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May 24, 2005
Proposed Laws Would Reveal Costs of Plastic
Sen. Dianne Feinstein (D–Calif.) introduced legislation last
week requiring credit card issuers to spell out for consumers how deep
in debt they’ll get by making only minimum monthly payments,
sfgate.com reported. Feinstein’s bill,
href='http://thomas.loc.gov/cgi-bin/bdquery/z?d109:s.1040:'>S. 1040,
would require card issuers to provide a generic description of how long
it would take to pay off balances of $1,000, $2,500 and $5,000 and how
much it’ll cost if the cardholder makes only minimum monthly
payments. A slightly less detailed warning is already required by the
bankruptcy reform law enacted last month. Alternatively,
Feinstein’s bill says card issuers could provide all customers
with individual projections for how long it’ll take them to pay
off their balance if they make minimum payments. Read the full article
at
href='http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/05/2…'>sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/05/22/BUG5OCSNEQ1.DTL.
Board of Directors Set for Eddie Bauer Holdings Inc.
A board of directors has been announced for Eddie Bauer Holdings
Inc., the corporation to be established as the new parent company of the
premium retailer Eddie Bauer upon the company’s emergence from
chapter 11 reorganization, it was announced in a press release. The
announcement was made following the motion identifying the board filed
with the U.S. Bankruptcy Court on May 20, 2005. The nine-member board
includes experts in management, finance, merchandising, marketing, human
resources and communications. William End, former chairman and CEO of
Cornerstone Brands Inc., will serve as chairman of the board.
Planned US Airways and America West Merger Faces Obstacles
US Airways and America West tentatively agreed last Thursday to merge
in order to better compete with low-cost airliners, such as JetBlue
Airways and Southwest Airlines. According to wire reports, US Airways
has invited alternative proposals to its planned America West merger due
to the skeptical reaction of Wall Street last Friday. The US Airways and
America West merger faces many obstacles, including approval by federal
regulators and America West shareholders. The U.S. Bankruptcy Court will
have to accept it as part of US Airways’ chapter 11 restructuring.
Some industry analysts are skeptical that the two companies can be
peaceably integrated, the National Ledger reported.
U.S. Cautions Banks on Fees Intended to Steer Retiree Accounts
The Labor Department has issued an advisory opinion that banks,
brokerage firms and investment firms cannot accept payments from mutual
fund companies in exchange for steering retirement account customers
into those funds, the New York Times reported. The opinion
may help eliminate some of the troubling conflicts of interest that
exist in many individuals’ retirement accounts. Read the full
story at
href='http://www.nytimes.com/2005/05/24/business/24fees.html'>www.nytimes.com/2005/05/24/business/24fees.html.
Pension Law Bars Disclosure to Those Who Need It Most
A Washington Post article examines pension law
disclosure requirements. Read the article at
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/05/23/AR20050…'>www.washingtonpost.com/wp-dyn/content/article/2005/05/23/AR200505230192….
Scandal Biting into San Diego’s Reputation
San Diego’s unfunded pension liability—the gap between
the value of its pension assets and its obligation to retirees—has
swelled to $1.37 billion after decisions were made in recent years to
sidestep payments to the fund and still enhance benefits, the Associated
Press reported. The problem has led to criminal conflict-of-interest
charges against six current and former pension-fund trustees and sparked
the resignation of Mayor Dick Murphy as the city cuts costs to invest
money into the troubled fund.
Unemployment Fund Lost $10 Million from SES Bankruptcy
Michigan’s unemployment-insurance trust fund is out nearly $10
million because of the bankruptcy of Simplified Employment Services Inc.
(SES), the Michigan Unemployment Insurance Agency said on Friday,
Crain’s Detroit Business reported. The agency has
been investigating SES for avoiding the payment of state unemployment
taxes—a practice known as SUTA, or State Unemployment Tax Act,
dumping. The agency, however, does not expect a return on the claims. In
addition, the state’s unemployment-insurance trust fund must
absorb an additional $8 million in jobless benefits paid to former SES
employees, who became unemployed when SES and its 11 affiliated
companies became insolvent and shut down.
New Statute Might Be Especially Vexing for Little Firms
The new bankruptcy law imposes tougher rules on small businesses that
want to keep creditors at bay, the Sacramento Business
Journal reported. The law establishes a streamlined procedure for
small businesses that file for chapter 11 bankruptcy reorganization.
Businesses with less than $2 million in debt will have six months to
file a reorganization plan. After that period, the company’s
creditors can submit reorganization plans for the business. If no plan
is filed within 300 days, the bankruptcy case can be dismissed or
converted into a chapter 7 liquidation. Larger businesses, by contrast,
will have 18 months to file reorganization plans. Small businesses also
will be required to file regular financial reports, listing not only
their profits and losses but also their anticipated cash receipts and
disbursements. Read the full article at
href='http://www.bizjournals.com/sacramento/stories/2005/05/23/focus3.html'>www.bizjournals.com/sacramento/stories/2005/05/23/focus3.html.
Delta Shareholders Raise Stock Issue Authorization
Delta Air Lines shareholders have approved the increase of the number
of shares that the carrier can issue to 900 million, from 450 million,
it said in a filing with regulators yesterday, Reuters reported. Delta
also said shareholders voted to reduce the par value of the common stock
to 1 cent a share, from $1.50 a share—which means the
cash-strapped carrier will be able to issue new shares until its stock
drops to 1 cent a share. “I think they’re just keeping their
options open to try and keep all avenues open to increase
liquidity,” said Jim Corridore, an airline analyst with Standard
& Poor’s, the newswire reported. Delta Air has said it
won’t generate enough cash to meet its needs this year, raising
new alarms the airline could have to file for bankruptcy in the next few
months.
Ross Warns of Risks in Asia Buyouts
Low-cost production and access to huge markets makes Asia attractive
for more buyouts by U.S. private equity firms, but dealmakers must not
ignore the challenges of operating overseas, Wilbur Ross said on Monday,
Reuters reported. Ross, CEO of $2.5 billion buyout firm WL Ross &
Co., urged caution while chasing the opportunities in fast-growing
countries like China and India, where political and cultural obstacles
can tangle up a deal. “The real challenge is
implementation,” Ross told a luncheon of mid-market private equity
managers attending the Asian Venture Forum in Chicago.
Bankruptcy Reorganization Plan for Hare Krishna Temples
Approved
A federal bankruptcy court on Monday approved a reorganization plan
that will allow six California-based Hare Krishna temples and their
affiliates to remain open while compensating members who claim they were
abused at the society’s schools, the Associated Press reported.
The plan includes $9.5 million for alleged victims of sexual, physical
and emotional abuse during the 1970s and 1980s at religious boarding
schools run by the Hare Krishnas. A similar reorganization plan was
approved May 16 in West Virginia, where temples also filed for
bankruptcy. The monotheistic tradition, also known as the International
Society of Krishna Consciousness, was founded in 1966 by an Indian
scholar.