The new infusion of cash comes on the heels of nearly $13.5 billion the government already doled out to GMAC since December 2008.  The government hopes thats that additional funds will bring the auto and mortgage lender to profitability in the first quarter of 2010. Moreover, the move is aimed at keeping GMAC’s mortgage lending arm – Residential Capital – out of bankruptcy.

The new bailout doesn’t come without strings. The Treasury upped its stake in GMAC to 56% (it had been at 35%).  Given the struggling state of other U.S.-backed mortgage lenders (Fannie and Freddie), however, GMAC is likely to follow its troubled siblings’ examples.  First, if commercial real estate is in fact the next bubble waiting to pop, then GMAC may be on shaky ground given that it’s a 21% stakeholder in Capmark Financial – a leading commercial real estate lender – filed for bankruptcy at the end of 2009.  Second, much of GMAC’s business is wrapped up in auto lending, and despite the fact that it showed some signs of life in late 2009, that may have been a one-time-only surge prompted by the “cash for clunkers” program. In the absence of such incentives, projections for growth in auto purchases (and consequently auto lending) may fall below expectations.

Nonetheless, GMAC has been relentless in targeting new customers. Ally Bank (formerly GMAC Bank) has been offering “high” interest rates to generate new accounts. Ally’s holdings amount to about 29 percent of GMAC’s assets (By the way, did anyone else miss the line in the onslaught of Ally Bank commercials that it was the new incarnation of troubled GMAC?)

So, what becomes of that 56% stake the government now has in GMAC? Is it a sound investment in a future profit? A look at the numbers would make even the most novice investor hesitate: In November 2009, it reported a quarterly loss of $767 million – an improvement over 4Q 2008 – but homeowners continue to default, and if unemployment continues to hover around 9 or 10%, it could mean more defaults. I’m going to call this one a lump of coal for the time being.

Initially, the Chapter 11 plan proposed a sale of the franchise for $212.5 million to PSE Sports and Entertainment.  PSE wanted to move the team to Ontario, where it would eventually be owned by Toronto businessman Jim Balsillie, the Blackberry mogul.  That deal, however, appears to have been iced. According the WSJ, the NHL bodychecked those plans, and is prepared to buy the team and park it in Phoenix – at least for the next 10 months. 

Insiders doubt that the NHL will figure as the white knight in this tale.  Ultimately, if there’s a better price to be paid, the team may inevitably move to Canada. The NHL offer may only delay it by one season – at that point, it would need a buyer with a commitment to keep the team in Phoenix.  The league has already failed to persuade Chicago White Sox owner Jerry Reinsdorf to buy the team out of bankruptcy.

The NHL seems desparate to keep the Coyotes in Phoenix depsite a habit of mismanagement and an owner that’s been eager to dump the team for years. The NHL may want to fix the problem, but perhaps in this case hockey is better off in the Great White North than in the desert.

The AJC reports

Atalaya’s bid dwarfed the competing bid from Ben Eason, the newspaper’s CEO. Eason offered $2.3 million, while Atalaya more than doubled it to $5 million.  Creative Loafing filed for bankruptcy last September to avoid defaulting on loans, including debts owed to Atalaya of $30 million.

Launced by Eason’s mother, Deborah, in 1972 in Atlanta, Creative Loafing is now based in Tampa, Florida.  Caryl E. Delano, a bankruptcy judge in Tampa was not persuaded by Eason’s years of experience in running the company.  Delano rejected Eason’s request to buy the counter-culture weekly at auction.  

As mainstream newspapers suffered with the economy and the increasing amount of Internet readership, Creative Loafing was not immune. The number of loyal readers plunged, and debts continued to mount.

For now, Atalaya plans to keep Creative Loafing in a forward direction.  It plans to take over operations immediately, and will meet today to build a strategy for increased readership and, ultimately, to turn a profit. 

Hopefully this will breathe some new life into a stagnant publication.  It’s regrettable that the family that brought the paper up from birth has been replaced, but as history has shown, continued regimes do not always bring stability, especially financial stability.

Much like the legal layoff watch, in the financial sector, one doesn’t have to wait long to see the tipping point when a flailing bank becomes a failed bank. The gamble here amounts to real money and lots of it: he FDIC has droppped billions into loss-sharing arrangements that incentivize other banks to take home the leftovers – much like barnacles feeding on detritus.

With banks collapsing faster than Steve Winn can raze an old casino in Vegas, the FDIC launched an investigation. Of course, it doesn’t take Ben Bernanke to finger the housing bubble as a usual suspect. Bad loans and no cash – like a record player stuck indefinitely on the same sorry country music song.  While the government insists that things are improving, you have to wonder where it bought those rose-colored glasses (and where the money came from). It’s been a long and hard recession, and it’ll be a long and hard climb out of it. For every bank that goes belly-up, there’s another two or three riding on the brink. Numbers 22 & 23 are likely to have company in the black hole.

Back from the dead.

WIDEawake Entertainment Group Inc. purchased Death Row’s assets out of Chapter 11 protection this past January.  Death Row will re-introduce Dr. Dre’s classic album, “The Chronic.”  “The Chronic Re-Lit” will include the 16 original songs that launched Dr. Dre and Death Row, plus seven new songs from the rapper and other artists.

Later this year, a new Death Row films unit will being production on “Sons 2 the Grave” in Toronto.  Death Row also plans to license music to other television and film projects.  Truly a last-minute reprieve for a company that was close to the grave.

While the pace is impressive, it’s doubtful that this trend can hold.  Pre-pack bankruptcies have their advantages, but putting the horse before the court won’t work in many cases where there are too many claims and too big of a debt load to mash into one concise package at hyperspeed.  In those cases, something has to give, and it’s usually time.

U.S. District Judge Joel Pisano has taken an unusual step by not only reviving the case, but also by removing it to the district court.  The brick wall in the plan is the creation of a trust for tens of thousands of asbestos claims against the company. 

In the 1970s and 1980s, Congoleum manufactured floor tiles and vinyl products that contained asbestos.  Between 1981 and 2002, it settled 33,000 personal injury claims over asbestos exposure at a total cost of $13.5 million, exhausting its primary insurance policies.

When Congoleum failed to to get its excess insurers to cover the amount beyond the primary policy limits, it filed a pre-packaged bankruptcy plan.  Over the course of its long progression through bankrputcy, Congoleum proposed numerous plans, only to have them rejected by Judge Kathryn Ferguson for the unbalanced treatment of various asbestos claims.  This latest ruling is a last ditch effort to resurrect Congoleum and get the plan (and trust) operational.  Anything less and Congoleum’s case could be converted to a Chapter 7, and it would face liquidation.

A high-end Swedish sports car manufacturer has agreed to take Saab off GM’s hands.  Koenigsegg Automotive, maker of $1.2-million sports cars (and its investment partners) will buy Saab from General Motors by the end of the year. 

This could bring Koenigsegg into the mainstream automobile market. Completion of the sale is contingent funding from the European Investment Bank (the EIB) backed by Swedish state guarantees.  GM will provide transitional assistance.

The Saab brand would add a more traditional inventory of sedans and station wagons to Koenigsegg’s limited lineup, which includes the uber-customized CCXR car.  For Saab, the deal might bring it back from the brink of extinction.  In the twenty years that GM has owned Saab (has it really been that long?!), Saab has been a mostly unprofitable brand, with less than 100,000 cars being sold last year.  “Cash for Clunkers” doesn’t appear to be turning any new buyers into Saab loyalists.

For more coverage of the Saab Story, click here.

Tam’s company, Jerry Tam LLC, filed for Chatper 7 protection last week in the Southern District of New York.  This effectively shuts down his boutique label, Form.  The lag in the economy apparently contributed to Form’s demise, dwindling lines of credit and lack of investor interest left the label with no ability to break even, let alone turn a profit.  For the full story in Crain’s New York Business, click here.

Meanwhile, across the pond in Germany, Escada is moving to restructure its business after suffering heavy financial blows.  In 2008, Escada had a net loss of  €70 million, and the first half of its current fiscal year shows a loss of  €92 million. Still, Escada hopes to rebound after some bond swaps aimed at injecting liquidity and reducing some debt in the company’s balance books.  For the full story in the Wall Street Journal, click here.

It looks like it could be another tough year in the retail sector. With credit still hard to come by;  uncertainty over CIT, a primary retail lender in financial straits; and fewer buyers, the coming months (the traditional ramp up to the holiday shopping season) could see more retail bankruptcies.

The new Chapter 7 filings — which rose from 9,584 to 15,363 — highlight the continued drag of the recession, said Jessica Gabel, a bankruptcy professor at Georgia State University’s College of Law.