DealZone

Liveblogging the Chrysler bankruptcy hearing

Reuters’ Emily Chasan will be sending live updates from the Chrysler bankruptcy hearing, scheduled to begin at 11:00 am on Wednesday. Read her updates on DealZone or follow the DealZone Twitter account.

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GM: Before any bankruptcy, the backlash

USA/For weeks, General Motors has been working to prepare its customers, suppliers and employees for the hard landing most analysts see waiting at month end: a bankruptcy filing.

The embattled automaker’s drop dead date is Monday, June 1 when it has $1 billion in bond payments due that it plans to skip.  Five days earlier, on May 27, GM learns how much of some $27 billion in bonds it was able to retire in exchange for its devalued stock.

Analysts and restructuring experts see little chance GM will meet its target of wiping its balance sheet almost clean of bond debt. That would leave one option: a Chapter 11 filing.

Good news for some: bankruptcies head to record year

mall2This week’s mega-bankruptcies by mall operator General Growth Properties and Canadian newsprint company AbitibiBowater, have put 2009 well on its way to being the worst ever for filings, according to a report released Thursday by research firm BankruptcyData.com.

General Growth had pre-bankruptcy assets of $29.6 billion, overtaking chemical maker Lyondell Chemical as the biggest bankruptcy of the year so far. While far behind, AbitibiBowater is no slouch, with $10 billion.

According to BankruptcyData.com, these new entrants in the bankruptcy sweepstakes bring to 79 the number of bankruptcies by public companies this year, with total assets of $145 billion, 69 percent ahead of the pace of 2002, the worst year ever. Measured by the number of filings, 2009 is on pace to best 2001′s record bloodbath of 263 bankruptcies in a year, according to BankruptcyData.com.

General Growth’s collapse

mallThe modern shopping mall is the cathedral of consumer prosperity, so news that U.S. shopping mall owner General Growth Properties sought bankruptcy protection, capping a months-long effort to cope with a $27 billion debt load, is something of a seminal event in the global economic crisis.

The story of the second-largest U.S. mall owner reflects the larger trend in today’s credit-stifled economy: companies that loaded up on debt in better times and have been struggling to refinance so they can cover their payments. Many have succumbed to Chapter 11 after frequent negotiations with lenders, and many more are expected to.

It’s even worse for shopping malls. Commercial-property values have sunk, and the U.S. retail market is hurting. Many analysts say General Growth could survive a lengthy bankruptcy without resorting to a liquidation, but would have to sell off some properties. That could consolidate power in the mall industry if major players like Simon Property Group, Westfield Group and Taubman Centers could cherry-pick some of the assets.

“The He-Man of the recession”

Children's character Postman Pat poses outside Buckingham Palace in central London

As anti-capitalists, environmentalists, anti-war campaigners and others protested in the City of London to mark what they dubbed “Financial Fools’ Day”, the lobby group for Britain’s much-maligned private equity industry spied an opportunity to contrast the mayhem with their own activities.

It’s hard to tell just how far the BVCA‘s metaphorical tongue was in its cheek with this OTT press release, prompted by the protests and the “pre-pack sale” of the owner to the rights of some British kids’ TV characters, including He-Man and Postman Pat (pictured).

Still they insisted it was not an April fool, even as they billed private equity a possible “He-Man of the recession”. With this kind of deft “brand repositioning”, surely it won’t be long before Britons warm to the buyout houses. Full release in all its glory below:

GE Cap tries to repossess jalopy jet

cessna1General Electric Capital Corporation has asked the federal bankruptcy court in Delaware for permission to repossess bankrupt housewares retailer GottschalksCessna Citation jet, which was used as collateral for a $3 million loan because Gottschalks has stopped making its monthly payments, according to court documents filed Thursday.

GE Cap said Gottschalks, which filed for Ch. 11 in January, still owed it $2,304,671 as of March 19, 2009.

GE Cap, which was downgraded this week, estimates the jet could be sold for $1.7 million, but faulted Gottschalks for “numerous material maintenance deficiencies” that have lowered the plane’s value.

Distressed investors say TGIF

Roman Catholics have fish Fridays. Boxing fans have Friday Night Fights. For distressed investors, like Jon Winick, president of Clark Street Capital, there’s Friday night Failure. 
 
“You can count on Friday failures for the next six to twelve months,” Winick said at a distressed investing conference in New York this week. He forecasts bank failures to rise to 200 through next year.
 
There have been 14 bank failures so far this year, according to the Federal Deposit Insurance Corp, with filings every Friday since Jan. 16 after the year end and New Year’s Day holidays.
    
The FDIC seized 25 banks last year. In just the first seven weeks of 2009, the 14 bank failures mean the FDIC is on pace to close more than 100 banks in 2009.
     
Distressed investors say they are expecting a record wave of bankruptcies this year, marking unprecedented opportunity for investors and a feeding frenzy on Fridays. The filings on Fridays are procedural, as the FDIC posts the failures at the end of the week. That allows the declaring bank to give regulators the weekend to sort things out, and it prevents a big run on the bank because branches are closed.
 
Brad Hunter, national director of consulting at Metrostudy, a housing industry research firm, thinks things are just getting started. He said bank takeovers ultimately could exceed 1,000. 
 
“Option ARM loans are coming due, and that will trigger another wave of foreclosure,” he said.

Doom and glee in bankruptcy

Top-class bankruptcy lawyers, vulture investors and credit experts revealed a range of emotions at a bankruptcy conference on Thursday, from doom and gloom to subdued confidence, but some comments bordered on outright glee.

Reflecting on the prospects for distressed investing opportunities this year, Michael Psaros, managing partner at KPS Capital Partners, was blunt.

“We are going to invest an awful lot of money this year,” Psaros said, during a Dow Jones restructuring and turnaround conference in New York. “We’re just very excited about this year and next.”

Rough Cut: Last night at Lehman

Lehman Brothers employees carried out boxes of their possessions on Sunday night in New York as bankruptcy became inevitable. View the rough cut video from Reuters.