September 172003

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September 17, 2003

Fed Holds Rates Steady

Federal Reserve officials on Tuesday kept the U.S. interest rates at
45-year lows and said official borrowing costs could remain low for 'a
considerable period,' Reuters reported. The central bank's
policy-setting Federal Open Market Committee said it had left the
benchmark federal funds rate at 1 percent, a 1958 low hit after the Fed
cut rates 13 times since early 2001 in an effort to foster a vigorous
expansion. In announcing their decision, policy-makers repeated a
warning they first issued in May over what they termed a small risk that
inflation could move undesirably low. 'The committee judges that on
balance the risk of inflation becoming undesirably low remains the
predominant concern for the foreseeable future. In these circumstances,
the committee believes that policy accommodation can be maintained for a
considerable period,' the Fed said in its post-meeting announcement,
reported the newswire.

Hiring Outlook Flat for Q4

Twenty-two percent of employers plan to hire in the fourth quarter,
while 11 percent plan to decrease staff, either through layoffs or
attrition, CBS MarketWatch reported. That adds to a net hiring
increase of 11 percent, the same as forecast by employers for the third
quarter, according to a Manpower quarterly survey of about 16,000 U.S.
employers. Sixty-two percent of firms plan no changes, and 5 percent are
uncertain about their hiring activity for the quarter, the study
found.

'This is positive news, there's no doubt about it, but it also must be a
bit guarded,' said Jeffrey Joerres, chief executive of Manpower, a
global staffing agency. 'The direction is right, which is bit more
optimism coming from companies, but there isn't enough magnitude to feel
the results. 'If you're a job seeker, you're not going to feel much
impact. It's still difficult to find a job,' he said, reported
MarketWatch.

Boehner Measure Sets Up Pension Confrontation With Senate

House Education and the Workforce Chairman John Boehner (R-Ohio) plans
today to introduce legislation temporarily changing the way companies
calculate the payments they must make to their pension plans,
underscoring a split with the Senate on long-term pension reform,
CongressDaily reported. Boehner's bill requires companies to use
a corporate bond rate to determine their future payouts. The rate would
be higher than the 30-year Treasury rate that will go into effect at the
end of the year if Congress does not act. Under the House plan, the
corporate rate would stay in place for two years, after which Congress
would adopt a permanent replacement for the Treasury rate.

The Senate version would put in place a 'yield curve' formula for
calculating company contributions. The administration proposed the yield
curve in July as a way of more accurately reflecting future liabilities
of pension plans. The Senate Finance Committee introduced a bill on
Monday, and the measure is scheduled for a markup session today.

Boehner said his bill would give Congress more time to consider broader
pension-funding reforms. 'This measure will help us ensure the financial
integrity of America's defined benefit plans in the short term, as the
committee takes a broader look at the defined benefit system and
considers permanent solutions to the pension underfunding problems that
will give working families and employers long-term certainty,' he said
in a prepared statement, reported the newswire.

Asbestos-plagued Shares Up on Liability Limit Talk

Shares of companies battling asbestos lawsuits rose on Tuesday as a U.S.
insurance trade group presented a proposal to insurers and
asbestos-plagued firms capping liability payments, Reuters reported.
'Negotiations to reform U.S. asbestos litigation procedures are building
momentum,' Lehman Brothers analyst Joseph D'Amadeo said in a research
note, the newswire reported. The American Insurance Association is
presenting the proposal, said Julie Rochman, spokeswoman for the group,
which presents more than 400 insurance firms.

Citing U.S. congressional staff members, D'Amadeo said the proposal
would commit asbestos-liable companies to an upfront payment of $52
billion, with insurers matching that amount over a longer period of 20
years to 30 years. Any additional payments would be split between the
two industries, up to an undetermined hard cap, according to D'Amadeo.
The talks are part of a broader series of negotiations sparked by an
asbestos reform bill in the U.S. Congress. Its main sponsor, Sen. Orrin
Hatch (R-Utah), has asked insurers and asbestos companies to try to
reach a deal that could help rescue the floundering measure, reported
the newswire. Hatch's bill, which passed the Judiciary Committee in July
on a near party-line vote, would end asbestos lawsuits and instead
compensate claimants from a trust funded supported by business and
insurers.

Renco Group's WCI Steel Unit Files for Bankruptcy Protection

WCI Steel Inc., a manufacturer of custom and commodity steel products,
filed for bankruptcy after increased competition and a series of
unprofitable quarters, Bloomberg News reported. Privately held WCI
listed $352.5 million in assets and $643.3 million in debts in chapter
11 papers filed yesterday in the U.S. Bankruptcy Court in Youngstown,
Ohio. The Warren, Ohio-based company is controlled by the Renco Group
Inc. At least 40 U.S. steelmakers, including Bethlehem Steel Corp. and
LTV Corp., have sought bankruptcy protection in the past six years,
according to the United Steelworkers of America. As labor and retiree
costs grew for domestic steelmakers, the U.S. market has been flooded by
cheaper foreign steel.

'Although we very much had hoped to accomplish the restructuring of the
company outside of bankruptcy, industry conditions and our cash position
forced us to take this step in order to protect the future of the
company,'' WCI CEO Edward R. Caine said in a statement, reported the
newswire.

Ivaco Files for Bankruptcy Protection

Ivaco Inc. filed for bankruptcy protection on Tuesday to help the
steelmaker develop a restructuring plan and bring it back to profit,
Reuters reported. Montreal-based Ivaco said the company and its Canadian
subsidiaries, excluding IMT Corp., have filed for creditor protection
under the Companies' Creditors Arrangement Act. The company also said
its U.S. operations would be discontinued. Ivaco blamed a downturn in
the North American steel industry, caused in part by high levels of
imported steel, for forcing it into restructuring, the newswire
reported.

'The steel and steel products industries have been beset by serious
difficulties over the past few years caused, in part, by the broad
economic downturn that has affected the North American economy for the
last three years,' the company said in a release. Ivaco named Gordon
Silverman as its chief restructuring officer, reported the newswire.

Furr's Restaurant Gets Court Approval of Sale, Plan

Furr's Restaurant Group Inc., which operates 55 cafeterias in six
states, said it won court approval of its sale to Buffet Partners LP as
part of its bankruptcy recovery plan, Bloomberg News reported. Buffet
will pay $25.8 million in cash for the assets and assume about $3.2
million in liabilities, Furr's said in a statement. The company said it
expects to close the sale by the end of this month. The U.S. Bankruptcy
Court in Dallas approved the plan, the company said.

Richardson, Texas-based Furr's filed for bankruptcy in January, after
losing more than $31.2 million in the first three quarters of 2002 amid
slumping sales. The company also operates Dynamic Foods, its food
preparation, processing and distribution division, in Lubbock, Texas.
Furr's listed $49.3 million in assets and $80.3 million in debts in the
chapter 11 filing, reported the newswire.

PG&E, Consumers Reach Accord in California Rate Case

Pacific Gas & Electric Co. said on Tuesday it had reached a
settlement agreement with consumer and customer groups in its 2003
general rate case, Reuters reported. PG&E said the agreement is
intended to resolve all disputed issues among the settling parties in
this phase of the rate case, except for PG&E's request that the
California Public Utilities Commission (CPUC) include funding for a
PG&E contribution to its employee pension fund. The pension fund
contribution will be included in the continuing regulatory process at
the CPUC, the utility said. Under terms of the settlement agreement, the
PG&E Corp.-owned utility would receive an increase in revenues of
$236 million for its electric distribution business, $52 million for gas
distribution and $38 million for electric generation, Reuters
reported.

Cone Mills to File for Chapter 11, Gets Buyout Offer

Cone Mills Corp. said on Tuesday it plans to file for chapter 11
bankruptcy protection soon and accept a buyout offer from distressed
asset fund W.L. Ross & Co. under court auspices, Reuters reported.
The company, which defaulted on a $4.5 million bond payment due on
Monday, is the latest in a long line of U.S. textile makers to succumb
to harsh foreign competition that has cost thousands of workers their
jobs and decimated a once-flourishing industry.

Greensboro, N.C.-based Cone didn't disclose the terms of the offer from
W.L. Ross. In August, Ross won approval to buy Cone competitor
Burlington Industries in a bankruptcy court auction. One person familiar
with the situation said Ross offered between $50 million and $75 million
for Cone, reported the newswire.

MCI Fights to Keep CEO from Testifying in Court

Telephone company MCI on Tuesday fought a subpoena of Chief Executive
Michael Capellas, calling efforts to force him to testify in open court
a 'harassment' tactic by disgruntled investors, Reuters reported. Judge
Arthur Gonzales, the bankruptcy judge overseeing the case, is due to
decide on MCI's request after reviewing arguments and motions filed with
the court.

MCI sought bankruptcy protection in 2002 amid an accounting scandal
that has ballooned to $11 billion. But the company is moving closer to
an exit from bankruptcy and has entered its second week of confirmation
hearings. MCI has no plans to call Capellas -- who gave testimony in
depositions on two earlier occasions -- to take the stand in the case.
But OZ Management and OZF Management, which hold stock in a subsidiary
of MCI named Intermedia, have issued a subpoena that calls on Capellas
to testify about certain negotiations that resulted in a reorganization
plan. For its part, MCI asked the judge to block the subpoena because
Capellas 'cannot provide any testimony relevant to any issue in dispute
with respect to OZ's objection' to the company's restructuring plan,
reported the newswire.

Judge In Loral Chapter 11 Denies EchoStar's Bid For More
Information

The judge overseeing the Loral Space & Communications Ltd.
chapter 11 case denied a request by EchoStar Communications Corp.
seeking complete access to all information it said it needs to form a
bid for all of Loral's assets. Stephen Karotkin, an attorney
representing Loral with the firm Weil Gotshal & Manges LLP, told DBR
Tuesday that Judge Robert D. Drain of the U.S. Bankruptcy Court in
Manhattan denied the EchoStar request at a hearing Monday. Judge Drain
also rejected another part of EchoStar's motion that asked the court to
delay the bidding deadline, auction and sale hearing tied to the Loral
asset sale. EchoStar had asked the court to delay the bid deadline for
at least 58 days if the bankruptcy court approved the motion.

Court Grants Magellan Health 45-Day Exclusivity Extension

The U.S. Bankruptcy Court in Manhattan on Monday gave Magellan Health
Services Inc. a 45-day extension of its exclusive period to seek votes
in favor of its chapter 11 reorganization plan. The company had asked
for a 60-day extension, through Nov. 7, Magellan Health spokeswoman Erin
Somers told DBR on Monday. A 45-day extension will prevent creditors
from filing competing chapter 11 plans for Magellan Health through Oct.
23.

Illinois Court Cuts Philip Morris Bond

Philip Morris USA was handed a major victory on Tuesday when the
Illinois Supreme Court slashed almost in half a $12 billion bond
required from the company pending an appeal of a critical verdict,
Reuters reported. The state high court also reversed its own ruling and
agreed to bypass the state appellate court and hear the appeal of a
judge's $10.1 billion verdict in which the company was found to have
tricked smokers into thinking 'light' cigarettes were safer than regular
ones, the newswire reported.

The decision, which triggered an 8.7 percent rise in the shares of
Philip Morris parent Altria Group Inc., spares Altria from a potential
cash shortage. It could also safeguard billions of dollars in payments
the group owes U.S. states in a massive settlement over the health costs
of smokers, according to Reuters. 'I would say it is probably one of the
most favorable tobacco legal developments in the last decade,' said
Morgan Stanley analyst David Adelman. 'It granted everything Philip
Morris wanted and more,' he said, reported the newswire.
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