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February 22,
2010
Rates, Solicitations
Increase as New Credit Card Rules Go Into Effect Today
A new federal credit card law that takes effect today
that could erase billions of dollars a year in fees and interest charges
paid by consumers, but card issuers are already deploying new tactics
that could prove costly for even the most cautious cardholder, the
Wall Street Journal reported today. Under the Credit Card
Accountability Responsibility and Disclosure Act of 2009, card companies
must now tell customers how long it would take to pay off the balance if
they only make the minimum monthly payment. Customers can only exceed
their credit limit if they agree ahead of time to pay a penalty fee.
Also, if a cardholder misses payments for more than 60 days,
interest-rate increases will affect only new purchases, not existing
balances, according to the new credit card rules. However, credit card
companies can raise the rate on new purchases made as long as they
provide 45 days' notice that they are doing so.
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In related news, the nation's largest credit card
issuers upped their direct-mail solicitations to consumers by more than
45 percent in the fourth quarter from the prior quarter, according to
two leading market-research firms, the Wall Street Journal
reported today. However, a new credit card these days will cost
consumers as the average annual percentage rates, which climbed steadily
most of last year, are now at their highest levels in five years. Nearly
35 percent of cards now have annual fees, and a number are raising or
imposing new charges for balance transfers and inactive accounts. In the
fourth quarter, the average annual percentage rate stood at 13.5
percent, well above the year-ago rate of 11.8 percent, according to
Synovate Mail Monitor. Last week's average APR, according to
CreditCards.com, was about 14.2 percent, up from 12.1 percent just six
months ago. Interest rates for subprime borrowers were significantly
steeper at 24.9 percent, compared with 14.3 percent six months
ago.
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on Chapter 11
Bankruptcy Judge Bruce A. Markell could rule as
soon as the this week as to whether the chapter 11 filing of Las Vegas
Monorail Co. (LMVC) should be dismissed or converted to chapter 9, the
Deal Pipeline reported on Friday. Ambac Assurance Corp., which
insures the payments on the debtor's bonds, asked that the case be
dismissed on Jan. 13, the same day that the operator of the monorail on
the Las Vegas Strip filed its petition. Ambac asserts that the company
is a municipality so it is ineligible to be a debtor in chapter 11, and
that LMVC must seek protection under chapter 9. However, the state of
Nevada has not authorized chapter 9 filings, so the case would likely be
handled in state court instead.
href='http://http//pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005392395'>Read
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Commentary: Proposed
Resolution Authority Can Help Convince Banks They Are Not Too Big to
Fail
As the White House and Congress continue to push for
financial regulatory overhauls, it is essential to re-institute the
principle of failure in our financial marketplace, according to a
commentary by former chairman of the Securities and Exchange Commission
Arthur Levitt in today's Wall Street Journal. The problem of 'too
big to fail' is behind President Obama's support of the so-called
Volcker rule, which would prevent banks from getting too big by limiting
their ability to engage in proprietary trading or run their own hedge
funds or private equity funds. The rule is premised on the idea that
because these banks will be protected from failure, they should not be
permitted to engage in these activities. Far from ending the problem of
'too big to fail,' the Volcker rule practically institutionalizes it,
according to Levitt's commentary. Therefore, the only reasonable
solution to 'too big to fail' is the creation of a resolution authority
that makes the failure of any financial institution possible and
orderly. The rights and responsibilities of equity holders, bond
holders, other creditors and management would be spelled out
lang='EN'>—in advance. If a bank or
financial institution should require the direction of a resolution
authority, failure might not be the only option, but it would remain the
first one. That prospect alone, according to Levitt, would reintroduce
the risk of failure in our financial markets.
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Analysis: Millions of Unemployed Face Years
Without Jobs
Even as the American economy shows tentative signs of a rebound, the
human toll of the recession continues to mount with millions of
Americans remaining out of work, out of savings and nearing the end of
their unemployment benefits, the New York Times reported
on Saturday. Economists fear that the nascent recovery will leave more
people behind than in past recessions, failing to create jobs in
sufficient numbers to absorb the record-setting ranks of the long-term
unemployed. Roughly 2.7 million jobless people will lose their
unemployment check before the end of April unless Congress approves the
Obama administration’s
proposal to extend the payments, according to the Labor Department.
Nearly 6.3 million Americans have been unemployed for six months or
longer, the largest number since the government began keeping track in
1948 and a figure that is more than double the toll in the next-worst
period in the early 1980s. Labor experts say the economy needs 100,000
new jobs a month just to absorb entrants to the labor force. With more
than 15 million people officially jobless, even a vigorous recovery is
likely to leave an enormous number out of work for years.
href='http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html?em=&pagewanted=print'>Read
more.
Dodd Moves Regulatory Overhaul Bill to
Markup Despite Doubts
Senate Banking Chairman Christopher Dodd's (D-Conn.) has called for a
markup hearing for the first week of March on legislation to revamp
regulation of financial markets, CongressDaily reported on
Friday. Dodd plans to release a revised draft this week in preparation
for a markup, but some lobbyists doubt that Dodd will meet his goal as
he must reconcile disagreements with Sen. Bob Corker (R-Tenn.) on very
complex issues in a very short time. As a condition, Corker has asked
Dodd to put off discussion of the contentious issue of a proposed
Consumer Financial Protection Agency as the last item for negotiations.
In addition, the two senators would have to settle other issues such as
how much regulation there should be of the over-the-counter derivatives
market, which caused American International Group's collapse.
Reliance Raises Bid for
LyondellBasell
India's Reliance Industries Ltd. has again sweetened its offer to
take control of LyondellBasell Industries when it exits bankruptcy,
boosting its valuation of the chemical maker to $14.5 billion, the
Wall Street Journal reported today. The offer, made over the
weekend, would give Reliance a minority stake in Lyondell, but would
give the Indian company super-voting power to control Lyondell's board.
Unlike a previous offer Reliance made, the new offer would give some
creditors a chance to get cash for their claims. Creditors could also
choose to receive stock in the restructured Lyondell under the new
offer. A third option would allow some creditors to receive stock and
also purchase additional Lyondell stock in a rights offering. Under the
current reorganization plan, lenders would take control of Lyondell in
exchange for forgiving some $18 billion in debt. Investors--including
Apollo Management, Ares Management and Lyondell's owner, Access
Industries--also plan to 'backstop' a $2.8 billion stock sale to take
the company out of bankruptcy, buying up shares others choose not to
purchase.
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Judge Confirms Accuride's Reorganization
Plan
Accuride Corp. won approval of its reorganization plan, fending off a
challenge from shareholders convinced that the company struck its
restructuring deal in bad faith, Dow Jones Daily Bankruptcy
Review reported on Friday. Bankruptcy Judge Brendan L.
Shannon on Feb. 18 signed off on the plan, which will hand the
company over to its bondholders. The lengthy courtroom showdown between
the company and its shareholders was resolved with a last-minute deal
that sweetened the shareholders' treatment by giving them additional
warrants to purchase stock and reducing the strike price of the
warrants. Judge Shannon had earlier this month delayed Accuride's plan
confirmation hearing by seven days amid concerns from the shareholders,
who argued that the company's plan was denying them a better recovery
that was actually within reach. The shareholders had introduced a rival
plan they said was superior.
Simon Rejects General Growth's Terms for
Negotiations
Simon Property Group Inc. said it could not agree to conditions
General Growth Properties Inc. wanted to impose before talks about
Simon's $10 billion bid for the No. 2 U.S. mall owner, Reuters reported
on Friday. General Growth's terms for a nondisclosure agreement were not
constructive and 'make clear your apparent interest in precluding our
offer from moving forward or being considered by your stakeholders,'
Simon said in a letter to its smaller rival. The letter is the latest
salvo in a battle that has rapidly escalated after the No. 1 U.S. mall
owner went public with its offer for General Growth on Feb. 16. General
Growth, which became the biggest real estate failure in U.S. history
when it filed for bankruptcy in April, has said that it is pursuing an
exit plan, which includes emerging from bankruptcy as a stand-alone
entity as well as potential deals.
href='http://www.reuters.com/article/idUSN1912110220100220'>Read
more.
Six Flags Wins Exclusivity Extension to
File Reorganization Plan
Six Flags, which has locked horns with creditors for months over its
plans to exit bankruptcy, will be the only group allowed to present a
restructuring plan to the court until April 5, Reuters reported on
Friday. Six Flags said that the extension means that it will be able to
solicit votes ahead of its March 8 confirmation hearing without the
distraction of a competing plan. Bankruptcy Judge Christopher
Sontchi last week overruled objections from some creditors to an
extension to the company's deadline, according to Paul
Harner, a lawyer at Paul, Hastings, Janofsky & Walker, who
represents Six Flags. Six Flags sought chapter 11 protection in June
with a restructuring plan that was friendly to its lenders. Then in
November it adopted a plan proposed by certain senior bondholders, who
plan to take control of the company.
href='http://www.reuters.com/article/idUSN1922747620100219'>Read
more.
Orleans Homebuilders Defaults on $350
Million Loan
Orleans Homebuilders Inc. said Friday that it defaulted on a $350
million loan since it doesn't have sufficient funds to repay the amount
owed to its creditor and failed to renegotiate the terms of the loan,
the Associated Press reported on Friday. The homebuilder said that its
second amended and restated revolving credit loan, which it defaulted
on, began in Sept. 2008 and matured on Feb. 12. The company had been
working with its lenders to lengthen the term of the loan, but said that
it could not get the proper approval by Dec. 3 or agree with lenders to
any changes to the loan agreement. Orleans Homebuilders said that it is
looking at its options for getting funding, including filing for
bankruptcy protection, a deal out of court or a sale of the
company.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/02/19/AR2010021904446_pf.html'>Read
more.
Magna Sale of Maryland Tracks Postponed
Again
The bankruptcy sale of Magna Entertainment Corp.'s horse racing
assets in Maryland has been postponed a fourth time, the Associated
Press reported on Friday. According to a filing on Friday, a Feb. 23
auction of Laurel Park and Pimlico tracks and the Preakness race has
been delayed to March 25. A new date for a hearing on the sale of
Maryland Jockey Club assets was not set. Also postponed on Friday was a
hearing on Maryland's asserted right of first refusal in any sale. The
state wants the Preakness race at Pimlico, part of horse racing's Triple
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/02/19/AR2010021903734_pf.html'>Read
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