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June 29, 2007
id='1'>Business Bankruptcy
Filings Continue to Rise
The number of businesses
seeking bankruptcy
protection has risen steadily over the past 15 months, a trend that may
continue if the
liquidity from private equity that has kept some troubled companies
afloat dries up,
Bankruptcy Law360
size='3'>reported yesterday. Statistics released by the Administrative
Office of the U.S.
Courts show that 6,280 businesses filed for bankruptcy in the first
quarter of 2007,
representing more than a 50 percent increase from the similar period in
2006, when there
were 4,086 filings. While BAPCPA is widely credited with reducing the
overall level of
bankruptcy filings the recent lull in corporate bankruptcy filings is
largely attributable
to the availability of money from private equity,
w:st='on'>
face='Times New Roman' size='3'>ABI
size='3'>executive
director Sam
Gerdano
size='3'>said.
size='3'> “There's a lot of scrutiny
of the influence of
private equity now,” Gerdano noted.
size='3'>Ultimately, the
long-term ramifications of private equity on businesses and bankruptcies
will be best
assessed on a company-by-company basis, not by generalizations, Gerdano
said. “Every
business is going to have their own story to tell,” he
said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28137'>Read
more. (Registration required.)
Subprime
Mortgages
id='2'>Bank Regulators Agree
on Subprime Rules
Bank regulators have agreed on
new standards for
subprime mortgage loans and are prepared to release their guidance
today, Reuters reported
yesterday. The guidance will come from the Federal Reserve Board, the
Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corp., the
Office of Thrift
Supervision and National Credit Union Administration. The five
regulators released a draft
of the guidance in early March, and have been consulting both internally
and externally on
how to refine the standards that will guide how depository lenders make
loans to borrowers
with damaged credit. The draft called on mortgage lenders to take more
care when dealing
with less-credit worthy borrowers by assessing whether they can cover
long-term payments and
warning them about hidden costs.
href='http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyid=2007-06-2
9T010225Z_01_WAT007822_RTRUKOC_0_US-USA-SUBPRIME-REGULATION.xml'>Read
more.
id='3'>Commentary: Mortgage
Companies Working to Avert Foreclosures
Though it may seem like
an obvious tactic,
the current subprime mortgage crisis has mortgage companies scrambling
to work out deals to
help as many borrowers as possible stay in their houses as defaults on
home loans mount,
the Wall Street
Journal
size='3'>reported today. However, the effort to hold down foreclosures
threatens to create
clashes between mortgage companies and investors in securities backed by
bundles of home
loans, a $6 trillion market that has been shaken recently by losses on
some of the riskier
types of mortgage bonds. Due to the way these securities are sold, these
efforts can pit
groups of holders against each other. Investors holding mortgage-backed
bonds are watching
nervously because loan modifications may not always be in their best
interest.
href='http://online.wsj.com/article/SB118308383764052523.html?mod=home_whats_news_us'>Read
more. (Registration required.)
Creditors Tussle
over 'Leaked' Business Plan
Bankrupt Dura Automotive
Systems Inc. filed a
motion on Wednesday in opposition to its unsecured creditors' attempts
to compel it to file
a portion of its business plan, contesting the creditors' claims that
since the information
has already been leaked, the filing would cause no additional
harm,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported
yesterday. The leak,
they argued, put
the unsecured creditors at risk and likely prompted a spike in trading.
The unsecured
creditors’ motion said the leak likely occurred after Dura met
with the creditors and
second-lien committees. The company said the motion by the unsecured
creditors’
committee comes a month after the group discussed the issue with Dura.
From the beginning,
Dura has held that releasing the EBIDTA numbers would be detrimental to
the company's
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28202'>Read
more. (Registration required.)
id='5'>Commentary: United
Struggles to Navigate New Course
Seventeen months after
completing a lengthy
trip through bankruptcy court, United Airlines parent UAL Corp. is still
struggling to
navigate its new flight plan, the
size='3'>Wall
Street Journal reported today. The No. 2 U.S.
carrier by traffic
is laboring with a dispirited work force, poor consumer ratings and
mediocre punctuality.
United posted disappointing losses in the past two quarters, when other
airlines were
showing financial resurgence. Last week, an employee error shut down its
flight operations
computer system for two hours, resulting in flight delays and
cancellations. Glenn Tilton,
chairman and chief executive, and his management team say they are
confident the airline is
on the right trajectory, although more work lies ahead. They're
predicting strong
second-quarter profits and insist their strategy of pursuing high-yield
passengers with
segmented product offerings and more international destinations is
sound.
href='http://online.wsj.com/article/SB118307487060552233.html?mod=home_whats_news_us'>Read
more. (Registration required.)
id='6'>Report Questions Pension
Advisers’ Roles
A reported by the Government
Accountability Office
(GAO) found that pension plans may have lower investment gains when they
use consultants who
have undisclosed conflicts of interest, Dow Jones reported yesterday.
The GAO study found
that pension plans using consultants considered by federal regulators to
have undisclosed
conflicts had annual investment returns 1.3 percentage points lower than
those whose
consultants did not have significant conflicts. The GAO said that its
findings were
“consistent with the views of the experts we interviewed
concerning the adverse effect
that complex service-provider-related conflicts of interest can have on
pension
plans.” It cautioned that its findings, “while suggestive,
should not be
considered as proof of causality between consultants and lower rates of
href='http://www.nytimes.com/2007/06/29/business/29pension.html?pagewanted=print'>Read
more.
id='7'>National Century Docs
Temporarily Sealed
A magistrate judge has
ordered all documents
obtained during National Century Financial Enterprises Inc.'s bankruptcy
proceedings limited
to “attorney's eyes only” in multidistrict litigation
involving a scandal dubbed
the Enron of health care,
size='3'>Bankruptcy
Law360 reported yesterday. The interim order,
issued Wednesday by
U.S. Magistrate Judge Mark R. Abel, follows motions filed this week by
JPMorgan Chase &
Co., Bank One NA and former NCFE executives Lance Poulson and Donald
Ayers, seeking to keep
the financial information from becoming public. Abel gave counsel until
July 9 to send a
proposed final protective order, for which a telephone conference will
be held a day later.
The order would clarify what can be designated as confidential. The
litigation includes
several suits naming NCFE's former trustees JPMorgan and Bank One, as
well its affiliates,
for their fiduciary roles with the company, which collapsed after
investors discovered it
had hidden cash and collateral shortfalls.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=28190'>Read
more. (Registration required.)
id='8'>Century-Old Ban Lifted on
Minimum Retail Pricing
Striking down an
antitrust rule nearly a
century old, the Supreme Court ruled on Thursday that it was not
automatically unlawful for
manufacturers and distributors to agree on minimum retail prices,
the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The
decision will give producers significantly more, though not unlimited,
power to dictate
retail prices and to restrict the flexibility of discounters. The court
struck down the
96-year-old rule that resale price maintenance agreements were an
automatic, or
per se
size='3'>, violation of the
Sherman Antitrust Act. In its place, the court instructed judges
considering such agreements
for possible antitrust violations to apply a case-by-case approach,
known as a “rule
of reason,” to assess their impact on competition. The new rule is
considerably more
favorable to defendants. The five justices agreeing with the
nation’s major
manufacturers said that the new rule could in some instances lead to
more competition and
better service. However, the four dissenting justices sided with 37
states and some consumer
groups that abandoning the old rule could result in significantly higher
prices and less
competition for consumer and other goods.
href='http://www.nytimes.com/2007/06/29/washington/29bizcourt.html?_r=1&oref=slogin&
ref=business&pagewanted=print'>Read more.
Transmission Unit
General Motors said
Thursday that it had
agreed to sell the commercial and military business of its Allison
Transmission unit for
about $5.6 billion to a private equity firm, the Carlyle Group, and the
Onex Corporation
of
face='Times New


Roman'
size='3'>Canada,
the Associated Press
reported yesterday. The deal is part of an effort by GM to raise money
and focus on its core
business. GM said in January that it was considering a sale of Allison.
The sale includes
seven manufacturing plants in
w:st='on'>
face='Times New Roman'
size='3'>Indianapolis
size='3'>and its global distribution network and sales offices. GM,
based in
size='3'>Detroit, said the
deal was expected to
close as early as the third quarter pending union and regulatory
approval.
href='http://www.nytimes.com/2007/06/29/business/29auto.html?pagewanted=print'>Read
more.
id='10'>TROUBLED COMPANIES
IN THE NEWS
1000’s of companies lose
money or experience
some form of difficulty each quarter.
The business news articles
below are excerpts taken
from the most recent Weekly Summary of Troubled U.S. Companies and Other
Business News
published by Bastien Financial Publications.
To begin receiving this
news, each morning,
through Bastien Financial Publication’s
size='3'>DAILY e-Summary,
that emails you information on over 70 such companies each morning,
email
steve@creditnews.com your name, company name, address, phone and
fax.
size='3'>We’ll set you up within 24 hours.
The
face='Times New Roman' size='3'>ABI
size='3'>member discount
rate is only $250 for an annual subscription.
size='3'> Indicate
“
face='Times New Roman' size='3'>ABI
size='3'>CODE 27” in
your email.
size='3'>Beazer Homes USA
Inc., an
w:st='on'>
face='Times New Roman' size='3'>Atlanta
size='3'>,
w:st='on'>
size='3'>Ga
size='3'>,. homebuilder, fired its chief accounting officer for
allegedly trying to destroy
internal documents. Both the Federal Bureau of Investigation and
the Department of
Housing and Urban Development have been investigating Beazer for alleged
improper lending
practices. A number of top Beazer executives have departed in recent
months to take jobs at
other companies, but over the winter Beazer fired its general counsel
for behavior including
violation of certain company policies.
size='3'>Capital One
Financial Corp.,
w:st='on'>
w:st='on'>
size='3'>McLean
size='3'>,
size='3'>Va., announced
that it will reduce
its payroll by 2,000 workers (6% of its workforce). The move,
which will result in
pretax charges of $300 million, is aimed at cutting expenses by $700
million in the next two
years. Capital One, which has been expanding its retail banking
business, said that
about half of the job cuts have already been enacted, with the remaining
reductions to be
achieved by not refilling currently open positions.
size='3'>Hanesbrands
Inc., the
w:st='on'>
face='Times New Roman' size='3'>Winston-Salem
size='3'>,
size='3'>N.C. maker of
underwear and other
apparel, announced that it will shutter nine of its sewing and assembly
facilities and
reduce its payroll by 5,300 workers (11% of its workforce). Most of the
layoffs will be at
the firm’s operations in the
w:st='on'>Dominican Republic
size='3'>and
size='3'>Mexico as it moves
to lower-cost
facilities, though some 350 administrative and management positions will
be phased out,
mostly in the
w:st='on'>
size='3'>U.S.
size='3'> The moves will
result in $42 million in restructuring charges. Hanesbrands, which was
spun off last year by
Sara Lee Corp., announced in May that it would close three sewing and
assembly operations
and cut 1,400 jobs.
size='3'>HealthSouth
Corp., the
face='Times New Roman'
size='3'>Birmingham, Al. hospital
operator, will sell its
stake in Chesapeake Lithotripsy Associates LLP, a Maryland-based mobile
provider of
kidney-stone removal services, to United Medical Systems International
AG of
size='3'>Germany
size='3'>for an undisclosed
amount. HealthSouth, which has been focusing on its inpatient care
operations, has
been selling off assets to whittle down its debt, which currently stands
at about $4.8
billion. In the past several months, HealthSouth sold off its outpatient
unit for $245
million, a diagnostics business for $47.5 million, its surgery unit for
$945 million and its
corporate campus for another $60 million.
size='3'>Image Entertainment
Inc., a Chatsworth, Ca. film and video title
distributor, reported
a fourth quarter net loss of more than $3 million. Sales slipped nearly
1%–to $30.2
million. For the year, it lost $12.6 million on an 11% revenue
decline–to $99.8
million.
size='3'>Springs Global US
Inc., a unit of Brazilian-based Springs
Global, will close two
plants as it winds down its manufacturing operations in
w:st='on'>
size='3'>South
Carolina. The
producer of bedding
materials said that the plant closures will result in the loss of 750
jobs.