Bankruptcy Judge Kevin J. Carey on Tuesday rejected Spansion Inc.’s bid for authorization to enter into a patent litigation settlement and licensing deal that called for Samsung Electronics Co. Ltd. to pay Spansion $70 million, Bankruptcy Law360 reported yesterday. The deal was geared toward resolving three cases: an action the debtors filed against Samsung with the U.S. International Trade Commission in November 2008, a simultaneous patent infringement suit the debtors brought against Samsung in the U.S. District Court for the District of Delaware and a patent infringement suit Samsung filed in 2009 in Japan against a Japanese Spansion subsidiary. Judge Carey wrote that he was unable to conclude that the settlement agreement was fair, reasonable and in the best interest of the estate.

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A key Senate Democrat said yesterday that it was unlikely the chamber would consider a bill to allow bankruptcy judges to modify terms of a primary mortgage until after the spring recess, CongressDaily reported today. Sen. Evan Bayh (D-Ind.) said there is not enough support to prevent a filibuster of the bill that would allow mortgages to be restructured through a chapter 13 filing. “I think this is going to be probably not taken up until after the upcoming recess. But right now I think there is going be some difficulty in getting to the 60 votes,” said Bayh. Senate Majority Leader Reid said that timeframe was about right. “I would expect very soon after we get back after April recess that we’ll be working on what they [Banking Committee] report out,” he said. He is working with Judiciary ranking member Arlen Specter to narrow the eligibility for borrowers who could cram down the principal of their mortgages. Senate staffers met yesterday afternoon in an effort to work on a compromise. The House-passed version allows bankruptcy judges to consider whether homeowners were offered a “qualified” loan workout similar to a plan the Obama administration has announced to help lower the interest rate for up to 9 million families. But the House measure did not mandate that the borrower had to take such an offer if he were eligible, in lieu of cramdown - a provision advocated by the lending industry. Senate moderates are pushing for such a requirement. Bayh said he is looking to impose a sunset period for the cramdown provisions.

Circuit City Stores Inc. began liquidating its remaining 567 U.S. stores on Saturday, as the electronics and digital-media retailer started marking down goods by 10-30 percent with higher discounts as the expected April closing approaches, the Wall Street Journal reported on Saturday. “We are extremely disappointed by this outcome,” Circuit City’s acting chief executive, James A. Marcum, said in a statement. “Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement” to sell the company and avoid liquidation, he said. The going-out-of-business sales will last roughly 90 days, company officials said.

General Motors Corp. COO Fritz Henderson said that the company’s path to recovery is fraught with uncertainty and potential pitfalls that could force more painful restructuring in the years to come, the Wall Street Journal reported today. The industry already appears off to a tough start in 2009. Henderson said January auto sales are shaping up no better than last month, when GM’s sales fell 31 percent. Despite the foreboding tone, Henderson reiterated his confidence in GM’s recovery plan, presented to the U.S. government as a condition of winning up to $13.4 billion in federal loans.

Building industry economists said that the worst U.S. housing downturn since World War II is likely to deepen further this year with no broad recovery until at least 2010, the Wall Street Journal reported today. Single-family-housing starts, which fell 40 percent to 617,000 in 2007, are expected to drop to about 441,000 this year — the lowest since records have been kept — according to the economic outlook of the National Association of Home Builders released yesterday. That would be a nearly 75 percent drop from the industry’s highwater mark of 1.7 million single-family starts in 2005. Economists from Freddie Mac, the government-backed lending agency, mortgage insurer PMI Group Inc. and the Portland Cement Association trade group also predicted this year would be worse than 2008 in terms of starts and overall housing activity. One of the big problems for the industry, economists said, is a huge overhang of unsold homes brought on in large part by extensive job losses. The inventory of new homes on the market now stands at 11.5 months, more than double the level normally required to encourage builders to begin building again.

Bankruptcy filings among publicly traded companies surged 74 percent in 2008, according to data from BankruptcyData.com on Friday. There were 136 bankruptcy filings by publicly traded companies in 2008, compared with 78 in 2007, according to the data. The 2008 results were still short of the record 263 bankruptcy filings in 2001. While the year-over-year growth in bankruptcies rose quickly, the value of the firms seeking protection grew much faster. The 136 companies seeking bankruptcy protection in 2008 had about $1.16 trillion in assets, compared with just $70.5 billion in assets for firms filing for bankruptcy protection in 2007. Overall, 12 publicly traded financial firms filed for bankruptcy. Those 12 firms had $1.09 trillion in assets, according to BankruptcyData.com.

Domino’s Pizza Inc. CEO David Brandon said that nine franchisees have filed for chapter 11 protection since November 2007, leading to the closure of 10 locations, Reuters reported yesterday. Brandon called the time when the nine franchisees filed for chapter 11 a “perfect storm.” The filings occurred between November 2007 and January 2009, according to information provided by the company. Domino’s added 70 new franchisees in the first nine months of 2008, compared with 93 in all of 2007, Brandon said. The company announced plans in October to save cash and said it may make loans directly to franchisees. The company also said it might help its best franchisees buy weaker operators.

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Residential real estate developer Tarragon Corp. said yesterday that it and some of its subsidiaries have filed for chapter 11 protection because of financial losses caused by falling prices and slower sales in its home building division, the Associated Press reported today. Tarragon, a multifamily housing developer with operations concentrated in the Northeast, Florida, Texas and Tennessee, said that it will seek additional outside financing and participation of a new investor or investor group. Tarragon said it has received a commitment for debtor-in-possession financing from an affiliate of ARKO Holdings Inc., an Israeli company.

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A $300 billion federal program meant to prevent foreclosures is doing almost nothing to aid U.S. homeowners, Reuters reported today, but it could become effective if Washington slashes cumbersome red tape, the nation’s top housing policymaker said. At issue is the Hope for Homeowners program created by Congress in July to help 400,000 troubled homeowners secure a new loan. The program has aided fewer than 1,000 borrowers since it began in October and it is a flop with both lenders and borrowers discouraged by its excessive costs and paperwork, said Housing and Urban Development Secretary Steve Preston. As originally written, the housing rescue bill required mortgage companies to write down the loan by 10 percent and homeowners could have to share future home price gains with the federal government. Still, he said, the program’s safeguards have made it all but ineffective. Democrats who control Congress and the Obama transition team both seem to understand that the Hope for Homeowners program has serious flaws, Preston said, and they seem prepared to fix them. Preston warned policymakers not to relax lending standards to the point where the government begins to underwrite excessive risk.

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Circuit City goes on the auction block at noon today, the Richmond (Va.) Times-Dispatch reported today. Potential buyers can bid on the consumer electronics company as a whole, per store or on individual assets. The auction, being carried out in the Manhattan offices of Circuit City Stores Inc.’s attorneys, is scheduled to finish tomorrow. According to an order filed yesterday by U.S. Bankruptcy Judge Kevin Huennekens, when the auction is completed the company must post the results on the retailer’s bankruptcy Web site, http://www.kccllc.net/circuitcity. On Friday, the chain will seek the judge’s approval for a deal or deals, or to get ongoing financing if necessary, according to a court order. Judge Huennekens also allowed the chain to enter into a stalking-horse agreement. If the company fails to find a buyer or secure additional financing, it could be forced to liquidate, the retailer said. Circuit City has been losing money for nearly two years and struggled through the recent holiday shopping season. It filed for bankruptcy Nov. 10 after announcing it was closing 155 stores and cutting about 700 jobs at its headquarters.

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