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October 2, 2002
Durbin Substitute Amendment to S.2798 Would Delete Controversial
Provisions
Sen. Richard Durbin (D-Ill.) introduced a substitute amendment to the
Employee Abuse Prevention Act of 2002 (S.2798) on Sept. 19 that deletes
the most controversial provisions of the prior bill, while retaining
most of the provisions designed to protect employees and retirees when
businesses file bankruptcy. Provisions that would have limited Delaware
and New York filings, as well as provisions that would have enhanced the
trustee's power to challenge security interests and asset securitization
transactions, have been deleted. The most significant remaining
provisions increase the wage priority to $13,500, give priority status
to certain employee pension claims, limit insider compensation and
permit the recovery of 'excessive' insider compensation received during
the four years prior to bankruptcy.
The Durbin substitute amendment is on the agenda for Thursday's
meeting of the Senate Judiciary Committee. A full analysis of the
substitute amendment is available at ABI World (
href='/legis/newlegfront.html'>http://www.abiworld.org/legis/newlegfront.html).
U.S. Manufacturing Activity Contracts in September
U.S. manufacturing activity was down in September after seven straight
months of growth, according to the Tempe, Ariz.-based Institute for
Supply Management, CongressDaily reported. The institute said its
index of business activity declined to 49.5 in September, compared with
50.5 in August. An index above 50 signifies growth, while one below 50
shows contraction. Since June, manufacturing activity had been growing
at a declining rate. 'Stagnant and sluggish are apt descriptions for
manufacturing at this time,' said Norbert Ore, chairman of the
institute. Meanwhile, the Commerce Department reported that construction
spending dropped 0.4 percent in August as private builders cut back on
the construction of offices, industrial complexes and hotels. That drop
followed a 0.1 percent decrease in July. Spending on all construction
projects around the country fell to a seasonally adjusted annual rate of
$829.8 billion in August.
Warnaco Expects to Emerge from Chapter 11 Bankruptcy in
2003
Warnaco Group Inc. said it will emerge from bankruptcy protection in
early 2003 with significantly less debt and with each of its core
businesses intact, the Associated Press reported. The manufacturer of
Olga bras, Calvin Klein jeans and Speedo swimwear said in a
reorganization plan filed on Tuesday that it is seeking a permanent
president and chief executive. The company has hired executive
recruiting firm Heidrick & Struggles to find someone to succeed Tony
Alvarez in those roles, according to the plan. In May 2001 Warnaco
appointed Alvarez, a founding partner of the Alvarez & Marsal Inc.
turnaround consulting firm, as chief restructuring adviser to oversee
the reorganization. In November 2001 he was named president and chief
executive, succeeding Linda J. Wachner, who was asked to step down by
the company's board. Warnaco filed for chapter 11 bankruptcy protection
on June 11, 2001.
WORLDCOM
WorldCom Secures $1.15 Billion Loan
WorldCom Inc., which expects to finalize its borrowing agreement in two
weeks, has so far secured $1.15 billion from its lenders, Dow Jones
reported. 'The level of commitments is at least on target,' said Marcia
Goldstein of Weil Gotshal & Manges, who represents WorldCom in the
chapter 11 case. The Clinton, Miss.-based company, which initially
sought as much as $2 billion in debtor-in-possession funding, has
recently said thanks to a better-than-expected cash position. It now
needs less money—probably in the range of $1.25 billion to $1.5
billion—to work its way through the bankruptcy proceedings. The
company currently has $1 billion in unrestricted cash, more than
doubling what it had on hand upon its bankruptcy filing in late
July.
WorldCom, parent of MCI Group and Internet provider UUNet, filed for
protection against creditors amid a massive accounting scandal. On the
first day of its bankruptcy hearing, Judge Arthur Gonzalez
approved a $750 million interim DIP loan from lenders led by Citigroup
Inc., J.P. Morgan Chase & Co. and General Electric Co.'s
financial-services arm, GE Capital.
WorldCom Gets Court OK to Pay Full Severance
A federal bankruptcy judge on Tuesday cleared the way for WorldCom Inc.
to pay full severance to about 4,000 employees who have been laid off by
the troubled telecommunications company in recent months, Dow Jones
reported. WorldCom has so far made $22 million in payments to the
laid-off workers, but each of them got only $4,650 because of a cap set
in place by the Bankruptcy Code. Many employees have complained that the
amount of money was far below what they are owed. WorldCom, in a bid to
enhance employees' morale, moved earlier last month to ask permission
from the court to pay an additional $36 million in severance payments,
which includes any severance still owed, unpaid commissions to its sales
staff, vacation pay, medical benefits and expenses for which employees
weren't reimbursed. Meanwhile, Judge Arthur Gonzalez in the New
York bankruptcy court also approved WorldCom's request to cancel
'enhanced-severance agreements' with 19 executives. Those agreements
would have paid the executives a total of $900,000.
Burlington Industries Can Modify DIP Loan Thanks to Court
The bankruptcy court handling Burlington Industries Inc.'s chapter 11
case has authorized the company to modify its debtor-in-possession loan,
Dow Jones reported. The changes allow the textile company to increase
asset sales by $31.3 million above an original cap of $50 million and
pay down $33.7 million of principal on its pre-petition secured loan.
The company also said it has reduced the amount of maximum available
borrowings and the accompanying commitment fee under the DIP credit line
to $100 million, all of which was undrawn as of last Saturday.
Burlington said that since filing for chapter 11 protection, it has
'generated a significant amount of cash and has fully repaid the
outstanding borrowings of $95 million drawn against the DIP credit line
in November.' Greensboro, N.C.-based Burlington Industries, one of the
largest textile companies in the United States, filed for chapter 11
protection last November in the U.S. Bankruptcy Court in Wilmington,
Del., listing assets of $1.2 billion and liabilities of $1.1
billion.
Agway Files for Bankruptcy
Seven months after announcing a restructuring plan to sell troubled
units and boost sluggish sales, agricultural cooperative Agway Inc. has
gone bankrupt, The Deal reported. The DeWitt, N.Y.-based company
filed for chapter 11 reorganization yesterday, putting its agricultural
supply and farm products divisions in bankruptcy, while leaving its
energy and equipment leasing units unaffected, the online newspaper
reported. The co-op is owned by 70,000 farmers in the Northeast. The 550
Agway stores in the Northeast that sell everything from gardening
equipment to farm implements are independently owned and are not part of
the bankruptcy.
Agway, which filed in the U.S. Bankruptcy Court for the Northern
District of New York, said it hopes to restructure some $478 million in
debt. Agway has lined up a $125 million debtor-in-possession financing
package from GE Commercial Finance. In its annual report, Agway lists
assets of $1.57 billion and liabilities of $1.51 billion. The filing
doesn't include Agway Energy Products, Agway Energy Services Inc. and
Agway Energy Services-PA Inc., all of which Agway plans to keep. The
chapter 11 also excludes equipment leasing unit Telmark LLC, which Agway
intends to sell.
ATNG Inc. Contemplating Chapter 11 Bankruptcy Filing
ATNG Inc. said it is contemplating a chapter 11 bankruptcy proceeding to
reorganize the company and that it may include the sale of its Segmented
Data and Asian Infolink divisions, Dow Jones reported. ATNG didn't
specify the reasons surrounding its consideration for seeking to file
chapter 11 bankruptcy protection. The company also said in the filing
that it is negotiating a settlement with the Missouri Division of
Securities over the sale of unregistered securities. ATNG, based in Los
Angeles, provides voice and data telecommunications services.
Budget Group Seeks OK for $16 Million Employee Retention
Plan
Budget Group Inc. has asked the court handling its chapter 11 case to
approve a key employee retention plan for 64 of the company's employees,
Dow Jones reported. The program, which less than 1 percent of the car
rental company's employees are eligible to participate in, was initially
slated to cost up to $21.3 million. After negotiations with its
unsecured creditors' committee, the company modified the plan to reduce
the maximum cost to $15.9 million, according to court papers obtained by
Dow Jones Newswires. A hearing on the proposed plan is scheduled for
Oct. 8 before Judge Mary Walrath of the U.S. Bankruptcy Court in
Wilmington, Del. The company, which rents out cars and trucks under the
Budget and Ryder brand names, filed for chapter 11 in late July, saying
the impact of the Sept. 11 terrorist attacks and the continued recession
in the travel sector had left it with non-vehicle debt that was greater
than its operations could reasonably support.
Interliant Seeks OK to Sell Hosting Assets to Sprint Unit
Interliant Inc. is seeking a bankruptcy court's authority to sell the
assets of its web hosting business as a going concern to a subsidiary of
Sprint Corp. for $5 million, subject to higher bids at an auction, Dow
Jones reported. As a result, Interliant is also asking the court to
approve bidding procedures in connection with the proposed asset sale,
according to a motion filed Friday. The U.S. Bankruptcy Court in White
Plains, N.Y., will consider the bidding procedures at a hearing on
Thursday, and interested parties may file objections through Wednesday.
Purchase, N.Y.-based Interliant provides web site and application
hosting, consulting services and programming and hardware to support the
information technologies infrastructure of its customers. Interliant
listed about $69.8 million in total assets and roughly $151.1 million in
total debts as of March 31 in its chapter 11 filing. The company filed
for bankruptcy protection along with 11 affiliates.
Court Gives Polaroid More Time for Turnaround Plan
A bankruptcy court has given Polaroid Corp. more time to develop a
turnaround plan that would satisfy the camera-maker's debts, Dow Jones
reported. A ruling on Sept. 23 from the U.S. Bankruptcy Court in
Wilmington, Del., gives both Polaroid and the official unsecured
creditors' committee the exclusive right to file a reorganization plan
until Oct. 15 and up to Dec. 16 to lobby for creditor approval. If the
court had turned down the company's request, its exclusive periods would
have ended on Aug. 12 and Oct. 12. The company and its committee of
unsecured creditors, which share exclusivity, said they need the
extension to prevent other parties from filing competing plans while
they negotiate the final terms of a plan.
Mobile Tool Files for Chapter 11 Bankruptcy Protection
Mobile Tool International Inc. filed for chapter 11 bankruptcy
protection late Monday with the U.S. Bankruptcy Court in Wilmington,
Del., Dow Jones reported. The company listed total assets of about $65.3
million and total debts of roughly $46.6 million as of June 30. In
another petition, subsidiary MTI Insulated Products Inc. cited total
assets of $28.7 million and total debts of $27.4 million as of the same
date.
Mobile Tool was purchased in 1995 in an employee buyout of a company
called General Cable Co./Apparatus Division, which was part of General
Cable Corp. (BGC). Court papers said 'sales began to decline
precipitously' with the collapse of the telecommunications industry in
2001. Mobile Tool filed a motion late on Monday seeking bankruptcy court
approval of a $23 million debtor-in-possession financing agreement with
pre-petition Fleet Capital Corp. The filing sought interim authority for
the company to borrow up to $5 million to maintain operations through a
final hearing. According to the motion, Mobile Tool owed Fleet Capital
about $23.5 million as of Monday's bankruptcy filing. The proposed DIP
loans would be secured by liens on all Mobile Tool's assets. Fleet
Capital would also be granted a superpriority administrative expense
claim in Mobile Tool's chapter 11 case.
Court Confirms Williams Communications's Chapter 11 Reorganization
Plan
A bankruptcy court confirmed a chapter 11 reorganization plan for
Williams Communications Group Inc. under which bondholders will get a 55
percent stake in the reorganized company, Dow Jones reported. Judge
Burton R. Lifland approved the plan after a hearing on Monday,
according to an order later that day. 'The plan is the result of
extensive arm's-length negotiations and reflects substantial input from
the principal constituencies having an interest in the debtors' chapter
11 cases and, as evidenced by the overwhelming acceptances of the plan,
achieves the goal of consensual reorganization embodied by the
Bankruptcy Code,' according to Judge Lifland's order.
The confirmed plan incorporated certain modifications that weren't
immediately available. However, Judge Lifland said that the
modifications don't materially or adversely affect or change the
treatment of any claim against or equity interest in the debtors.
Williams Communications, a broadband network services provider, will
transition to the WilTel name over the next two years and repurchase its
Tulsa, Okla.-based headquarters building for $150 million from Williams
Cos., an energy pipeline and trading company that spun off from the
telecom carrier in April 2001.
Amtrak May Not Be Able to Pay Debts if Liquidated
Amtrak employees and private lenders would be repaid a small fraction of
the $8.3 billion the railroad owes them if it were to be liquidated,
according to a new report, reported the Associated Press. According to
the report released Tuesday by the General Accounting Office, the
nation's other railroad workers and employers would end up paying more
taxes into retirement and unemployment insurance funds, the newswire
reported. The GAO report said that as of Dec. 31, 2001, Amtrak's secured
liabilities included $3.8 billion in debt to private lenders for
equipment and property. Amtrak has another $4.4 billion in unsecured
liabilities, including severance pay and debts to vendors. It owes the
government $14.2 billion on a 970-year promissory note that has a
principal balance of $3.8 billion.
The prospect of bankruptcy increased Friday with a vote in the House
Appropriations Committee to give Amtrak $762 million, less than the $1.2
billion the railroad says it needs to keep running for another year, the
Associated Press reported. Although the Senate approved a $1.2 billion
appropriation for Amtrak, the Bush administration wants to give it $521
million. Liquidating Amtrak would cost the independent federal body that
pays pension and disability benefits to retired railroad workers and
survivors $400 million, or 9 percent of its receipts, if Amtrak's
employees could not find new railroad jobs, the newswire reported. Other
railroad employees and employers would have to pay 8 percent more in
payroll taxes to fund the system between 2002 and 2023, the report
said.
NRG South Central Didn't Make Payment with Grace Period
NRG Energy Inc.'s NRG South Central LLC unit did not make about $47
million in combined principal and interest payments on senior secured
bonds within the 15-day grace period, which ended yesterday, putting it
into default, reported Dow Jones. As previously announced, NRG South
Central LLC did not make the payments on Sept. 16, when they were due;
the bondholders subsequently hired advisors and formed a committee to
represent them in negotiations with NRG, reported the newswire. In a
press release Tuesday, NRG Energy said it is continuing to negotiate
with this committee of bondholders, as well as with all of its other
lenders, in the context of a restructuring plan.
NRG said it intends to submit to its lenders and bondholders a
comprehensive restructuring plan by late October, Dow Jones reported. As
a part of this process, NRG continues to work with certain of its bank
lenders to obtain an extension of the deadline by which it must post
about $1.0 billion of cash collateral in connection with certain bank
loan agreements. The prior extension expired Sept. 13, and NRG has been
working with its bank lenders since then to obtain an extension. Unless
and until an extension can be agreed upon, the banks have the right to
demand posting of the cash collateral. Analysts have said that allowing
NRG more time to work on its business plan and raise cash, rather than
seeking immediate payment and pushing the company toward possible
bankruptcy, is in the banks' best interest.
Viasystems Files for Bankruptcy Protection
Electronics manufacturing services provider Viasystems Inc. on Tuesday
filed for chapter 11 protection in the U.S. Bankruptcy Court for the
Southern District of New York, listing assets of $1.6 billion and debts
of $1.1 billion, Reuters reported. St. Louis-based Viasystems said that
in late August it had reached a debt restructuring deal with its banks
and debtholders that included a pre-packaged, voluntary bankruptcy, the
newswire reported. Viasystems has said that restructuring would reduce
its debt load to $380 million.
Filing from Adelphia
Adelphia Communications Corp. announced that Century/ML Cable Venture,
which holds a franchise in Puerto Rico, has filed for chapter 11
bankruptcy protection in the Southern District of New York, Business
First reported. Century/ML Cable Venture is a joint venture between
Adelphia subsidiary Century Communications Corp. and ML Media Partners
L.P. Both Century and Adelphia have a 50 percent stake in Century/ML
Cable Ventures. The cable franchise has about 15,000 subscribers in
Puerto Rico.
Kitty Hawk Emerges from Bankruptcy
Dallas air cargo carrier Kitty Hawk Inc. has emerged from bankruptcy,
according to The Deal. Terms of the carrier's reorganization plan
give the company's noteholders 81 percent of the reorganized company,
while its unsecured creditors will own 14 percent, the online newspaper
reported. Kitty Hawk's aircraft lessors will own 5 percent. The plan was
confirmed in July by Judge Barbara Houser of the U.S. Bankruptcy Court
for the Northern District of Texas. The company filed for bankruptcy in
May.
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