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October 17, 2005
name='1'>U.S.
Senate Plan More Than Doubles Pension Premiums
A plan to sharply
increase
pension insurance premiums and collect even larger sums from companies
that
shed pension obligations in bankruptcy is scheduled for a vote by a
Senate committee
this week, Senate aides said Friday, according to Reuters reports. The
premium
hike had been threatened by Sen. Mike Enzi (R-Wyo.) a week ago, when
he warned
that a dramatic premium increase would be needed if business interests
continued
to block comprehensive pension legislation, Reuters reported Friday.
The proposal
would raise insurance premiums to $46.75 per participant, per year,
from the
current $19. It would also force companies that drop their pension
plans in
bankruptcy to pay a special premium for the privilege—$1,250 per
plan
participant—in each of the first three years after emerging from
bankruptcy,
according to a summary of the proposal released by Health, Education,
Labor
and Pensions (HELP) Committee aides. The insurance premiums are paid
to the
Pension Benefit Guaranty Corp. (PBGC), which has a $23.3 billion
deficit that
is expected to get worse if companies in bankruptcy, including two
airlines
and the nation’s largest auto parts supplier, Delphi Corp.,
transfer their pensions
into the agency. The proposal is part of the HELP committee’s
recommendations
for meeting federal budget targets. A summary of the plan says that
comprehensive
pension reform, if enacted, would override the premium increases in
the proposal.
href='http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-10-14T172204Z_01_N14550642_RTRIDST_0_CONGRESS-PENSIONS.XML'>Read
the full story.
BAPCPA
id='2'>Bankruptcy
Relaxing Unlikely
House and Senate
GOP leaders
have rejected efforts by consumer advocates and bankruptcy attorneys
to delay
the new bankruptcy law’s implementation for victims of the
recent hurricanes
by at least a year, CongressDaily reported today. They also
have opposed
efforts to permanently exempt hurricane victims from a new means test
and several
other major provisions in the bill, which is scheduled to take effect
today.
Those lawmakers contend that victims of the recent hurricanes already
qualify
for exemptions under the bill’s "special circumstance"
provisions,
and contend that recent regulatory actions by the Justice Department
are evidence
that the law is working as intended. The U.S. Trustee Program (USTP)
announced
that it had taken several steps to provide debtors in
hurricane-affected areas
with leeway under the law. For example, the USTP decided to
temporarily exempt
residents of Louisiana and southern Mississippi from the law’s
requirement that
individual debtors go through credit counseling before filing for
bankruptcy.
Senate Finance Chairman Charles Grassley (R-Iowa), the bankruptcy
law’s chief
Senate sponsor, also believes that the USTP’s actions
demonstrated the law’s
adaptability to special circumstances, according to a Grassley aide.
Grassley
is co-sponsoring legislation with Sen. David Vitter (R-La.) to specify
that
victims of a natural disaster would qualify for exemptions under the
bankruptcy
law’s "special circumstance" provisions and make other
targeted modifications
for natural-disaster victims. That bill is awaiting action by the
Senate Judiciary
Committee. But Sen. Russell Feingold (D-Wis.), who is sponsoring
legislation
providing the types of broader exemptions sought by consumer groups,
has argued
that while the bankruptcy law allows the trustee to waive the credit
counseling
requirements, it does not provide that type of flexibility for other
provisions.
id='3'>New
Law Raises Stakes for Debtors’ Attorneys
New obligations,
responsibilities
and liabilities awaits bankruptcy attorneys this week as a
controversial law
directly affects the attorney-client relationship, warn practitioners,
academics
and bar groups, the New York Law Journal reported today.
Although the
effect on debtors has been well-publicized, resulting in a surge in
filings
in recent weeks as savvy debtors filed ahead of the deadline, the
repercussions
for attorneys and their practice is at least as dramatic, experts say.
Suddenly,
attorneys will be personally liable for the accuracy of their
clients’ petitions.
They will be required to advertise themselves as "debt relief
agencies."
They will be barred from telling clients certain pertinent
information, such
as the fact that it is legal to incur new debt on the eve of
bankruptcy. And
they will be required to give advice that some practitioners say is
directly
contrary to other sections of the U.S. Bankruptcy Code, potentially
pitting
their ethical obligations against their legal responsibilities.
href='http://www.law.com/jsp/article.jsp?id=1129280709784'>Read
the full story.
id='4'>BAPCPA
Makes Debt Writeoffs Tougher
BAPCPA takes effect
today,
making it harder for consumers, and possibly businesses, to write off
debts
and get a clean slate, AFP reported yesterday. Lawmakers inserted a
number of
changes into the business bankruptcy code, aiming to shorten the
reorganization
process and give more clout to creditors in court. Mallory Duncan of
the National
Retail Federation said the law is aimed at curbing abuses in
bankruptcy, especially
at the individual level. Under the new law, Duncan said there is
flexibility,
"but if they can afford to repay, they have to repay what they
can."
Backers of the law point to high-profile bankruptcies like those of
CNN host
Larry King, actor Burt Reynolds and boxer Mike Tyson, who ran up
millions in
debt. But consumer advocates and others say that many people get over
their
heads in debt though "predatory" lending—ranging from
home equity
loans with high interest rates to credit cards with overly generous
limits.
Linda Sherry of Consumer Action pointed out that revolving
debt—most of
which is credit card debt—increased nearly 15-fold from January
1980 through
2004, from $54 billion to $791 billion, heightening bankruptcy risks.
David
Yen, a bankruptcy specialist at the Legal Assistance Foundation of
Metropolitan
Chicago, said that low-income consumers may still be able wipe the
slate clean,
but that those in the middle may be "priced out of
bankruptcy" because
of the new income limits and complexities, which make legal costs
higher.
href='http://news.yahoo.com/s/afp/20051016/pl_afp/useconomybankruptcy_051016040631'>Read
the full story.
id='5'>Bankruptcy
Law Affects Debtors of All Ages
Two age groups,
debtors under
35 and those over 65, are expected to have a particularly hard time
under the
law, the Associated Press reported yesterday. For young people with
jobs, it
will be probably tougher under the new bankruptcy law to qualify for
chapter
7 bankruptcy, which would wipe out much or all of their debts. For the
elderly,
a group badly in need of debt erasure, higher legal fees are likely to
be the
big disincentives. Legal fees for chapter 7 bankruptcy now range from
as low
as $500 in some parts of the country to as high as $2,500 in
metropolitan areas
like Chicago and Los Angeles, said lawyer James Cossitt, who
conducted
a national attorney fee survey. Experts estimate that these costs will
double
under the new law, and that older debtors already struggling on
limited incomes
will be hard-pressed to come up with that money. The Congressional
Budget Office
said in a report, based on a projection of 1.6 million chapter 7 and
chapter
13 bankruptcy filings in 2007, that the direct cost of complying with
the new
law will be between $240 million and $800 million, and "some of
the additional
costs incurred by attorneys would most likely be passed on to their
clients"—including
the elderly.
href='http://news.yahoo.com/s/ap/20051016/ap_on_bi_ge/bankruptcy_the_old_and_the_young_1'>Read
more.
id='6'>Delta,
Retired Pilots to Meet in Court
Delta Air Lines Inc. and its pilots are about to go to court over a
key issue
in the carrier’s bankruptcy case—pensions, the
Associated Press reported
yesterday. The pilots want the carrier to continue making minimum
contributions
to their pension plan and certain payments to higher-paid retirees,
while
the company vows that it won’t do either unless a judge forces
its hand. Lawyers
for both sides will argue the issue at a bankruptcy court hearing in
New York
today in a dispute that comes as many observers wonder whether Delta
will
terminate its pension plan altogether if it doesn’t get relief
from Congress.
Read
more.
In other news, DP3 filed a statement in support of the Delta
Pilots’ Pension
Preservation Organization’s motion to compel the continued
payment of collectively
bargained for pension benefits to retired pilots, BankruptcyData.com
reported
today. DP3 was incorporated in October 2003 to protect the pension,
medical,
dental and other retirement benefits of Delta’s retired
pilots, survivors
and dependants.
id='7'>Likely
Buyer Said to Emerge for Failed Commodities Giant
After a weekend of
meetings
to try to save Refco, the large commodity and futures trading firm
that virtually
unraveled last week, a private equity firm, J. C. Flowers, has emerged
as a
likely buyer of Refco’s futures business, said someone briefed
on the negotiations.
That unit was the sole functioning arm of Refco, the Wall Street
Journal
reported today. J. C. Flowers, a $1.5 billion to $2 billion fund
founded by
J. Christopher Flowers, a former partner at Goldman Sachs, could
announce as
early as today that it will buy the business for an undisclosed price.
Negotiations
with company officials and advisers continued last night, although
other potential
buyers expressed interest. J. C. Flowers is based in New York. Refco
is expected
to put its capital markets business into bankruptcy this week. Refco
announced
Thursday that it had imposed a 15-day moratorium on all activities in
the unit,
which offers services like lending stock, financing and clearing
trades to hedge
funds and other institutions as well as brokerage services for
derivative and
foreign exchange transactions, because it did not have enough cash. It
was the
only one of Refco’s three units that was unregulated.
href='http://www.nytimes.com/2005/10/17/business/17refco.html%20'>Read
more.
id='8'>Huffy
Corp. Emerges from Chapter 11
Huffy Corp. Friday
announced
that it has emerged from the chapter 11 reorganization process,
PRNewswire reported
Friday. The Ohio-based company officially concluded the reorganization
process
Friday after completing all required actions and satisfying all
remaining conditions
to its reorganization plan, which was confirmed by the U.S. Bankruptcy
Court.
One of the conditions to Huffy’s emergence was the receipt of
the necessary
exit financing; and the condition was satisfied with the
company’s closing yesterday
of a $40 million revolving loan facility provided by a syndicate led
by Wachovia
Capital Finance Corp. and Wachovia Capital Markets LLC, and a $10
million term
loan from Patriarch Partners LLC.
href='http://biz.yahoo.com/prnews/051014/clf029.html?.v=24'>Read
the full story.
id='9'>Foamex
Financing Objections Filed
Foamex
International’s
official committee of unsecured creditors filed an objection to the
company’s
motion for an entry of a final order pursuant to §§361, 363
and 364
of the Bankruptcy Code authorizing the debtors to obtain post-petition
financing,
authorizing the use of cash collateral, authorizing the repayment of
certain
pre-petition secured debt, granting liens and super priority
administrative
expense status, and providing adequate protection, BankruptcyData.com
reported
today. Pension Benefit Guaranty Corp. also filed a limited objection
to the
motion.
id='10'>O’Sullivan
Industries to File for Chapter 11
O’Sullivan
Industries Holdings,
Inc. and certain of its direct and indirect subsidiaries filed for
chapter 11
bankruptcy protection, PRNewswire reported Friday. The company, with
headquarters
in Roswell, Ga., is a leading designer, manufacturer and distributor
of ready-to-assemble
furniture and other products. Subsidiaries included in the filing are
O’Sullivan
Industries, Inc., O’Sullivan Industries - Virginia Inc. and
O’Sullivan Furniture
Factory Outlet Inc. To expedite the court proceedings,
O’Sullivan will file
its reorganization plan and disclosure statement, the material
economic terms
of which have the support of holders of approximately 83 percent of
its senior
secured notes. The plan must be approved by the U.S. Bankruptcy Court.
id='11'>Photocircuits
Files Chapter 11
Photocircuits
Corp., a Glen
Cove, N.Y.-based manufacturer of printed circuit boards, filed for
chapter 11
protection Saturday, EMSNow reported. The filing involves only the
company’s
U.S. operations and does not affect the company’s Costa Rican or
Philippine
operations. The company has taken this step to allow for the
restructuring of
its financial obligations following the recently completed
consolidation of
its North American operations from three facilities to a single
manufacturing
campus in Glen Cove. This consolidation was necessitated by the
structural changes
in the U.S. Printed Circuit Industry during the past five years.
href='http://www.emsnow.com/npps/story.cfm?ID=14830'>Read
more.
id='12'>Gardenburger
Blames Carb Fears for Chapter 11
Gardenburger Inc.,
an Irvine,
Calif., company that claims to have originated the veggie burger, said
Friday
that it had filed for chapter 11 bankruptcy protection, the Los
Angeles Times
reported Saturday. The company said in a statement that it planned to
continue
operations and eventually emerge as a private firm. In documents filed
in bankruptcy
court in Santa Ana, Calif., Gardenburger listed $20.2 million in
assets and
$40.2 million in debts. Gardenburger, whose frozen vegetarian products
are sold
in more than 30,000 stores, blamed the anti-carb movement for its
financial
woes.The company lost $11.1 million in the nine months ended June 30,
and its
sales fell 10.5 percent to $33.8 million compared with the same period
a year
ago. To fight back, the company said that it "reformulated"
its veggie
burger to reduce its carbohydrate content. It had also diversified its
product
line, introducing selections such as Meatless Citrus Glazed Chicken,
but it
wasn’t enough. Its stock fell three cents to a penny a share on
Friday.
id='13'>The
Austin Co. to Reorganize Under Chapter 11
The Austin Co., an
international
firm offering a comprehensive portfolio of in-house architectural,
engineering,
design-build and construction-management services, announced Friday
that it
and two affiliates have filed for chapter 11 protection, PRNewswire
reported
Friday. The company said that the filing would facilitate completion
of its
previously planned strategic restructuring. The Austin Co. will strive
to maintain
business as usual in the interim and that it expects that employees
and vendors
will continue to be paid for services performed following the filing
in the
ordinary course of business. Austin intends to finance continued
operations
with cash during the chapter 11 process.
href='http://biz.yahoo.com/prnews/051014/clf041d.html?.v=1'>Read
more.
id='14'>Vioxx
Litigation Likely to Span Years
As Merck & Co.
continues
its defense in the second Vioxx product-liability trial, many
observers say
settlements in the thousands of similar cases across the country are
probably
years away, the Associated Press reported Saturday. The individual
physical
condition of each Vioxx user, the fact that heart ailments are a
leading cause
of death in the United States, and Merck’s steadfast resolve to
fight suggests
that the day when cases are bundled together and settled is a distant
one. As
of Thursday, there are more than 5,600 lawsuits by former Vioxx users
or their
family members alleging that the painkiller that once had 20 million
users caused
serious cardiovascular and heart problems. Merck voluntarily withdrew
the drug
from the market last year after a study revealed that people taking
Vioxx for
more than 18 months suffered twice as many heart attacks or strokes.
But the
firm says that until that withdrawal, numerous company and independent
studies
showed the drug to be safe.
href='http://www.miami.com/mld/miamiherald/business/national/12919541.htm'>Read
more.
id='15'>Arkansas
Diocese Startled by Suit
Officials with the
Fairbanks,
Ark., Catholic Diocese were surprised by the "new twist" in
the most
recent civil suit filed against a priest, diocese spokeswoman Ronnie
Rosenberg
said, the Fairbanks News-Miner reported today. The suit claims
that the
Rev. James E. Jacobson, a Jesuit priest who served more than a decade
in western
Alaska, sexually assaulted two women, impregnated them and left two
sons behind.
Rosenberg said that the latest filing came as a surprise because it
differs
from the more than 80 suits filed so far against priests who served in
diocese.
Most of those claims allege child sexual abuse.While diocese officials
were
surprised, the Rev. John Whitney, provincial of the Oregon Province of
the Society
of Jesus, said that he was recently made aware that Jacobson is the
father of
the two male complainants. DNA test results attached to the complaint
show a
99.5 percent probability that John A. Doe and a 99.95 percent
probability that
John B. Doe are Jacobson’s children.
href='http://www.news-miner.com/Stories/0,1413,113%7E7244%7E3094627,00.html'>Read
the full story.
id='16'>United
Way Worried about Bankruptcy Effect
Mass layoffs at
Delphi Corp.
could have a substantial impact on the United Way’s year-end
fundraising
campaign, Crains reported today. Last year, the automotive
supplier’s
U.S. employees contributed $6.4 million to United Way of America
affiliates
across the country, said Ron Beeber, Delphi director of corporate and
government
community relations and director of the Delphi Foundation. About
$530,000 of
that came to the United Way for Southeastern Michigan, said CEO
Michael Brennan.
The ongoing compression of the automotive industry and supplier
network creates
economic challenges for the United Way and the nonprofits it funds, in
terms
of their collective capability to respond to social issues, Brennan
said. So
far, the United Way has received commitments of about $20 million, he
said.
Many large corporate workplace campaigns have yet to begin, including
Delphi’s,
which is scheduled for Oct. 31.
id='17'>Krispy
Kreme Affiliate Files for Bankruptcy
Krispy Kreme
Doughnuts Inc.
said today that a majority-owned affiliate and franchisee partner in
the Philadelphia
region filed for chapter 11, sending the doughnut company’s
stock down 18 percent,
Reuters reported today. Krispy Kreme, still grappling with an
accounting investigation
that prompted it to restate earnings over several years, said it
agreed to provide
funding to Freedom Rings LLC during the restructuring process. Freedom
Rings
operates six stores in the Philadelphia region, a Krispy Kreme
representative
said. The parent company has about 360 stores and 50 satellites in 45
U.S. states.
Krispy Kreme had expected the joint venture to open 16 stores in
Philadelphia,
New Jersey and Delaware, according to a March 2001 statement. Shares
of Krispy
Kreme, which traded above $40 in 2003, fell 18.1 percent to $3.98 on
the Inet
electronic brokerage early on Monda