership of an investor group that owns rival Serta, Reuters
reported yesterday. The Atlanta-based company said that had closed the
$760 million deal to be bought by affiliates of Ares Management LLC and
Teachers' Private Capital. Under a pre-packaged chapter 11 filing, the
company cut its debt obligations to about $450 million from $1 billion.
The company took on debt after a 2003 buyout by private equity firm
Thomas H. Lee Partners LP. Ares & Teachers' said they will own
Simmons and control Serta through a company called National Bedding Co,
but Serta and Simmons will operate separately. The case is In re
Simmons Bedding Co., U.S. Bankruptcy Court, District of Delaware,
No. 09-14036.
href='http://www.reuters.com/article/idUSN2121403220100121'>Read
more.
Freedom, Creditors Reach Bankruptcy
Deal
size='2'>
Bankruptcy Court
Judge Brendan Shannon
yesterday approved a deal between Freedom Communications, its unsecured
creditors and its lenders that could allow the struggling media company
to emerge from bankruptcy by the end of March, the Orange County
(Calif.) Register reported today. The deal provides for about eight
times more money for the company’
lang='RU'>s unsecured creditors –
including a group of longtime current and former
employees – than the
company had originally proposed. Under the new plan, Freedom
lang='EN'>’s secured debt would be reduced
from $770 million to $325 million. Company officials will now solicit
Freedom’s creditors
and if they approve the plan, it will go before Judge Shannon on March
9. The lenders, who will take over the company, will name a new
board to take over when the company emerges from bankruptcy.
href='http://ocbiz.freedomblogging.com/2010/01/21/freedom-creditors-reach-bankruptcy-deal/16613/'>Read
more.
name='10'>Gottschalks' Disclosure Statement Receives Court
Approval
Bankruptcy Judge Kevin J. Carey on Wednesday
signed off on Gottschalks Inc.'s disclosure statement, moving the
department store chain one step closer to getting approval for its
liquidation plan, Bankruptcy Law360 reported yesterday. The plan
proposes full recovery for debtor-in-possession financier GE Capital
Corp., a cancellation of stock and interest, and no recovery for holders
of interests and securities subordinated claims. Unsecured creditors
would recover as little as 4 percent and no more than 14 percent under
the plan, according to the disclosure statement. A hearing on the
department store's latest liquidation plan is scheduled for March
16. Read
more. (Subscription required.)
Hit U.S.
The U.S. government's move to deepen its ties to
mortgage-finance giants Fannie Mae and Freddie Mac by agreeing to absorb
unlimited losses for the next three years is igniting a debate over
whether it should bring the business operations of the companies onto
its books, the Wall Street Journal reported today. The White
House to this pointhas resisted calls by Republicans to bring Fannie's
and Freddie's obligations onto the government's books, a move that could
boost the federal deficit by tens of billions of dollars. The
Congressional Budget Office has reiterated its support for bringing the
companies onto the federal budget
lang='EN'>—and onto the government
books—which would
effectively mean accounting for their operations in the federal budget
as if they were federal agencies. The CBO pegged the government's total
costs of bailing out the two companies at $291 billion and said the
government's takeover could cost an additional $99 billion in the coming
decade. The White House, however, only projects costs equal to the
actual cash infusions that the Treasury injects into the companies each
quarter to keep them afloat. That tab is currently at $112 billion. The
CBO's estimate, as opposed to the White House's, reflects the amount of
taxpayer subsidy used by Fannie and Freddie as a result of lower
borrowing costs enabled by their federal backing.
href='http://online.wsj.com/article/SB10001424052748704381604575005242824023092.html?mod=WSJ_hps_sections_business'>Read
more. (Subscription required.)
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