Archive for May 13th, 2009
May 13th, 2009
WASHINGTON — U.S. Treasury Secretary Timothy Geithner on Wednesday told a group of community bankers that the Treasury Department plans to soon offer smaller banks more capital by reopening a key financial-rescue program.
The Treasury expects to receive billions of dollars in funds from banks paying back the taxpayer funds they received from the Troubled Asset Relief Program, and Mr. Geithner said those proceeds will enable Treasury to funnel additional taxpayer cash into banks with total assets under $500 million.
“Using the proceeds of the repayments, we expect to receive from some of the largest banks, we plan to re-open the application window for banks with total assets under $500 million under the Capital Purchase Program,” Mr. Geithner said during a speech at a bankers forum in Washington.
He added that Treasury plans to raise the amount of risk-weighted assets for which qualifying institutions can apply from 3% to 5%. Additionally, the new round of injections will be available for public and private corporations as well as subchapter S corporations and mutual institutions. Banks that have already received capital can reapply through an expedited approval process.
Treasury also plans to extend the deadline for small banks to form a holding company for the purposes of the Capital Purchase Program, the secretary said.
Mr. Geithner also said he will propose within a couple weeks a set of substantial steps to strengthen and simplify oversight of the financial system.
“Our system now is too complex,” Mr. Geithner said. The proposals would create “a cleaner, more simple, more consolidated oversight structure so there’s less opportunity for arbitrage,” he added.
Mr. Geithner said changes would involve more constraints on capital and leverage for bigger institutions.
On the outlook for the economy, Mr. Geithner said the financial system is starting to heal and concern about systemic risk has diminished.
But Mr. Geithner said he would support the creation of a separate fund to cover losses at institutions whose collapse could threaten the financial system. Some in Washington want to create a systemic risk regulator to oversee such firms.
The Treasury is pushing for authority to wind down nonbank financial firms. Asked about the fund, Mr. Geithner said such authority “requires a solution on the funding side.” He said the burden should be “born by those institutions in a level proportionate to their size.”
Source: Wall Street Journal, May 13, 2009
May 13th, 2009
DETROIT – Fiat SpA will be allowed to increase its ownership stake in Chrysler LLC if the Italian auto maker achieves certain goals such as starting production of its engines in the U.S., according to documents Chrysler submitted in bankruptcy court.
Under the terms of their alliance, Fiat will get an initial 20% stake in Chrysler and can increase its holding in 5% increments up to 35% if it achieves three goals by Jan. 1, 2013, the filings show.
Fiat will get an additional 5% if it starts production of Fiat engines in the U.S., and a further 5% if it introduces a Fiat-developed vehicle in the U.S. market that can go 40 miles on a gallon of gasoline. Fiat can get another 5% if Chrysler is able to generate more then $1.5 billion in sales outside of the North American market, according to a “Master Transaction Agreement” that was filed on Tuesday in the U.S. Bankruptcy Court in Manhattan.
The agreement also gives Fiat the option to purchase an additional 16% in Chrysler. If it achieves all three goals and exercises its option, it could eventually end up with a 51% stake in Chrysler.
It will not be able to take full control of Chrysler, however, until the American auto maker pays back the loans it has received from the U.S. government. Until the loans are paid, Fiat would not be able to increase beyond 49.9%, the agreement says. And until the loans are repaid, any Fiat shares above 35% will be held in a trust controlled by the U.S. Treasury.
The agreement also says the partnership between the two companies will be governed by a six-person “Alliance Cooperation Board” made up of three representatives from each company.
Chrysler will regain possession of its sprawling headquarters in Auburn Hills, Mich., as part of the restructuring plan the company has laid out in bankruptcy court.
The 504-acre site is currently owned by Cerberus Capital Management LP, the private equity firm that acquired Chrysler in 2007. As part of that deal, Cerberus took possession of the headquarters itself, and then mortgaged it to borrow $225 million from a unit of Citigroup Inc.
According to documents filed with the court, Chrysler’s reorganization plan calls for the auto maker to pay off the $225 million to Citigroup and re-take ownership of its headquarters. Cerberus is giving up its equity stake in Chrysler as part of the government-led restructuring.
The heart of the headquarters complex is a 15-floor office tower connected to a technology center that was once the workplace of more than 10,000 employees. Now only about half as many people work there because of waves of job cuts. The building comprises more than five million square feet of office space. Chrysler describes it as the second largest office building under one roof after the Pentagon.
Source: Wall Street Journal; May 13, 2009
May 13th, 2009
Last week while at the IA conference one of the speakers spoke about the SBA and stimulus dollars….the stimulus package included some help to get money to small business. The 504 loan that many companies use has a low rate and several fees have been waived—$8700 of fees waived on a 1M loan. New is a 2M line of credit to be used for materials and wages to fulfill a specific purchase order. For the first time they have money available to help small business refinance old debt. You will have to find the details but it might be a help is this difficult time!
Resources: your local banker (educate them if they don’t know about the new offerings); RLDC John Phelps–they are our local SBA office; SBA.GOV
