Lehman Brothers Holdings Inc. said it wants to soon begin distributing about $ 10.7 billion to its creditors, less than two months after a judge approved the failed investment bank’s historic $ 65 billion repayment plan. Read the Daily Bankruptcy Review story here.
Inner City Media Corp.’s parent company is suing its subsidiary’s lenders, including funds managed by billionaire Ron Burkle’s Yucaipa Cos., seeking to protect 13 trademarks from being counted as collateral for a loan that has ballooned to $ 250 million. Read the Daily Bankruptcy Review Small Cap story here.
(The Daily Bankruptcy Review and DBR Small Cap are daily newsletters with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial to DBR, click here. For DBR SC click here.)
The government agency charged with protecting corporate pensions is ramping up its fight with the parent company of American Airlines, filing liens against many of the airline’s international assets, The Wall Street Journal reports.
Moody’s Investors Service told a congressional subcommittee that the ratings firm didn’t know about MF Global Holdings Ltd.’s huge bets on European sovereign bonds until three days before the downgrade that helped push the company into bankruptcy, WSJ reports.
The Hungarian government stepped in Monday and rescued Malev, the country’s ailing state-owned national airline, from all-but-certain bankruptcy, report our colleagues at WSJ’s Emerging Europe.
Creditors of Saab Cars North America Inc., the U.S. unit of the bankrupt Swedish automaker, are seeking to force the Saab unit into bankruptcy in the U.S., reports Bloomberg.
The founder and top shareholder of privately-owned South Korean retailer E-Land Group is part of a consortium trying to buy the Los Angeles Dodgers out of bankruptcy, says Reuters.
Jon S. Corzine, MF Global’s former leader, has put his 2,400-square-foot apartment in Hoboken, N.J., up for sale, according to DealBook.
If you’re struggling with serious debts contact Debt Free Direct on 0800 298 8836. People with debt problems should not just jump straight to bankruptcy as a way of addressing their issues — an Individual Voluntary Arrangement (IVA) may be better suited to them. The greater public awareness of bankruptcy can lead some to opt for it without considering all the different debt management solutions on offer. Although it may appear attractive to have your debts fully addressed after a year — which is what Bankruptcy could potentially offer, the consequences can last significantly longer. If for example you have surplus income, you may be required to pay into an Income Payments Order for 3 years. The threat of bailiffs and debt collectors can also pressure people into making a decision that isn’t correct for them. Bankruptcy is a serious matter with significant consequences and people should be made fully aware of their options before proceeding. An IVA may be a better debt solution for people owing more than £12000. An IVA has a lesser impact upon your employment and won’t put the family home at risk. Any IVA costs are included within your single monthly payment that is negotiated with your creditors. If you’re struggling with serious debts call Debt Free Direct on 0800 298 8836 for confidential, specialist help. Visit www.debtfreedirect.co.uk
ALBANY — Benjamin M. Lawsky is not the attorney general of New York State.
But one could be forgiven for being confused. Since Gov. Andrew M. Cuomo installed him as superintendent of a new state agency, the Department of Financial Services, which became active in October, Mr. Lawsky has been making headlines normally associated with attorneys general.
He has forced insurers to turn over more than $ 100 million in unpaid death benefits to surviving family members, dispatched rafts of subpoenas to banks, and pressed lenders to curb abusive foreclosure practices.
Critics say the new financial services agency reflects Mr. Cuomo’s expansive view of his executive powers, which he has continually sought to strengthen during his 13 months in office. They also see an attempt by the governor to encroach on the turf of Attorney General Eric T. Schneiderman, a fellow Democrat with whom Mr. Cuomo has had a precarious relationship.
Supporters say it is an auspicious time to have two cops on the financial beat — after all, the agency, which subsumed the existing Banking and Insurance Departments, came into being as the Occupy Wall Street movement was finding its footing and focusing its critique on those very industries.
Mr. Lawsky, in his first few months on the job, is using a playbook that he helped write as a top lieutenant in the attorney general’s office when Mr. Cuomo held that post, gravitating toward headline-grabbing cases while looking for negotiated solutions with industry executives.
“We set our priorities here often simply based on what the big issues are,” Mr. Lawsky, 41, said in an interview. “Does that come from the world of Andrew Cuomo? Yes, because government shouldn’t be a waste of time. Government should be about making a difference in people’s lives.”
For his part, Mr. Schneiderman has not allowed himself to be rolled over.
Last year, he helped beat back an effort by Mr. Cuomo’s office to give Mr. Lawsky and the new agency even more expansive powers that would have cut into the heart of the attorney general’s jurisdiction. The governor’s proposal, which would have allowed Mr. Lawsky to investigate violations of the Martin Act, the sweeping state securities law used by former Gov. Eliot Spitzer and his successors to pursue financial malfeasance, alarmed Wall Street and even academics.
And in a recent interview, John C. Coffee Jr., a law professor at Columbia University, put it this way: “Cuomo made his fame as attorney general, and he sort of treated that jurisdiction as portable and took it with him as governor.”
The Cuomo administration backed off, dropping the Martin Act provision. Nonetheless, the new agency, besides absorbing two major regulatory bodies, has gained a number of new powers. It has broader authority to fight fraud beyond the insurers and state-chartered banks it licenses, and its reach has extended to all manner of financial products, including student lending, credit cards and tax refund anticipation loans.
Eric R. Dinallo, a partner at Debevoise & Plimpton and former state insurance superintendent, likened the new agency to the Securities and Exchange Commission, in the way it combines regulation and enforcement under one roof.
“It’s not common to have a combined regulatory and enforcement function,” he said, adding, “It’s effectively very competitive with the attorney general’s jurisdiction.”
The two agencies are publicly cordial, but behind the scenes they are much like two boxers feeling each other out in an opening round. Already, turfs are overlapping.
Mr. Schneiderman, a liberal-minded attorney general, made a national name for himself in his first year by spurning a settlement that the Obama administration and other attorneys general had been negotiating with the banking industry over foreclosure practices. Then last week, President Obama, vowing to get tougher on Wall Street, reached out to Mr. Schneiderman, naming him co-chairman of a new financial crimes unit to prosecute large-scale financial fraud.
At the same time, Mr. Cuomo, in his State of the State address this month, turned to Mr. Lawsky, not Mr. Schneiderman, on the issue, directing the Department of Financial Services to create a Foreclosure Relief Unit. And Mr. Lawsky has moved on his own to secure deals with smaller lenders on curbing abuses.
Asked whether he supported Mr. Schneiderman’s stance on the national negotiations, Mr. Lawsky was noncommittal.
“We’re not commenting at all on the ongoing negotiations because we are at least tangentially a part of them and could ultimately be called on to sign or not sign,” he said, adding, “We want to see what the final proposal is.”
Danny Kanner, a spokesman for Mr. Schneiderman, said in a statement that the two offices “will continue to work together toward our common purpose of protecting consumers, investors, and the integrity of New York’s global markets.”
“In the aftermath of the financial crisis,” the statement said, “we need more willing hands on deck, not less, to meet that critical objective.”
Mr. Lawsky said he was learning to balance the roles of regulator and enforcer. And during his years as a top aide to Mr. Cuomo, Mr. Lawsky has been known as one of the relatively few administration officials to play nicely with others.
“A lot of people like to paint me as a tough guy because I’m a former prosecutor,” he said, adding: “You are being handed a huge amount of power over people’s lives and their businesses. It’s not something you willy-nilly bang people over the head with.”
Mr. Lawsky grew up in New York and Pittsburgh, received his undergraduate and law degrees from Columbia, and worked under four United States attorneys for the Southern District of New York, prosecuting everything from insider trading to terror and mob cases. He is a runner, but last had time to train for and run a marathon — the Marine Corps Marathon — in 2009. (His time was 3:40:17.)
Perhaps his most notable early achievement has been putting pressure on health insurers to make public proposed rate increases. But his office also pointed to early relationships he has formed with both industry executives and consumer groups.
Theodore A. Mathas, chief executive of the New York Life Insurance Company, said, “Ben is approachable, he’s a good listener and he’s quickly grasped a lot of complex things we’ve thrown at him.” Michael P. Smith, president of the New York Bankers Association, said, “We are very pleased with his performance.”
On the consumer advocacy side, Charles Bell, programs director for Consumers Union, said, “We’ve been pleased that they have reached out,” adding that a group of consumer advocates was meeting with the agency monthly on a variety of topics.
Mr. Lawsky does know how to answer the tough questions. During a recent online question-and-answer session with the public, the first questioner asked: “Mr. Lawsky, are you copying the governor’s hairstyle? It seems you have a similar look.” He replied: “That never occurred to me. It’s very flattering. Thanks.”
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Ed answers questions about bankruptcy options Video Rating: 0 / 5
I get all sorts of comments on this blog, not to mention inquiries from prospective clients via email. This one, which I’ll paraphrase, really caught my attention, as it presents a situation I suspect a lot of Florida homeowners are facing. Here’s the question, and my response:
Question: My wife and I have always paid our mortgage, but with the economy as it is we’ve struggled to do so recently. Our house is about $ 150,000 underwater, and for the past year or so, we’ve borrowed money from my parents to make the mortgage payments. Unfortunately, my parents can no longer afford to lend us any more money, so we’re trying to decide what to do.
I’ve been asking the bank for a loan modification for many months. They keep telling me “we’ll get back to you,” but then I never hear anything. Most recently, the bank began insisting that my wife disclose her financial information as well. I argued with them about this, since my wife wasn’t a borrower and did not sign the Note, but they insisted that the only way I would be considered for a loan modification was if my wife submitted her financial information as well.
What should I do? My wife doesn’t want to disclose anything, but if she doesn’t, and we don’t get a modification, then we can’t continue to keep making our mortgage payments for much longer.
Answer: First off, this might sound backwards to you, but I’m glad your parents are no longer giving/lending you money for your monthly mortgage payments. I can understand the logic behind their doing so, don’t get me wrong, and I’m certainly not trying to criticize you or them. However, as I’ve explained on many occasions, including here and here, depleting a 401(k), IRA, or savings account to make monthly mortgage payments on a house you just can’t afford is almost never a good idea.
Please read this post, which I wrote in July, 2010. As I explained there in detail, it’s almost never a good idea to deplete your savings to make monthly mortgage payments, as all that will happen is you’ll run out of savings and then still be facing foreclosure anyway. If you realize you can’t afford to continue making monthly mortgage payments indefinitely into the future, isn’t it better to stop making those payments now, keep whatever money you have in your own pocket, and brace yourself for the impending foreclosure lawsuit, rather than spend all of your savings, then face foreclosure with no money left in your pocket?
The fact that your parents were lending to you, as opposed to you depleting your own savings, doesn’t change my view. In fact, it might make it worse. Your parents are obviously older than you, so they’ll have fewer years in the work force (if any) to recover, and I suspect from your email that you’ve depleted your own savings, too. Nonetheless, you’re still in the same situation you would have been in had you and your parents kept those monies in your own pockets – facing foreclosure.
It’s critical for you, your parents, and all homeowners to realize that any money in your 401(k) or IRA can never be taken by the bank (i.e. to collect on a deficiency judgment) – the only way you’ll ever lose that money is if you take it out voluntarily. Even if you get foreclosed, you’ll still get to keep your 401(k) and IRA monies. Even if you have to file bankruptcy, you’ll still get to keep your 401(k) and IRA monies. Hence, I can hardly imagine a circumstance where it makes sense to dip into these accounts to make mortgage payments. I suppose a temporary reduction in income could justify doing so for a short period of time, but that’s the catch – lots of people think/hope their reduction in income is temporary, but before they know it, they’ve made a year of mortgage payments from their IRA or 401(k) with no end in sight.
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Finally, you can have your Friendly’s ice cream—and eat your Burger King fries, too.
The company known for its Fribbles and sundaes is on to a new venture after emerging from bankruptcy protection earlier this month. With 100 of its full-scale eateries shuttered during the Chapter 11 proceedings, it’s trying on a new format for size: a 200-square-foot counter space in a New Jersey burger king, according to the Boston Globe.
The location, known as “Friendly’s Scoop,” is the brainchild of Joe Anghelone, a Burger King franchisee hoping customers might want a sweet treat to go with that Whopper. So far, so good, Anghelone told the newspaper, noting that sales of the ice cream now account for 18% of total sales—beating his projections and giving him hope that the venture could bring in even more money when the weather warms.
Jealous that the Garden State gets to enjoy the two brands’ food in seamless harmony? You might soon be able to indulge in the hybrid concept; plans are in the works for 10 more of the shops over the next year, Friendly’s said.
As the company does away with many of its traditional spots—it closed 37 earlier this month as its bankruptcy proceedings drew to a close, leaving it with about 380 locations total—it’s looking for ways to breathe new life into the chain.
“Friendly’s Scoop” could potentially be the way forward. The start-up costs for “Friendly’s Scoop” are much lower than the restaurant’s full-service locations, which are usually around 2,500 square feet, and they’re a way to reach new customers, Ron Paul, president of Chicago market research firm Technomic Inc., told the Globe.
Of course, Friendly’s isn’t the first company to stumble upon the concept of fast-food marriages. Baskin Robbins can frequently be spotted shacking up with Dunkin’ Donuts at their joint locations and Yum! Brands Taco Bell, KFC and Pizza Hut brands often get cozy at combo spots.
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RECEIVERS SHOULD BE APPOINTED TO FORCE DISGORGEMENT OF PENSION MONEY
Editor’s Note: It isn’t just the Banks that are covering up the fact that those “assets” on their balance sheet are not assets and never were owned by the Banks. The underlying threat here is that the loss is going to hit pension funds and other “investors” in RMBS whose money was used to fund mortgages (after the investment banks took a huge bite out of the pool of funds as “trading profits”). Pensioners are already getting notices of cutbacks and even elimination of the pension benefits.
This is all brought to you by the makers of such accounting tricks like “off balance sheet transactions.” Try telling your boss that the money you stole was an off balance sheet transaction and see if that covers it — or if you end up a guest of the state or federal government in prison.
RMBS Losses in Limbo: As Bad As They Seem, The Reality May Be Much Worse
Since the financial crisis in 2007, residential mortgage-backed securities have been hit with high levels of borrower defaults, realized losses and credit rating downgrades. Realized losses declared on private residential mortgage-backed securities (RMBS), already much higher than original rating agency and investor estimates, are projected to rise substantially in the coming months, according to a recent analysis by R&R Consulting, a credit rating and valuation firm in New York.
On the securities performing at December 2011, a universe of approximately $ 1.42 trillion, R&R estimate the amount of additional losses likely to materialize is $ 300 billion, with one-third concentrated in ten arranger names, including Countrywide, Morgan Stanley and JP Morgan. About 17,000 tranches, or 34% of the universe analyzed by R&R, may lose up to 83% of their remaining principal.
In addition, R&R estimates that approximately $ 175 billion of losses already incurred on the loans have not yet been allocated to the bonds in the related transactions. Failure to allocate realized loan losses could distort the valuation of related RMBS tranches.
“The light at the end of the tunnel is still a long way off for RMBS,” said Iuliia Palamar, head of ABS research for R&R. “We are now drilling down into the analysis to identify the individual transactions by vintage, servicer and other important issues with respect to these losses.”
Unallocated Losses by Security Vintage
In the course of conducting valuations on RMBS, the R&R analytics team discovered widespread, serious, repeated data discrepancies. Ann Rutledge, a founding principal, asked the team to measure the magnitude of the discrepancy on the RMBS universe. To do this, R&R subtracted cumulative losses allocated to the tranches from unallocated, expected losses, calculated as the sum of defaults, bankruptcies, foreclosures and REOs minus recoveries. “The results were very disturbing: $ 175 billion of unallocated current losses and $ 300 billion of imminent losses,” Rutledge said.
Rutledge commented that she was not clear why these losses are being held in limbo instead of being properly allocated, since the data used by R&R in the calculations were included in the servicer reports. She cautioned, “Investors should be concerned about receiving inaccurate bond performance information and paying unnecessary fees.”
The implication for bond holders in RMBS is significant with respect to both estimates. Subordinated securities in the RMBS with probable future losses ought to be written down by such losses but instead may be continuing to receive interest owed to more senior tranches. It could also mean that servicers are earning fees against loans that have already been liquidated, which also reduces the amount of cash to pay senior bond holders. For example, in one month, servicers could generate $ 75 million or more in inappropriate fees against the $ 175 billion in unallocated losses.
Rutledge also noted that R&R has observed a steady increase in amount of limbo losses, raising the prospect that a significant amount of funds are still being misallocated for bond investors.
“The system for MBS is still fundamentally broken,” she said. “All the loose ends need to be identified and knit together into a well-functioning system before investors can feel comfortable investing in RMBS once more.”
R&R Consulting is a credit rating and valuation boutique. Founded in 2000, R&R has a patented process for obtaining current intrinsic valuations on structured securities in the secondary market.
