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April 7, 2009
name='1'>Connecticut AG Questions Steering $400 Million to Ratings
Firms
Connecticut Attorney General Richard
Blumenthal said yesterday that he is investigating why a Federal Reserve
Board bailout program will steer up to $400 million to the three largest
credit-rating agencies, according to Dow Jones Newswires. The firms,
Standard & Poor's Ratings Services, Moody's Investors Service and
Fitch Ratings, have been widely criticized for their role in fueling the
financial crisis with overly optimistic debt ratings.The Federal
Reserve's rules for its $1 trillion Term Asset-Backed Securities Loan
Facility (TALF), which is intended to restart consumer lending, require
financial institutions to have new securities rated by two or more
'nationally recognized statistical ratings agencies.' Only the largest
three credit-rating firms meet those criteria. Blumenthal yesterday
wrote to Federal Reserve Chairman Ben Bernanke asking him to revise the
TALF program to stop giving the three agencies an advantage and assure
that seven smaller competitors can compete for their work.
href='http://money.cnn.com/news/newsfeeds/articles/djf500/200904061641DOWJONESDJONLINE000495_FORTUNE5.htm'>Read
more.
Treasury
Department Seeks More Partners for Troubled Asset Program
The Treasury Department is making it
easier for hedge funds and other private investors to participate in its
plan for buying up banks' bad assets, the Associated Press reported
yesterday. Treasury yesterday relaxed a requirement that companies must
manage at least $10 billion of the mortgage-backed securities to
participate. A Treasury official said that only a few firms qualified
under that criteria. The department also emphasized that the program is
open to small and women- and minority-owned firms and said that it will
encourage such firms to partner with private-asset managers.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/06/AR2009040601247_pf.html'>Read
more.
Autos
GM
Bankruptcy Plan Said to Speed Up as Board Seeks Savings
Goal
General Motors Corp. is speeding up
preparations for a possible bankruptcy filing even as directors scout
for deeper savings this week to avoid that outcome, Bloomberg News
reported today.GM would focus on forming a new company from its best
assets if court protection is needed. The efforts to set a new cost-cut
goal center on how to go beyond a proposal to slash debt by 46 percent
and shed 47,000 jobs in 2009, and will include talks with Treasury
officials.The moves are a response to President BarackObama’s
March 30 rejection of GM’s bid to keep $13.4 billion in federal
loans. With bondholders and the United Auto Workers balking at
concessions, a push for more savings makes bankruptcy more
“probable,” Chief Executive Officer Fritz Henderson has
said.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aDglrExs3oK0&refer=home'>Read
more.
Challenges Despite Cutting Debt by $9.9 Billion
While Ford announced yesterday
that it cut its debt by $9.9 billion, analysts say that the automaker's
finances could still crumble later this year despite the aggressive
restructuring, the Washington
Post reported today. For now, the debt
restructuring, which reduces Ford's interest payments by more than $500
million this year, 'will substantially strengthen Ford's balance sheet,'
the company said. Under the deal, the automaker and its finance arm will
pay $2.4 billion and issue 468 million shares. On average, Ford paid 38
cents on the dollar in cash and stock to retire $9.9 billion of its
$25.8 billion in debt, according to the company.
face='Cambria' size='3'>'The failure of competitors or key suppliers
could further complicate Ford's situation and cause it to ask for the
government loans that it is trying to avoid,' said Efraim Levy, auto
manufacturers and parts analyst for Standard and Poor's.Ford insists
that it does not need government assistance.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/06/AR2009040603485_pf.html'>Read
more.
Energy
Partners Issues Another Bankruptcy Warning
Issuing another warning that it
may soon have to file for bankruptcy protection, Energy Partners Ltd.
said Monday that it didn’t have the cash resources to repay some
$38 million of a borrowing base deficiency,
face='Cambria' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Last week, Energy Partners received an
extension on the due date for the repayment for the borrowing base
deficiency until April 14. The company said that it was attempting to
negotiate a forbearance agreement with its bank lenders.Last month
Energy Partners also signaled in an SEC filing that it was short on cash
and could be headed for bankruptcy court, amid reduced consumer demand
and the past year's sudden drop in energy prices.
href='http://bankruptcy.law360.com/articles/95602'>Read more.
(Subscription required.)
Lyondell
Creditors Will Investigate Basell Merger
Creditors of bankrupt Lyondell
Chemical Co. won permission to pursue discovery into whether the
leveraged buyout and acquisition of Lyondell by Dutch firm
BasellPolyolefins and private investment firm Access Industries saddled
the company with too much debt,
size='3'>Bankruptcy Law360 reported
yesterday.The creditors will now be able to seek documents, financial
analysis information, meeting records and other evidence related to
discussions over the 2007 merger that created LyondellBasell Industries
AF SCA, which is owned by Access.The creditors plan to seek information
from lenders involved in the deal, including Citibank NA, Goldman Sachs
Credit Partners LP, Merrill Lynch Capital Corp., UBS Securities LLC,
JPMorgan Chase Bank NA and others.
href='http://bankruptcy.law360.com/articles/95708'>Read
more. (Subscription required.)
Dismissal of JPMorgan Suit over $8 Billion
Bankrupt Charter Communications
Inc. has revealed that it will push to dismiss an adversary suit brought
by JPMorgan Chase Bank NA over more than $8 billion in prepetition loans
from the financial firm,
size='3'>Bankruptcy Law360 reported yesterday.
Through its recent chapter 11 filing, Charter is hoping to restructure
an estimated $24.2 billion in debt, $8.2 billion of which it received
from JPMorgan in a credit facility in 1999.In an adversary complaint
filed March 27, JPMorgan claimed that Charter moved some of that money
to various subsidiaries in violation of the terms of its existing credit
facility agreement, which prohibited transferring the money to Charter
subsidiaries through dividend, interest or intercompany
payments.
href='http://bankruptcy.law360.com/articles/95692'>Read
more. (Subscription required.)
Blockbuster,
Struggling with Debt, Nears Chapter 11
Movie rental company Blockbuster
announced yesterday that it might not be able to stay in business if it
didn't reach an accord with its creditors, MSNMoney.com reported today.
The company said that there was 'substantial doubt' about its ability to
avoid chapter 11 in an SEC filing yesterday. Blockbuster is struggling
to renegotiate the terms of a $250 million revolving- and term-loan
agreement.The company has until May 11 to complete the deal.
href='http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches-040709.aspx'>Read
href='http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches-040709.aspx'>
for AIG Unit
Thougha half-dozen bidders have
emerged for American International Group Inc.'s asset-management
business,the sale of the $100 billion portfolio has become complicated
by client withdrawals and declines in asset prices, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. The auction is for the piece of AIG Investments
that handles outside asset management for pension funds, insurance
companies and wealthy individuals. The division's portfolio consists of
a wide range of investments, including private-equity stakes, hedge-fund
interests and stocks and bonds.Several buyers have submitted offers
between $400 million and $800 million. That would register below the
typical price for asset-management businesses, which historically have
been valued at 1 - 2 percent of assets, which would value AIG's unit at
between $1 billion and $2 billion.
href='http://online.wsj.com/article/SB123906212349795179.html#mod=testMod'>Read
more. (Subscription required.)
Analysis:
Muted Signs of Life in the Credit Markets
Companies with good credit are
borrowing more money in the bond markets, the
face='Cambria' size='3'>New York Times
size='3'>reported today. Confidence in the banking industry seems to be
returning, despite the daily ups and downs of financial shares. Even
junk bonds, the high-risk corporate debt instruments, are luring
investors again.The revival is tentative and, like the gains in the
stock market, which pulled back yesterday, it may well prove fleeting.
However, some analysts say that the improvements suggest that investors
are being enticed by the markets, mainly because of sweeping federal
efforts to get credit flowing again.
href='http://www.nytimes.com/2009/04/07/business/economy/07credit.html?_r=1&ref=business&pagewanted=print'>Read
more.
Financier
Charged in Madoff Fraud
J. Ezra Merkin, a money manager
who funneled $2.4 billion from universities and nonprofit organizations
into Bernard Madoff's firm, was charged yesterday on allegations he
'betrayed hundreds of investors' by repeatedly lying to them about how
he invested their money, the
size='3'>Wall Street Journal reported today.
Merkin, a New York philanthropic leader and the former chairman of
finance company GMAC, raised billions of dollars for his three hedge
funds, telling clients he was managing the money himself. However, New
York Attorney General Andrew Cuomo filed a civil fraud complaint filed
alleging that Merkin collected hundreds of millions of dollars in fees
over more than a decade while weaving a 'panoply of lies' to conceal
that he was channeling much of his clients' funds to Madoff.
href='http://online.wsj.com/article/SB123903070566093099.html#mod=testMod'>Read
more. (Subscription required.)
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