May 172005

May 17, 2005

U.S. Warns Lenders to Elevate Standards

Federal banking regulators yesterday warned banks and other lenders
to be more selective about who can get home equity loans and lines of
credit because rising interest rates may make it harder for people to
repay their loans, the Washington Post reported. Government
officials said that while mortgage defaults remain rare, many
institutions are loading up on high-risk loans. Read the full article at

href='http://www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR20050…'>www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR200505160155….

Boehner Might Look Beyond PBGC to Find Budget Savings

House Education and the Workforce Chairman John Boehner
(R–Ohio) might defy expectations and find savings in ways other
than upping premiums that companies pay to the Pension Benefit Guaranty
Corp. (PBGC), CongressDaily reported. The committee has
until Sept. 16 to report back to the Budget Committee on how it plans to
achieve savings. “All the mandatory spending programs within the
committee’s jurisdiction are under review, not just the
PBGC,” a committee spokesman said, the newswire reported.

United, Mechanics Reach Labor Pact

The parent of bankrupt United Airlines said yesterday it has reached
a tentative labor agreement with the union representing its mechanics,
Reuters reported. The airline is restructuring in an attempt to save
$725 million a year from its labor force to exit chapter 11 bankruptcy
protection by the end of the year. The agreement must still be ratified
by the roughly 7,000 mechanics that work at United, a unit of UAL Corp.
The mechanics union in January overwhelmingly rejected a tentative labor
contract with the company.

A Washington Post article examines how United Airlines
is seeking to reassure its biggest corporate clients. Read the full
article at
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR20050…'>www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR200505160152….

Study Hints at Bias of Advisers on Pensions

Many of the firms that provide advice to operators of pension and
401(k) plans appear to have undisclosed financial ties to companies
whose services they recommend, according to a study released yesterday
by the Securities and Exchange Commission (SEC), the Washington
Post reported. The study raises questions about whether
pension-plan operators and 401(k)-plan participants always get the
unbiased advice required by federal law, SEC officials said, the
newspaper reported. Read the full article at
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR20050…'>www.washingtonpost.com/wp-dyn/content/article/2005/05/16/AR200505160132….

Some MCI Investors Withhold Votes in Protest

Nine of MCI’s largest shareholders, including Bruce Berkowitz,
president of Fairholme Capital Management, said last week that they
would not back the board at yesterday’s annual meeting, Bloomberg
News reported. Opposition was aimed at luring Qwest Communications
International, which abandoned its $9.75 billion offer, to return to
bidding. Directors of MCI need support from holders of more than half of
MCI’s shares to complete the planned $8.44 billion Verizon
deal.

KB Toys Files Reorganization Plan to Exit from Bankruptcy

KB Toys Inc. has expressed its optimism regarding its exit from
bankruptcy protection before the holiday shopping season this year,
Newratings.com reported. KB Toys, the largest mall-based specialty toy
retailer in the United States, said in a statement on Monday that it has
filed a reorganization plan and related disclosure statement with the
U.S. Bankruptcy Court for the District of Delaware on Friday, May 13,
2005. The plan is based on a funding agreement reached by the company
with an affiliate of the investment firm, Prentice Capital Management
LP, the statement added.

Laich Files for Chapter 11

Laich Industries Corp. has filed for chapter 11 protection,
Crain’s Cleveland Business reported. In its May 5
filing, Laich Industries listed debts in the range of $1 million to $10
million and assets valued in that same range. Its largest unsecured
creditors are materials suppliers Entec Polymers (owed $501,000), Matrix
Polymers ($492,000), Huntsman Corp. ($247,000) and A. Schulman Inc.
($191,000).

Garden Ridge Emerges from Bankruptcy

Garden Ridge Corporation has successfully completed its
reorganization and reports a 6.9 percent increase in April sales,
retail-merchandiser.com reported. This is the fifth straight month of
sales increases for the company. The effective date of the emergence
from bankruptcy was May 12, 2005 after a Delaware court approved the
reorganization on April 28, 2005. “Garden Ridge has a strong
balance sheet and ample line of credit,” said Don Martin, chief
restructuring officer for Garden Ridge. “We have obtained $80
million in exit financing and $25 million in cash from Three Cities
Research.”

Lagging
Behind the Wealthy, Many Use Debt to Catch Up

More and more Americans are turning to
debt to pay for lifestyles their current incomes can't support, the
Wall Street Journal reported.
Financial firms have turned credit for the masses into a huge business,
aided by better technology for analyzing credit risks. For Americans who
aren't getting a big boost from workplace raises, easy credit offers a
way to get ahead. Read the full article at
face='Arial' size='3'>www.wsj.com 
size='3'>(subscription required).

name='10'>Collins & Aikman Files for Chapter 11

Collins &
Aikman Corp. filed for chapter 11 bankruptcy
protection today, making it the largest of a string of chapter 11
filings in the auto industry, the Wall
Street Journal reported. Collins, which reported $3.9 billion of
sales last year, has been struggling for months as industrywide
financial pressures increased. The problems of parts makers are just one
facet of a crisis in the
size='3'>U.S.
auto industry. In the first quarter, General Motors Corp. had a loss of $1.1 billion and
face='Times New Roman'>Ford Motor Co. reported lower profit. Read
the full article at
face='Arial' size='3'>www.wsj.com
size='3'>(subscription required).