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August 29, 2007
name='1'>District Judge Overturns Order in Enron Claims
Case
A U.S. District Court
judge has overturned a bankruptcy court's order in the Enron Corp. case,
ruling that institutions that purchase claims against a bankrupt
company from sellers who engaged in inequitable conduct may still
recover those claims without penalty,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Shira A. Scheindlin of the Southern District of New York on Monday
vacated and remanded a bankruptcy court order that dismissed
Springfield Associates LLC and intervenor Citibank NA's attempt to stop
Enron from eliminating
w:st='on'>
size='3'>Springfield
claims. Bankruptcy Judge Arthur Gonzalez
had ruled that
w:st='on'>
size='3'>Springfield
claims could be wiped out even though it was not accused of any
wrongdoing. Scheindlin remanded the order back to the bankruptcy court
to determine whether
w:st='on'>
size='3'>Springfield
purchased or been assigned a $5 million claim against Enron from
Citibank, which is accused of inequitable conduct by allegedly
conspiring with Enron insiders. If the bankruptcy court rules that the
$5 million claim was assigned,
w:st='on'>
size='3'>Springfield
still be subject to the subordination and disallowance provisions of
bankruptcy law, Scheindlin ruled.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33512'>Read
more. (Registration required.)
name='2'>Calpine Files Amended Disclosure Statement and
Reorganization Plan
Calpine Corp. filed an
amended reorganization plan and disclosure statement, which the bankrupt
electricity provider says should augment the returns for holders of
Calpine's common stock, and keeps the company on track to have its
chapter 11 plan confirmed before the end of 2007,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Calpine anticipates that investors will get
$2.05 per share of common stock, as opposed to the $1.80 per share the
company had projected under the original plan. Calpine's midpoint
reorganization value will be $21.7 billion, including $1.4 billion in
distributable cash, assuming that the plan is confirmed by Dec. 31,
Calpine said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33483'>Read
more. (Registration required.)
name='3'>Commentary: Housing Market Not Severely Damaged by Subprime
Mortgage Crisis
While the subprime
mortgage problem is certainly serious, it is a short-term problem mainly
involving mortgages originated in the last three years and will likely
play out over the next two years or so, according to a commentary in
today’s Wall
Street Journal. Loans originated in 2003 and
earlier pose no unusual problem. Those loans were less risky, and those
borrowers have enjoyed the double-digit home price appreciation of 2004
and 2005. Subprime delinquencies and foreclosures have risen sharply
this year, but they are still below the rates reached during 2000-02.
The Mortgage Bankers Association reports that about 6 percent of
subprime loans were seriously delinquent (90 days or more) in 2005 and
the first half of 2006. So far this year, about 8 percent are
delinquent. The foreclosure rate has climbed from 1.5 percent at the end
of 2005 to 2.5. During 2000-02, serious delinquencies were about 12
percent, and foreclosures ranged from 2.5 - 3 percent. Rates could go
higher over the next couple of years. Delinquencies and especially
foreclosures on prime mortgages remained low during 2000-02 --
consistently around 1 percent for serious delinquencies and 0.2 percent
for foreclosures. The subprime spike had no impact on the prime market
then and there is no reason to expect one this time.
href='http://online.wsj.com/article/SB118835560053011923.html?mod=opinion_main_commentaries'>Read
more. (Registration required.)
name='4'>Delays in Appointing Examiner Give Lender
Trouble
Bankruptcy Judge Arthur
B. Briskman of the
w:st='on'>
size='3'>U.S.
size='3'>Bankruptcy Court for the Middle
size='3'>District of Florida issued an order directing the appointment
of an examiner a day after three creditors filed an involuntary petition
for chapter 11 against TransLand, Bankruptcy
Law360 reported yesterday. By Monday, however,
no examiner had been appointed, and the company asked for permission to
issue disbursements for certain payments that were due that day. Along
with their involuntary petition, TransLand’s creditors, Tier One
Bank, Federal Trust Bank and MidCountry Bank, had filed an emergency
motion for the appointment of a chapter 11 trustee to run the embattled
company’s operations, but they did not request an examiner. The
examiner will be given the authority to investigate TransLand and report
back to the bankruptcy court by Aug. 31, Judge Briskman said. The judge
also expanded the examiner’s powers, giving him the authority to
oversee all of TransLand’s spending habits. The company was
instructed not to issue checks or make any disbursements without the
examiner’s approval. The examiner will also have to sign off on
the remittance of mortgage payments received by TransLand, any transfer
of assets and any attempt by TransLand to borrow money or open a line of
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33475'>Read
more.
size='3'>(Registration required.)
Rejects Appeal from Delta Bondholders
More than four months
after Delta Air Lines Inc. emerged from bankruptcy, a federal judge has
rejected an appeal from a group of bondholders who claimed they didn't
get enough out of a settlement,
size='3'>Bankruptcy Law360 reported yesterday.
The case involves more than $400 million in bonds related to Delta's use
of busy hub Cincinnati/Northern Kentucky International Airport and
improvements made to those facilities. Judge John G. Koeltl of the U.S.
District Court for the Southern District of Manhattan affirmed the
settlement, approved by the bankruptcy court in April, ruling that
Bankruptcy Judge Adlai
S. Hardin appropriately approved the deal
between Delta, the Kenton County Airport Board and bond trustee UMB Bank
NA. The appeal was filed by the ad hoc committee of
w:st='on'>
size='3'>Kenton
face='Times New Roman'
size='3'>County
size='3'>bondholders in May. The committee, which holds slightly more
than 10 percent of those bonds, has characterized the settlement deal as
“fatally defective” in court filings and sought full
repayment of debt.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=33451'>Read
more. (Registration required.)
name='6'>Chrysler Proposes Shedding Noncore Assets in UAW
Talks
Newly independent
Chrysler LLC has proposed in its contract talks with the United Auto
Workers shutting down or selling its Mopar unit, a maker of
high-performance and specialty auto parts, and Chrysler Transport, which
manages deliveries of supplies to Chrysler plants, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. While talks between the company and the UAW are
continuing, the union opposes the divestitures and it is unclear whether
the divesting of assets will be part of the final agreement. A sale or
divestiture would put Chrysler, controlled by private-equity firm
Cerberus Capital Management LP, along the same path as rivals General
Motors Corp. and Ford Motor Co. The two have moved in recent months to
pare assets and build up cash as they seek answers for their North
American auto operations.
href='http://online.wsj.com/article/SB118831703711211045.html?mod=hps_us_whats_news'>Read
more. (Registration required.)
name='7'>Census Shows a Modest Rise in
w:st='on'>
size='3'>U.S.
size='3'>Income
The nation’s median
household income grew modestly in 2006, the Census Bureau reported
yesterday, even as the percentage of people without health insurance hit
a high, the New York
Times reported today. Experts said that the
rise in income was mainly a reflection of an increase in the number of
family members entering the workplace or working longer hours. Average
wages for men and women actually declined for the third consecutive
year. The slight improvements in household income and a drop in the
poverty rate came during a period of job growth, particularly toward the
end of 2006, and declining inflation as a result of falling oil prices.
But in 2007, the economy has begun weakening because of the national
housing slump, and inflation has jumped. The average wage peaked at
$17.52 an hour in February and has since fallen, according to Labor
Department data.
href='http://www.nytimes.com/2007/08/29/us/29census.html?ref=us&pagewanted=print'>Read
more.
name='8'>Winn-Dixie Turns Profit after Chapter 11
Grocery-store chain
Winn-Dixie, which emerged from chapter 11 in November, said that it
swung to a profit in the fiscal fourth quarter due to sales growth and
cost-cutting measures, the Associated Press reported yesterday. Net
income for the quarter ended June 27th totaled $20.6 million, or 38
cents per share, versus a loss of $17.2 million, or 12 cents per share,
in the prior-year quarter. Winn-Dixie currently operates 521 stores
in
size='3'>Florida
w:st='on'>
size='3'>Alabama
w:st='on'>
size='3'>Louisiana
size='3'>Georgia
size='3'>Mississippi
company predicts fiscal 2008 same-store sales will see slight growth,
and gross margin also is expected to improve.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/08/28/AR2007082800535_pf.html'>Read
more.
name='9'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
ABI Members receive a 50% discount off of our regular subscription rate
of $500 when subscribing to the complete Daily Summary.
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800-407-9044—use ABI Code 37.
Alcoa Inc.,
soft-alloy-extrusion plants in the
w:st='on'>
w:st='on'>U.S.
Fort Lupton, Co. for an undisclosed amount. Also, Alcoa is
shutting down a third soft-alloy-extrusion facility in
w:st='on'>
w:st='on'>Ga.
workers, after failing to find a buyer for that plant. The sale
and shutdown are part of Alcoa’s plans to spin off its soft-alloy
operations into a joint venture with
w:st='on'>
w:st='on'>Norway
Sapa Group.
BDO Seidman, a
w:st='on'>Chicago
w:st='on'>Il
recently ordered to pay $520 million in damages, might have to sell off
some of its offices or face the possibility of losing partners and
clients, according to some industry observers. BDO was ordered to
pay the fine after being found negligent in failing to uncover fraud in
the audits of a now-defunct factoring company. BDO said that it
will appeal the result.
Chrysler LLC, the Auburn Hills, Mi. automaker, may
divest certain noncore assets in moves related to its contract
negotiations with the United Auto Workers union. The firm may also
sell certain assets and shut down its Chrysler Transport and Mopar
operations, possibly affecting more than 1,200 employees. The firm
was purchased recently by Cerberus Capital Management LP, a
w:st='on'>
private-equity firm. Chrysler’s current restructuring plan
includes trimming its workforce by 13,000 and climbing out of the red by
next year.
EarthLink Inc., the
w:st='on'>Atlanta
w:st='on'>Ga.
it may close several offices and cut nearly 900 jobs as part of its
restructuring efforts. The affected offices include
w:st='on'>Knoxville
Francisco
and
record costs of nearly $70 million from the move and expects to generate
as much as $35 million in savings by the end of 2007. In addition,
the firm authorized a buyback of additional outstanding common shares
valued at $200 million.
ION Media Networks Inc., a
w:st='on'>
Fl. television company which operates sixty stations, reported a second
quarter net loss of $50 million, on a 2.9% revenue increase–to
$55.5 million.
On Track Innovations Ltd., an Israel-based manufacturer
of software and contactless “smart cards”, reported a second
quarter net loss of $3.2 million, on a slight revenue decline–to
$10.2 million.
Safeguard Scientifics Inc. was sued by Phillip Feiner,
a former president and CEO of a unit that Safeguard sold last spring.
Mr. Feiner says he was terminated by the unit, Pacific Title &
Art Studio Inc., because he refused to help Safeguard overstate the
worth of Pacific Title for potential buyers. Mr. Feiner is now
seeking at least $18.6 million in damages. Safeguard sold Pacific Title
in March for $23 million.
Thornburg Mortgage Inc., a
w:st='on'>
w:st='on'>N.M.
that it has returned more than $5 million that it owed to a banking unit
of Wachovia Corp. that had been left over from an unwound series of
derivatives transactions. Earlier the Wachovia unit had sued Thornburg
to collect the amount.