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March 30, 2009
size='3'>Housing
Senate Majority Leader
Might Drop Cramdown Provision from Banking Bill
Senate Majority Leader Harry Reid (D-Nev.) said on
Friday that he would drop the cramdown provision from a House-passed
banking bill if the language threatened to keep the Senate from passing
the overall bill,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported. Reid said that he would work to keep the package
intact, but raising the prospect of pulling the provision seemed to
acknowledge assertions by Sen. Evan Bayh (D-Ind.) and others that the
cramdown bill cannot pass due to opposition from Republicans and some
Democratic moderates. Bayh and Judiciary ranking member Arlen Specter
(R-Pa.) are pushing an alternative bill that narrows the range of
borrowers who could have their mortgage principal reduced. Democrats
hope to move the package after the spring recess. For the latest
perspectives on the cramdown debate, make sure to visit
href='http://townhall.abiworld.org/issue_2'>ABI’s Town Hall Web
site.
Mortgage Defaults,
Delinquencies Increase in February
Defaults on home mortgages insured by the Federal
Housing Administration (FHA) in February increased from a year earlier,
the
size='3'>Wall Street Journal reported today.
The FHA said that 7.5 percent of its loans were 'seriously delinquent'
at the end of February, up from 6.2 percent a year earlier. The FHA's
share of the U.S. mortgage market soared to nearly a third of loans
originated in last year's fourth quarter from about 2 percent in 2006 as
a whole, according to
face='Times New Roman' size='3'>Inside Mortgage Finance
size='3'>. Foreclosed FHA homes owned by HUD totaled 39,687 in January,
up 22 percent from a year earlier.
href='http://online.wsj.com/article/SB123840821794969275.html#mod=testMod'>Read
more. (Subscription required.)
Banks Starting to Walk
Away from Foreclosures
City officials and housing advocates here and in
cities across the country say that they are seeing an unsettling
development in banks quietly declining to take possession of properties
at the end of the foreclosure process, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The officials say that the banks most often
move in that direction because the cost of the ordeal — from legal
fees to maintenance — exceeds the diminishing value of the real
estate. The so-called bank walkaways rarely mean relief for the property
owners, caught unaware months after the fact, and often mean additional
financial burdens and bureaucratic headaches. Experts suggest
that the bank walkaways are most visible in states where
foreclosures are processed through the courts and therefore tend to be
more transparent. Other states, like Indiana and New York, have
court-mandated foreclosures, but roughly half of the states allow
foreclosures to proceed without court intervention, making it difficult
to accurately count the number of bank walkaways in recent
months.
href='http://www.nytimes.com/2009/03/30/us/30walkaway.html?adxnnl=1&ref=business&pagewanted=print&adxnnlx=1238418038-Ax34K7+uNd/INZvYG3vJ3Q'>Read
more.
Government Plans for U.S. Automaker Overhaul
The White House yesterday pushed out General Motors
chairman and CEO Rick Wagoner and instructed Chrysler to form a
partnership with the Italian automaker Fiat within 30 days as conditions
for receiving another much-needed round of government aid, the
size='3'>New York Times reported today.
President Obama is scheduled to announce details of the auto package at
the White House today, but two senior officials made clear that some
form of bankruptcy — a quick, court-supervised restructuring, as
they described it — could still be an option for one or both
companies. Obama’s auto industry task force, in a report released
Sunday night assessing the viability of both companies and detailing the
administration’s new plans for them, concluded that Chrysler could
not survive as a stand-alone company. The report said the company would
get no more help from the government unless it can finalize a proposed
alliance with the Italian automaker Fiat by April 30. GM, on the other
hand, has made considerable progress in developing new energy-efficient
cars and could survive if it can cut costs sharply, the task force
reported. The administration is giving GM 60 days to present a
cost-cutting plan and will provide taxpayer assistance to keep it afloat
href='http://www.nytimes.com/2009/03/30/business/30auto.html?_r=1&hp=&pagewanted=print'>Read
more.
Executive Gets 30 Years in
$2.9 Billion Fraud
Nearly seven years after National Century Financial
Enterprises collapsed in a $2.9 billion fraud, its founder, Lance K.
Poulsen, was sentenced to 30 years in prison on Friday in one of the
harshest white-collar punishments in history, the
face='Times New Roman'>New York
Times reported on Saturday. Poulsen was
convicted in October of leading a vast fraud as CEO of National Century,
a company based in Dublin, Ohio, that provided financing for hundreds of
clinics, hospitals and other health care providers. The company’s
fall in 2002 contributed to the bankruptcies of 275 health care
facilities and cost Credit Suisse and the Pacific Investment Management
Company, the nation’s biggest bond fund investor, more than $540
million.
href='http://www.nytimes.com/2009/03/28/business/28fraud.html?ref=business&pagewanted=print'>Read
more.
Charter Files for
Pre-packaged Chapter 11
Charter Communications Inc. on Friday filed for a
pre-packaged chapter 11 as the nation's fourth-largest cable operator
strives to keep its head above water and still compete with phone
companies and satellite TV providers, the Associated Press reported on
Saturday. The St. Louis-based company seeks to emerge from bankruptcy as
early as the end of summer and doesn't plan on selling any of its assets
to competitors. After chapter 11, interest costs at Charter, which has
never posted a profit since going public in 1999 due to massive debt
interest payments, will be cut in half to $830 million a year. The
filing restructures about $8 billion of debt at Charter, which is
controlled by Microsoft Corp. co-founder Paul Allen, but leaves about
$13 billion of debt on its books. Allen will control 35 percent of the
votes in the reorganized company.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/27/AR2009032700751_pf.html'>Read
more.
Ritz Camera Receives
Approval to Sell 400 Stores
Ritz Camera Center Inc. received approval from
Bankruptcy Judge
face='Times New Roman' size='3'>Mary Walrath
size='3'>to sell the assets at 400 stores it plans to shutter,
the
size='3'>Portland (Maine) Business Journal
size='3'>reported on Friday. Ritz has more 1,000 locations in 45 states.
Judge Walrath also approved Ritz's request to borrow $85 million from
Wachovia Bank to help fund operations as it shuts the stores. The
company said that it wants liquidators to bid for rights to oversee the
sales by March 30. If more than one acceptable bid is received, it will
hold an auction April 1. Ritz scheduled an April 2 hearing to approve
the sale.
href='http://www.bizjournals.com/portland/stories/2009/03/23/daily51.html?t=printable'>Read
more.
Madoff Liquidator Says $2.6
Billion Will Pay Victims of Fraud
The agency liquidating Bernard Madoff’s
brokerage says that the $2.6 billion it has on hand is enough to satisfy
all legitimate claims by victims of the money manager’s $65
billion Ponzi scheme, Bloomberg News reported on Friday. The Securities
Investor Protection Corp. is using a formula that investors may
challenge in court. The agency has the money in an industry-financed
fund and from recovered assets to reimburse Madoff’s 5,000
customers to the maximum allowed by its charter, said SIPC president
Stephen Harbeck. The SIPC has $1.6 billion in a fund designed to
reimburse customers as much as $500,000 on lost investments, plus $1
billion recovered by brokerage trustee Irving Picard from Madoff firm
bank accounts and desk drawers, Harbeck said.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=agrg_Lqei7Cw&refer=home#'>Read
more.
Credit Problems Grow for
Crusader Energy
Days after warning that it may have to seek bankruptcy
protection, oil and gas drilling company Crusader Energy Group has
revealed further evidence of its mounting liquidity problems by
notifying investors that it has declined to make its first payment in a
debt-workout deal with certain creditors,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported on Friday. The Oklahoma City-based company said on
Thursday in an SEC filing that it has opted not to pay a first
installment of $833,000 on a repayment plan intended to cure a
deficiency of $5 million on a senior credit line. Because it did not
make the first payment according to its agreed-upon six-payment
installment plan, Crusader Energy is now technically in default on its
senior credit line and the facility’s administrative agent could
immediately demand full repayment, the filing said. In addition, the
default on the senior credit line triggers a default under a $250
million second-lien credit facility, which could also be called in as a
result, the filing said.
href='http://bankruptcy.law360.com/articles/94045'>Read
more. (Subscription required.)
ING, Others Sue Ailing
Freescale over $1 Billion in Loans
As Freescale Semiconductor Inc. edges closer to
bankruptcy, a group of secured creditors including affiliates of ING,
Babson Capital Management LLC and Denali Capital LLC have filed suit,
alleging the chip maker has diluted the value of their holdings by
refinancing about $1 billion in lower-tier bonds into higher-priority
term loans,
size='3'>Bankruptcy Law360 reported on Friday.
The plaintiffs, which include more than 30 investment funds, filed the
lawsuit Tuesday in the Supreme Court of the State of New York, County of
New York, alleging that Freescale breached its credit agreements with
them by issuing the term loans, the last portion of which were issued
this week. The new term loans issued by Freescale would replace bonds
held by certain unnamed junior creditors, elevating the status of their
holdings and diluting the market value of the plaintiffs’ debt on
the secondary market, as well as potentially interfering with the
plaintiffs’ rights to Freescale’s collateral, the complaint
said.
href='http://bankruptcy.law360.com/print_article/94082'>Read more.
(Subscription required.)
Additional Roles Seen for
Fannie Mae, Freddie Mac
The regulator of Fannie Mae and Freddie Mac is
considering giving the government-backed mortgage companies another role
in helping to finance small mortgage banks, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The Federal Housing Finance Agency said that it
is looking at ways that the two companies might help revive the market
for so-called warehouse loans, which are loans made to mortgage banks.
Demand for mortgages is surging as low interest rates prompt millions of
Americans to refinance. New U.S. first-lien home-mortgage loans granted
this year will surge to $2.78 trillion, up 72 percent from 2008's
depressed level, the Mortgage Bankers Association predicts. However,
mortgage banks have been hobbled in recent months by the current credit
crunch, making it hard for them to respond to that demand.
href='http://online.wsj.com/article/SB123837208039067699.html'>Read
more. (Subscription required.)
Tumbleweed Restaurants
Chain Files for Chapter 11
Tumbleweed Restaurants, a Louisville, Ky.-based chain
that employs 2,200 people, filed for chapter 11 protection on Friday as
it tries to restructure $18 million in debt from lender GE Capital,
the
size='3'>Louisville Courier-Journal reported
on Saturday. Tumbleweed Southwest Grill, the 'Tex-Mex' chain, has 37
U.S. locations and has nearly $10 million of its $18 million in debt
owed backed by restaurants and real estate.
href='http://www.courier-journal.com/article/20090328/NEWS01/903280406/1008/NEWS01'>Read
more.
MGM Buys a Lifeline for
Struggling Las Vegas Project
In an 11th-hour effort to save its $8.6 billion City
Center resort and casino development, debt-strapped MGM Mirage made a
$200 million payment required to keep construction going, the
size='3'>Wall Street Journal reported on
Saturday. The payment made by MGM Mirage covers Dubai World's share of
the monthly obligation. Last week, the government of the Dubai-owned
conglomerate sued MGM Mirage alleging breach of contract, cost overruns
and mismanagement at City Center. Dubai World has poured $4.3 billion
into City Center, more than it expected when it agreed to invest, and is
reluctant to provide more cash.
href='http://online.wsj.com/article/SB123817896386759181.html'>Read
more. (Subscription required.)
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