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July 7, 2009
Congress Set to Tackle
Credit-Rating Firms
Congress is poised to rein in credit-rating agencies
that have been tagged as one of the culprits for the bust in the housing
market when they gave favorable grades to mortgage-backed securities
that were based on faulty loans,
face='Times
New
Roman' size='3'>CongressDaily reported
yesterday. House Financial Services Capital Markets Subcommittee
Chairman Paul Kanjorski (D-Pa.) said that he plans to go much farther
than the Treasury Department's plan to provide more oversight, which
called on the SEC to push for greater public disclosure of firms'
methodologies and for better differentiation between structured credit
and other products. Options include those that would make moderate
changes, such as legislation by Reps. Michael Castle (R-Del.) and Gary
Ackerman (D-N.Y), to allow the SEC to determine what products can be
eligible for ratings from nationally recognized firms, which now total
10. In addition, some analysts have suggested that Congress should
consider a rotation where credit-rating firms are randomly assigned to
issuers in an attempt to lessen the conflict of interest. One measure
that might pick up steam is legislation by Senate Banking Securities and
Insurance Subcommittee Chairman Jack Reed (D-R.I.) to give the SEC more
authority over the industry and allow investors to sue a firm if it
'knowingly or recklessly' failed to review key
information.
Industry Takes Aim at Plan
to Create Financial Protection Agency
A coalition of business representatives who are
skeptical about a proposed Consumer Financial Protection Agency have met
repeatedly in recent weeks to hone their argument that a new consumer
financial regulator could cause more harm than good, the
face='Times New Roman'>
size='3'>Washington Post reported today. The
opponents to the Obama Administration’s proposed agency have
included the American Bankers Association, American Financial Services
Association, National Auto Dealers Association, U.S. Chamber of
Commerce, Mortgage Bankers Association and other lobbyists. Business
groups warn that another layer of regulation could increase costs,
stifle innovation and curtail choices for consumers. They complain that
an agency responsible solely for examining consumer financial products
would not be concerned about the health of the firms providing them. The
Obama administration is seeking to give the proposed agency broad powers
to oversee a range of financial products, from mortgages to credit cards
and checking and savings accounts. House Financial Services Committee
Chairman Barney Frank (D-Mass.) has said that he plans to have the
committee vote on a bill before Congress's summer recess, scheduled to
begin Aug. 3.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/06/AR2009070603622_pf.html'>Read
more.
Autos
Protection
Struggling automotive parts supplier Lear Corp. said
today that it has filed for chapter 11 protection after receiving the
support it needed from lenders and bondholders, the Associated Press
reported. The company, which makes automotive seating systems and
electronics, had been negotiating with its lenders and bondholders for
additional support for its restructuring plan. It previously received a
commitment for $500 million in loans to finance its bankruptcy from a
group of lenders led by JPMorgan and Citigroup. Lear has asked the
bankruptcy court to allow it to continue to provide pay and benefits for
its workers without interruption and to continue to allow it to provide
payments for its U.S. and Canada pensions. It plans to present its
restructuring plan to the court within 60 days.
href='http://www.google.com/hostednews/ap/article/ALeqM5gQg78Lh18noT5SR56gOA5se8a97AD999IDRO0'>Read
more.
Contech Seeks Chapter 7
Conversion
Auto parts maker Contech U.S. LLC is seeking to change
its chapter 11 reorganization to chapter 7 liquidation in order to
salvage remaining compensation for its creditors,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
Less than six months after first filing for chapter 11 protection,
Portage, Mich.-based Contech U.S., a light-metal die casting and
machining company that manufactured advanced metal components for major
U.S. automakers, claimed that “no reasonable hope of
reorganization” remained for it. Contech, which listed $100
million to $500 million in both assets in liabilities in its February
chapter 11 petition, said that it had already been through sales of its
most valuable assets, including its two core die-casting and steel
products business units, all outstanding and issued shares of Contech
U.K., and its metal forge facility in Albemarle, N.C.
href='http://bankruptcy.law360.com/articles/109673'>Read
more. (Subscription required.)
Analysis: GM and U.S.
Backers Face Rough Road Ahead
General Motors Corp. is set to emerge from bankruptcy
into an economic downturn that presents a major challenge for the
country's largest automaker -- and for the White House that saved it,
the
size='3'>Wall Street Journal reported today.
Sunday's late-night ruling from the bankruptcy court cleared away
objections to GM's reorganization. Later this week, GM Chief Executive
Frederick 'Fritz' Henderson plans to introduce a revamped GM as a
greener, more customer-focused company with a leaner management.
Nonetheless, the new GM still has a rough road ahead. The company, soon
to be 60 percent government-owned, continues to lose market share to
foreign rivals, having shed nearly two percentage points of its U.S.
share in just the past six months. Some buyers have flocked to GM's
chief U.S. rival, Ford Motor Co., allowing Ford to substantially narrow
its market-share deficit with GM in June. GM, meanwhile, is spending
nearly $500 more per vehicle than the industry average on sales
incentives, and it carries the highest inventory levels among its peers,
according to Autodata Corp. Plans to sell the Hummer brand and other
lines remain in limbo.
href='http://online.wsj.com/article/SB124690290741101607.html'>Read
more. (Subscription required.)
States Straining to Repair
Budgets
Nearly a week into the new budget year, many states
are unable to balance their books and unable to decide whether to fill
the huge gaps with tax increases, spending cuts or both, the
size='3'>Washington Post reported today. Ohio
Gov. Ted Strickland (D) said that his state is losing money every day
its two-year budget goes unpassed. 'For a lot of people, there is a
continuing failure to recognize the severity of what is happening with
this economy,' Strickland said. 'Programs will be reduced. Some programs
will be eliminated.' In California, the budget hole was $24 billion
until the government missed its July 1 deadline to have a new budget in
place. Now, Governor Arnold Schwarzenegger (R) said yesterday that the
gap has grown to $26.3 billion. The combination of a sour economy and
balanced-budget requirements is forcing states to live with smaller
budgets at a time when demand for services is increasing.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/06/AR2009070603515_pf.html'>Read
more.
Court Allows Rival
Restructuring Plan in Pliant Bankruptcy
Private equity fund Apollo Management has won the
right to put a rival restructuring plan up for a vote by creditors in
the case of bankrupt plastic film and packaging manufacturer Pliant
Corp.,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Mary Walrath signed an
order on Thursday terminating Pliant's exclusivity period, allowing
creditors the opportunity to consider Apollo's reorganization plan. Last
month, Pliant had requested an extension of its exclusive right to file
a chapter 11 plan through Oct. 9, 2009, arguing that denying the
company's request would signal a loss of confidence in the company's
reorganization effort and could harm both Pliant and its creditors. In a
motion filed June 19, Apollo, Pliant's largest single creditor, argued
that its reorganization plan was an “economically superior”
proposal, and said that the debtors' exclusive right to propose a plan
should be terminated so that the Apollo plan could be put to a
vote. Read
more. (Subscription required.)
Judge Hears Arguments in
Magna Bankruptcy
Attorneys for a hedge fund are asking for the
appointment of an examiner in Magna Entertainment's chapter 11 case, the
Associated Press reported today. A hearing was scheduled today at the
request of Greenlight Capital Offshore Partners, which wants an
investigation of ties between Magna and its parent company, known as
MID. MID has played a dual role as both a potential bidder for MEC
assets and one of its primary lenders. Greenlight, an unsecured creditor
of Magna as well as a large shareholder in MID, is concerned about the
fairness of any asset sale.
href='http://rds.yahoo.com/_ylt=A0WTTki8SVNKwTQA5EXQtDMD;_ylu=X3oDMTBjcXBoZjEwBHBvcwMzBHNlYwNzcg--/SIG=12j7tk2f8/EXP=1247058748/**http%3a//www.hometownannapolis.com/cgi-bin/read/2009/07_07-04/BUS'>Read
more.
Chicago Tribune's Deal to
Sell Cubs, Wrigley Field Moves Foreward
Tribune Co.'s deal to sell the Chicago Cubs to the
Ricketts family took another step forward as the two sides shared
working drafts of their agreement with Major League Baseball over the
holiday weekend, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The deal, tentatively valued at just under $900
million, has yet to be finalized. Debt-burdened Tribune Co. -- which
owns the
size='3'>Los Angeles Times, the
size='3'>Chicago Tribune, the
size='3'>Baltimore Sun and other dailies, as
well as 23 TV stations -- is selling the Cubs, Wrigley Field and its
stake in a Chicago cable sports network to raise capital.
href='http://online.wsj.com/article/SB124692412108102913.html'>Read
more. (Registration required.)
Tries to Weather Tough Economy
As people re-examine their budgets, jewelry is turning
out to be one of the easiest places to cut back, and many jewelers are
feeling the economic squeeze, the
face='Times
New
Roman' size='3'>New York Times reported today.
The new frugality has forced diamond mines to curtail production, led to
deep discounting at jewelry chains, spurred hundreds of store closings
and resulted in job cuts at boutiques and department stores. Because
jewelry is expensive inventory that moves slowly even in better economic
times, many stores are laden with debt — even though wholesale
global prices of polished diamonds were down 15.4 percent in June
compared with a year earlier. Experts say that when the shakeout is
over, far fewer jewelers will be left standing. About 20 percent more
American jewelers will go out of business this year than did last year,
according to Kenneth Gassman, president of the Jewelry Industry Research
Institute, an independent research practice.
href='http://www.nytimes.com/2009/07/07/business/07jewelry.html?_r=1&ref=business&pagewanted=print'>Read
more.
Deadline for
face='Times
New
Roman' size='3'>Boston Globe
size='3'>Bids Postponed
The
face='Times New Roman' size='3'>Boston Globe's
owners have postponed a deadline for potential buyers of the newspaper
to submit their initial bids, the Associated Press reported today. The
New York Times Co., which owns the
face='Times
New
Roman' size='3'>Globe, had set a Wednesday
deadline for nonbinding bids. However, the
face='Times New Roman'>
size='3'>Globe reports today that Goldman
Sachs & Co., the investment banking firm hired to manage the sale,
has told interested parties they will be given more time to prepare
offers for the
face='Times
New
Roman' size='3'>Globe and the
Worcester
Telegram & Gazette. The
Globe
size='3'>'s largest union votes July 20 on a new contract that would cut
wages and benefits by $10 million. The paper lost $50 million last
year.
href='http://www.boston.com/news/local/massachusetts/articles/2009/07/07/deadline_for_boston_globe_bids_postponed?mode=PF'>Read
more.
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