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March 25, 2005
Durable Orders Weak, Jobless Claims Rise
New orders for U.S.–made durable goods barely gained last month
but sales of new homes soared, mixed news that analysts said did little
to alter a view of a solidly expanding U.S. economy, Reuters reported.
In a somewhat disappointing signal on the factory sector and business
spending plans, the Commerce Department said on Thursday that orders for
durable goods—pricey items meant to last three years or
more—edged up 0.3 percent in February. This was well below the 1
percent gain expected on Wall Street. But the department said sales of
new U.S. homes soared 9.4 percent in February, the largest jump in more
than four years. A third report showed claims for jobless aid
unexpectedly rose last week, but remained at levels suggesting a
continued labor-market recovery, the newswire reported.
Shareholders Approve Kmart’s Acquisition of Sears; Merger
Won’t Bring Store Closings
Shareholders on Thursday voted to approve Kmart Holdings
Corp.’s $12.3 billion acquisition of Sears, Roebuck and Co., a
deal that will create the No. 3 U.S. retailer, Reuters reported. The
combination of discounter Kmart with department store operator Sears
will create a retailer with $55 billion in annual sales and nearly 3,500
stores. The shareholder meetings were held at Sears headquarters outside
Chicago. The Associated Press reported that while changes are on the way
for the two stores following the merger of their parent companies,
widespread store closings won’t be part of them.
Adelphia Close to $725 Million U.S. Settlement
Adelphia Communications Corp. is close to agreeing to pay about $725
million to U.S. authorities to settle claims stemming from its
accounting and management scandal, a source familiar with the matter
said on Thursday, Reuters reported. Such a settlement, with the U.S.
Justice Department and the Securities and Exchange Commission, would be
one of the largest penalties of recent times, just below the $750
million settlement that WorldCom Inc. made with the SEC in 2003.
Investors lost billions of dollars when the cable company collapsed in
2002 amid claims that the company’s founding Rigas family siphoned
millions of dollars of Adelphia funds for personal use and
misrepresented its financial condition. The scandal forced Adelphia to
seek chapter 11 bankruptcy protection in 2002. A federal judge has
postponed the sentencings of Adelphia Communications Corp. founder John
Rigas and his son Timothy, both convicted of fraud last summer, until
April 18, the Associated Press reported.
UAL Chief Says Latest Air Fare Increases May Stick
Recent air fare hikes by major U.S. airlines to combat soaring fuel
prices seem to have staying power despite faltering on Monday, the chief
executive of United Airlines said on Thursday, Reuters reported. Glenn
Tilton, in a phone message to employees, said United, a unit of UAL
Corp., has had some success in improving unit revenue and increasing
fares. “It appears that after some tentativeness in the
marketplace, the latest fare increase may well stick,” Tilton
said, the newswire reported. “The pricing can, and certainly must,
improve.” Several major airlines raised fares by $5 on one-way
domestic flights last week, following the lead of Continental Airlines
Inc. Fares have been inching higher since February. Carriers, including
Continental, rescinded the fare hikes on Monday, fearing that higher
fares would scare off customers. The roll-back, however, proved
temporary in most cases, when airlines began nudging fares up again.
Loral Shareholders Get Bankruptcy Court Committee
A U.S. Bankruptcy Court Trustee has appointed an official equity
committee for shareholders in bankrupt Loral Space & Communications
Ltd., a significant victory for stockholders in the satellite operating
company, Reuters reported. Jeff Swartz, a Loral shareholder who helped
organize a group to press for a court-mandated equity committee, on
Thursday said he received a letter from U.S. Trustee Pamela Lustrin,
saying she is giving Loral shareholders at least one official committee.
Official designation means Loral is required to pay for the costs of
legal and financial representation for shareholders. It follows the
publication of an examiner’s report last week that said Loral has
undervalued assets in bankruptcy reorganization.
MCI’s Move to Sell Itself Could Be a Test Case for New Era
(Wall Street Journal)
An article in today’s Wall Street Journal
considers MCI’s effort to sell itself, which the paper says is
quickly turning into a test case of corporate governance with its nine
directors becoming ensared in an agonizing drama over the sale. MCI
agreed last month to be acquired by Verizon Communications
Inc.—turning down an offer of more than a billion dollars more
from the struggling phone company Qwest Communications International
Inc. Since then, some MCI shareholders and Qwest officials have
pressured the board to reconsider their decision. Qwest’s move
last week to raise its bid has put even more pressure on MCI’s
directors because Qwest’s offer is now 25 percent higher than
MCI’s $6.75 billion deal with Verizon. The closely watched
decision by the former WorldCom, which emerged from bankruptcy
reorganization last spring, could become an important test case
examining the fiduciary duty of directors in the era of the
Sarbanes–Oxley corporate-responsibility law. Read the full story
at www.wsj.com (subscription
required).
Court Approves $65 Million in Financing for Aloha Air
Aloha Airgroup Inc. and its principal operating subsidiary, Aloha
Airlines Inc., secured U.S. Bankruptcy Court approval on Thursday
evening for $65 million in financing to pay off outstanding loans and
supply working capital. Following a continued hearing for the financing,
the court approved an interim financing agreement to provide Aloha with
a debtor-in possession (DIP) revolving credit facility of up to $65
million.
Winn-Dixie Case Likely to Stay in New York Courts
An article by the Florida Times–Union looks at
Winn-Dixie Stores Inc.’s decision to file its chapter 11
bankruptcy case in New York, rather than Jacksonville, Fla., and the
attention the issue is attracting from legal scholars and lawmakers.
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Maywood Bankruptcy Bids Merged
A federal bankruptcy court judge on Wednesday consolidated chapter 11
filings by dozens of companies controlled by an admitted swindler,
Knight Ridder reported. At the same time, Judge Robert Drain
suggested that a receiver appointed by a New Jersey court might be a
good choice to oversee the complex web of ownership and claims against
businesses operated by Joseph Greenblatt. Drain also delayed until April
22 a decision on separating some of the properties from the bankruptcy
suit. But he expressed “serious concerns” about the success
of the motion made by a company that “appears to be controlled by
an insider.” The bid to separate the properties was made by Bodden
Funding Corp., an entity controlled by Mark Irgang, a former Greenblatt
associate. Bodden claims it owns majority interests in several of the
properties. The hearing in the old U.S. Customs House near the southern
tip of Manhattan was the latest in a year-long series of proceedings in
state and federal courts involving Greenblatt and Maywood Capital Corp.,
the high-risk real estate investment company he runs.
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Oxford Automotive Emerging from Chapter 11 Bankruptcy
Auto supplier Oxford Automotive Inc. announced that it is emerging
from chapter 11 bankruptcy protection, effective Thursday, after working
to shed its plants in the United States, the Associated Press reported.
The Troy, Mich.–based company’s reorganization plan provides
for the sale or liquidation of its North American businesses, while
preserving its European operations. Oxford will continue to operate
exclusively in Europe under a newly appointed board. Of Oxford’s
10 U.S. plants, the company said six have been sold and four have been
or will be liquidated. Oxford filed for chapter 11 protection in
December.
Sources Say Loan Will Save Krispy Kreme from Bankruptcy
The cash crunch at Krispy Kreme Doughnuts Inc. may be over, Knight
Ridder reported. The company warned last month that it needed additional
credit by today to keep the business going. Analysts and investors have
been speculating on the possibility that the company may have to file
for bankruptcy because of its financial problems. But an international
business-information service that focuses on distressed debt said
yesterday that Krispy Kreme has selected investment bank Credit Suisse
First Boston and hedge fund Silver Point Capital to provide it with a
$225 million loan that would rescue the company. Debtwire, citing three
unidentified sources, said that Krispy Kreme would announce the loan
within 30 days. The new agreement would replace Krispy Kreme’s
existing $150-million lending agreement, Debtwire said. Krispy Kreme
owes $91 million under the agreement to several banks, including
BB&T Corp. and Wachovia Corp.
Morgan Stanley Dumps Chicago Law Firm Days Before Heading to
Court
The Chicago Tribune reports that prominent Chicago law
firm Kirkland & Ellis is fighting for its reputation after one of
its high-profile clients fired the firm and threatened it with
malpractice just days before a high-stakes trial was supposed to begin.
New York investment bank Morgan Stanley removed Kirkland this week as
its main law firm in a dispute with New York financier Ronald Perelman,
who is chairman of cosmetics giant Revlon Inc. The dismissal came after
the Florida judge in the case slammed Morgan Stanley for failing to turn
over documents to Perelman’s legal team. The move is embarrassing
for Kirkland, one of the country’s biggest law firms, on several
fronts, the newspaper reported. Law firms are rarely dismissed so close
to trial, legal experts said, so the firing suggests that Kirkland may
have acted unethically, the Tribune reported.
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