December 22, 2006
The economy continued to lose momentum in the third quarter, expanding at a weaker-than-expected 2 percent inflation-adjusted annual rate, and many signs suggest it will stay in a lukewarm zone in the months ahead, the Wall Street Journal reported today. After surging to 5.6 percent inflation-adjusted annualized growth in the first quarter, U.S. gross domestic product eased to a 2.6 percent pace in the April-June period before cooling to a 2 percent rate in the third quarter, the Commerce Department reported. Growth in the July-September span had been pegged at a 2.2 percent rate, but weaker readings on housing-sector investment and business inventories led to a downward revision. Read more. (Registration required.)
Airlines
Comair Wins Ruling on Pilot Wage Cuts
A federal bankruptcy judge ruled yesterday that Delta Air Lines subsidiary Comair can impose wage cuts and changes in work rules for the regional airline's 1,500 pilots, the final holdouts in the airline's plan to trim labor costs as part of its restructuring, the Associated Press reported today. Pilots have threatened to strike if concessions are imposed on them. U.S. Bankruptcy Court Judge Adlai Hardin gave Comair permission to throw out its contract with the pilots, and the airline said Thursday that it would impose those concessions Dec. 30 if a deal is not reached. Comair, based in Erlanger, Ky., near the Cincinnati/Northern Kentucky International Airport, has been seeking concessions of $15.8 million a year as part of its restructuring plan to save $70 million annually. Comair's plan also includes concessions from its flight attendants and mechanics. Read more.
Delta Expected to Weigh Options
An unofficial group of Delta Air Lines creditors said today that it looked forward to discussing the carrier's plan to exit bankruptcy, but added it expects the No. 3 U.S. airline to weigh other options, Reuters reported today. Delta earlier this week filed a reorganization plan that would see it emerge from bankruptcy as an independent carrier, and rejected an $8.3 billion takeover offer from US Airways Group. The unofficial committee of unsecured claimholders' comments come after a similar statement by Delta's court-approved official committee of unsecured creditors, and a day after US Airways dismissed the stand-alone plan as "unrealistic." Delta has repeatedly said that it intends to emerge from bankruptcy as an independent carrier and hopes to get creditors to vote on its plan by February or March so that it can exit by spring of 2007. Read more.
After months of negotiations, Northwest Airlines Corp. and Pinnacle Airlines reached a new agreement yesterday afternoon, the Memphis Business Journal reported today. NWA and its regional partner Memphis-based Pinnacle Airlines have signed an amended Airline Services Agreement, subject to approval by the bankruptcy court overseeing Northwest's chapter 11 proceedings. Under the agreement, effective Jan. 1, 2007, Pinnacle will continue to serve Northwest through 2017. In addition, the two airlines have also agreed that Pinnacle will receive $377.5 million NWA owes it to settle all claims that Pinnacle has against Northwest. Read more.
SEC Accepts Twinkie Maker’s Offer
The U.S. Securities and Exchange Commission has settled an investigation into bankrupt snack cake maker Interstate Bakeries Corp. over the way it set its workers' compensation reserves, Bankruptcy360 reported yesterday. In a settled civil action filed Wednesday before the U.S. District Court in Kansas City, the SEC accused former IBC financial officer Paul Yarick of ignoring the company’s insurance consultant, claiming he used obsolete information to set quarterly workers' comp reserves and was therefore able to trick shareholders into believing IBC had enough money for future claims, the complaint said. As a result, IBC filed financial statements that understated its reserves by at least $30 million and overstated its pre-tax income, the complaint added. As part of the deal, Yarick consented to a $50,000 civil penalty and an officers and directors bar of five years. Neither Yarick nor the company admitted or denied wrongdoing in the matter. Read more.
Delphi Gets Second Investment Offer
Delphi's second-largest shareholder, Highland Capital Management, proposed investing $4.7 billion in the auto-parts maker, exceeding an offer by rival hedge funds, Bloomberg News reported today. The new offer, made in a letter to Delphi's board of directors, came three days after Delphi agreed to sell a stake to five New York financial firms, led by Cerberus Capital Management and Appaloosa Management, for $3.4 billion. Appaloosa is Delphi's biggest shareholder. Highland, which holds 8.8 percent of Delphi, is the fourth party to oppose the Cerberus-Appaloosa plan. Bondholders, creditors and a union representing many Delphi workers have filed objections in U.S. Bankruptcy Court. Read more.
Jobs Lost as Ohio Plant Closes
Hourly workers of Creative Engineered Polymer Products in Middlefield, Ohio, finished their last day of work with the company Wednesday, the Ashtabula Star-Beacon reported today. The factory is closing down on Dec. 29, when salaried employees have their last day. CEPP, an Akron, Ohio, firm, filed for chapter 11 bankruptcy on Sept. 20, according to the company's human resources director. Five plants, three in Ohio and two others, in Bishopville, S.C. and Tuscaloosa, Ala., will close during the next 10 days. The other Ohio CEPP plants closing are in Canton and Crestline. One hundred sixty employees are losing their jobs in Middlefield. Read more.
Details Emerge on Oklahoma Medical Center's 'Stalking Horse' Bidder
The "stalking horse" company that bid millions for the bankrupt Moore Medical Center in Oklahoma City is actually a newly formed holding company headed by an Oklahoma City medical consultant with former ties to Schuster Group CEO Michael Schuster, the Norman (Okla.) Transcript reported today. Acadiana Healthcare of Oklahoma Inc.—the entity that emerged as the "stalking horse" bidder when it offered $48 million for the Moore Medical Center—is a holding company formed by Oklahoma City medical consultant Robert R. Hicks and a group of private investors. Most of that group, Hicks said, want to remain anonymous until the hospital's fate is decided early next year. However, Hicks confirmed that earlier, he was a consultant for Schuster Group CEO Michael Schuster. Though officials with other potential bidders— such as Norman Regional Hospital and Oklahoman City's Integris Health— have been close-mouthed about their interest in the Moore facility, Acadiana Healthcare's offer is the first bid made public. Read more.
International
U.K. Screen Printing Co. in Liquidation
The U.K.’s Secretary of State for Trade and Industry has presented a petition in the High Court to wind up Print 88 Ltd. in Somerset, England, in the public interest, the Creditman reported today. The company operated a screen printing service selling banners, signs and advertising. The petition to wind up the company was presented following an investigation carried out by Companies Investigation Branch under section 447 of the Companies Act 1985 (as amended). The case is now subject to High Court action and no further information will be available until the petition is heard on Feb. 28, 2007. The petition was presented under s124A of the Insolvency Act 1986. The Official Receiver was appointed as provisional liquidator of the company on Dec. 1. Read more.
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BEA Systems Inc., a San Jose, Ca. provider of enterprise software, got a
second warning that its stock could be delisted from trading on Nasdaq. The
company, which earlier delayed filing its second quarter results, is
reviewing its stock-options practices.
Finish Line Inc., an Indianapolis, In. retailer of footwear, activewear and
accessories, reported a third quarter net loss of nearly $3 million on a 3%
increase in sales--to more than $281 million.
Ford Motor Co.'s days as the U.S.'s second-biggest carmaker are numbered.
The beleaguered Dearborn, Mi. firm said that Toyota Motor Corp. of Japan
will likely pass it for good in the next year to become the second-largest
auto manufacturer in the U.S., behind General Motors Corp. Ford's internal
projections predict that it could fall to a permanent third place as soon as
January, sooner than the company had anticipated. CEO Alan Mulally, who
came on board several weeks ago, has said that Ford has to focus on reducing
expenses and rethinking the way it does business rather than worrying about
measures such as marketshare. Ford has been the U.S.'s number-two automaker
since the 1920s.
International Assets Holding Corp. of Altamonte Springs, Fl., a securities
firm, reported a fourth quarter net loss of $2 million on a 44% revenue
decline--to just under $4 million. For the year, its net income increased
32%--to $3.5 million, on a 36% increase in revenue--to $33.8 million.
Juniper Networks Inc., the Sunnyvale, Ca. maker of network equipment, will
record at least $900 million in noncash charges to rectify accounting errors
resulting from misdated stock-option grants. That figure exceeds the
company's combined net income from the years it has operated as a public
company. In an internal review, the company uncovered "serious concerns"
about the actions of certain former management.
Tecumseh Products Co., a Tecumseh, Mi. maker of compressors, small engines
and powertrain products, reported a third quarter net loss of $37.8 million.
Its operating loss of $45.3 million included extra charges of $8.4 million.
Revenue declined 5%--to $429 million.