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March 5, 2009
name='1'>House to Vote Today on Mortgage Modification
Legislation
The House of
Representatives is scheduled to vote today on legislation that would
allow bankruptcy judges to change mortgage terms to help homeowners
avoid foreclosure, the
size='3'>New York Times reported today. To
appease Democratic critics, backers of the bill recently made changes to
try to ensure that homeowners first try to negotiate a voluntary
loan change from their lenders before filing for bankruptcy. As a
result, the bill requires a homeowner facing foreclosure to seek a loan
change 30 days before pursuing one in court and to provide the necessary
personal financial information to the lender. Judges would be required
to determine whether a voluntary loan modification had been sought from
a lender before the homeowner entered bankruptcy. Judges would also have
to weigh a person’s income against the payments before deciding
whether an interest rate or principal reduction was called for and use
federally approved appraisal guidelines in determining a home’s
value.
href='http://www.nytimes.com/2009/03/05/business/05cramdown.html?pagewanted=print'>Read
more.
name='2'>Administration’s Mortgage Bailout to Aid 1 in 9 U.S.
Homeowners
The Obama administration
announced details of a housing-rescue plan it said would help as many as
one in nine homeowners, from low-income Americans struggling to avoid
foreclosure to well-off borrowers who owe more than their homes are
worth, the Wall Street
Journal reported today. The administration
estimates the new plan will cover as many as 9 million mortgage
holders. First, the government will offer financial incentives and
subsidies to persuade mortgage-servicing companies to ease up on
borrowers who are in financial straits so severe that they risk losing
their homes. Borrowers will have to sign affidavits attesting to their
financial hardships. In return, they will see their interest rates drop
to as low as 2 percent, their payment periods lengthened, and other
modifications aimed at bringing their monthly payments to 31 percent of
their income -- commonly considered a reasonable ratio. This program
will be limited to first-lien mortgages with outstanding principal
balances that don't exceed $729,750, in the case of single-family homes.
The second main component of the plan calls for Fannie Mae and Freddie
Mac to refinance loans for millions of borrowers who may owe more than
their homes are worth, even if they are wealthy enough to afford their
current payments. There is no income ceiling for beneficiaries, but they
must have mortgages held or guaranteed by Fannie Mae or Freddie Mac, and
they cannot owe more than 105 percent of the current value of their
home.
href='http://online.wsj.com/article/SB123617623602129441.html'>Read
more. (Subscription required.)
Autos
Auditors Raise Warning on Bankruptcy Risk
General Motors Corp. today said
that its auditors had raised 'substantial doubt' about its ability to
survive outside bankruptcy if it fails to stem its losses and stop
burning cash, Reuters reported. The 'going concern' warning from the
struggling U.S. automaker had been expected, but underscored the stakes
for GM as it seeks up to $30 billion in U.S. government aid to
restructure outside the bankruptcy process. GM said that its creditors
had agreed to waive a requirement that could have allowed them to force
the automaker to repay more than $6 billion in loans because of the
warning in order to allow GM to press its case for government aid. GM
has about $1 billion in convertible debentures that mature on June 1.
Absent a deal to restructure its debt, that looming payment could force
GM into bankruptcy, according to the company’s auditors.
href='http://www.reuters.com/article/bondsNews/idUSN0531966920090305'>Read
more.
name='4'>Analyst: Chrysler Plan Won’t Save It from
Bankruptcy
An automotive industry
analyst yesterday said that the restructuring plan that Chrysler LLC
continues to discuss with the federal government is not enough to save
the auto maker from bankruptcy, the
size='3'>Wall Street Journal reported today.
Craig Cather, CEO of automotive research firm CSM Worldwide, said that
Chrysler’s strategy is fundamentally flawed because it assumes
that the company will maintain its U.S. market share, even as it
promises to cut models, factory capacity and dealerships. If
Chrysler’s market share and revenue drop, the company won’t
have the cash it needs to execute its turnaround plan, Cather
said.
href='http://blogs.wsj.com/bankruptcy/2009/03/04/analyst-chrysler-plan-won%e2%80%99t-save-it-from-bankruptcy/print/'>Read
more.
name='5'>Ford Hopes to Cut Debt by $10.4 Billion to Trim
Costs
Ford Motor Co. said that
it will seek to retire up to $10.4 billion in debt, or 40 percent of the
car maker's total, as it moves to further cut costs, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The company plans to use a combination of stock
and cash largely from its financing arm to pay investors who turn in
their debt. Ford's total debt stood at $25.8 billion at the end of
2008. Ford said it would spend up to $2.2 billion in cash and use 500
million in shares if the maximum amount of debt is turned in under the
voluntary offer.
href='http://online.wsj.com/article/SB123620254554233003.html?mod=article-outset-box'>Read
more. (Registration required.)
name='6'>Congressional Committee to Examine AIG’s
Downfall
The Senate Banking
Committee will hold a hearing today entitled “American
International Group: Examining what went wrong, government intervention,
and implications for future regulation.” The hearing will be held
at 10 a.m. ET in room 538 of the Dirksen Senate
Office Building.
href='http://banking.senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=2a61e4c9-776a-4daf-a59a-7baf5369d573'>Click
here to see the witness list and to watch the hearing via
Webcast.
SEC
to Discuss Revamping of Rules Governing Credit-Rating
Agencies
The Securities and
Exchange Commission will announce that it will hold a roundtable to
discuss how to revamp the rules governing credit-rating agencies,
the Washington
Post reported today. The roundtable is
scheduled for April 15. The three major credit-raters,
including Standard & Poor's, Fitch Ratings and
Moody's, and others have been invited to speak. SEC Chairman Mary
L. Schapiro has criticized the way credit-rating firms are paid.
Currently, the issuers of securities pay the firms to rate them, which
Schapiro has called a conflict of interest. She has said it might be
better for financial firms to contribute to a pot of money that would be
used to pay for calculating ratings. Meanwhile, Standard & Poor's
released a set of principles today to guide the future regulation of
credit raters. Among others things, the principles say the performance
of credit ratings should be publicly disclosed and users of ratings
should be able to raise questions about methods.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/04/AR2009030403396_pf.html'>Read
more.
In related news, the House
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises will hold a hearing today entitled 'Perspectives on Systemic
Risk.' 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/hr030509.shtml'>Click
here for the prepared testimony.
name='8'>Connecticut Attorney General Objected to Journal
Register Bonuses
The Connecticut attorney
general's office objected to bankrupt Journal Register Co.'s proposal to
pay up to $1.7 million in bonuses to executives, the Associated Press
reported yesterday. The Yardley, Pa.-based newspaper publisher filed for
chapter 11 protection last month. The proposed bonuses would be earned
in part by meeting employee layoff targets. The attorney general's
office said that the proposed bonuses violate federal bankruptcy
law.
href='http://www.boston.com/news/local/connecticut/articles/2009/03/04/conn_ag_office_objects_journal_register_bonuses?mode=PF'>Read
more.
name='9'>Mortgages Ltd. Files Competing Chapter 11
Plan
Mortgages Ltd. filed a
reorganization plan in its chapter 11 case that calls for continuing
loan operations through a reorganized company and establishing a trust
to liquidate some of its assets and handle litigation, Bankruptcy
Law360 reported yesterday. The new company would be called Phoenix
Loan Services LLC, and it would continue to manage and administer the
debtor's loans under existing agreements, according to the plan and
disclosure statement filed. Creditors and investors would own both the
reorganized company and the trust, which would be responsible for
litigating against parties that have caused significant losses for the
company, the debtor said. The debtor's plan will compete with one
submitted Jan. 21 by the official investors’ committee, which
recently drew harsh criticism from both the debtor and unsecured
creditors’ committee.
href='http://bankruptcy.law360.com/articles/90058'>Read
more. (Subscription required.)
name='10'>Sporting Goods Retailer Files for
Bankruptcy
Joe's Sports & Outdoor,
with 30 retail outlets in the Pacific Northwest, has filed for chapter
11 protection, the Associated Press reported yesterday. Joe's obtained
$50 million from Wells Fargo Retail Finance to fund the restructuring,
subject to court approval. The chain was purchased by private equity
firm Gryphon Investors of San Francisco in 2007. The decision to file
for bankruptcy follows a strategic review announced by the company last
month during which it temporarily laid off warehouse workers and
explored ways to bring more capital to the business.
href='http://www.google.com/hostednews/ap/article/ALeqM5guubJHlw2Iy8fxeVeyX6O1B83WCQD96NKIU82'>Read
more.
name='11'>Judge Grants Eclipse Aviation’s Conversion to
Chapter 7
Bankruptcy Judge
Mary Walrath
size='3'>verbally granted a motion to convert Eclipse Aviation’s
chapter 11 case to a chapter 7 liquidation, the Associated Press
reported yesterday.Secured noteholders had requested that the company be
converted from chapter 11 restructuring to chapter 7 after a company
that hoped to buy Eclipse failed to obtain financing.
href='http://www.google.com/hostednews/ap/article/ALeqM5hVzirIgWRGvk-CtSPIUU_wW2SiKwD96NHLL02'>Read
href='http://www.google.com/hostednews/ap/article/ALeqM5hVzirIgWRGvk-CtSPIUU_wW2SiKwD96NHLL02'>
name='12'>Tribune Co. Asks Court to Halt Personal Injury
Suits
Tribune Co. has asked a
bankruptcy court to prevent a personal-injury lawsuit against the
beleaguered media giant from proceeding in an effort to stave off a
flood of similar lawsuits that the company claims will impede its
chapter 11 proceedings,
size='3'>Bankruptcy Law360 reported yesterday.
In an objection filed Tuesday, the debtors told the court that granting
a motion for relief from the automatic stay in a personal-injury suit
could cause a slew of similar motions to be filed and would cost the
debtors' estate a $1 million deductible in defense costs before their
insurer would assume liability. The debtors object to a motion filed by
Allen Francisco on Feb. 20 asking the bankruptcy court for permission to
proceed with a civil action filed in May 2006 in the Circuit Court of
Cook County, Illinois that was put on hold when the debtors filed for
chapter 11 protection in December.
href='http://bankruptcy.law360.com/articles/90052'>Read more.
(Subscription required.)
name='13'>Hawaii Teachers Union Unit Files for
Bankruptcy
Member Benefits Corp., a
subsidiary corporation of the Hawaii State Teachers Association's (HSTA)
Voluntary Employees Benefits Association, filed for bankruptcy on
Monday, according to the Associated Press yesterday.
size='3'>The HSTA said that the company’s activities and finances
have been 'grossly mismanaged.' The HSTA decided to dissolve the
corporation last year after determining that the for-profit
subsidiary didn't fit within the union's mission. The union has told its
members that the mismanagement was discovered by an outside team of
attorneys and accountants that was brought in as part of the process of
closing the corporation. The HSTA says the problems included unpaid
taxes, penalties and interest.
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