Mortgage crisis tops Mo. business news
Wednesday, December 26, 2007
KANSAS CITY, Mo. -- The nationwide mortgage meltdown spurred some of the state's biggest news stories this year, affecting homeowners and big corporations alike.
H&R Block Inc., best known for its tax preparation services, got tripped up by a little-known part of its business -- subprime lending.
The Kansas City-based company's Option One Mortgage Corp. subsidiary, which loaned money to people with spotty credit, was caught in the same meltdown that claimed dozens of competing lenders as mounting borrower defaults created huge losses.
A plan to sell Option One to Cerberus Capital Management LP, announced in April, fell through by early December as attempts to restructure the acquisition failed amid a worsening market. H&R Block said it would shutter most of Option One, shrinking the Irvine, Calif.-based subsidiary from a high of more than 3,000 employees at the start of the year to 800.
The turmoil also cost Chairman and chief executive officer Mark Ernst his job. Dissident shareholder Richard Breeden was elected in September to H&R Block's board of directors and replaced Ernst as chairman two months later, making good on his plans to refocus the wide-ranging financial services company on its core tax business.
H&R Block not alone
The mortgage mess hammered another Kansas City company as NovaStar Financial Inc., also a subprime lender, watched its stock price drop from $105 in January to, at one point, less than $2.
Continued losses forced the company to give up its status as a real estate investment trust, incurring large tax payments and leading the New York Stock Exchange to move to delist Nova-Star's stock.
By the end of the year, Nova-Star was a shadow of its former self, having closed most of its mortgage lending operations, sold off its mortgage servicing rights and cut its work force from 2,000 employees at the start of the year to 625 in September.
This month, the company said three of its top executives will step down early next year. Chairman and CEO Scott Hartman, Chief Financial Officer Gregory Metz and General Counsel Jeff Ayers will leave the company, effective Jan. 3, because of what NovaStar said was "a result of changes in the business environment and operations of the company."
NovaStar also said its board of directors has elected Lance Anderson, the current chief operating officer and president, to replace Hartman, who has led the company since 1996.
Taum Sauk troubles
In St. Louis, utility Ameren Corp. finally put an end to legal woes over the Taum Sauk reservoir collapse of 2005. The company announced in November that it had agreed to pay $180 million in cash and property to compensate for damage from the collapse.
The settlement ended months of negotiations between the St. Louis-based company and three state agencies. The agreement will end a lawsuit filed by Attorney General Jay Nixon and settle all other state demands for compensation.
The bulk of the settlement cost -- some $103 million -- will go toward rebuilding Johnson's Shut-Ins State Park, which was devastated after the reservoir breach unleashed more than 1 billion gallons of water into the park. Ameren also agreed to pay the Missouri Department of Natural Resources $18 million to extend the Katy Trail along 46 miles of the company's Rock Island Railroad.
Utility Great Plains Energy Inc. announced in February that it planned to acquire rival utility Aquila Inc.'s Missouri assets for $1.7 billion. Aquila's remaining electric and natural gas assets in Iowa, Nebraska, Kansas and Colorado would be purchased by South Dakota-based Black Hills Corp. for $940 million.
Shareholders at both Aquila and Great Plains agreed to the deal, but it ignited a firestorm when it went before the Missouri Public Service Commission for approval. Commission Chairman Jeff Davis disclosed that he had been part of private meetings with an Aquila executive in January to discuss the acquisition, prompting consumer advocates to demand he recuse himself and for the commission to deny the purchase.
An administrative judge has suspended the case until January.
Interstate Bakeries Corp., the Kansas City-based maker of Hostess Twinkies and Wonder Bread, appeared finally headed ready to exit bankruptcy after more than three years. In October, the company filed a reorganization plan, saying specialty lender Silver Point Finance LLC had agreed to provide $400 million in post-bankruptcy financing and that several of its creditors supported the idea.
The final chapter could play out in January when Interstate Bakeries may be forced to hold an auction to choose the best plan.
St. Louis' loss
St. Louis lost another corporate headquarters this year when A.G. Edwards Inc. was purchased by Charlotte, N.C.-based Wachovia Corp. for $6.8 billion. The deal forms the nation's second-largest retail brokerage firm, which will be based in North Carolina.
The new company, called Wachovia Securities, will have more than 3,300 brokerage locations nationwide, more than $1.1 trillion in client assets and nearly 15,000 financial advisers.
St. Louis Anheuser-Busch Cos. Inc. isn't moving anywhere, but the company is building its clout overseas. The nation's biggest brewer announced plans to double distribution in China will include a new brewery in that nation's Guangdong province.
Anheuser-Busch plans to expand Budweiser distribution to an additional 100 Chinese cities, making it potentially available to 150 million new beer drinkers. Anheuser-Busch also said it will introduce Harbin premium brands to 33 new markets in 2007.