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May 28, 2009
U.S. Lawmakers Weigh Limits
on Bankruptcy Forum Shopping
U.S. lawmakers are considering banning the
controversial practice of bankruptcy “forum shopping” by
requiring companies to seek protection from their creditors in their
home states, Dow Jones
face='Times New Roman' size='3'>Daily Bankruptcy Review
size='3'>reported today. Sen. Jeff Sessions (R-Ala.), the ranking member
of the Senate Judiciary Committee, is circulating a measure that seeks
to “combat” forum-shopping. The measure hasn’t been
officially introduced in the Senate, but the proposal would require
businesses to file for bankruptcy protection where their
“principal place of business” is located. The measure is a
proposed amendment to the Consumer Credit Fairness Act, a bill that
addresses the treatment of consumer credit debts in bankruptcy. That
bill, according to the committee’s Web site, is on the agenda of a
June 4 meeting, and any amendments to the bill would be introduced at
that time.
Autos
Auto Parts Supplier
Visteon Files for Chapter 11
U.S. auto parts maker Visteon Corp. said today that it
has filed for chapter 11 protection for its U.S. operations, Reuters
reported. Visteon listed total assets of $4.58 billion and total debts
of $5.32 billion. The Michigan-based company's unsecured creditors
include a unit of Bank of New York Mellon Corp. holding bond debts, the
Pension Benefit Guaranty Corp. and IBM, which is a trade creditor. No
Visteon subsidiaries or joint ventures outside the United States are
part of the filing, the company said, adding that it would continue its
operations throughout the reorganization process. Visteon, which Ford
Motor Co. spun off in 2000, said the carmaker had made a commitment to
support debtor-in-possession financing for the restructuring efforts and
to ensure long-term continuity of supply. Ford is still Visteon's
biggest customer and accounted for about 31 percent of its $1.35 billion
of sales last quarter. The case is
face='Times New Roman' size='3'>In re Visteon Corp.
size='3'>, U.S. Bankruptcy Court, District of Delaware, No.
09-11786.
href='http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSBNG47742620090528'>Read
more.
Influence over Reorganized GM
The government would retain significant control over
the restructured General Motors under an Obama administration plan that
would allow U.S. officials to directly name or influence the
appointments of the vast majority of a new 13-member board that would
oversee the company, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. The plan calls for federal officials to
directly appoint five or six members to the board after GM emerges from
its expected bankruptcy. Another six would roll over from GM's existing
board, but even these directors would reflect the government's influence
since GM is reconstituting its board under government direction. The
United Auto Workers' health care trust would name one director to the
company board, and Canada is likely to appoint a board seat as
well.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/05/27/AR2009052701275_pf.html'>Read
more.
Chrysler Asks Bankruptcy
Judge to Approve Fiat Sale
Chrysler LLC’s sale to a group led by Fiat SpA
is the best deal for all involved in the automaker’s bankruptcy,
CEO Robert Nardelli said in a court filing before a hearing to approve
the transaction, Bloomberg News reported yesterday. Court approval of
the $2 billion offer from a group including Fiat, a United Auto Workers
union benefit trust and the U.S. and Canadian governments would enable
the reorganized company to begin building cars again. Chrysler has said
that it needs to close the sale quickly to preserve business value. More
than 300 objections or responses have been filed, including a group of
Indiana state pension and construction funds that hold a portion of
Chrysler’s secured debt. The Indiana funds are objecting to the
sale, saying their claims are being improperly subordinated and that the
Treasury Department improperly influenced the Chrysler bankruptcy. The
hearing is scheduled to resume today at 10 a.m. ET.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=ag8q2xLwUW6g&refer=home#'>Read
more.
Analysis: Bankruptcy
Helping to Cure Chrysler, but Tests Loom
While Chrysler appears to be on track to emerge from
the chapter 11 process soon, the new company will face stiff challenges
upon emergence as it will be competing in a brutal marketplace that may
make bankruptcy court seem like a refuge by comparison, the
face='Times New Roman'>New York
Times reported today. Americans are not
purchasing vehicles as they did in years past, and people who are
shopping are steering clear of Chrysler showrooms. Chrysler is even more
vulnerable than GM because its products are heavily tilted toward
pickups, minivans, and sport utility vehicles, which have fallen out of
favor with fuel-conscious consumers. Fiat has promised to add small and
sporty cars to Chrysler’s lineup, but they won’t be
available for nearly two years. Chrysler, which has been subsisting on
federal loans since the beginning of the year, will also need to stretch
the $7 billion it is getting from the Treasury Department to cover its
losses until the Fiat alliance starts paying off. To save money,
Chrysler has idled most of its plants so it can sell off a big backlog
of new cars and it drastically scaled back spending to develop new
products.
href='http://www.nytimes.com/2009/05/28/business/28chrysler.html?ref=business&pagewanted=print'>Read
more.
Mortgage-Bond Yields Jump,
Jeopardizing Fed’s Housing Effort
Yields on Fannie Mae and Freddie Mac mortgage bonds
rose for a fourth day after exceeding for the first time yesterday their
levels before the Federal Reserve announced it would expand purchases to
drive down interest rates on loans, Bloomberg News reported yesterday.
Yields on Washington, D.C.-based Fannie Mae’s current-coupon
30-year fixed-rate mortgage bonds climbed to 4.55 percent yesterday, the
highest since Dec. 5 and up from 3.94 percent on May 20, according to
data compiled by Bloomberg. Rising mortgage-bond yields, driven higher
in part by climbing Treasury rates, mean that the Fed now “faces a
challenge to its ability to sustain low mortgage rates,” according
to Jeffrey Rosenberg at Bank of America Corp. The Fed, seeking to use
lower home-loan rates to stem the housing slump and bolster consumers,
said March 18 it would increase its planned purchases of so-called
agency mortgage bonds by $750 billion to as much as $1.25 trillion, and
start buying government notes.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aF0VQ.cbvEtI&refer=home'>Read
more.
Clothing Retailer Files for
Bankruptcy
Casual clothing retailer and outlet operator Anchor
Blue Retail Group Inc. filed for chapter 11 protection yesterday, the
latest in a line of West Coast retailers to be taken down by the
recession,
size='3'>Bankruptcy Law360 reported yesterday.
Anchor Blue said that it would use the bankruptcy process to restructure
its operations, including a 363 sale of several stores and the closing
of others. In a statement, Anchor Blue Retail Group said it had already
entered into an agreement that will see Levi Strauss & Co. purchase
73 Levi’s and Dockers outlet stores. As part of its restructuring,
Anchor Blue Retail Group will shutter 50 underperforming stores in nine
states, including Arizona, California and Florida, three states that
have been particularly hard-hit by the recession. The company currently
has 177 stores in 12 states, it said. The bankruptcy is
size='3'>In re Anchor Blue Retail Group Inc.,
case number 09-11770, in the U.S. Bankruptcy Court for the District of
Delaware.
Harbinger Files Competing
Chapter 11 Plan for Asarco
Bankruptcy Judge
face='Times New Roman' size='3'>Richard Schmidt
size='3'>allowed bondholder Harbinger Capital to file a reorganization
plan for bankrupt copper mining company Asarco LLC, pitting the creditor
against Asarco parent Grupo Mexico SAB and India's Sterlite Industries
Ltd. in their efforts to take control of Asarco through their own
chapter 11 plans,
face='Times



New
Roman' size='3'>Bankruptcy Law360 reported
yestereday. Harbinger Capital filed its plan yesterday in the U.S.
Bankruptcy Court for the Southern District of Texas, which would call
for the mining company to sell substantially all its assets to an entity
designated by Harbinger in exchange for $500 million in cash. The plan
would also provide repayment for many creditors by preserving certain
legal claims against Sterlite and an entity related to Grupo Mexico.
According to a disclosure statement filed along with the plan,
Harbinger's plan will provide for pro rata share recovery for unsecured
asbestos plaintiffs with claims against Asarco through cash payments and
interest in litigation proceeds.
href='http://bankruptcy.law360.com/print_article/103622'>Read
more. (Subscription required.)
PBGC Takes over Abandoned
Circuit City Pension Plan
The Pension Benefit Guaranty Corp. (PBGC) yesterday
assumed responsibility for a plan covering more than 21,000 former
workers and retirees of bankrupt Circuit City Stores Inc.,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The PBGC estimates that Circuit City's retirement plan was 82 percent
funded, with $284.9 million in assets to cover $349 million in benefit
liabilities. Of the estimated $64 million shortfall, the agency would be
responsible for about $62 million, the PBGC said. Retirees will continue
to receive monthly benefit checks without interruption, and other
participants will receive their pensions when they are eligible to
retire, the agency said.
href='http://bankruptcy.law360.com/articles/103595'>Read
more. (Subscription required.)
Financial Services
Single-Regulator Plan
for Banks Now Close
Top Obama administration officials are close to
recommending that Congress create a single regulator to oversee the
entire banking sector, a departure from the hodgepodge of federal
agencies that failed to contain the financial crisis as it ballooned out
of control last year, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The new agency is expected to be a major part
of a proposal that Treasury Secretary Timothy Geithner and White House
officials send to Capitol Hill in a few weeks with the goal of
overhauling supervision of financial markets. Other components under
consideration are an agency to police financial products offered to
consumers and a beefed-up investor-protection regulator. The new bank
regulatory agency could prove controversial because it would consolidate
the Office of the Comptroller of the Currency and the Office of Thrift
Supervision, and strip supervisory powers from the Federal Reserve and
the Federal Deposit Insurance Corp. People involved in the process said
that much is still in flux and could change before a formal
recommendation is made to Congress in mid-June.
href='http://online.wsj.com/article/SB124347634088461159.html#mod=testMod'>Read
more. (Subscription required.)
Citi, SEC Are in Talks
to Settle Asset Probe
Citigroup Inc. is in the early stages of negotiating
with the Securities and Exchange Commission to settle an investigation
into whether it misled investors by not properly disclosing the amount
of troubled mortgage assets it held as the market began to implode in
2007, the
size='3'>Wall Street Journal reported today.
The talks signal that the SEC could be moving toward resolving a number
of civil probes that began in late 2007, when mortgage-related losses
began mounting on the books of banks and Wall Street firms. Among issues
being debated inside the SEC is whether, as a recipient of
government-rescue funds, Citigroup should pay a large penalty in the
case. There is concern at the SEC about the notion of financial firms in
effect using taxpayer money to pay penalties. Citigroup received $45
billion from the government's Troubled Asset Relief Program and plans to
raise an additional $5.5 billion in capital from private
investors.
href='http://online.wsj.com/article/SB124347855330961363.html#mod=testMod'>Read
more. (Subscription required.)
Hedge Fund Is
Dissolving as It Faces Second SEC Inquiry
Arthur J. Samberg told his investors that he had
reached a “painful conclusion” to wind down his $3 billion
investment firm, Pequot Capital Management, because a long-simmering
investigation into insider trading at the fund was heating up once
again, the
size='3'>New York Times reported today. The
initial investigation in 2006 and its trappings — which included a
whistle-blower, a prominent banking executive, the suggestion of a
federal cover-up and a yearlong Congressional inquiry — struck
some on Wall Street as political theater. Even though the Securities and
Exchange Commission dropped its investigation, citing insufficient
evidence, the scandal did not die. Samberg said that he planned to
liquidate his Core Funds, which have about $2 billion of assets under
management. The firm’s other funds, which manage about $1 billion
in assets, will be spun out of Pequot into independent entities.
href='http://www.nytimes.com/2009/05/28/business/28pequot.html?ref=business&pagewanted=print'>Read
more.
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