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March 23, 2009
Treasury Looks to
Public-Private Investment Plan to Deal with Toxic Assets
Noting that the U.S. financial system 'is still
working against economic recovery,' the U.S. Treasury Department today
revealed details of its plan to address toxic assets weighing on banks'
balance sheets, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Treasury said one major reason the financial
system is still facing challenges is because of 'legacy assets' and
securities that are compromising banks ability to raise capital and
their willingness to boost lending. Under the new “Public-Private
Investment Program,” the Treasury Department, Federal Reserve and
the Federal Deposit Insurance Corp. plan to work with private investors
to try to restart a market for these troubled assets. The federal
government will use up to $100 billion in TARP funds and capital from
private investors in order to generate $500 billion in purchasing power
to buy legacy assets. The Treasury Department noted that the program
could potentially expand to $1 trillion over time.
href='http://www.ustreas.gov/press/releases/tg65.htm'>Click here to
read further details from the Treasury Department’s
plan.
House Financial Services
Chair Unveils Broader Legislation Tackling Bonus Payouts
As it works to recoup the $165 million in bonuses to
executives at American International Group, Congress is taking other
steps so all firms receiving government aid will have to give back bonus
payments, CongressDaily reported on Friday. The House Financial
Services Committee will vote Wednesday on legislation, sponsored by
committee chair Barney Frank (D-Mass.), that would ban bonus payments by
firms receiving loans under the Troubled Asset Relief Program. The bill
could be on the House floor the following week. Instead of addressing
bonuses on an ad-hoc basis, as in the AIG case, the bill would ban any
bonus regardless of when the agreement was entered into. It would also
prohibit any compensation deemed 'unreasonable or excessive,' as deemed
by the Treasury Department, and bar any other bonus payment that is not
tied to performance-based standards set by Treasury. Firms covered by
the bill include those that benefited from the 2008 housing bill, which
would include Fannie Mae, Freddie Mac and the Federal Home Loan
Banks.
In related news, some leading Obama economic
advisersreacted coolly to congressional actions to recoup bonuses from
financial firms through targeted taxes, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. While acknowledging the legitimacy of the
public outcry over at least $165 million in bonuses paid to executives
at American International Group, administration officials stopped short
of endorsing legislation passed last week by the House that would levy a
90 percent tax on the payments. The Senate is scheduled to take up a
modified version of the measure this week.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/22/AR2009032201606_pf.html'>Read
more.
Washington Mutual Sues FDIC
for Over $13 Billion
Failed U.S. savings and loan Washington Mutual Inc.
has sued the Federal Deposit Insurance Corp. (FDIC) for more than $13
billion in connection with the loss of its banking operations, which
were acquired by JPMorgan Chase & Co., Reuters reported on Saturday.
In a complaint filed Friday with the U.S. District Court for the
District of Columbia, the thrift's former parent accused the FDIC of
having on January 23 made a 'cryptic disallowance' of its claims,
prompting the lawsuit. It also accused the FDIC of agreeing to an
unreasonably low price in arranging the $1.9 billion sale of the banking
business to JPMorgan on Sept. 25, when regulators seized Washington
Mutual and appointed the FDIC as receiver. In its complaint, Washington
Mutual seeks to recover as much as $6.5 billion of capital contributions
it said it made to its banking unit from December 2007 through the
seizure.
href='http://www.reuters.com/article/newsOne/idUSTRE52K1K620090321'>Read
more.
Plan Risks Bankruptcy Filing
Bondholder representatives said General Motors
Corp.’s formula to swap debt for equity is likely to lead to
“a bankruptcy that would have dire consequences,” and the
advisers urged agreement on an alternative, Bloomberg News reported
today. “We believe that, unless the framework we suggested is
utilized, the restructuring currently contemplated will not achieve the
required level of acceptance to succeed on an out-of-court basis,”
the advisers wrote in a letter yesterday to Treasury Secretary Timothy
Geithner and representatives of President Barack Obama’s auto task
force. The advisers said they are “disappointed” that the
proposals they offered March 5, which the letter doesn’t describe,
received no response from the task force or GM. The automaker is trying
to persuade bondholders to swap debt valued at $27.5 billion for $9.2
billion and equity in the automaker.
href='http://www.nytimes.com/pages/business/index.html'>Read
more.
Federal regulators on Friday seized two large
companies that provide critical banking services to the credit union
industry after finding that the companies had sustained debilitating
losses, threatening the health of thousands of credit unions, the
size='3'>Washington Post reported on Saturday.
The seizure of U.S. Central Corporate Federal Credit Union, based in
Lenexa, Kan., and Western Corporate Federal Credit Union, based in San
Dimas, Calif., marked a dramatic expansion of the government's efforts
to stabilize a corner of the financial industry long viewed as a safe
haven because of its generally conservative practices. The National
Credit Union Administration said that it would place both institutions
in conservatorship, replacing senior management but leaving their
operations otherwise unaffected. The NCUA said its action was intended
to shelter customers of retail credit unions from any
consequences.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/20/AR2009032003558_pf.html'>Read
more.
In related news, the Senate Banking Committee will be
holding a second hearing to examine modernizing bank supervision and
regulation. The hearing will take place at 10 a.m. ET and be held in
room 538 of the Dirksen Senate Office Building.
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=e7f6e704-ad36-4870-b3bb-ba301df361c8'>Click
here for further details.
Analysis: At AIG, the Brand
Is Tarnished
The damage done to AIG’s brand has competitors
circling to snap up its customers, but not to buy its insurance
divisions, the
size='3'>New York Times reported today. The
giant insurance portfolio of AIG looks less like it is being salvaged by
the government than being savaged, as competitors try to exploit the
company’s weakness and as customers grow wary of the very name.
The company said in a regulatory filing that it took in 22 percent less
in premiums in the last three months of 2008 after its federal rescue
than it did in the last three months of 2007. It also said that its
ability to retain existing business had improved somewhat in early 2009,
but not enough to catch up with the 2008 level — and that was
before the public scrutiny of the past week.
href='http://www.nytimes.com/2009/03/23/business/23aig.html?ref=business'>Read
more.
In related news, the House Financial Services
Committee will hold a hearing tomorrow titled
face='Times New Roman' size='3'>“
size='3'>Oversight of the Federal Government’s Intervention at
American International Group.” The hearing will be held at 10:00
a.m. ET in room 2128 of the Rayburn House Office Building.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr03240923.shtml'>Click
here for further details.
Almost four months after filing for bankruptcy
protection, giftware and collectibles company Lenox Group Inc. has
finalized a deal to emerge from chapter 11,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. The “New Lenox,” which includes
the Lenox, Dansk, Gorham and Department 56 brands, will now operate
outside of chapter 11 after a group led by Clarion won the bankruptcy
auction to acquire Lenox's assets for nearly $100 million in February,
the companies announced Monday. The Minnesota-based retailer filed its
bankruptcy petition on Nov. 23 in the U.S. Bankruptcy Court for the
Southern District of New York, listing total assets at $264 million and
total liabilities at $238 million. The case is
face='Times New Roman'>
size='3'>In re Lenox Group Inc., case number
08-14679, in the U.S. Bankruptcy Court for the Southern District of New
York. Read
more. (Subscription required.)
Mall Owner Presses
Bondholders
General Growth Properties Inc., struggling to avoid a
bankruptcy filing, remained locked in talks yesterday with bondholders
it was trying to persuade to accept reduced terms, the
face='Times New Roman'>Wall
Street Journal reported today. The big mall
owner has been fighting for months to dig out of $27 billion of debt as
the recession drags down retail sales. Its balancing act got tougher
last week after it missed a payment deadline on $395 million of bonds.
The company had been in negotiations with several dozen banks over
past-due debt. Now, it also must deal with hundreds of bondholders, many
with divergent interests. The company has $2.25 billion in bonds due
between now and 2013, but any of those bondholders could demand
immediate payment, because the bonds all have cross-default provisions.
General Growth, which plans to stop paying interest and principal on the
bonds, has offered bondholders a deal in which it would pay them a fee
in exchange for their not demanding payment through the end of this
year. The proposed quarterly fee would be 62.5 cents per $1,000 of bonds
-- less than the interest that they would be owed.
href='http://online.wsj.com/article/SB123776324465208609.html'>Read
more. (Subscription required.)
Herbst Gaming Files for
Chapter 11
Casino operator Herbst Gaming Inc. said yesterday that
it filed for chapter 11 protection based on a previously arranged deal
with its lenders, Reuters reported yesterday. The company said that it
would keep operating under the direction of current management and the
restructuring agreement would follow terms outlined in an accord with
lenders earlier this month. The Las Vegas-based company plans to split
its casino and slot machine operations into two separate holding
companies. Herbst Gaming said that all of its outstanding debt
obligations under its senior credit facility, about $847 million, will
be converted into debt and equity of the reorganized companies.
href='http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN2254367720090322'>Read
more.
Monaco Coach Receives
Approval to Tap $73 Million in Cash Collateral
Bankruptcy Judge
face='Times








New


Roman'
size='3'>Kevin J. Carey approved an interim
order for recreational vehicle maker Monaco Coach Corp. to use nearly
$73 million in loans as cash collateral to fund its ongoing
operations, Bankruptcy Law360 reported
on Friday. The interim order expires on March 25, when Judge Carey will
hold a hearing for a final order. Monaco Coach entered into the
financing arrangements in November, including a three-year, $80 million
revolving working capital loan and security agreement with several
financial institutions with Bank of America in the lead, and a secured
financing agreement with Ableco Finance for a $39.3 million,
three-and-a-half year secured term loan.
href='http://bankruptcy.law360.com/articles/92794'>Read
more. (Subscription required.)
Tribune Co. Looks to
Control Rights to “Dick Tracy” Franchise
Attorneys for the Tribune Co. have asked a Delaware
bankruptcy judge to declare that the company owns the television and
movie rights to comic book character “Dick Tracy,” the
Associated Press reported Friday. Tribune Media Services, a Tribune
subsidiary, has been battling for years with actor Warren Beatty over
rights to the cartoon icon, which Tribune says represent tens of
millions of dollars in potential income. Beatty filed suit in California
last year in response to Tribune's assertion that he reneged on a 1985
agreement follow up to the 1990 movie 'Dick Tracy' with a
television special within a certain time period, and rights reverted
back to Tribune. In a filing related to its chapter 11 case, Tribune
said that Beatty hasn't proved that photography on the TV special has
begun.
Indalex Files for Chapter
11 Protection
Indalex Inc., a maker of soft alloy aluminum extrusion
products, filed for chapter 11 protection listing assets and liabilities
each between $100 million to $500 million, Reuters reported on Friday.
Indalex's largest unsecured creditors include Alcoa Inc. to which it
owes $6 million, and Rio Tinto Alcan, which it owes $5 million.
href='http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN2051765320090320'>Read
more.
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