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Manufacturing Activity Jumps on Strong Rise in New Orders
In a tentative sign the industrial sector might be crawling out of the
soft patch it hit last year, manufacturing activity expanded in December
for the first time since late summer, according to a report released
yesterday, the Wall Street Journal reported. The Institute for
Supply Management said its December index of manufacturing activity rose
to 54.7 from 49.2 in November, a much larger increase than expected.
Readings above 50 indicate expansion of activity in the manufacturing
sector, while readings under 50 denote contraction. The index was 48.5
in October, 49.5 in September and 50.5 in August, reported the
Journal. Some economists said Thursday's report could be taken as
one small sign that the manufacturing sector is stabilizing after
hitting what Federal Reserve Chairman Alan Greenspan has described as a
'soft patch' in late 2002. 'It is an encouraging sign, but the overall
array of information on the industrial sector is still mixed,' said
Richard Rippe, an economist with Prudential Securities, reported the
online newspaper.
ENRON
J.P. Morgan Settles $1 Billion Suit Over Enron Contracts
J.P. Morgan Chase & Co. said it settled its lawsuit seeking $1
billion from insurers who guaranteed energy trades involving Enron
Corp., Bloomberg News reported. The bank said 10 of the 11 insurers it
sued will pay 60 percent of what they owe. Investors said the settlement
will lift the bank's shares. 'The uncertainty is what was bothering
investors,'' said Steve Wharton, who helps manage $60 billion at Loomis
Sayles & Co., including J.P. Morgan shares, Bloomberg News reported.
'This is the first step in getting more clarity on the legal
situation.''
Separately, Dow Jones reported that Liberty Mutual Insurance Co. and
Hartford Financial Services Group Inc. both confirmed that they settled
J.P. Morgan Chase & Co.'s Enron Corp.-related surety bond claim.
Liberty Mutual agreed to pay less than $12 million to J.P. Morgan while
Hartford would pay $21 million, and both would convey related bankruptcy
rights to the bank, the insurers said in separate press releases
yesterday, reported the newswire.
Enron Building Sells for $102 Million
The sale of Enron Center South, a 40-story Houston office tower built by
the bankrupt
energy company Enron Corp, to a New York investor for $102 million
was completed on Monday, Bloomberg News reported. The buyer, Intell
Management and Investment, outbid Dallas, Texas-based Lincoln Property
Co. and J.E. Robert Cos. of McLean, Va., for the 1.2 million square foot
tower, which was completed early last year, according to Bloomberg.
Proceeds from the sale of the almost-empty tower will go toward repaying
some of the more than $50 billion Enron owes to its creditors, officials
of the energy trader have said, the newswire reported.
WorldCom to Hike Calling Rates for Third Time
WorldCom Inc., the second-biggest U.S. long-distance telephone provider,
is
raising some rates at its MCI residential unit for the third time in
three months after the bankrupt company's sales fell, Bloomberg News
reported. Starting Feb. 1, the state-to-state rate on four plans,
including MCI Anytime Advantage, will rise to 9 cents a minute from 7
cents, according to WorldCom's web site. WorldCom plans to restate
results after admitting $9 billion in accounting errors dating to 1999.
The last time the company issued comparable results, WorldCom reported a
7.8 percent drop in first-quarter 2002 sales, reported the newswire.
AT&T Corp., the biggest long-distance company, and No. 3 Sprint
Corp. are also raising prices after years of declines.
UNITED AIRLINES
Machinists Union Challenges UAL's Plan to Reduce Pay
The union for United Airlines groundworkers filed an opposition to
proposed pay cuts on Tuesday, setting itself apart from the troubled
carrier's other unions, the Wall Street Journal reported.
Judge Eugene Wedoff plans to rule by Jan. 9 or 10 on whether
United parent UAL Corp. can impose wage cuts on the International
Association of Machinists and Aerospace Workers, which represents
approximately 37,000 ground workers, according to the Journal.
UAL, which is under bankruptcy protection, told the judge on Monday that
it expects an operating loss of $3.2 billion for 2002. Jack Brace, UAL's
chief financial officer, said the airline lost $2.8 billion through the
end of November and expects an additional $400 million loss for
December. Last year, the company had a loss from operations of $3.7
billion, reported the Journal.
UAL Noteholder Panel Seeks Protection for Collateral
Loss
An ad hoc committee of noteholders in United Airlines Inc.'s parent, UAL
Corp. is asking a bankruptcy court to prohibit the carrier from using
equipment on which the noteholders have security interests unless they
are granted further protection for any loss in the value of their
collateral, Dow Jones reported. Members of the ad hoc committee hold
about $3 billion in principal of the trust certificates, the motion
said, and they hold first-priority security interests in the equipment
and the leases as well as equipment that is owned by UAL. UAL was
required to make $375 million in payments in connection with some of the
notes on Dec. 2, which the company failed to make. The company filed for
bankruptcy protection on Dec. 9, and has made no post-petition payments
to the noteholders, the motion said, reported the newswire.
Separately, a creditor that owns aircraft that are leased to UAL is
asking the court to force the airline to provide all information in
connection with some of its pass-through certificates, according to Dow
Jones. General Foods Credit Corp. owns 24 trusts, each of which owns one
Boeing 757-200 that is leased to UAL , according to another motion filed
Monday. The U.S. Bankruptcy Court in Chicago will consider both motions
at a hearing on Jan. 15, reported Dow Jones.
Group of United's Creditors Form Unofficial Committee
A group of creditors claiming to hold more than $3 billion in enhanced
equipment trust certificates and equipment trust certificates issued by
UAL Corp.'s United Airlines unit formed an unofficial committee to
respond to the restructuring proposals put forward by the bankrupt
carrier, Dow Jones reported. In a press release yesterday, the group
said the committee is comprised of about 25 institutions and is
formulating responses to United's restructuring proposals, which the
committee said provide 'little or no information about United's
intentions or its overall restructuring plans.' The creditor group opted
to form the unofficial committee despite the recent bankruptcy court
approval of an official creditors' committee to represent the interests
of UAL's creditors, Dow Jones reported.
Sleepmaster Wins Interim OK of Insurance Financing Deal
Sleepmaster LLC won interim authority to enter into an insurance premium
financing agreement with Cananwill Inc. that allows the debtor company
to continue its insurance coverage, Dow Jones reported. The interim
order, signed by Judge Mary F. Walrath of the U.S. Bankruptcy Court in
Wilmington, Del., on Tuesday, authorizes Sleepmaster to finance the
payment of its annual $947,319 premium for crime, commercial property,
excess property, and boiler and machine insurance, according to court
documents obtained Thursday by Dow Jones Newswires. Judge Walrath's
interim order grants Cananwill the right to cancel the policies if a
final order isn't signed by Jan. 22. A hearing to consider final
approval of the insurance premium financing agreement is scheduled for
Jan. 22, reported the newswire.
US AIRWAYS
US Air Reaches Pact with GE Capital
U.S. Bankruptcy Judge Stephen S. Mitchell will consider approving
a settlement that requires US Airways to emerge from chapter 11 by July
1, at a hearing scheduled for Jan. 16, Dow Jones reported. US Airways
says its post-petition lenders have consented to the request and agreed
it's permitted under the parties' current $500 million post-petition
loan. The $120 million DIP loan would be made available in a series of
monthly drawdowns beginning Jan. 27 and ending when the airline
substantially completes a reorganization plan, reported Dow Jones. The
DIP loan would be refinanced with proceeds from a $360 million exit
loan, which GE Capital would provide from the time the airline
substantially completes its plan through Dec. 31, 2008, according to the
newswire. GE Capital also has agreed to modify a past credit agreement,
resolve aircraft or lease issues and forgive or defer 'significant
amounts owed to them by the debtors,' US Airways said, reported Dow
Jones.
US Air, Revenue Bond Trustee in Pact Over $22 Million in
Funds
US Airways Group Inc. has reached a settlement that will allow the
trustee for some of its revenue bonds to disburse up to $19 million in
funds to bondholders, Dow Jones reported. In a filing last Friday with
the U.S. Bankruptcy Court in Alexandria, Va., US Airways said the
parties have agreed to divvy up $22 million in revenue bond funds that
haven't yet been distributed to the airline. US Airways will get $3
million of the $22 million. The rest of the $19 million will be
disbursed by the bond trustee, HSBC Bank USA, to pay fees and
bondholders pursuant to the terms of the bond indenture, reported the
newswire.
AmeriKing Seeks Approval of Retention, Severance Plans
Burger King franchisee AmeriKing Inc. is seeking court authority to make
roughly $1.41 million in incentive and retention payments to critical
employees and up to $2.43 million in severance payments to senior
executives, including its chief executive, Dow Jones reported. AmeriKing
is asking the U.S. Bankruptcy Court in Wilmington to allow it to make
payments under a pre-petition incentive plan, a key employee-retention
plan and a severance plan. The company also seeks authority to reject
the employment contracts of three senior executives, reported Dow Jones.
AmeriKing operates 329 Burger King restaurants in the Midwest and
mid-Atlantic states. The debtor said it's the second-largest independent
Burger King franchisee in the nation.
Allegheny Energy Sells Fellon-McCord, Alliance Energy
Services
Constellation Energy Group agreed to buy Allegheny Energy Inc.'s
Alliance Energy gas supply and transportation unit and its Fellon-McCord
& Associates energy consulting business, Dow Jones reported. In a
press release on Thursday, Constellation said the two companies have a
combined client base of about 1,000 facilities in North America.
Allegheny said the sale of the two companies, both based in Louisville,
Ky., was part of the company's strategy of increasing financial
flexibility by focusing on core assets, reported the newswire. In
addition, the sale reduces Allegheny's contingent obligations and
working capital support, a move that frees up working capital, reported
Dow Jones.
Peregrine Panel Fears Liquidation, Seeks to File Own Plan
The official creditors' committee for San Diego-based Peregrine Systems
Inc.'s chapter 11 bankruptcy announced that it is seeking to terminate
the company's exclusive period for filing a plan so that it may propose
its own reorganization plan for the software company, reported Dow
Jones. The committee says it fears Peregrine is trying to sell all of
its remaining business operations outside of a chapter 11 plan and
asserts that the company 'cannot and should not be permitted to sell all
of [its] remaining business operations outside of a plan of
reorganization,' reported Dow Jones.
According to the newswire, the committee wants the court to terminate
the company's plan filing exclusivity so that it may put forth a
reorganization plan providing for substantial deleveraging and continued
operations of the company. The initial 120-day exclusive period for the
company to file a plan is currently set to expire Jan. 21, reported Dow
Jones. The U.S. Bankruptcy Court in Wilmington, Del., has scheduled a
hearing on the matter for Jan. 28, with objections due Jan. 11, reported
the newswire. Peregrine Systems filed for chapter 11 bankruptcy
protection on Sept. 22, 2002.
Denver-based EMEX Files for Bankruptcy
Denver-based EMEX Corp. filed for chapter 7 bankruptcy protection in the
U.S. Bankruptcy Court for the District Colorado on Dec. 31, according to
the Denver Business Journal. In a filing with the Securities and
Exchange Commission, company officials said, 'the company believes that
its assets will be insufficient to satisfy the claims of all creditors
and it is unlikely that the company's shareholders will be eligible to
participate in any distributions of the company's assets as a result of
the bankruptcy. Upon liquidation, the company will cease operations and
wind up its business,' reported the online newspaper. For the first nine
months of 2002, the company reported revenues of only $12,000 and a net
loss of $7.8 million, according to the Business Journal.
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