Developer Ian Bruce Eichner’s Cosmopolitan Resort Casino located on the Las Vegas Strip got caught last year in the capital-markets crisis and is headed toward foreclosure, the Wall Street Journal reported yesterday. Deutsche Bank AG has sunk nearly $1 billion into the project, and two other lenders have provided $175 million. The willingness of lenders to give such developers more money helped fuel the commercial real estate boom that started in 2003 and reached its zenith in early 2007. Some of those lenders now face the potential for loan losses.

Société Générale, the French bank that was rocked by a multibillion-dollar rogue trading scandal, said late yesterday that Daniel Bouton would step aside as chief executive but would remain nonexecutive chairman as part of a management reorganization, the New York Times reported today. Bouton will be succeeded by Frédéric Oudea, the chief financial officer, who joined the bank’s senior management team last month as a deputy chief executive.  For nearly three months, French politicians have been pressuring Société Générale’s management to take responsibility for nearly 5 billion euros ($7.9 billion) in losses suffered after the bank closed out 50 billion euros ($79.3 billion) in unauthorized bets made by a junior derivatives trader, Jérôme Kerviel.

Xerium Technologies Inc. paper disclosed that it may default on some of its loans and that it could file for bankruptcy soon if the lenders call in the debts, Bankruptcy Law360 reported yesterday. The company said that it “was in compliance with its financial covenants under the credit agreement at Dec. 31, 2007 and expects that it will generate cash flow from operations sufficient to service the debt under the credit agreement prior to the stated maturity of the debt if there is not otherwise an event of default under the debt.” However, Xerium said that it expects it will not meet the terms of the covenant for the first quarter of 2008 and afterward. The company said that it is contemplating a private placement of equities in order to generate enough cash flow, through private investors, to pay down the debt it has absorbed from its credit agreement.

Bankruptcy Judge Robert Drain yesterday granted Delphi Corp. a three-month extension of its right to control its bankruptcy case, giving the auto-parts supplier more time to complete its reorganization plan, the Associated Press reported yesterday. Judge Drain extended Delphi’s deadline to win approval of its chapter 11 plan to March 31 and also gave the company until May 31 to win creditor support for its plan. Delphi faced a Dec. 31 deadline to complete its plan and a Feb. 29 deadline to solicit creditor support. The company has already proposed a reorganization plan and won approval from the court to send the plan to creditors for a vote.

InPhonic, which sells wireless products and services, sought bankruptcy protection after it agreed to be bought by a private-equity firm, Bloomberg News reported yesterday. InPhonic listed assets of $120.9 million and debt of $179.4 million in chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Del. InPhonic, which hired the investment banking firm Lazard last month to explore a possible sale, plans to sell its assets to an affiliate of Philadelphia-based Versa Capital Management, the company said. Seven affiliates of InPhonic also filed for bankruptcy protection yesterday. The company, which began operations in 1999, asked that the cases be jointly administered by the court.
See Also:  Bankruptcy Phoenix

U.S. Education Secretary Margaret Spellings announced yesterday an overhaul of rules governing the student loan industry, including measures prohibiting lenders from offering schools gifts in exchange for business and a mandate that each university include at least three companies on its preferred lender list, the Washington Post reported yesterday. The new regulations, which will be released today and go into effect in July, were crafted in response to criticism that the department has not provided adequate oversight of the $85 billion-a-year industry. Federal education officials also said that the department has sent letters to 921 colleges and universities nationwide seeking details on their relationships with lenders. The letters, mailed in July, were sent to institutions at which more than 80 percent of loans are handled by a single lender. A second set of letters was sent to 55 schools and 23 lenders in October.

William S. Lerach, the California plaintiff’s attorney who helped turn class-action lawsuits into a lucrative trend, pleaded guilty yesterday to a conspiracy charge stemming from his role in a wide-ranging kickback scheme, the Washington Post reported today. Lerach acknowledged in a Los Angeles courtroom that he and his former partners at the Milberg Weiss firm hid payments to people who served as repeat plaintiffs in their class-action suits. According to federal prosecutors, the lawyers found people who held shares — often only a few — in companies that were accused of fraud. By getting those people to sign up as early plaintiffs in civil lawsuits against the companies, Lerach and his firm were able to exert greater control over the cases and reap additional fees. In all, the scheme infected more than 150 cases over the past two decades, bringing Lerach and his partners well over $200 million, according to court papers.

U.K. banks approved the fewest mortgages in 26 months in September as borrowing costs increased, adding to evidence that the property market is cooling, Bloomberg News reported today. Lenders granted 102,000 loans for house purchase, the fewest since July 2005 and down from 108,000 in August, the Bank of England said in London today. Borrowing rates for home loans are rising after the central bank lifted its benchmark interest rate to a six-year high in July and credit dried up following the collapse of the U.S. subprime mortgage market. The Bank of England raised the benchmark interest rate to 5.75 percent in July, the highest among Group of Seven industrial nations, in an effort to curb inflation.

House Ways and Means Chairman Charles B. Rangel (D-N.Y.) yesterday unveiled a broad proposal that includes repealing the alternative minimum tax as well as reducing taxes on an estimated 91 million mostly lower- and middle-income Americans while raising them for many in the upper income brackets, the Washington Post reported today. Among the bill’s most controversial elements is a surtax of four percentage points on married couples with adjusted gross income of more than $200,000 and 4.4 percentage points for couples with more than $500,000 in income. The bill also targets the managers of hedge funds and private-equity firms as executives’ earnings would be taxed at ordinary income tax rates, which are more than double the capital gains rate they now pay. Hedge fund operators would also lose their ability to defer income taxes through the use of offshore havens. The plan would not change the amount of revenue collected, according to the staff of the Joint Tax Committee, but it would alter existing law to shift $1 trillion of the tax burden over 10 years. Rangel’s bill is unlikely to be voted on or even debated before next year. Many Democratic leaders have endorsed components of the bill, but Republicans have generally rejected it, and the debate is likely to spill into the 2008 presidential campaign.

French Labor minister Xavier Bertrand said that he will meet with unions and state-owned corporations this week to discuss the proposed reforms to certain public-sector pension schemes that sparked strike action last week, AFXNews.com reported today. The government wants to end by 2012 an arrangement that allows workers in certain state sectors to draw a full pension after 37.5 years of contributions, bringing them into line with the 40 years required elsewhere in the public sector. The government said that while it is willing to negotiate the details of the reforms, it will not give way over the extension of contributions to 40 years.