The ruling by Judge Allan Gropper paves the way for the No. 5 U.S. airline to solicit approval from its creditors. The airline intends to exit bankruptcy by the end of June as a streamlined carrier with an equity value of $7 billion.
"Subject to the revisions ... I find the disclosure statement provides adequate information and should be approved," Gropper said of the plan, which is known as a disclosure statement.
Gropper requested that Northwest (Charts) add to its statement certain revisions related to worker compensation.
Flying High
Among the revisions is an agreement by Northwest to honor a bankruptcy claim by workers who hold more than $275 million in special shares awarded in 1993.
The airline also gave up a management compensation claim and offered to pay about 4,000 nonunion workers $77.4 million upon exiting bankruptcy.
Northwest left open the amount of stock it would issue to compensate managers after bankruptcy, but said it would submit information on management equity compensation by Friday.
The airline offered the concessions in hopes of overcoming objections by unions representing its pilots and flight attendants as well as a group of equity investors. Those groups said Northwest's disclosure statement was inadequate in that it featured no details on management equity compensation.
"To the best of our ability, we have attempted to address the objections," Bruce Zirinsky, an attorney for Northwest, told the court during the hearing.
The question of equity compensation leaves a question mark over the plan, because that compensation dilutes the payment unsecured creditors may receive for their claims.
According to the terms of plan approved on Monday, Northwest will give holders of general unsecured claims stock valued at up to 83 percent of allowed claims.
The disclosure statement still needs approval from a majority of the carrier's creditors. The official committee of unsecured creditors, which acts in the interest of all creditors, has said it supports the plan.
United CEO: Airline deals still possible
The airline filed for Chapter 11 protection from creditors in 2005 alongside Delta Air Lines (Charts), which also plans to leave bankruptcy this year. Northwest intends to exit bankruptcy with its costs down $2.5 billion a year and its debt decreased by $4.2 billion.
At a similar hearing for Delta in February, the carrier had resolved all outstanding objections before appearing in court.
The airline industry is in recovery mode after a five-year slump triggered by terrorism concerns and low-fare competition. Major airlines have sought to improve their competitive positions by slashing costs.
Wednesday, April 4, 2007
Zell wins Tribune in bid to revive a media empire
Nearly a year ago, William Stinehart, a Tribune Co. director and the lawyer for its largest shareholder, stormed out of the company's boardroom and slammed the door, according to two people who were there.
The company's share price was sluggish, the newspaper industry's prospects were dim, and the Chandler family, his client, wanted action. But the company's management and its board rebuffed the family's recommendations. Mr. Stinehart began to agitate for change, writing a public letter demanding something more than the stock buyback that had been proposed.
What he got was one of the most wrenching auctions in the history of newspapers -- a seemingly endless process that featured tepid buyers, unhappy employees and angry investors. As the process dragged on, the landscape shifted constantly, and the entire industry lurched into decline as fears of Internet pressure on advertising and circulation mounted. In the end, the Chandlers had to settle for less than they had hoped to receive.
Yesterday, the Chicago Tribune, Los Angeles Times, several other newspapers and 23 television stations fell into the hands of an unlikely newspaper baron, iconoclastic real-estate magnate Sam Zell, whose bid had come at the eleventh hour. Mr. Zell's plan suggests that he has some degree of confidence in the beleaguered newspaper business. He has told people he sees promise in the company's Internet assets. But the deal leaves many unanswered questions about the future of Tribune.
"It's generally not wise to sell your house when the market is going to hell in a handbasket," says Barry L. Lucas, an analyst with Gabelli & Co., whose parent company, Gamco Investors Inc., owns shares in Tribune Co. "I certainly hope no one else is thinking of doing what Tribune has done. It's a mess."
Complex Deal
Early yesterday, following a weekend of negotiations, the company's board accepted a revised $34-dollar-a-share proposal from Mr. Zell to take the company private. The complex deal is structured around an employee stock-ownership plan, or ESOP. When it is completed, most of the company's shares will be held by Tribune employees. Although he has no background in journalism, Mr. Zell will become chairman of a media company that will be carrying a heavy debt load, which will force its new owners to face tough questions.
The company said yesterday morning that Mr. Zell will invest $315 million in the deal in a two-step process. In the first step, Tribune will stage a tender offer, at $34 a share, for a bit more than half of the company's shares. To fund the offer, the company will use $250 million of the $315 million pledged by Mr. Zell, plus additional borrowed money. It will return $4.2 billion to shareholders.
If the deal is approved by regulators, a second step will follow: the ESOP will buy the rest of the shares at $34 a share and Zell will put in $65 million, the rest of his pledge. The ESOP then will hold all of Tribune's remaining stock outstanding, and Mr. Zell will hold a subordinated note and a warrant entitling him to acquire 40% of the common stock for a price initially set at $500 million. The deal values the company at roughly $8.2 billion.
Mr. Zell will get a seat on the company's board and will be able to appoint one other member. If the deal is approved, he will become chairman. The board will have five independent directors, a majority. Dennis FitzSimons, the company's current chairman and chief executive, will remain on the board and continue as CEO. Although Mr. Zell will not control a majority of the stock, he is expected to exert considerable influence over decision-making.
The deal will spell the end to the Chandler family's involvement in Tribune, ending a period of open warfare between the family and the company. Yesterday, Mr. FitzSimons referred to the letter in which the Chandlers originally attacked the company's board, which was filed with the Securities and Exchange Commission, as "the most bogus filing of all time."
A spokesman for the Chandler family trust said: "We are pleased with the outcome" of the auction process.
Tribune kept open the possibility that a rival bidder might jump in with a higher bid. The company set a relatively low "breakup fee" of $25 million, which it would have to pay Mr. Zell if it abandoned yesterday's deal. Among those who could try to extend the auction are Los Angeles billionaires Ron Burkle and Eli Broad, who tried to outbid Mr. Zell late in the auction.
How Mr. Zell will be received remains to be seen. He has said he doesn't intend to break up the company, but Tribune said yesterday it will sell off the Chicago Cubs after the completion of the current baseball season. One person who has spoken to Mr. Zell about his plans says he is likely to seek further budget cuts, a move that will likely be unpopular with staff, particularly at the Los Angeles Times, where the editor and publisher both stepped down last year to protest budget cuts ordered by Tribune's headquarters. (See related articles on the Cubs and the ESOP.)
Billionaire entertainment executive David Geffen, who had earlier made an offer for the L.A. Times, said yesterday he was still interested in the paper. "I hope to meet with Sam Zell sometime in the future," he said.
Mr. FitzSimons told Tribune employees yesterday in a town hall meeting at the company's headquarters that Mr. Zell "has identified...assets that he views as undervalued, and that's his track record as a contrarian investor. He sees things, he's been successful in identifying assets that others think are out of favor..."
The newspaper industry certainly fits into that category. Last summer, a dramatic decline in newspaper advertising revenue forced many newspaper executives to re-evaluate their businesses. A drop-off in print ad revenue has plagued Tribune's biggest markets -- Chicago, Los Angeles and New York -- undermining the rationale for its 2000 merger with Times Mirror Co. That merger was designed to bring newspapers and TV stations together in large markets to amplify ad revenue. The strategy has proved disastrous for Tribune, and the merger has turned into a huge disappointment for the company and its investors.
A Quiet Offer
Mr. Zell, 65 years old, made a quiet offer for Tribune last October, when the company was having trouble scaring up bids. Private-equity firms had been looking and walking away. Potential buyers, including Los Angeles billionaires intrigued by the L.A. Times, only expressed interest in parts of the company, or were making lowball offers. The company was cobbling together a "self-help" deal to recapitalize the company and to spin off its TV stations, which would have paid a dividend to the Chandlers and other shareholders.
Mr. Zell got sidetracked on another deal. In November, he announced he would sell Equity Office Properties Trust, a public real-estate investment trust he headed. A bidding war broke out, and Blackstone Group eventually agreed to pay about $23 billion, excluding debt. By some measures, it was the largest leveraged buyout in U.S. history. Mr. Zell, chairman of Equity Office Properties and its largest individual shareholder, walked away with $900 million.
On Feb. 7, the day shareholders approved that deal, he discussed his interest in the Tribune. He provided no details, saying only that he felt the business was undervalued and had prospects for recovery. Civic pride may have played a part. Mr. Zell is a longtime Chicagoan whose office features a bronze cast of Michael Jordan's hands. He is a part owner of the Chicago White Sox, one reason why Tribune is selling the crosstown Cubs. (Mr. Zell wouldn't be permitted to have stakes in both).
In some ways, Mr. Zell is cut from different cloth than the buttoned-down culture of Tribune, which is closely aligned with the Chicago establishment. He prefers blue jeans to suits and is a longtime motorcycle rider. The son of a Jewish grain trader who escaped Poland as the Nazis were preparing to invade, Mr. Zell broke into the real-estate business investing in apartments with his fraternity brother from the University of Michigan. He has called himself the Grave Dancer, in reference to his affinity for buying distressed properties on the cheap. Over the years, he has also invested in a railroad-car company, a cruise line, a bicycle manufacturer and a fertilizer company, among others.
Many of his deals have been successful, but he has had his share of missteps. He was unable to turn around the Schwinn Bicycle Co. in the mid-1990s, and in 2001, American Classic Voyages Co. sought Chapter 11 bankruptcy protection in the wake of a deep dip in tourism after the Sept. 11 terrorist attacks.
Equity Office Properties, the enormous real-estate company he assembled and ran, suffered from some operational problems. Although it dwarfed other publicly traded office companies in scale, it often lagged behind them in performance, with one analyst calling it a "perennial disappointment."
Deteriorating Conditions
After the Equity Office sale was complete, Mr. Zell turned back to Tribune. Conditions in the newspaper industry were deteriorating fast, and the auction wasn't going well. The company's revenue numbers came in lower than anticipated, forcing management to downgrade its internal estimates for the full year.
Messrs. Broad and Burkle already had submitted a bid valued at $34 a share. After the company's internal revenue estimates were lowered, an adviser to the two investors informed a representative of the Tribune's board that they were dropping the value of their proposal to $27 a share. If the company was interested in that new offer, the adviser said, the Broad-Burkle team would put it in writing. That never happened, this person said.
Mr. Zell came in with his own offer.
At that time, the Tribune's board was working on a restructuring it could do on its own: It would borrow money and pay shareholders a big dividend. Then a company-related charity, the McCormick Tribune Foundation, which owns roughly 14% of Tribune, would buy out roughly half of the Chandler family's stake, and the three Chandler board members -- Mr. Stinehart, Jeffrey Chandler and Roger Goodan -- would step down, according to a person familiar with the matter. "The idea was to have peace in the valley," says one person familiar with the negotiations.
But the economics of that idea were problematic. In early March, the company began re-evaluating that plan. The declining performance of some of Tribune's properties made the special committee overseeing the auction uncomfortable with the proposed debt load, according to people familiar with the matter. The plan's proposed dividend had been shaved from more than $20 a share to roughly $18, these people say.
The company's management and the special committee's advisers were uncomfortable with the level of debt in Mr. Zell's proposal as well. By March 9, negotiations with Mr. Zell were at a standstill, according to one person familiar with the talks.
Mr. Zell met Mr. FitzSimons for breakfast on March 13 to discuss his proposal, according to people familiar with the matter. Days earlier, Mr. FitzSimons had met with publishers from some of Tribune's newspapers, who expressed concerns about the trajectory of the business.
After the breakfast, Mr. FitzSimons and the special committee's advisers continued pushing hard for a self-help deal. But later that week, on March 15, William Osborne, Tribune's lead independent director, called Mr. Zell to tell him that he wanted to get a deal with him back on track, according to a person familiar with the call.
Mr. Zell called him back the following day and said: "We aren't going to do anything until you tell us it is worth our time," according to a person familiar with his thinking. Mr. Osborne assured him the company was seriously considering his offer.
The two sides continued talking. The team of advisers included Merrill Lynch & Co. and Citigroup Inc. for Tribune; Morgan Stanley for the special committee; Duff & Phelps for the ESOP trustee, and J.P. Morgan Chase & Co. for Mr. Zell.
By March 21, Tribune presented the outlines of Mr. Zell's proposal to ratings agencies, which eventually said they would grant a double-B-minus rating to the company. That gave the company the push it needed to move forward with Mr. Zell, who had by this point raised the value of his offer to above $33 a share.
At the last minute, Messrs. Burkle and Broad resurfaced, complaining that they hadn't been given adequate information to make a sufficient bid. They said they would be happy to make an offer for Tribune at $34 a share, but needed more information.
A weekend of fevered negotiations followed. Mr. Zell, working from his weekend home in Malibu, agreed to raise the equity in his offer to $315 million, from $225 million, which allowed him to match the Broad-Burkle offer.
The full board of directors, including three representatives from the Chandler family and Mr. FitzSimons, convened via conference call on Sunday night, at 10:30 Chicago time, to discuss the deal. The board approved it shortly before 11 p.m.
The company's share price was sluggish, the newspaper industry's prospects were dim, and the Chandler family, his client, wanted action. But the company's management and its board rebuffed the family's recommendations. Mr. Stinehart began to agitate for change, writing a public letter demanding something more than the stock buyback that had been proposed.
What he got was one of the most wrenching auctions in the history of newspapers -- a seemingly endless process that featured tepid buyers, unhappy employees and angry investors. As the process dragged on, the landscape shifted constantly, and the entire industry lurched into decline as fears of Internet pressure on advertising and circulation mounted. In the end, the Chandlers had to settle for less than they had hoped to receive.
Yesterday, the Chicago Tribune, Los Angeles Times, several other newspapers and 23 television stations fell into the hands of an unlikely newspaper baron, iconoclastic real-estate magnate Sam Zell, whose bid had come at the eleventh hour. Mr. Zell's plan suggests that he has some degree of confidence in the beleaguered newspaper business. He has told people he sees promise in the company's Internet assets. But the deal leaves many unanswered questions about the future of Tribune.
"It's generally not wise to sell your house when the market is going to hell in a handbasket," says Barry L. Lucas, an analyst with Gabelli & Co., whose parent company, Gamco Investors Inc., owns shares in Tribune Co. "I certainly hope no one else is thinking of doing what Tribune has done. It's a mess."
Complex Deal
Early yesterday, following a weekend of negotiations, the company's board accepted a revised $34-dollar-a-share proposal from Mr. Zell to take the company private. The complex deal is structured around an employee stock-ownership plan, or ESOP. When it is completed, most of the company's shares will be held by Tribune employees. Although he has no background in journalism, Mr. Zell will become chairman of a media company that will be carrying a heavy debt load, which will force its new owners to face tough questions.
The company said yesterday morning that Mr. Zell will invest $315 million in the deal in a two-step process. In the first step, Tribune will stage a tender offer, at $34 a share, for a bit more than half of the company's shares. To fund the offer, the company will use $250 million of the $315 million pledged by Mr. Zell, plus additional borrowed money. It will return $4.2 billion to shareholders.
If the deal is approved by regulators, a second step will follow: the ESOP will buy the rest of the shares at $34 a share and Zell will put in $65 million, the rest of his pledge. The ESOP then will hold all of Tribune's remaining stock outstanding, and Mr. Zell will hold a subordinated note and a warrant entitling him to acquire 40% of the common stock for a price initially set at $500 million. The deal values the company at roughly $8.2 billion.
Mr. Zell will get a seat on the company's board and will be able to appoint one other member. If the deal is approved, he will become chairman. The board will have five independent directors, a majority. Dennis FitzSimons, the company's current chairman and chief executive, will remain on the board and continue as CEO. Although Mr. Zell will not control a majority of the stock, he is expected to exert considerable influence over decision-making.
The deal will spell the end to the Chandler family's involvement in Tribune, ending a period of open warfare between the family and the company. Yesterday, Mr. FitzSimons referred to the letter in which the Chandlers originally attacked the company's board, which was filed with the Securities and Exchange Commission, as "the most bogus filing of all time."
A spokesman for the Chandler family trust said: "We are pleased with the outcome" of the auction process.
Tribune kept open the possibility that a rival bidder might jump in with a higher bid. The company set a relatively low "breakup fee" of $25 million, which it would have to pay Mr. Zell if it abandoned yesterday's deal. Among those who could try to extend the auction are Los Angeles billionaires Ron Burkle and Eli Broad, who tried to outbid Mr. Zell late in the auction.
How Mr. Zell will be received remains to be seen. He has said he doesn't intend to break up the company, but Tribune said yesterday it will sell off the Chicago Cubs after the completion of the current baseball season. One person who has spoken to Mr. Zell about his plans says he is likely to seek further budget cuts, a move that will likely be unpopular with staff, particularly at the Los Angeles Times, where the editor and publisher both stepped down last year to protest budget cuts ordered by Tribune's headquarters. (See related articles on the Cubs and the ESOP.)
Billionaire entertainment executive David Geffen, who had earlier made an offer for the L.A. Times, said yesterday he was still interested in the paper. "I hope to meet with Sam Zell sometime in the future," he said.
Mr. FitzSimons told Tribune employees yesterday in a town hall meeting at the company's headquarters that Mr. Zell "has identified...assets that he views as undervalued, and that's his track record as a contrarian investor. He sees things, he's been successful in identifying assets that others think are out of favor..."
The newspaper industry certainly fits into that category. Last summer, a dramatic decline in newspaper advertising revenue forced many newspaper executives to re-evaluate their businesses. A drop-off in print ad revenue has plagued Tribune's biggest markets -- Chicago, Los Angeles and New York -- undermining the rationale for its 2000 merger with Times Mirror Co. That merger was designed to bring newspapers and TV stations together in large markets to amplify ad revenue. The strategy has proved disastrous for Tribune, and the merger has turned into a huge disappointment for the company and its investors.
A Quiet Offer
Mr. Zell, 65 years old, made a quiet offer for Tribune last October, when the company was having trouble scaring up bids. Private-equity firms had been looking and walking away. Potential buyers, including Los Angeles billionaires intrigued by the L.A. Times, only expressed interest in parts of the company, or were making lowball offers. The company was cobbling together a "self-help" deal to recapitalize the company and to spin off its TV stations, which would have paid a dividend to the Chandlers and other shareholders.
Mr. Zell got sidetracked on another deal. In November, he announced he would sell Equity Office Properties Trust, a public real-estate investment trust he headed. A bidding war broke out, and Blackstone Group eventually agreed to pay about $23 billion, excluding debt. By some measures, it was the largest leveraged buyout in U.S. history. Mr. Zell, chairman of Equity Office Properties and its largest individual shareholder, walked away with $900 million.
On Feb. 7, the day shareholders approved that deal, he discussed his interest in the Tribune. He provided no details, saying only that he felt the business was undervalued and had prospects for recovery. Civic pride may have played a part. Mr. Zell is a longtime Chicagoan whose office features a bronze cast of Michael Jordan's hands. He is a part owner of the Chicago White Sox, one reason why Tribune is selling the crosstown Cubs. (Mr. Zell wouldn't be permitted to have stakes in both).
In some ways, Mr. Zell is cut from different cloth than the buttoned-down culture of Tribune, which is closely aligned with the Chicago establishment. He prefers blue jeans to suits and is a longtime motorcycle rider. The son of a Jewish grain trader who escaped Poland as the Nazis were preparing to invade, Mr. Zell broke into the real-estate business investing in apartments with his fraternity brother from the University of Michigan. He has called himself the Grave Dancer, in reference to his affinity for buying distressed properties on the cheap. Over the years, he has also invested in a railroad-car company, a cruise line, a bicycle manufacturer and a fertilizer company, among others.
Many of his deals have been successful, but he has had his share of missteps. He was unable to turn around the Schwinn Bicycle Co. in the mid-1990s, and in 2001, American Classic Voyages Co. sought Chapter 11 bankruptcy protection in the wake of a deep dip in tourism after the Sept. 11 terrorist attacks.
Equity Office Properties, the enormous real-estate company he assembled and ran, suffered from some operational problems. Although it dwarfed other publicly traded office companies in scale, it often lagged behind them in performance, with one analyst calling it a "perennial disappointment."
Deteriorating Conditions
After the Equity Office sale was complete, Mr. Zell turned back to Tribune. Conditions in the newspaper industry were deteriorating fast, and the auction wasn't going well. The company's revenue numbers came in lower than anticipated, forcing management to downgrade its internal estimates for the full year.
Messrs. Broad and Burkle already had submitted a bid valued at $34 a share. After the company's internal revenue estimates were lowered, an adviser to the two investors informed a representative of the Tribune's board that they were dropping the value of their proposal to $27 a share. If the company was interested in that new offer, the adviser said, the Broad-Burkle team would put it in writing. That never happened, this person said.
Mr. Zell came in with his own offer.
At that time, the Tribune's board was working on a restructuring it could do on its own: It would borrow money and pay shareholders a big dividend. Then a company-related charity, the McCormick Tribune Foundation, which owns roughly 14% of Tribune, would buy out roughly half of the Chandler family's stake, and the three Chandler board members -- Mr. Stinehart, Jeffrey Chandler and Roger Goodan -- would step down, according to a person familiar with the matter. "The idea was to have peace in the valley," says one person familiar with the negotiations.
But the economics of that idea were problematic. In early March, the company began re-evaluating that plan. The declining performance of some of Tribune's properties made the special committee overseeing the auction uncomfortable with the proposed debt load, according to people familiar with the matter. The plan's proposed dividend had been shaved from more than $20 a share to roughly $18, these people say.
The company's management and the special committee's advisers were uncomfortable with the level of debt in Mr. Zell's proposal as well. By March 9, negotiations with Mr. Zell were at a standstill, according to one person familiar with the talks.
Mr. Zell met Mr. FitzSimons for breakfast on March 13 to discuss his proposal, according to people familiar with the matter. Days earlier, Mr. FitzSimons had met with publishers from some of Tribune's newspapers, who expressed concerns about the trajectory of the business.
After the breakfast, Mr. FitzSimons and the special committee's advisers continued pushing hard for a self-help deal. But later that week, on March 15, William Osborne, Tribune's lead independent director, called Mr. Zell to tell him that he wanted to get a deal with him back on track, according to a person familiar with the call.
Mr. Zell called him back the following day and said: "We aren't going to do anything until you tell us it is worth our time," according to a person familiar with his thinking. Mr. Osborne assured him the company was seriously considering his offer.
The two sides continued talking. The team of advisers included Merrill Lynch & Co. and Citigroup Inc. for Tribune; Morgan Stanley for the special committee; Duff & Phelps for the ESOP trustee, and J.P. Morgan Chase & Co. for Mr. Zell.
By March 21, Tribune presented the outlines of Mr. Zell's proposal to ratings agencies, which eventually said they would grant a double-B-minus rating to the company. That gave the company the push it needed to move forward with Mr. Zell, who had by this point raised the value of his offer to above $33 a share.
At the last minute, Messrs. Burkle and Broad resurfaced, complaining that they hadn't been given adequate information to make a sufficient bid. They said they would be happy to make an offer for Tribune at $34 a share, but needed more information.
A weekend of fevered negotiations followed. Mr. Zell, working from his weekend home in Malibu, agreed to raise the equity in his offer to $315 million, from $225 million, which allowed him to match the Broad-Burkle offer.
The full board of directors, including three representatives from the Chandler family and Mr. FitzSimons, convened via conference call on Sunday night, at 10:30 Chicago time, to discuss the deal. The board approved it shortly before 11 p.m.
Mercer chair endowed in Drake's name
A professorship has been established at Mercer University's Walter F. George School of Law in the name of Newnan resident W. Homer Drake Jr.
Drake is a judge with the U. S. Bankruptcy Court. The SBLI/W. Homer Drake, Jr. Endowed Chair in Bankruptcy Law has been established through gifts from the Southeastern Bankruptcy Law Institute Inc. and from Drake.
The establishment of the endowed chair was formally announced Feb. 22 at a recognition dinner in Atlanta. Drake, a native of Colquitt who grew up in Newnan, is a Mercer alumnus and trustee.
"We are thrilled that the Southeastern Bankruptcy Law Institute has chosen to establish the SBLI/Homer Drake Endowed Chair at Mercer," said Law School Dean Daisy Floyd. "Judge Drake has been for many years a national force in the area of bankruptcy law, and the endowed chair in his honor will greatly supplement our teaching resources in this increasingly important area of the law."
A United States bankruptcy judge for the Northern District of Georgia, Drake served as chief judge from 1968-1976. He is a former partner in the Atlanta law firm of Swift, Currie, McGhee & Hiers. He is a founder of, and adviser to, the SBLI, a former member of the Judicial Conference of the United States' Committee on the Administration of the Bankruptcy System and a fellow of the American College of Bankruptcy.
Drake also is a past president of the National Conference of Bankruptcy Judges.
A loyal alumnus, Judge Drake is a past president of the Mercer Law School alumni association and past chairman of the Law School Board of Visitors. He currently serves on the Mercer Board of Trustees. The University honored him in 2002 with the Monroe F. Swilley Award for Christian Statesmanship and in 2003 honored him with the Mercer Law School Outstanding Alumnus Award.
He has served as an adjunct professor of law at Emory University School of Law and the University of Georgia School of Law.
Drake is the author of "Bankruptcy Practice for the General Practitioner." With Christopher S. Strickland, he wrote "Chapter 11 Reorganizations," and Drake and Jeffrey W. Morris wrote "Chapter 13 Practice and Procedure." Drake also is the author of numerous articles.
Drake was recipient of the first David W. Pollard Achievement Award presented in 1994 by the Atlanta Bar Association for contributions to bankruptcy law and practice.
He earned his bachelor of arts degree from Mercer in 1954 and his law degree in 1956. After finishing law school, Drake served in the U.S. Army Judge Advocate General Corps for three years. He was associated with the Atlanta firm of Arnall, Golden and Gregory for two years and was a clerk for U.S. District Court Judge Lewis R. Morgan for three years.
Drake's father, W. Homer Drake Sr., was superintendent of the Newnan City Schools for a number of years. In 2005, the judge and his wife established the Walter Homer and Mary Lois Drake Memorial Scholarship Trust in memory of Homer Drake, Sr., and his wife, Mary Lois Drake.
Professor Michael Sabbath, a George Law School faculty member for more than 28 years, will be the holder of the endowed chair. Sabbath earned his undergraduate degree from the University of Wisconsin and holds the JD and LLM degrees from Emory University and Columbia University, respectively.
At a 2003 Mercer gathering in Macon, Sabbath paid tribute to Drake. "He deals with people and issues with integrity while genuinely caring for the individual. People respect him for his moral values, leadership and common sense approach to solving complex problems," Sabbath said.
Drake and his wife, Ruth Bridges Drake, live in Newnan. They are active members of Central Baptist Church.
Unless otherwise stated, all material on this page and all pages on this site ©2000 - 2006 The Times-Herald, Newnan, Georgia. Any reproduction of any part of this web site without written permission is strictly prohibited.
Housing Bubble and Real Estate Market Tracker
Judy Weil submits: Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can get this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.
Quote of the Day- "Shouted From The Rooftops"
"Would you buy a property for $420,000 if you could only sell it for $400,000? It's a risky business."- Adnan Kabbara of Weston, Fla., a developer and contractor who has bought foreclosed homes in the past, on the risks of foreclosure property buying now. (Sun Sentinel, Apr. 1st)
Real Estate Sales and House Prices
* Stocks Surge On Home Sales Data (Helena Independent Record, Apr. 3rd): "The National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 0.7% to 109.3 in February from a reading of 108.5 in January. The index was 8.5% below its level of a year earlier, but stronger than the market had been expecting. The data reassured investors that the housing sector, while weak, is not being pummeled by the struggling subprime mortgage sector. Fears that mortgage problems will spill over into the rest of the economy have been a big factor behind the market's volatility of the past several weeks, and the uptick in sales came as a pleasant surprise."
* Area Median Home Price Falls (Contra Costa Times, Apr. 3rd): "East Bay cities such as Berkeley, Brentwood, Clayton and Walnut Creek experienced a nearly 25% drop in median home prices from February of last year. DataQuick Information Systems: Walnut Creek's median home sales price dropped to $519,000, making it lower than the median home price for Martinez, Brentwood and Pinole. But many say those statistics can be misleading because DataQuick's numbers include condominiums and both resale and new single-family homes… Walnut Creek's statistics were based on 92 sales, which can be indicative of a trend."
* Sales Rise Steadily in Rhode Island; Prices Continue Declining in February, According to The Warren Group (Business Wire, Apr. 3rd): "Warren Group: Single-family home sales… rose 4.2% compared with February 2006, and rose 8.5% year-to-date. Prices… continued to decline. The median sale price of single-family homes fell 4.1% in February, from $260,000 in February 2006 to $249,250 in February 2007. The median price declined slightly more year-to-date, from $262,000 in the first two months of 2006 to $250,000 this year, a 4.6% decrease… Condominium… Sales fell 18.8%, from 165 in February 2006 to 134 this year. Year-to-date sales fell 8.9%, from 339 in 2006 to 309 this year. Condo prices fell by 14.9%."
* Coastal Home Prices Level Off, For Now at Least (Mail Tribune, Apr. 2nd): "After five years in which median sale prices for homes in the Florence area surged more than 100%, to $243,000, buyers have backed off. Tawfik Adhab, a Eugene appraiser: "What we had is a huge withdrawal of buyers." Florence home sales fell by 29% from 2005 to 2006, nearly triple the county average… In Lane County, most of the demand for housing comes from job creation, wage increases, new households. Those are the fundamental factors that affect housing in Lane County... But in Florence, it's not jobs or wage increases. It's in-migration."
* The Richest Zip Codes—and How They Got That Way (Business Week, Apr. 2nd): "During the five-year boom in housing prices, from Q3'01 –Q3'06… overall housing prices rose rapidly, but prices in the nation's richest Zip codes went up even faster. For the U.S. as a whole, the five-year increase in the Case-Shiller Home Price Index was 63.7%, while the increase was 79.5% for those Zip codes with a median sales price of $750,000 or more, according to Fiserv Lending Solutions… The increase in the ranks of the very well-to-do almost guarantees that demand to live in exclusive areas will continue to drive prices upward over the long run."
* Retirement Homes Go High-Rise and Urban (NY Times, Apr. 1st): "Continuing-care retirement communities… offers residents access to independent living, assisted living and skilled nursing care in the same complex. Most of these communities… are found in suburban or rural settings… A growing number of such retirement communities, many developed by nonprofit organizations, are coming to cities. Kathryn L. Brod, SVP for Zeigler, a senior living finance company: About 15 continuing-care communities are planned or under construction in city neighborhoods. There are communities in San Francisco and Philadelphia, and one in Boston. The first one in New York City [Queens]… is scheduled to open in 2008."
Foreclosure Impact
* O.C. Home Market Dodges Bullet (OC Register, Apr. 2nd): "Author Ryan Ratcliffe of the UCLA Anderson Forecast: "Markets with a higher proportion of first-time buyers and new homes – such as the Inland Empire and Ventura County – are seeing a bigger surge in defaults… than areas like Orange County. That's because "buyers without a major equity windfall from their last home are the most likely to stretch to afford their first mortgage," while builders trying to move inventory quickly might have lowered lending standards to close deals... Orange County is "not a first-time buyer market or a market with a lot of new building."
* Foreclosures On the Rise (Desert Sun, Apr. 1st): "Home foreclosures climbed in February across the Coachella Valley, up to 62 from just seven at the same time last year. DataQuick Information Systems: Mortgage default notices jumped to 282 valleywide in February, up from 104 in February 2006… Although February's numbers represent a whopping 786% increase in foreclosures and a 171% increase in defaults, such percentages can be misleading, experts said. That's because numbers in February 2006 and before were extremely low amid a climate of strong home sales and steep home-price appreciation. So even the slightest increase in February resulted in triple-digit percentage increases."
* Even Foreclosures are a Tough Sell (Sun Sentinel, Apr. 1st): "Realty Trac: Florida has more foreclosures in the pipeline than any other state, 19,144 in February… In South Florida… homeowners have been socked by high prices, high property taxes, soaring insurance premiums and gimmick mortgages that have blown up in their faces… The real estate market has become so uncertain, and the debts racked up on these properties so high… Properties that would have attracted a bidding war a year or two ago, when the real estate market was soaring, now stay with the lenders. The banks sell them through major national real estate firms, more frequently at a loss."
Real Estate Investing and Sentiment
* Rate Cuts Get a Bad Rap Even Before They Happen: Caroline Baum (Bloomberg, Apr. 2nd): "The glut of homes on the market, which is apt to get larger as foreclosed properties are dumped into inventory, will take a long time to work off, just as it did in the last boom-bust real estate cycle of the late 1980s, early 1990s. Housing won't be leading the economic recovery… Empty homes can't be co-opted for a new business venture. The asset class standing alone in the corner when the music stops isn't the first one asked to dance when the band starts up. Something else is. And it will be lower interest rates that make that something else do a jig."
* Zillow Upbeat, No Matter What (Seattle Times, Apr. 2nd): "[On the housing] downturn, Zillow founder Rich Barton said: "I'm not at all worried, just not worried. If I were a homebuilder, I would be worried, but we're not worried… There's a "tidal shift from offline activities to online activities" happening regardless of "vagaries" in the real-estate market… Whether the market's up, down or sideways, people are interested in real estate, people are moving and buying houses and selling houses… A slower market could even result in more people using Zillow, which is centered on providing free property-value estimates called "Zestimates."
* Spring May Turn into Season of Reckoning for Housing Industry (Naperville Sun, Mar. 31st): "Investors on the Chicago Mercantile Exchange are turning more pessimistic too. A housing futures index tracking 10 major U.S. cities is now projecting January 2008 prices in those markets will be down 5.1% from early 2007. At the end of February, the same futures index put together by Tradition Financial Services had forecast a 3.7% drop."
Mortgates, Real Estate Lending and the Subprime Fallout
* New Century Financial Begins a New Chapter: 11 (Seeking Alpha, Apr. 3rd): "Battered subprime lender New Century announced yesterday it filed for bankruptcy protection under Chapter 11. It will receive up to $150 million in debtor-in-possession financing from The CIT Group and Greenwich Capital Financial Products. Also, it has entered an agreement to sell its servicing assets and platform to Carrington Capital Management for around $139m. Greenwich Capital will buy certain loans and residual interests in some securitized trusts for $50m… New Century plans to cut its workforce by about 3,200, or 54%, in order to align its cost structure and in preparation for a possible sale of its businesses."
* Barclays Buys U.S. Subprime Lender EquiFirst (Scotsman.com, Apr. 2nd): "Barclays Bank said on Monday it completed the acquisition of subprime lender EquiFirst Corp. for $76 million (38.5 million pounds), about two-thirds less than it originally agreed to pay. In January, Barclays said it would buy EquiFirst from Regions Financial for about $225 million."
* How Many Debtors are Enough? (Barron's Apr. 2nd): "In the Great Depression... Every three to five years, homeowners were obliged to get new mortgages to pay off their old ones. Sooner or later, hard times would arrive when one's mortgage was due, so that the creditor could not pay just when the lenders were least willing to lend… The new Federal Housing Administration… was creating a mutual insurance fund to insure mortgages for any amount up to $16,000, not to exceed 80% of the value of the property, up to a term of 20 years, on an amortization schedule that would pay off the loan at the end of the term… Mortgage debt was the largest capital category in the U.S. in 1935, at $47 billion. Household mortgages were $21 billion of that. (Federal debt -- not the deficit, the debt -- was $31 billion.)"
* Tighter Credit Could Reverse Home-Ownership Gains (San Jose Business Journal, Apr. 2nd): "The National Association of Realtors doesn't see a disaster for the overall housing market. Only one out of every 200 homes in the United States actually will be foreclosed on, predicts NAR economist Lawrence Yun, and most of these will be bought as soon as they go back on the market… Sandor Samuels, Executive Director of Countrywide Financial Corp.: Congress and regulators need to "be careful about an overcorrection... It is important that we preserve access to credit for those who cannot qualify for prime loans… [Overcorrection] could materially reduce housing demand, especially among first-time homebuyers, and delay the housing recovery."
* U.S. Mortgage Woes Could Hit Regional Banks (Reuters, Apr. 2nd): "Shares of M&T Bank Corp. (MTB) dropped more than 8% on Monday, after the bank said it was writing down mortgages in its portfolio of loans to people unable to document regular income, known as "Alt-A mortgages…" Such mortgages are considered less risky than subprime ones… But if 'Alt-A' home loans are broadly weakening, shares of banks and finance companies including SunTrust Bancorp., (STI), Capital One Financial Corp. (COF) and BB&T Corp. (BBT) could get hit in coming weeks, said Frank Barkocy, of Keefe Managers."
* Rise and Fall of Subprime Lenders Began on Wall St. (NPR.org, Mar. 30th): "Subprime lending has long been the forgotten, low-rent corner of the mortgage business, touched by a down-market taint. But the image is deceiving, industry analysts say: Subprime lending is based on the support of Wall Street's old-line banking establishment. "It encouraged it; it funded it," says Guy Cecala, publisher of the Inside Mortgage Finance newsletter. "Since the mid-90s, warehouse lending by Wall Street firms is what's kept companies like New Century in business." Cecala says that at one time, companies that were in the mortgage business lent out their own money."
Global Alternatives To The Housing Slump
* Morgan Stanley Investing in Russian Real Estate (Real Russia Project, Apr. 2nd): "Morgan Stanley's Special Situations Fund III has recently acquired a minority stake in RBI development holding. According to experts, this is the biggest deal of its kind thus far in Russia – some estimate it at about $200 million. This is the third transaction for Morgan Stanley in this sector, which previously acquired 10% of RosEvroDevelopment and minority shares in Moscow-based commercial real estate developer RGI International. Morgan Stanley recently announced that it plans to increase direct investments in Russia with a focus on Russian developers. For this purpose the bank plans to add about $1 billion to its fund."
Macro Impact, And Will The Housing Slump Cause A Recession?
* Mortgage Crisis Calls American Dream into Question (Reuters, Apr. 3rd): "With an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards… Statistics show poor and minority homeowners are bearing the brunt of the [subprime] crisis… The belief that every American can or should own their own home remains pervasive… Massachusetts Democratic Rep. Barney Frank says: "A lot are not economically ready now [for homeownership]…" It's a tricky thing to say. Key to the American Dream is the belief that everyone can make it to the top. Restricting lending is expected to disproportionately hurt blacks and Hispanics -- voters coveted by both Republicans and Democrats."
* The Perils of Bankrolling Slackers (Barron's Online, Apr. 2nd): "Loans in First Marblehead's securitizations suggests that defaults are nearing the danger level, as higher interest rates and falling home prices take a toll on families' abilities to make payments. That, in turn, could reduce investors' appetite for the securities and crimp the company's margins.… And this is occurring during an economic recovery that has seen unemployment levels sink to near record levels and real incomes resume their upward march. Debt-encumbered graduates ought to have their pick of satisfactory job opportunities and have no need to apply for six-month forbearances or to not service their loans."
* The Threat to National, Local Economies from the Housing Sector (IndyStar.com, Apr. 1st): "Midwest states, and Indiana in particular, lead the nation in delinquency and foreclosure rates. This is not a story about creative, or even deceptive, financing of home purchases, however. It's a story about our economic performance. For every type of loan -- prime, subprime, fixed rate, or variable rate -- Indiana's delinquency rates are in the top five for all 50 states, joined by Ohio and Michigan in sharing this dubious distinction… In Indiana, the correction is already happening, but less from speculative excess than from economic transition.
Homebuilders And Housing Stocks
* Subprime, Alt-A Woes to Shrink Borrower Market (Builder Online, Apr. 3rd): "Credit Suisse analyst Ivy L. Zelman says possible lender restrictions involving subprime and Alt-A mortgages, which accounted for an estimated 40% of purchase dollar originations in 2006, may result in a shrinking pool of buyers for new homes… The bottom line for builders is that as lenders go under, tighten the qualification process, or face possible government restrictions on future subprime or Alt-A loans, the pool of potential borrowers for new home purchases could be negatively impacted by as high as 20%."
Commercial Real Estate and REITs
* Steve Heyer Resigns as CEO of Starwood Hotels & Resorts (Business Wire, Apr. 2nd): "Steven J. Heyer has resigned as Chief Executive Officer and a director. Heyer, 54, had been CEO and a director since October 2004. Bruce W. Duncan, will serve as interim CEO… Stephen R. Quazzo, Chairman of the Governance and Nominating Committee of the Starwood Board: “While the Board appreciates the good work Steve Heyer has done to position Starwood for the future, issues with regard to his management style have led us to lose confidence in his leadership. Starwood today is performing well and has a strong market position, a winning strategy, and significant growth potential."
Quote of the Day- "Shouted From The Rooftops"
"Would you buy a property for $420,000 if you could only sell it for $400,000? It's a risky business."- Adnan Kabbara of Weston, Fla., a developer and contractor who has bought foreclosed homes in the past, on the risks of foreclosure property buying now. (Sun Sentinel, Apr. 1st)
Real Estate Sales and House Prices
* Stocks Surge On Home Sales Data (Helena Independent Record, Apr. 3rd): "The National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 0.7% to 109.3 in February from a reading of 108.5 in January. The index was 8.5% below its level of a year earlier, but stronger than the market had been expecting. The data reassured investors that the housing sector, while weak, is not being pummeled by the struggling subprime mortgage sector. Fears that mortgage problems will spill over into the rest of the economy have been a big factor behind the market's volatility of the past several weeks, and the uptick in sales came as a pleasant surprise."
* Area Median Home Price Falls (Contra Costa Times, Apr. 3rd): "East Bay cities such as Berkeley, Brentwood, Clayton and Walnut Creek experienced a nearly 25% drop in median home prices from February of last year. DataQuick Information Systems: Walnut Creek's median home sales price dropped to $519,000, making it lower than the median home price for Martinez, Brentwood and Pinole. But many say those statistics can be misleading because DataQuick's numbers include condominiums and both resale and new single-family homes… Walnut Creek's statistics were based on 92 sales, which can be indicative of a trend."
* Sales Rise Steadily in Rhode Island; Prices Continue Declining in February, According to The Warren Group (Business Wire, Apr. 3rd): "Warren Group: Single-family home sales… rose 4.2% compared with February 2006, and rose 8.5% year-to-date. Prices… continued to decline. The median sale price of single-family homes fell 4.1% in February, from $260,000 in February 2006 to $249,250 in February 2007. The median price declined slightly more year-to-date, from $262,000 in the first two months of 2006 to $250,000 this year, a 4.6% decrease… Condominium… Sales fell 18.8%, from 165 in February 2006 to 134 this year. Year-to-date sales fell 8.9%, from 339 in 2006 to 309 this year. Condo prices fell by 14.9%."
* Coastal Home Prices Level Off, For Now at Least (Mail Tribune, Apr. 2nd): "After five years in which median sale prices for homes in the Florence area surged more than 100%, to $243,000, buyers have backed off. Tawfik Adhab, a Eugene appraiser: "What we had is a huge withdrawal of buyers." Florence home sales fell by 29% from 2005 to 2006, nearly triple the county average… In Lane County, most of the demand for housing comes from job creation, wage increases, new households. Those are the fundamental factors that affect housing in Lane County... But in Florence, it's not jobs or wage increases. It's in-migration."
* The Richest Zip Codes—and How They Got That Way (Business Week, Apr. 2nd): "During the five-year boom in housing prices, from Q3'01 –Q3'06… overall housing prices rose rapidly, but prices in the nation's richest Zip codes went up even faster. For the U.S. as a whole, the five-year increase in the Case-Shiller Home Price Index was 63.7%, while the increase was 79.5% for those Zip codes with a median sales price of $750,000 or more, according to Fiserv Lending Solutions… The increase in the ranks of the very well-to-do almost guarantees that demand to live in exclusive areas will continue to drive prices upward over the long run."
* Retirement Homes Go High-Rise and Urban (NY Times, Apr. 1st): "Continuing-care retirement communities… offers residents access to independent living, assisted living and skilled nursing care in the same complex. Most of these communities… are found in suburban or rural settings… A growing number of such retirement communities, many developed by nonprofit organizations, are coming to cities. Kathryn L. Brod, SVP for Zeigler, a senior living finance company: About 15 continuing-care communities are planned or under construction in city neighborhoods. There are communities in San Francisco and Philadelphia, and one in Boston. The first one in New York City [Queens]… is scheduled to open in 2008."
Foreclosure Impact
* O.C. Home Market Dodges Bullet (OC Register, Apr. 2nd): "Author Ryan Ratcliffe of the UCLA Anderson Forecast: "Markets with a higher proportion of first-time buyers and new homes – such as the Inland Empire and Ventura County – are seeing a bigger surge in defaults… than areas like Orange County. That's because "buyers without a major equity windfall from their last home are the most likely to stretch to afford their first mortgage," while builders trying to move inventory quickly might have lowered lending standards to close deals... Orange County is "not a first-time buyer market or a market with a lot of new building."
* Foreclosures On the Rise (Desert Sun, Apr. 1st): "Home foreclosures climbed in February across the Coachella Valley, up to 62 from just seven at the same time last year. DataQuick Information Systems: Mortgage default notices jumped to 282 valleywide in February, up from 104 in February 2006… Although February's numbers represent a whopping 786% increase in foreclosures and a 171% increase in defaults, such percentages can be misleading, experts said. That's because numbers in February 2006 and before were extremely low amid a climate of strong home sales and steep home-price appreciation. So even the slightest increase in February resulted in triple-digit percentage increases."
* Even Foreclosures are a Tough Sell (Sun Sentinel, Apr. 1st): "Realty Trac: Florida has more foreclosures in the pipeline than any other state, 19,144 in February… In South Florida… homeowners have been socked by high prices, high property taxes, soaring insurance premiums and gimmick mortgages that have blown up in their faces… The real estate market has become so uncertain, and the debts racked up on these properties so high… Properties that would have attracted a bidding war a year or two ago, when the real estate market was soaring, now stay with the lenders. The banks sell them through major national real estate firms, more frequently at a loss."
Real Estate Investing and Sentiment
* Rate Cuts Get a Bad Rap Even Before They Happen: Caroline Baum (Bloomberg, Apr. 2nd): "The glut of homes on the market, which is apt to get larger as foreclosed properties are dumped into inventory, will take a long time to work off, just as it did in the last boom-bust real estate cycle of the late 1980s, early 1990s. Housing won't be leading the economic recovery… Empty homes can't be co-opted for a new business venture. The asset class standing alone in the corner when the music stops isn't the first one asked to dance when the band starts up. Something else is. And it will be lower interest rates that make that something else do a jig."
* Zillow Upbeat, No Matter What (Seattle Times, Apr. 2nd): "[On the housing] downturn, Zillow founder Rich Barton said: "I'm not at all worried, just not worried. If I were a homebuilder, I would be worried, but we're not worried… There's a "tidal shift from offline activities to online activities" happening regardless of "vagaries" in the real-estate market… Whether the market's up, down or sideways, people are interested in real estate, people are moving and buying houses and selling houses… A slower market could even result in more people using Zillow, which is centered on providing free property-value estimates called "Zestimates."
* Spring May Turn into Season of Reckoning for Housing Industry (Naperville Sun, Mar. 31st): "Investors on the Chicago Mercantile Exchange are turning more pessimistic too. A housing futures index tracking 10 major U.S. cities is now projecting January 2008 prices in those markets will be down 5.1% from early 2007. At the end of February, the same futures index put together by Tradition Financial Services had forecast a 3.7% drop."
Mortgates, Real Estate Lending and the Subprime Fallout
* New Century Financial Begins a New Chapter: 11 (Seeking Alpha, Apr. 3rd): "Battered subprime lender New Century announced yesterday it filed for bankruptcy protection under Chapter 11. It will receive up to $150 million in debtor-in-possession financing from The CIT Group and Greenwich Capital Financial Products. Also, it has entered an agreement to sell its servicing assets and platform to Carrington Capital Management for around $139m. Greenwich Capital will buy certain loans and residual interests in some securitized trusts for $50m… New Century plans to cut its workforce by about 3,200, or 54%, in order to align its cost structure and in preparation for a possible sale of its businesses."
* Barclays Buys U.S. Subprime Lender EquiFirst (Scotsman.com, Apr. 2nd): "Barclays Bank said on Monday it completed the acquisition of subprime lender EquiFirst Corp. for $76 million (38.5 million pounds), about two-thirds less than it originally agreed to pay. In January, Barclays said it would buy EquiFirst from Regions Financial for about $225 million."
* How Many Debtors are Enough? (Barron's Apr. 2nd): "In the Great Depression... Every three to five years, homeowners were obliged to get new mortgages to pay off their old ones. Sooner or later, hard times would arrive when one's mortgage was due, so that the creditor could not pay just when the lenders were least willing to lend… The new Federal Housing Administration… was creating a mutual insurance fund to insure mortgages for any amount up to $16,000, not to exceed 80% of the value of the property, up to a term of 20 years, on an amortization schedule that would pay off the loan at the end of the term… Mortgage debt was the largest capital category in the U.S. in 1935, at $47 billion. Household mortgages were $21 billion of that. (Federal debt -- not the deficit, the debt -- was $31 billion.)"
* Tighter Credit Could Reverse Home-Ownership Gains (San Jose Business Journal, Apr. 2nd): "The National Association of Realtors doesn't see a disaster for the overall housing market. Only one out of every 200 homes in the United States actually will be foreclosed on, predicts NAR economist Lawrence Yun, and most of these will be bought as soon as they go back on the market… Sandor Samuels, Executive Director of Countrywide Financial Corp.: Congress and regulators need to "be careful about an overcorrection... It is important that we preserve access to credit for those who cannot qualify for prime loans… [Overcorrection] could materially reduce housing demand, especially among first-time homebuyers, and delay the housing recovery."
* U.S. Mortgage Woes Could Hit Regional Banks (Reuters, Apr. 2nd): "Shares of M&T Bank Corp. (MTB) dropped more than 8% on Monday, after the bank said it was writing down mortgages in its portfolio of loans to people unable to document regular income, known as "Alt-A mortgages…" Such mortgages are considered less risky than subprime ones… But if 'Alt-A' home loans are broadly weakening, shares of banks and finance companies including SunTrust Bancorp., (STI), Capital One Financial Corp. (COF) and BB&T Corp. (BBT) could get hit in coming weeks, said Frank Barkocy, of Keefe Managers."
* Rise and Fall of Subprime Lenders Began on Wall St. (NPR.org, Mar. 30th): "Subprime lending has long been the forgotten, low-rent corner of the mortgage business, touched by a down-market taint. But the image is deceiving, industry analysts say: Subprime lending is based on the support of Wall Street's old-line banking establishment. "It encouraged it; it funded it," says Guy Cecala, publisher of the Inside Mortgage Finance newsletter. "Since the mid-90s, warehouse lending by Wall Street firms is what's kept companies like New Century in business." Cecala says that at one time, companies that were in the mortgage business lent out their own money."
Global Alternatives To The Housing Slump
* Morgan Stanley Investing in Russian Real Estate (Real Russia Project, Apr. 2nd): "Morgan Stanley's Special Situations Fund III has recently acquired a minority stake in RBI development holding. According to experts, this is the biggest deal of its kind thus far in Russia – some estimate it at about $200 million. This is the third transaction for Morgan Stanley in this sector, which previously acquired 10% of RosEvroDevelopment and minority shares in Moscow-based commercial real estate developer RGI International. Morgan Stanley recently announced that it plans to increase direct investments in Russia with a focus on Russian developers. For this purpose the bank plans to add about $1 billion to its fund."
Macro Impact, And Will The Housing Slump Cause A Recession?
* Mortgage Crisis Calls American Dream into Question (Reuters, Apr. 3rd): "With an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards… Statistics show poor and minority homeowners are bearing the brunt of the [subprime] crisis… The belief that every American can or should own their own home remains pervasive… Massachusetts Democratic Rep. Barney Frank says: "A lot are not economically ready now [for homeownership]…" It's a tricky thing to say. Key to the American Dream is the belief that everyone can make it to the top. Restricting lending is expected to disproportionately hurt blacks and Hispanics -- voters coveted by both Republicans and Democrats."
* The Perils of Bankrolling Slackers (Barron's Online, Apr. 2nd): "Loans in First Marblehead's securitizations suggests that defaults are nearing the danger level, as higher interest rates and falling home prices take a toll on families' abilities to make payments. That, in turn, could reduce investors' appetite for the securities and crimp the company's margins.… And this is occurring during an economic recovery that has seen unemployment levels sink to near record levels and real incomes resume their upward march. Debt-encumbered graduates ought to have their pick of satisfactory job opportunities and have no need to apply for six-month forbearances or to not service their loans."
* The Threat to National, Local Economies from the Housing Sector (IndyStar.com, Apr. 1st): "Midwest states, and Indiana in particular, lead the nation in delinquency and foreclosure rates. This is not a story about creative, or even deceptive, financing of home purchases, however. It's a story about our economic performance. For every type of loan -- prime, subprime, fixed rate, or variable rate -- Indiana's delinquency rates are in the top five for all 50 states, joined by Ohio and Michigan in sharing this dubious distinction… In Indiana, the correction is already happening, but less from speculative excess than from economic transition.
Homebuilders And Housing Stocks
* Subprime, Alt-A Woes to Shrink Borrower Market (Builder Online, Apr. 3rd): "Credit Suisse analyst Ivy L. Zelman says possible lender restrictions involving subprime and Alt-A mortgages, which accounted for an estimated 40% of purchase dollar originations in 2006, may result in a shrinking pool of buyers for new homes… The bottom line for builders is that as lenders go under, tighten the qualification process, or face possible government restrictions on future subprime or Alt-A loans, the pool of potential borrowers for new home purchases could be negatively impacted by as high as 20%."
Commercial Real Estate and REITs
* Steve Heyer Resigns as CEO of Starwood Hotels & Resorts (Business Wire, Apr. 2nd): "Steven J. Heyer has resigned as Chief Executive Officer and a director. Heyer, 54, had been CEO and a director since October 2004. Bruce W. Duncan, will serve as interim CEO… Stephen R. Quazzo, Chairman of the Governance and Nominating Committee of the Starwood Board: “While the Board appreciates the good work Steve Heyer has done to position Starwood for the future, issues with regard to his management style have led us to lose confidence in his leadership. Starwood today is performing well and has a strong market position, a winning strategy, and significant growth potential."
Beaty wins AP/ONE Sweepstakes Award
The McAlester News-Capital received top honors at the Associated Press/Oklahoma News Executives awards banquet in Oklahoma City on Friday night.
News-Capital Senior Editor James Beaty won the Sweepstakes Award, while the News-Capital also received the General Excellence Award.
Editor Matt Lane won first place honors in Editorial Writing, which included editorials on the importance of open government.
Beaty won the Sweepstakes Award for his series of articles about differences in two separate contracts at City Hall for former McAlester City Manager Susan Monroe, and the stories that revealed Monroe had altered one of the contracts.
“It is no surprise to me that James was recognized by his peers for his incredible ability to get the facts and get the story,” Lane said. “For more than a decade I have had the distinct honor to work alongside James and learn from him. He is an asset to this newspaper and, moreover, to the community he serves.”
Publisher John Tucker congratulated the newspaper’s news staff on the awards they won in the AP/ONE’s Division B category.
“I’m really pleased with our news staff,” Tucker said. “I’ve been in the business for 35 years and this is the best news staff I’ve worked with.”
The General Excellence Award won by the News-Capital takes all of the elements in the newspaper into consideration.
“This honor belongs to the reporters, editors, composing artists, press crew, sales associates and business office staff who labor to bring your newspaper to you, our readers,” Lane said. “It is gratifying to have the excellent work these people do each and every day recognized. I am proud to be a part of this newspaper and am humbled to be able to work with such dedicated people.”
Tucker also congratulated the News-Capital employees on the General Excellence award.
“That’s what a newspaper’s for, to have something for all the readers.”
Beaty also won first place award in the Investigative Reporting category for his articles on the Monroe contract.
He also received first place honors in the Sports Feature category for his articles on the late Douglas Smith, a Crowder teen who had been killed in a baseball accident and the creation of a McAlester baseball field, supplied with defibrillators, in his honor.
News-Capital City Editor Doug Russell won second place honors for investigative reporting for his articles on the bankruptcy of former District 17 state Rep. Mike Mass.
Beaty also won the second place award for Reviews, for his reviews of albums by Bob Dylan, Jerry Lee Lewis and Maria Muldaur.
Former City Editor Trevor Dunbar took third place honors in the Public Service Reporting category for his series on how to access public records.
Photographer Kevin Harvison won honorable mention in Spot News Photogrpahy for his photo of tornadic clouds.
Tucker said he will look forward to another year of work by the News-Capital staff and the awards competition next year.
News-Capital Senior Editor James Beaty won the Sweepstakes Award, while the News-Capital also received the General Excellence Award.
Editor Matt Lane won first place honors in Editorial Writing, which included editorials on the importance of open government.
Beaty won the Sweepstakes Award for his series of articles about differences in two separate contracts at City Hall for former McAlester City Manager Susan Monroe, and the stories that revealed Monroe had altered one of the contracts.
“It is no surprise to me that James was recognized by his peers for his incredible ability to get the facts and get the story,” Lane said. “For more than a decade I have had the distinct honor to work alongside James and learn from him. He is an asset to this newspaper and, moreover, to the community he serves.”
Publisher John Tucker congratulated the newspaper’s news staff on the awards they won in the AP/ONE’s Division B category.
“I’m really pleased with our news staff,” Tucker said. “I’ve been in the business for 35 years and this is the best news staff I’ve worked with.”
The General Excellence Award won by the News-Capital takes all of the elements in the newspaper into consideration.
“This honor belongs to the reporters, editors, composing artists, press crew, sales associates and business office staff who labor to bring your newspaper to you, our readers,” Lane said. “It is gratifying to have the excellent work these people do each and every day recognized. I am proud to be a part of this newspaper and am humbled to be able to work with such dedicated people.”
Tucker also congratulated the News-Capital employees on the General Excellence award.
“That’s what a newspaper’s for, to have something for all the readers.”
Beaty also won first place award in the Investigative Reporting category for his articles on the Monroe contract.
He also received first place honors in the Sports Feature category for his articles on the late Douglas Smith, a Crowder teen who had been killed in a baseball accident and the creation of a McAlester baseball field, supplied with defibrillators, in his honor.
News-Capital City Editor Doug Russell won second place honors for investigative reporting for his articles on the bankruptcy of former District 17 state Rep. Mike Mass.
Beaty also won the second place award for Reviews, for his reviews of albums by Bob Dylan, Jerry Lee Lewis and Maria Muldaur.
Former City Editor Trevor Dunbar took third place honors in the Public Service Reporting category for his series on how to access public records.
Photographer Kevin Harvison won honorable mention in Spot News Photogrpahy for his photo of tornadic clouds.
Tucker said he will look forward to another year of work by the News-Capital staff and the awards competition next year.
Care centers get new owners
The start of this month opened a new chapter for two Wichita Falls care centers.
"We're going to be a small, just family-owned corporation," said Christina Burnett, one of the new owners of Denver Manor and Cedar Falls Care Center.
Christina and her husband, Steven Burnett, under the name Burnett Healthcare, took over Sunday as the owners of the two centers, which before were part of the Lubbock-based Conifer Care Inc.
The change in ownership came as, once again, word swirled in the community about bounced paychecks for employees at the centers when they were still under Conifer Care. It was the latest report in a series of such claims stretching over more than a year.
Christina Burnett said Tuesday that she spoke with Conifer about paychecks at the beginning of the week, and the company told her it would wire funds Tuesday to cover paychecks that had bounced.
Burnett said the new owners were coming from the Dallas area and planned to make Wichita Falls home as they operate centers that serve as home to dozens of residents.
"We found out they were up for grabs and took them," she said of the centers, and added that the Burnetts will set up their corporate office at Denver Manor.
She said they'll be in the buildings every day, and they'll make sure things are taken care of for both patients and staff.
"Patient care is a top priority to me," Burnett said.
She said they were not walking into any debt of a previous owner and said that Conifer Care really doesn't have a role with the centers now.
The past year has brought financial concerns for Conifer Care.
Its Chapter 11 bankruptcy case - aimed to address tax liens - was dismissed March 27 in U.S. Bankruptcy Court in Lubbock.
The operation wasn't bringing in the cash flow needed to fund a Chapter 11 plan, said Max Tarbox, an attorney in Lubbock who represented Conifer Care in its bankruptcy case.
Conifer Care filed Chapter 11 bankruptcy Sept. 6, and the Internal Revenue Service filed a claim Sept. 22 for $3,143,621.14.
Tarbox said the dismissal of the Chapter 11 case placed Conifer Care in the same situation it had been in before the bankruptcy. The dismissal lifted the stay against creditors.
"There's nobody here that you can talk with about that," a woman who identified herself only as Lisa said in response to a call Tuesday afternoon to the Conifer Care office in Lubbock.
Some employees of the Conifer Care-owned centers in Wichita Falls previously complained of checks that bounced beginning in 2004, a September 2006 Times Record News article reported. Other articles also addressed worries about a drop in supplies and issues surrounding nonpayment of a food vendor. The Texas Department of Aging and Disability Services reported that a March 2006 inspection did not show a shortage of food or supplies.
James Jewell, who operated Conifer Care, told the Times Record News in 2006 that similar facilities across the state face struggles resulting from a lack of reimbursement.
Burnett said Tuesday she and her husband had applied for the necessary licensing, and vendor arrangements were taken care of.
She said she hopes that everyone will see that things will get better.
"We're here to see that the residents' needs are met," she said.
Reporter Jessica Langdon can be reached at (940) 763-7530 or by e-mail at langdonj(at)TimesRecordNews.com.
Bad Credit Debt Consolidation – Get Professional Help Managing Your Debts
A bad credit debt consolidation company can get you out of a cycle of debt. Whether you have incurred debts on education, or through excessive use of your credit card, it is a good idea to ask for professional help in managing your debts. Taking the help of a debt consolidation company can help you avoid bankruptcy and foreclosure of property.
Bad credit debt consolidation helps you put all your debts into a single debt, making it easier for you to manage it. A credit debt company helps you make the best of your debt situation, and negotiates with debtors on your behalf.
Credit Card Debt Consolidation Program – Make Your Debts Manageable
Bad credit debt consolidation helps you repay your debts instead of filing for bankruptcy or getting your assets seized. Most debt consolidation companies help debtors by consolidating all debts into a single debt, then negotiating with creditors for easier payment options. This can be in the form of longer loan term or lowered interest. All you need to do is pay a fixed amount every month to the debt consolidation company along with low interest. The firm will also counsel you on how to save for repaying the debt.
Do You Need Bad Credit Debt Consolidation Loan ?
Sometimes, despite all your efforts, it may not be easy to save enough to pay your consolidate debt. In that case, your company will offer a bad credit debt consolidation loan to you to help you tackle your debt burden. You need to take another loan after bad credit debt consolidation to pay the amount owed. You can opt for the low interest secured consolidation loan, or go for high interest unsecured consolidation loans where you need not offer collateral.
Debt Consolidation For Free
If your situation is so bad that you cannot even afford to hire a debt consolidation company, you need not despair. You can find many organizations offering non-profit debt consolidation help. In addition, you need not go too far to look for free debt consolidation; simply go online and search from many non profit services available.
Financial Counseling
Once your bad credit debt consolidation program has succeeded in paying off your debt, you will be counseled by the company on ways to manage your finances. Credit card debts are a major liability, so you will be taught ways to avoid such falling into such debts. If you are stuck with spiraling debts and accumulating interest, then you should not wait any more before going for bad credit debt consolidation.
Author Resource: Bad credit debt consolidation helps you repay your debts instead of you having to file for bankruptcy or watching your assets seized. If your situation is so bad that you cannot even afford to hire a debt consolidation company, you need not despair. You can find many organizations offering non-profit
Bad credit debt consolidation helps you put all your debts into a single debt, making it easier for you to manage it. A credit debt company helps you make the best of your debt situation, and negotiates with debtors on your behalf.
Credit Card Debt Consolidation Program – Make Your Debts Manageable
Bad credit debt consolidation helps you repay your debts instead of filing for bankruptcy or getting your assets seized. Most debt consolidation companies help debtors by consolidating all debts into a single debt, then negotiating with creditors for easier payment options. This can be in the form of longer loan term or lowered interest. All you need to do is pay a fixed amount every month to the debt consolidation company along with low interest. The firm will also counsel you on how to save for repaying the debt.
Do You Need Bad Credit Debt Consolidation Loan ?
Sometimes, despite all your efforts, it may not be easy to save enough to pay your consolidate debt. In that case, your company will offer a bad credit debt consolidation loan to you to help you tackle your debt burden. You need to take another loan after bad credit debt consolidation to pay the amount owed. You can opt for the low interest secured consolidation loan, or go for high interest unsecured consolidation loans where you need not offer collateral.
Debt Consolidation For Free
If your situation is so bad that you cannot even afford to hire a debt consolidation company, you need not despair. You can find many organizations offering non-profit debt consolidation help. In addition, you need not go too far to look for free debt consolidation; simply go online and search from many non profit services available.
Financial Counseling
Once your bad credit debt consolidation program has succeeded in paying off your debt, you will be counseled by the company on ways to manage your finances. Credit card debts are a major liability, so you will be taught ways to avoid such falling into such debts. If you are stuck with spiraling debts and accumulating interest, then you should not wait any more before going for bad credit debt consolidation.
Author Resource: Bad credit debt consolidation helps you repay your debts instead of you having to file for bankruptcy or watching your assets seized. If your situation is so bad that you cannot even afford to hire a debt consolidation company, you need not despair. You can find many organizations offering non-profit
Subscribe to:
Posts (Atom)