Countrywide Bankruptcy Watch: Clock Still Ticking

Countrywide Financial Corp says it still isn’t bankrupt! The largest U.S. mortgage issued an announcement to deny rumors that it was on the verge of filing for bankruptcy.
“There is no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company,” the statement said.
Shares of Countrywide were down 21.3 percent before trading was halted.
Countrywide rejects bankruptcy rumor [Reuters]

Talk continues on Wall Street about the rumors that spread in the early hours this morning that a major US investment bank had or was about to file for Chapter 11 bankruptcy protection.
“We’ve heard vague talk a US investment bank is in trouble,” a source tells Thomson Financial, which first reported the story.
While a bankruptcy of a major investment bank is not beyond the realm of possibility, we’re skeptical on this rumor. If this was real, we would expect that there would be even more rumor-wine leaking from the grape vine than there has been. Even Thomson sounds a skeptical note about the report. “Another dealer said he had heard that a banking group has filed for Chapter 11 protection, but pointed out that any such news would be on the SEC website,” Thomson writes.
But if there’s one thing that has us wondering if there might be something to this story, it’s the full-court public relations press coming from our nation’s capital this morning. Treasury Secretary Hank Paulson went on CNBC this morning, before meeting with Federal Reserve chairman Ben Bernanke and Senator Chris Dodd. Cue shots of Bernanke walking through the halls of the Capitol building. Pan to Dodd press conference. Why all the pomp and circumstance unless something is very, very wrong?
Wall Street outlook down on talk large US bank filed for Chapter 11 protection [Thomson Financial via Forbes]

Vonage: Okay, Yeah, We Might Be Toast

screwedcrackcharttoast.JPGVonage warned yesterday that it’s troubles with Verizon have it teetering on the edge of bankruptcy, more or less prompting everyone in the world who doesn’t own stock in the company to say “we told you so.” Even as Vonage went public last year, skeptical observers and short sellers have been tearing into the company’s prospects. Until now, Vonage management’s statements have made it sound like they were born with rose-tinted glasses in their mouths.
Since the initial public offering, Vonage’s shares have dropped more than 80 percent. They are locked in a life-or-death patent infringement case against Verizon.
Over at the Motley Fool, Dave Mock greets the news with mock-shock and horror.

Absolutely stunned. That was my reaction to Internet telephony provider Vonageadmitting in its recent 10-K filing that it could be forced into bankruptcy at the behest of legal attacks from the likes of rival Verizon Communications. Who would have thought it could end like this?

We actually dropped Vonage, more or less, from DealBreaker commentary sometime last year. Our graphic–representing Vonage screwed on crack, toast, and in a freefall–was simply too cluttered to keep up with the company’s bad news.

Vonage 10-K
No Surprise From Vonage [Motley Fool]

Early Reactions To The End of the Century

As we reported this morning, one time mortgage king New Century has tumbled all the way down into bankruptcy. It will now be up to the courts, the creditors and the management to see if they can put this shattered egg-shell of subprime loans back together again.
Some quick reactions from around the blogs:

writes that “For New Century, which billed itself as ‘a new shade of blue chip'; whose executives grew rich as its stock soared; and where top sales people in the go-go years were treated to vacations in Europe and the Caribbean, the end came particularly fast and furious.”

Market Beat
comes with the broader market perspective: “The rest of the market isn’t going wild here, because this company’s fate has been all-but-assured for some time now. But the SPDRs Financial Sector ETF is down 0.9%, suggesting investors in financial stocks aren’t ignoring this news.”
MarketBeat also quotes the guy who might be the official analyst of the day judging by how frequently his stuff is getting referenced, emailed and cited in light of new Century’s announcement. His name is Jeffrey Saut, and he’s very skeptical about the idea that problems in real state are not spilling over into the broader economy. Here’s an excerpt that made its way into the Big Picture’s “Quote of the Day”:

Similarly, “Why is Citigroup cutting 15,000 financial-related jobs?” And, “Why is GMAC stating that its Residential Capital subsidiary is going to hurt profits?” Inquiring minds want to know such things.
Moreover, if the problems in sub-prime mortgages are NOT spreading, why are sub-prime mortgage companies dropping like flies, why are companies like ACC Capital closing their “call centers,” and why are delinquencies rising not only in the Alt-A complex, but in prime portfolios as well?”

Breaking: New Century Files For Bankruptcy Protection

As expected, New Century Financial Corp. has gone Chapter 11. Earlier today New Century said it said it will immediately cut 3,200 jobs, sell its loan servicing assets, and it is taking on 150 million of debtor-in-possession financing from CIT Group and Greenwich Capital Financial Products.
We will update as details and reactions emerge.
New Century Press Release [PR Newswire]

  • 15 Nov 2006 at 2:03 PM
  • Airlines

Deal of the Day: Uncovering Hidden Delta-US Air Synergies

deltausairmerger.jpgWe’ve been running through our financial models here in DealBreaker HQ. Okay. Not really. We’ve been doodling on cocktail napkins at Harry’s while we enjoy our liquid lunch. But we’ve none the less managed to uncover one potentially valuable and unreported synergy in the Delta-US Airways merger.
The two airlines have three recent bankruptcies between them—and after the merger both will continue to face challenges from fuel costs, employee costs, competition from cut-rate carriers and terrorism risks. So there’s a not to far-fetched chance that the combined company will face bankruptcy again.
And you know what? Bankruptcies are expensive. Everyone—debtors, creditors, purchasers—hires lawyers, and the lawyers get paid out ahead of almost everyone else. So next time around, instead of paying two sets of lawyers for Delta and US Airways, they can pay just one. Synergy, baby, synergy!