January 9, 2002
ABA Representative Optimistic About Bankruptcy Legislation
The Financial Services Coordinating Council (FSCC), a conglomeration of
industry trade groups, has helped the industry unite its lobbying
efforts in a way that should continue to prove especially useful
post-Sept. 11, FSCC officials said yesterday. Chief among the
FSCC’s goals for 2002 are pressing for an optional federal charter
for insurance and building on last year’s failed attempt to enact
a federal terrorism reinsurance measure. Officials said they also
expect that privacy issues would be raised in some form this year.
As for bankruptcy reform legislation, Edward Yingling of the American
Bankers Association (ABA) implied it would be more of an individual ABA
focus, rather than a FSCC item. Aides to House and Senate
conferees met yesterday to discuss the legislation. And while
Yingling conceded that the measure could remain locked up in conference,
“I am cautiously optimistic as I have been for the last six
years,” he said.
Fed Officials See Economic Recovery Further Off; More Rate Cuts
Could Come
Federal Reserve officials appear to be less optimistic about economic
recovery than many private analysts, and that suggests interest rates
could remain low for a while or even fall again, The Wall Street
Journal reported. “I believe recovery will occur around
mid-2002 — a few months later than the median forecast
predicts,” Anthony Santomero, president of the Federal Reserve
Bank of Philadelphia, said. He was one of five Fed officials to
speak so far this week. Their comments suggest they are less
impressed with the run of positive economic reports, ranging from
capital-goods orders to home sales, than private forecasters and
investors.
Atlanta Fed President Jack Guynn said the economy would probably
contract “for another quarter or two.” While he cited
several positive forces for “significant” recovery,
including low energy prices and interest rates, he projected second-half
growth of around 3 percent, less than the 3.6 percent consensus, at an
annual rate. The comments have prompted investors in the futures
markets to raise the odds that the Fed will cut rates again at its Jan.
29-30 meeting. But investors still put the chances at only 30
percent — meaning most investors still think the Fed has finished
easing rates. The markets also see the Fed starting to raise rates
by June. Chairman Alan Greenspan will speak both tomorrow and
Friday. His speech about the economy on Friday will likely make up
investors’ minds about the near-term direction of rates.
Bankruptcy Boom in a Falling Economy (The National Law
Journal)
Fueled by recession and led by such corporate giants as Enron Corp.,
Pacific Gas & Electric and Reliance Group Holdings Inc., bankruptcy
filings reached a historic high in 2001, a record some fear may be
topped in 2002, The National Law Journal reported. “I
think the second wave is yet to come. We’ve just seen the
tip of the iceberg,” said Deborah A. Crabbe, of Foster,
Pepper & Shefelman (Seattle), who also chairs the small business
subcommittee of the American Bankruptcy Institute.
After two consecutive years of decline in 1999 and 2000, bankruptcy
filings in 2001 were well on their way to setting a new 10-year record.
By the end of the third quarter in 2001, there were already 1,147,088
business and non-business filings, while in all of 2000 there were
1,253,444 filings. If filings continue at their present rate for the
last quarter of 2001, experts say, the final number will exceed the
previous 12-month record set in calendar year 1998 with 1,442,549
filings. But the ominous note in the business bankruptcies marking
this economic recession has not been the number, but the size and type
of the individual filings. Through Dec. 28, 2001, 251 public
companies filed for chapter 11 bankruptcy in 2001 with total prepetition
assets of $254.1 billion, compared with 176 public companies with assets
of $94.8 billion filing in 2000. To read the entire story, point
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Judge Orders Motorola to Pay $300 Million On Iridium Loan
A federal judge ordered Motorola Inc. yesterday to pay a $300 million
guaranty that was collateral for an $800 million loan granted to Iridium
LLC, according to Dow Jones. U.S. District Judge Alvin H.
Hellerstein in Manhattan ordered Motorola to pay the guaranty on the
loan, which was issued in 1998 by J.P. Morgan Chase & Co. and a
consortium of lenders. Iridium filed for chapter 11 bankruptcy
protection in August 1999. The satellite-telephone company, backed
by Motorola, slid into debt after failing to find a market for its
clunky, one-pound mobile phone handsets. Chase and other creditors
of Iridium claimed that Motorola kept control of the company even after
it went public in 1997, contributing to problems that drove Iridium into
bankruptcy.
ENRON UPDATE
Two More Enron Units Seek Protection, 33 Now Bankrupt
Two more Enron Corp. affiliates filed for chapter 11 protection on
Monday, bringing the distressed company’s bankrupt units to 33,
Dow Jones reported. Enron Global LNG LLC, the holding company for
Enron’s worldwide liquefied natural-gas projects, is 100 percent
owned by parent unit Atlantic Commercial Finance Inc., while Enron
International Fuel Management Co., which conducts business for the
DabholPower Co. project in India, is wholly owned by Enron Global
LNG.
Houston-based Enron Global listed assets of negative $17.5 million and
debts of $10.2 million. This doesn’t reflect off-balance sheet and
contingent obligations. The unit’s largest unsecured
creditors include URS Corp., Merlin Production, and AnalySys Inc.
Enron International Fuel listed assets of $900 million and debt of $36
million, not including off-balance sheet and contingent
obligations. The unit listed no creditors.
Williams Raises $1 Billion to Shore Up Balance
Sheets
In an attempt to shore up its balance sheet following the bankruptcy of
Enron Corp., the Williams Cos. has raised $1 billion from a sale of
securities convertible into stock, reported Reuters. Tulsa,
Okla.-based Williams became the latest energy company to sell
convertible securities to preserve its credit ratings and boost investor
confidence following Enron’s Dec. 2 bankruptcy. Its
“mandatory” convertibles carried a 9 percent coupon.
Williams sold its securities after announcing on Dec. 19 plans to cut
2002 capital spending by 25 percent to $3 billion, and to sell between
$250 million and $750 million of assets. It said it would use
proceeds to fund expenses, to pay down short-term debt and for other
purposes.
BP Submits $25 Million Bid For Enron Support Systems
U.K. integrated oil major BP PLC yesterday announced that it has
submitted a $25 million offer to buy Enron Corp.’s computer
settlement support systems used to process the trading of energy
products, Dow Jones reported. The support systems are primarily
used in back-office activities involving the settlement and
administration of natural gas and electricity contracts.
BP’s bid for the technology will go into an auction tomorrow when
Enron’s advisers are expected to press bidders to improve their
offers. Results will be known on Friday.
Investcorp Buys Teligent’s Executive Conference For $60
Million
Teligent Inc. yesterday announced that it sold its Executive Conference
Inc. unit, a provider of audio and Internet conferencing services, to
Investcorp for $60 million in cash, Dow Jones reported. A
spokesman for Investcorp said the global investment firm obtained a sale
order last week. The U.S. Bankruptcy Court for the Southern District of
New York authorized the deal. Vienna, Va.-based Teligent filed for
chapter 11 bankruptcy protection on May 21 after violating covenants of
an $800 million credit agreement. Executive Conference, which also
filed a chapter 11 petition, agreed in November to sell its assets to
Investcorp’s acquisition vehicle, Summit Acquisition LLC.
MediQuik Faces Financial Crunch After $619,800 Judgment, May Seek
Bankruptcy
Bayer Corp. yesterday was awarded $619,800 from MediQuik Services Inc.
in connection with a breach of a distribution agreement, which might
have a “significant adverse effect” on MediQuik’s
finances, Dow Jones reported. MediQuik hasn’t determined whether
it will appeal or seek to resolve the judgment through negotiations with
Bayer, according to a filing on Monday with the Securities and Exchange
Commission. The U.S. District Court for the Southern District of Texas
entered the judgment on Dec. 21. MediQuik may file for bankruptcy
protection, the filing said. Houston-based MediQuik Services deals with
home delivery of pharmaceuticals and testing supplies, educational
materials, and patient monitoring and consultations.
Sun Country Air Creditors Seek to Force Bankruptcy
Three aircraft leasing companies on Tuesday filed a petition to force
privately held Sun Country Airlines into bankruptcy court in an attempt
to recover $3.1 million they claim is owed to them, reported
Reuters. Sun Country, which last month laid off most of its 900
workers and temporarily suspended its flights, said it would appeal the
validity of the filing in Delaware and had 30 days to respond to the
petition. The three firms — Pegasus Aviation, Pegasus
Aviation Lease Asset Securitization Trust and Riverhorse Aviation Group
— filed a petition in the U.S. Bankruptcy Court in Delaware
seeking to force Sun Country into involuntary chapter 7 bankruptcy.
Settlement Urged in Playmate’s Case
Attorneys on both sides of the battle for the estate of ex-Playmate Anna
Nicole Smith’s late husband accused one another of perjury and
slander before the judge urged them to settle out of court, according to
the Associated Press. During yesterday’s closing arguments,
both camps cited missing or altered evidence and accused one another of
outright lies during the four-week hearing over J. Howard Marshall
II’s millions. Smith has fought a lengthy battle in several
courtrooms for the inheritance she says she was promised when she
married the millionaire. Pierce Marshall, Howard Marshall’s
son, said Smith should get nothing.
After they were finished, U.S. District Judge David O. Carter
told them the case could be easily resolved outside of court and
indicated that neither side will approve of his ruling. A
California bankruptcy court awarded Smith $474 million in December 2000.
After a Texas jury ruled in May that Smith had no claim to the estate,
Carter threw out the original California ruling in her favor, pending
his own review.
Indesco Seeks Approval For Reorganization Plan Today
New York-based Indesco International Inc. will seek approval of a
reorganization plan today in the U.S. Bankruptcy Court for the Southern
District of New York, The Daily Deal reported. If the plan
is approved, it would then go to creditors for a vote. Indesco was
forced into chapter 11 bankruptcy protection in November 2000 by a group
of unsecured creditors after its pump business soured. The company
filed a voluntary petition on Jan. 4, 2001. The disclosure
statement that will be presented to Judge Robert Gerber is
actually the ninth in the case but the first that represents a
settlement between Indesco management and the unsecured
creditors.
California Regulators Seek New PG&E Bankruptcy Plan
California regulators yesterday announced that they are seeking the
right to file their own reorganization plan for bankrupt utility Pacific
Gas & Electric (PG&E) that would contain many of the elements of
a pact designed to save utility Southern California Edison (SoCal
Edison) from bankruptcy, Reuters reported. Loretta Lynch,
president of the California Public Utilities Commission (CPUC), said its
plan to financially revive the utility would include a serious
contribution from Pacific Gas & Electric’s parent PG&E
Corp. She said the plan would also tap the utility’s cash on
hand and keep consumer rates at their premium to current power prices
while paying off the company’s debts. The CPUC plan also
would restrict the utility’s ability to pay dividends to its
parent company.
Bankrupt PG&E has the exclusive right to file a reorganization
plan until Feb. 4 and has sought an extension until June 30, a move
opposed by the CPUC in a bankruptcy court filing on Tuesday. The
San Francisco-based utility filed a reorganization plan of its own on
Sept. 20. The company is seeking to move its power plants and
energy transmission systems to units of its parent company that would
fall outside state regulation.
Honeywell Would Provide Narco DIP Loan
The North American Refractories Co. (Narco), the U.S. subsidiary of
Austrian fireproof materials maker RHI that has been plagued by
asbestos-related claims, is seeking bankruptcy court approval for $20
million in debtor-in-possession (DIP) financing provided by Honeywell
International Inc., The Daily Deal reported. The first-day
hearing in the case is set for tomorrow, and Narco will ask Judge
Judith K. Fitzgerald to approve the DIP financing. RHI acquired
Narco in 1994, when it took over Narco’s owner, Didier-Werke AG,
which had purchased Narco from AlliedSignal, now named Honeywell, in
1986. Narco filed for chapter 11 bankruptcy protection in the U.S.
Bankruptcy Court in Pittsburgh on Friday. In its petition, Narco
listed assets about $190 million and debts of about $175 million.
Going Under — January 8, 2001 (The Daily Deal)
Get updates on the past week’s recent developments in active
bankruptcies from The Daily Deal.
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Story
SEC Says Former InaCom Officers Manipulated Earnings
The Securities and Exchange Commission (SEC) sued two former
officers of InaCom Corp. on Tuesday, accusing them of securities
violations and lying to auditors, Dow Jones reported. David
Guenthner and Jay Samuelson engaged in a scheme to manage earnings in
InaCom’s quarterly reports throughout 1999, according to the
SEC. Guenthner was InaCom’s chief financial officer and
Samuelson worked as the company’s assistant controller. Both
men worked on the company’s financial statements and the quarterly
reports filed with the SEC.
The lawsuit alleges that during the first three quarters of 1999,
Guenthner and Samuelson improperly accrued unallocated general reserves,
and then reversed about $7.1 million of the reserves into income in the
third quarter of 1999. InaCom filed for bankruptcy protection in
2000. In addition, the men knowingly posted $10.8 million of
inventory cost reductions that related to prior quarters, the SEC said.
This further artificially inflated the company’s income for the
third quarter of 1999.
Genesis Bankruptcy Concludes
Genesis Physicians Group is able to close the bankruptcy file
on a now-defunct operating unit, after recovering $4.2 million in
settlements, officials said on Tuesday, The Dallas Morning News
reported. Doctors and hospitals in the Genesis Physicians Practice
Association have received payments over the last two months. The
unit filed for chapter 11 bankruptcy protection in July 1999, stating at
the time that its liabilities exceeded assets by more than $7
million.
About 600 physicians received $1.9 million in settlement, while
hospitals and other providers got $1.58 million. About $700,000 went to
pay legal and administrative expenses. Most physicians of the
bankrupt group, which focused solely on risk contracts, continue to work
under the broader parent company. Genesis Physicians Group is
associated with about 1,250 doctors in North Texas.
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