Below is a batch of entries on bankruptcy and defaults in the US from Rebel Traders.
(emphasis mine) [my comment]
Supreme Court Extends Stay -Chrysler Sale On Hold
By ·4:44 p.m. June 8
Supreme Court Justice Ruth Bader Ginsburg put a temporary hold Monday on the deal to sell Chrysler to save it from collapse. Her order, however, simply gives her or the full Court more time to ponder whether to postpone the sale further, or allow it to go forward. The order can be found here.
The action had almost no legal significance, however. The deal remains in legal limbo until Ginsburg, as the Circuit Justice, or the full Court takes some definitive action.
... Source: Supreme Court of the U.S. Blog
Thank goodness is all I have to say. I hope the rule of law will prevail and the Government will not be able to circumvent the laws any longer in this matter. I hope this goes to the full Supreme Court for a formal hearing.
[For why this is important, see *****Obama Administration Tearing Contract Law Apart*****]
Supreme Court Issues Ruling On Chrysler
By ·7:34 p.m. June 9
The United States Supreme Court will NOT take the case to the full court for open hearings. The following is the Supreme Court order released moments ago.
It looks as if the 'rule of law' has been considered a 'non issue'. This is very dangerous going forward for other companies who need or want to sell bonds for the purpose of raising capital.
From a personal point of view I am very disappointed that the Supreme Court has made this decision. [Agreed. Rule of law in America has been defeated by special interests.]
Six Flags Files Chapter 11 Bankruptcy
By ·10:19 p.m. June 13
Six Flags Inc., one of the largest regional amusement-park companies, filed for bankruptcy protection Saturday. [America's service sector (which makes up most of the economy) is slowly imploding.]
The theme-park company, shouldering more than $2 billion in debt, had been negotiating with lenders, selling parks and laying off staff in a race to restructure outside of bankruptcy court. But it couldn't outrun the deteriorating economy and a looming $288 million payment due preferred shareholders this August, along with $31 million in unpaid dividends.
Six Flags hopes to exit bankruptcy quickly through a prearranged reorganization plan. It struck a deal with senior secured lenders that would allow it convert $1.8 billion in debt to equity.
The plan was backed by J.P. Morgan Chase & Co., the agent for the facility, and a steering committee of lenders, according to court documents. The support represents half the facility's obligations, the company said. The plan would also wipe out more than $300 million in preferred stock obligations.
Six Flags listed assets of $3 billion and liabilities of $3.4 billion, including $2.4 billion in debt at the end of March. Among its largest unsecured creditors were HSBC Bank USA with $400 million in bond debt and Bank of New York Mellon, holding more than $500 million in the company's debt.
The filing marked another highly-leveraged company falling victim to the deep recession. Six Flags' 20 parks dot North America, with operations in Chicago, San Antonio and Mexico City. Revenue in the first quarter fell 24% and the company delayed certain debt payments. Several of the park company's subsidiaries also filed for protection from creditors.
The Chapter 11 filing is a setback for investor Daniel Snyder, the Washington Redskins football team owner who took control of the theme-park company in a contentious proxy fight in 2005 and installed his own management team. The bankruptcy would likely wipe out Mr. Snyder's 6% stake.
In the midst of his battle to wrest control of the company, Mr. Snyder wrote a letter to Six Flags stockholders saying they "would have been better off hiding their money under a mattress" than investing in the company under its prior management. [...] Source: WSJ
Opps.. I guess the shareholders should have left the money in the mattress... Now they have nothing.
Credit Card Defaults — New Record High
By ·10:28 p.m. June 15
More green shoot killers:
U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America's lending portfolio, in another sign that consumers remain under severe stress.
Delinquency rates—an indicator of future credit losses—fell across the industry, but analysts said the decline was due to a seasonal trend, as consumers used tax refunds to pay back debts, and they expect delinquencies to go up again in coming months.
Bank of America—the largest U.S. bank—said its default rate, tho se loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.
In addition, American Express, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.
Credit card losses usually follow the trend of unemployment, which rose in May to a 26-year high of 9.4 percent and is expected to peak near 10 percent by the end of 2009.
If credit card losses across the industry surpass 10 percent this year, as analysts and bank executives expect, loan losses could top $70 billion.[...] (Source: CNBC)
The devastation being experienced by bank loan portfolio is well captured in the graphic below from Worsening Bank Loans And The Underfunded FDIC
Extended Stay Bankruptcy — Tax Payers Lose
By ·9:08 p.m. June 16
With tax payers on the hook for just about every corporate failure in this nation I guess I should not be surprised by this one bit.
[Extended Stay is a hotel chain which filed for bankruptcy this week]
One of the biggest losers in the Extended Stay bankruptcy filing may be the Federal Reserve or, more generally, U.S. taxpayers.
The Federal Reserve holds $744 million of various junior classes of debt and $153 million in the senior debt that the central bank assumed after the collapse of Bear Stearns, which held a sizable amount of the hotel chain's debt.
The losses are mounting for the Fed on those Bear Stearns assets, which continue to sour. Extended Stay loans were held on the Fed's balance sheet via a company called Maiden Lane that the central bank lent $29 billion in June 2008 to purchase $30 billion of Bears' assets. J.P. Morgan invested $1 billion in Maiden Lane.
Maiden Lane's value had fallen to about $26 billion as of March 31 and is likely to fall further because the assets include securities backed by shaky Alt-A residential mortgages and commercial real-estate loans tied to companies in industries hit by the recession, such as a $4 billion of debt in Blackstone Group's $26 billion buyout of Hilton Hotels in 2007.
The losses so far also mean that J.P. Morgan would likely lose its $1 billion investment if Maiden Lane's assets were sold today. (The assets are held to reflect the current market value. A senior Fed official said the central bank has been advised that if it were to hold its Maiden Lane assets to maturity, it might not book any losses [if the dollar maintains its value over the next ten years, then this "senior Fed official" might be right. It is a bad bet though].)
As the assets inherited from Bear continue to wither in value, the question naturally arises, will the federal government step in to preserve its investment. It did with Chrysler. The Treasury Department loaned it $4 billion and then proceeded to orchestrate the auto maker's bankruptcy proceedings?[...] Source: Deal Journal
Eddie Bauer Is Bankrupt
By ·8:07 p.m. June 17
Eddie Bauer Holdings Inc. filed for Chapter 11 bankruptcy protection Wednesday.
As part of the filing, the company has an agreement to sell its assets to private-equity firm CCMP Capital Advisors LLC.
CCMP said it plans to keep a majority of the retailer's employees and operate a majority of its stores. It said it would support the company's efforts to continue to pay suppliers and honor gift cards while it operates under bankruptcy court protection.
The clothing retailer posted a net loss of $44.5 million for its most recent quarter and has $187.9 million in long-term debt. The company had been negotiating with holders of $75 million of its senior notes to convert that debt to equity. Shares have tumbled in recent weeks following rumors of a potential bankruptcy.[...]
Founded in 1920 [This company survived the Great depression only to go under yesterday], Eddie Bauer was known from the 1950s to the 1980s for its down jackets, mountaineering parkas and expedition gear. Then, in 1988, Spiegel Inc. bought the company and transformed it from an outdoor-wear and -gear store into a retailer focusing on women's casual clothes. In 2003, Spiegel filed for bankruptcy protection, and two years later Eddie Bauer was spun off.
American Empire Bankrupt
By ·10:43 p.m. June 15
(Hat tip to 'bee' for this article)
Truthdig has a very interesting article on the U.S. Dollar and the world's reserve currency. A harsh look from a different perspective.
This week marks the end of the dollar's reign as the world's reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That's over. It is not coming back. And what is to come will be very, very painful.
Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as ne ws while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America's imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.
There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, "the most important meeting of the 21st century so far." [Slight exaggeration. Still, this meeting is very important] [...]
[...] I called Hudson, who has an article in Monday's Financial Times called "The Yekaterinburg Turning Point: De-Dollarization and the Ending of America's Financial-Military Hegemony." "Yekaterinburg," Hudson writes, "may become known not only as the death place of the czars but of the American empire as well." His article is worth reading, along with John Lanchester's of the world's banking system, titled "It's Finished," which appeared in the May 28 issue of the London Review of Books.
"This means the end of the dollar," Hudson told me. "It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America's discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don't have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America's military aggression against them. They want to get rid of this."
My reaction: The US's economic decline continues...
1) After putting a temporary hold on the deal to sell Chrysler, the Supreme Court has decided NOT take the case to the full court for open hearings, badly damaging US contract law.
2) Six Flags (one of the largest regional amusement-park companies) filed for bankruptcy protection Saturday.
3) US credit card defaults rose to record highs in May.
4) Bank of America-the largest U.S. bank-said its default rate soared to 12.50 percent in May from 10.47 percent in April.
5) Credit card losses follow the trend of unemployment, which rose in May to a 26-year high of 9.4 percent.
6) One of the biggest losers in the Extended Stay bankruptcy filing may be the Federal Reserve, which held a sizable amount of the hotel chain's debt
7) on those Bear Stearns assets, which continue to sour, with Maiden Lane (the company created by the Fed to hold Bear Stearn's toxic assets) has lost 3 billion of its 29 billion investment.
8) The Fed's losses will ultimately be paid for by US taxpayers and the holders of dollar debt.
9) Eddie Bauer Holdings Inc, which was founded in 1920 and survived the Great depression, filed for Chapter 11 bankruptcy protection Wednesday.
10) Top officials from Asian Nations (Chinese President Hu Jintao, Russian President Dmitry Medvedev, etc...) are meeting in Yekaterinburg, Russia.
11) The United States, which asked to attend, was denied admittance from this meeting.
12) The meeting suggests China, Russia, India, Pakistan, Iran and other Asian nations are forming an official financial and military area to get America out of Eurasia.
Conclusion: These events have major implications, all of which are bearish for the dollar:
1) Rule of law in America has been defeated by special interests.
2) America's service sector (which makes up most of the economy) is slowly imploding.
3) Losses are mounting for the Fed, as the toxic assets it acquired continue to sour.
4) Asian nations are openly conspiring together about the future of the US and the dollar
I will be paying especially close attention to what comes out of the Yekaterinburg meeting in Russia.