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December 4, 2002
GOP Leaders Plan to Take Up Asbestos Next Session
With Congress in Republican hands, and a president friendly to tort
reform in the White House, many industry players believe next year will
prove pivotal in their effort to enact measures reforming what they see
as shortfalls in the legal system, CongressDaily reported.
Nevertheless, some proponents are desperate to avoid the tort reform
moniker. 'It's not, not, not tort reform,' said Julie Rochman, a
spokeswoman for the American Insurance Association, referring to an
industry-backed asbestos case management bill that would use medical
criteria to screen out litigants. Republican leaders have indicated the
measure would be back on the agenda next year.
Asbestos litigation reform has been the source of fights between
Republicans and Democrats, and their respective allies with the National
Association of Manufacturers and the Association of Trial Lawyers of
America, noted Anthony Sebok, a Brooklyn Law School professor on torts
law, the newswire reported. Moreover, while asbestos is a top business
priority, there is a competing priority in the form of legislation to
move most major class action legislation from state to federal courts.
Ken Schloman, Washington counsel for the Alliance of American Insurers,
which is backing both bills, in an interview said he expected there
would be a sit-down among industry leaders before the 108th Congress
begins to make decisions about a division of labor and resources between
the two bills.
According to the newswire, in some respects, the class action measure
might prove to have more post-election staying power. Class action
proponents argue that they are already halfway toward their goal,
because the House already has approved such legislation twice before and
doubtless will again. Schloman would not put odds on which of the two
measures would take precedence, but said he believed class action reform
would be 'first out of the box.'
Asbestos Suits Cost More Than 50,000 Jobs, Study Says
Asbestos lawsuits have cost 52,000 to 60,000 Americans their jobs and
U.S. businesses as much as $275 billion, a study commissioned by the
American Insurance Association said, Bloomberg News reported. The
industry group's report found that lawsuits brought by individuals
claiming asbestos-related illnesses hurt workers and shareholders in
companies that are sued, as well as employees vested in retirement plans
and smaller companies that do business with the lawsuit targets. 'This
is something that is significant for firms in bankruptcy and for the
economy as a whole,'' said Nobel laureate
Joseph Stiglitz, a Columbia University economics professor and chairman
of former President Bill Clinton's Council of Economic Advisers. 'Today
the impacts are being felt by workers.'' Asbestos suits have forced more
than 60 companies into
bankruptcy, including 20 since 2000, said Jonathan Orszag, a former
assistant Commerce secretary and report co-author, the newswire
reported. Each displaced worker forced into unemployment or a lower
paying job will lose an average of $25,000 to $50,000 in earnings over a
career, the study said. The companies already in bankruptcy face legal,
accounting and other costs as high as $650 million, the study said.
Federal Mogul Inc. and W.R. Grace & Co. are among the companies that
have sought chapter 11 protection since 2000 citing liability from
asbestos, a carcinogen used as insulation and fireproofing. Stiglitz and
Orszag urged Congress to enact legislation to protect companies facing
asbestos litigation liability, the newswire reported.
Wisconsin Funds Sue WorldCom's Former Banks, Auditor
The State of Wisconsin Investment Board sued WorldCom Inc.'s former
investment
banks and accountant, joining pension funds in at least six other U.S.
states that claim advisers of the now-bankrupt company misrepresented
its finances when selling its bonds, Bloomberg News reported. Named as
defendants are Citigroup Inc. and its Salomon Smith Barney Inc.
investment banking unit, J.P. Morgan Chase & Co., Bank
of America Corp., ABN Amro Inc., Deutsche Bank AG, Lehman Brothers
Holdings Inc., Credit Suisse Group, Goldman Sachs Group Inc.,
Nationsbanc Montgomery Securities LLC, UBS Warburg, and Arthur Andersen
LLP. The lawsuit alleges that WorldCom and its investment banks raised
billions of dollars through public offerings of investment- grade rated
bonds that were sold under prospectuses and registration materials
containing false statements. The pension funds said they relied on this
information when they bought the bonds.
Wisconsin, which said it lost about $40 million in WorldCom debt, was
joined in its lawsuit by the City of Milwaukee Employees' Retirement
System, which lost an estimated $10 million in WorldCom bonds. The suit,
filed in Dane County Circuit Court
today, seeks to recover the losses.
US Airways Flight Attendants Demand Management Cuts
Flight attendants at US Airways Group demanded that the airline's
management take salary and benefit cuts before the union will negotiate
further contract concessions, the Wall Street Journal reported.
The executive council for the flight attendants union, the Association
of Flight Attendants, also said on Tuesday that the union won't
negotiate until management finishes negotiations with all other labor
groups at the airline. The executive council's demands are subject to
approved by the company's flight attendants.
Last week, US Air announced a restructuring plan to help it emerge from
chapter 11 bankruptcy protection that included 2,500 employee furloughs
and meeting with labor unions to identify work-rule changes and other
cost-cutting moves.The airline said last week it intends to file its
disclosure statement and plan of reorganization by Dec. 20, in time for
the U.S. Bankruptcy Court in Alexandria, Va., to consider the adequacy
of the disclosure statement at a Jan. 16 hearing, reported the
Journal.
J.P. Morgan, Insurers Joust at Trial over Enron Risk
In the first day of a court battle between J.P. Morgan Chase & Co.
and 11 insurance companies over about $1 billion in losses related to
Enron Corp., lawyers on both sides focused on whether the bank
deliberately sought to deceive the insurers into taking on Enron risk,
the Wall Street Journal reported. At the center of the debate was
an internal J.P. Morgan memo, which describes a series of financing
arrangements between the bank and Enron as 'disguised loans.' The
insurance companies guaranteed the arrangement, in which J.P. Morgan
paid for the future delivery of oil and natural gas to an offshore
entity known as Mahonia, through the sale of surety bonds, the Journal
reported. Now, the insurers say the deals were a 'sham' and say they
shouldn't have to make good on the guarantees, valued at $965 million.
The insurers in the case include Chubb Corp., CNA Financial Corp., and
Travelers Property & Casualty.
Zaxis International Filed for Chapter 7 Bankruptcy In
November
Zaxis International Inc. filed for chapter 7 bankruptcy liquidation in
November, the company said in an 8-K filing with the Securities and
Exchange Commission Tuesday, Dow Jones reported. Zaxis, which develops
products to detect and separate proteins and nucleic acids, didn't give
a reason for the bankruptcy petition in the filing. In its most recent
quarterly filing with the SEC on Nov. 5, Zaxis reported break-even
per-share results for the quarter ended Sept. 30, compared with net
income of 4 cents a share for the year-earlier period on a one-time
gain. Also in that filing, the company said it was delinquent on senior
note payments and interest of more than $20,000, but said it was working
with noteholders to extend the payments, the newswire reported.
Canadian Affiliate Can Tap GenTek's Cash Collateral
GenTek Inc. on Tuesday won authority to grant an affiliate access to its
cash collateral, Dow Jones reported. Noma Co., GenTek's Canadian debtor
affiliate, needs GenTek's cash collateral to fund its operations, said
Domenic E. Pacitti, an attorney with Saul Ewing LLP, the firm
representing Noma. Noma had been granted interim authority to tap
GenTek's cash collateral in November. GenTek is a secured creditor of
Noma's Chapter 11 estate.
GenTek is using the cash collateral of JP Morgan Chase Bank to fund its
own operations. GenTek is using the money to pay employees, fund
shipping costs, and pay vendors it deems critical to its business and a
successful reorganization, Dow Jones reported. GenTek filed for chapter
11 bankruptcy protection with 31 affiliates, including Noma, on Oct. 11.
The companies listed assets of $1.2 billion and liabilities of $1.4
billion in the chapter 11 petition.
Genuity Sale Agreement Calls for $10 Million Breakup Fee
Genuity Inc., which has agreed to sell nearly all its assets to Level 3
Communications Inc, is seeking bankruptcy court approval to pay the
proposed buyer a $10 million breakup fee if Genuity ultimately sells its
assets to another party, Dow Jones reported. As part of proposed sale
procedures, Level 3 also could be entitled to a reimbursement of up to
$3 million of its expenses if the purchase agreement is terminated.
Those expenses would be related to Level 3's due diligence of Genuity as
well as negotiating and executing the purchase agreement, according to
the sale procedures motion from last Wednesday.
A competing bid for the networking services provider's assets would have
to be at least 5 percent higher than Level 3's bid, plus the total of
the breakup fee and the maximum expense reimbursement. The court would
schedule an auction if competing bids are filed. An attorney
representing J.P. Morgan Chase Bank told Dow Jones Newswires Tuesday
that the U.S. Bankruptcy Court in Manhattan hasn't yet scheduled a
hearing on the proposed bidding procedures. J.P. Morgan Chase Bank is
the administrative agent under Genuity's prepetition credit
agreement.
ANC RENTAL
ANC Rental Wins 2-Month Extension of Cash Collateral Use
ANC Rental Corp. on Tuesday won a two-month extension of its authority
to use the cash collateral of its secured lenders to fund operations and
maintain its fleet of rental cars, Dow Jones reported. The order signed
by Judge Mary F. Walrath of the U.S. Bankruptcy Court in Wilmington
authorizes the company to use the cash collateral of Lehman Brothers
Inc. and Congress Financial Corp. through Feb. 16. ANC Rental said the
order is vital to its reorganization efforts. 'Failure to obtain
authorization for the continued use of cash collateral would seriously
undermine the debtors' reorganization efforts and would be disastrous to
their creditors, equity holders and employees,' ANC Rental had said in
its motion.
ANC Rental's authority to use the cash collateral was set to expire Dec.
15. The extension granted Tuesday is the seventh granted to the debtor
since it won initial authority to tap the lenders' cash collateral weeks
after filing for chapter 11 bankruptcy protection on Nov. 13, 2001, the
newswire reported.
ANC Rental Reviews Frequent-Flyer Program Involvement
ANC Rental Corp., the parent of National Car Rental and Alamo Rent A
Car
that's operating under bankruptcy protection, will review its
participation in airline loyalty programs, Bloomberg News reported. ANC
will meet with airlines and commercial customers in the next 30 days. A
decision is expected during the first quarter, the Fort Lauderdale,
Fla-based company said in a statement. The car-rental agency plans to
reduce the amounts paid to airlines for the frequent flyer miles earned
by its customers by renting cars from National or Alamo. ANC filed for
chapter 11 bankruptcy protection in November 2001.
United Air to Furlough Pilots
UAL Corp.'s United Airlines will furlough 352 pilots in January and
February as part of its plan to decrease its flying schedule in 2003,
Dow Jones reported. In a press release on Tuesday, UAL said 220 pilots
will be furloughed on Jan. 6 and 132 will be furloughed Feb. 7, bringing
the total number of pilots furloughed to 1,196. UAL, which currently has
about 8,600 pilots, announced plans last month to slash 9,000 jobs by
2004, bringing the total employment level to 74,000 from the current
83,000. The company also expects its capacity next year to decline 6
percent over 2002 as it retires certain airplanes and defers new jet
deliveries. Bankruptcy rumors have circled the financially troubled
company as it missed a $375 million note payment on Monday. It has a
10-day grace period to make the payment before going into default, the
newswire reported.
Safety-Kleen Files Reorganization Plan
Safety-Kleen Corp. is seeking court approval for a reorganization plan
that would shed the company's outstanding debts and pay off creditors,
Dow Jones reported. Court papers said the plan assumes a reorganization
value of $480 million to $660 million for the company. Under the plan
administrative claims, a debtor-in-possession loan of $50 million,
priority tax claims, and a $50 million claim by the Carolina Department
of Health and Environmental Control would be paid in full. Priority
claims and estimated allowed claims also would be paid in full. Court
papers said the amount of recovery available for secured lenders,
general unsecured claims, senior note holders and unsecured claims
hasn't been determined.
Reorganized Safety-Kleen expects to get a $250 million exit financing
package, which includes a $125 million letter of credit, according to
court papers. The loan would be secured by a lien on all of the
reorganized company's assets and would be used to pay off the DIP loan
and to conduct postreorganization operations, the newswire reported.
Kmart Seeks Further Protection of Deposition Materials
Kmart Corp. has asked the judge overseeing its bankruptcy case here for
further protection of the materials the retailer collects during its
review of former management practices, according to court documents, Dow
Jones reported. Troy, Mich.-based Kmart has conducted three depositions
over the past three weeks. The company seeks an order to protect all
communications involved in the process including video tapes,
transcripts and documents related to subpoenas, according to the
documents, which were made available electronically on Tuesday morning.
While most materials are already protected through an earlier court
order, Kmart stated in its motion that it sought to protect information
specifically gathered during the deposition process, the newswire
reported. Kmart is expected to wrap up its investigation within the next
several weeks and has indicated that it could file suits against former
employees. A hearing on the matter has been set for Thursday.
Trustee Seeks Examiner In NewPower Holdings Chapter 11 Case
The U.S. Trustee acting in NewPower Holdings Inc.'s bankruptcy case
filed a request with the court seeking the appointment of an examiner to
investigate insider claims in the case, according to a motion filed with
the bankruptcy court on Monday, Dow Jones reported. The filing said the
Trustee believes an examiner is necessary to investigate and possibly
avoid as well as recover improper or otherwise voidable transfers to
company insiders. Monday's motion said the Trustee believes NewPower and
the committee will agree to the appointment of an examiner in the
chapter 11 case.
NewPower, which already has sold nearly all its assets, filed a chapter
11 liquidation plan Oct. 8 that proposes distribution of about $147
million among the creditors of the company and its units. The U.S.
Bankruptcy Court in Newnan, Ga., is set to consider the disclosure
statement to the plan at a hearing Dec. 17, the newswire reported.
US Trustee: Bankrupt CalPX Execs Overpaid Themselves
Executives of the bankrupt California Power Exchange have paid
themselves far more than what federal bankruptcy court has approved
since March 2001, according to the U.S. Trustee's office, Dow Jones
reported. The U.S. Trustee joined energy companies on Monday in
objecting to the compensation of executives at the state-chartered
market, which ceased operations nearly two years ago, according to a
copy of the filing obtained by Dow Jones Newswires on Tuesday. The CalPX
amended its insider compensation report in bankruptcy court on Sept. 25,
several months after some CalPX creditors began investigating suspected
excessive compensation. 'Compensation was paid in violation of Court
order and Court approval of the Debtor's bonus program was obtained
without full disclosure of material facts,' U.S. Trustee Maureen A.
Tighe said Monday in a filing in bankruptcy court in Los Angeles.
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