January 25, 2006
Senate Debate on Asbestos to Open Feb. 6
Legislation to create a $140 billion asbestos compensation fund will come to the Senate floor for debate on Feb. 6, Senate Judiciary Committee Chairman Arlen Specter (R-Pa.) said yesterday, according to a Reuters report. U.S. Senate Majority Leader Bill Frist (R-Tenn.) said that he was determined to go ahead with the bill, despite a suggestion by Senate Minority Leader Harry Reid (D-Nev.) that the asbestos debate be postponed to work on reforms in the wake of the scandal surrounding lobbyist Jack Abramoff. While the bill is intended in part to help lift the threat of litigation from companies, it has stirred controversy in the business community as elsewhere. Small to medium-size companies say that they would have to pay too much to the fund, while bigger companies would get a break from asbestos liabilities. Many insurers are worried, too. The American Insurance Association wrote to Frist to complain that the legislation as written does not provide insurance companies with "certainty" and "finality" at a cost they can afford. The bill would allow some asbestos claims to return to the courts if the fund is slow getting started, while insurers would already be paying billions to the fund, the AIA said. Read more.
Congress Seeks to Rein in Special Executive Pensions
Rankled by the rich retirement payouts many troubled companies make to
executives, Congress is moving to block such companies from funding the
lavish packages, the Wall Street Journal reported today. The provision,
tucked into legislation that would shore up the federal agency that provides
a safety net for private-sector pensions, would keep financially troubled
companies from setting aside any special pension benefits for top executives
if their pension plans for rank-and-file employees weren't adequately
funded. Disclosures about bankruptcy-proof supplemental executive retirement
benefits at some airlines, including a $45 million fund set up a few years
ago for 35 top officials by Delta Air Lines Inc., have galvanized bipartisan
support for reining in such perks at other beleaguered companies. "We've
heard too many stories of top executives of bankrupt companies sticking
workers with unfunded pensions while running off with millions of dollars of
so-called nonqualified pension benefits," says Senate Finance Committee
Chairman Charles Grassley, an Iowa Republican. Congress still hasn't worked
out the final restrictions on executive retirement plans, but they may kick
in when a company's defined-benefit pension plan is funded at 60 percent or
less of its projected liabilities. Read more.
Americans: World's Worst Savers
Americans are among the world's most cash-strapped people, according to the latest semi-annual survey from ACNielsen, CNN Money reported yesterday. Nearly a quarter (22 percent) of Americans have no money left once they've paid for their essential living expenses and spent their discretionary dollars. That puts the United States at the top of a list of 42 countries for saving futility. "Americans are legendary for incurring debt," said Tom Markert, Nielsen's chief marketing officer. Others in the top 10 for most cash-strapped countries included Canada, No. 3, at 19 percent, the United Kingdom (No. 4, 17 percent) and France (No. 5, 15 percent). Some good news for Americans—the results were an improvement from six months earlier, when 28 percent of those surveyed had nothing left at the end of the month. Read more.
No Change of Venue for Lay, Skilling
The upcoming trial of former Enron Corp. chiefs Ken Lay and Jeffrey Skilling will stay in the company's hometown despite their pleas for a new venue, according to a federal judge's ruling released yesterday, Reuters reported today. The ruling by U.S. District Court Judge Sim Lake was the second time he had denied defense requests to move the trial out of Houston. Defense requests had cited heavy publicity and lingering anger for the 2001 collapse of the company that had once been the seventh largest in the nation. Lawyers for Lay and Skilling had argued that 80 percent of the potential jurors harbored negative opinions about the two men, and that publicity surrounding the plea deal of a co-defendant had further hurt their chances to get a fair trial. In his ruling, Judge Lake wrote that written questionnaires and the court's questioning of jurors in person would "provide adequate safeguards" that an impartial jury would be selected. Read more.
Pa. Hospital Files for Chapter 11
The owners of Tara Hospital at Brownsville yesterday filed for bankruptcy in U.S. District Court in Pittsburgh, citing debts that could be as high as $10 million, the Pittsburgh Tribune-Review reported today. The hospital, previously known as Brownsville General, closed suddenly Jan. 8 after surrendering its operating license to the state Department of Health and locking out its employees. Frank Ricco, chairman of the board of Brownsville Real Estate Corp., a nonprofit that holds title to the building and surrounding land, doubts the hospital ever will reopen. The filing comes as another shock to the Brownsville and Redstone Township area after the new operators, a group of businessmen and physicians, promised to infuse new money into the hospital's operation and remain open as an acute-care facility. Ricco believes the bankruptcy petition was filed to break the unions.
Read more.
A bankruptcy court approved Foamex International’s Dec. 16, 2005, motion to approve the agreement as to a credit relationship between the debtors and the Dow Chemical Co. under the debtors' critical vendor program, BankruptcyData.com reported today. The court determined that the motion is in the best interests of the debtors and their estates and creditors. Some of the terms of the agreement are as follows: Foamex will pay in full all unpaid pre-petition invoices of Dow in the amount of $21 million; Dow will withdraw its goods-in-transit and reclamation claims and will withdraw its proof of claim once pre-petition invoices are paid in full; and Dow will extend credit to Foamex with Foamex making payment to Dow in accordance with normal trade terms that existed between the parties prior to Foamex’s chapter 11 filing.
Caterpillar Financial Services and the Bank of Nova Scotia, as agent for certain secured creditors of Calpine Generating Co. LLC and various subsidiaries, filed separate objections to Calpine’s motion requesting the entry of a final order authorizing the cebtors to use cash collateral and obtain post-petition financing, BankruptcyData.com reported today. Several parties have filed similar objections to the motion, which is scheduled for Jan. 25 consideration.
Judge to Rule on N.Y. Building Chapter 11 Filing
A federal bankruptcy court judge should decide Friday the future of the chapter 11 bankruptcy petition filed by the former owners of the Iszard's building in downtown Elmira, N.Y., the Elmira Star-Gazette reported today. Stephanie Becker, a trustee with the U.S. Bankruptcy Court in Rochester, said that her office has filed court papers seeking to convert the owners' petition to a chapter 7 filing, which would liquidate the company to satisfy its debts. Hon. John C. Ninfo II, will consider the trustee's motion but could also decide to dismiss the filing altogether. Dismissal is likely, Becker said, because the building has been sold and the owners now have no assets to protect through the chapter 11 filing. As of Tuesday, no papers contesting the motion had been filed by Elmira attorney Mark Weiermiller, who is representing the building's former owners, a bankruptcy court spokesman said. The case will be heard in Watkins Glen, N.Y. Read more.
Airlines
United: Now Boarding for the Nasdaq
UAL Corp., which will end a three-year tenure in bankruptcy next month, said yesterday that it will list its new shares on the Nasdaq stock market under the ticker symbol UAUA, Reuters reported today. The parent of United Airlines, the No. 2 U.S. carrier, said the shares will start trading in early February. Existing shares in the company will be terminated when the carrier emerges from bankruptcy. The airline also said it received offers of subscription for more than twice the capital necessary to support the $3 billion in exit financing it sought, which consists of a $2.8 billion term loan and a $200 million revolving credit line.
Delta to Cut 1,000 Jobs to Tame Costs
Bankrupt Delta Air Lines Inc. said it will cut up to 1,000 maintenance positions as part of an ongoing program to reign in costs, Reuters reported yesterday. At the same time, the troubled airline said it wants to launch a $14 million incentive plan to keep critical employees from leaving, which it said it needed to counter attrition at a key subsidiary, Delta Technology. Delta spokeswoman Chris Kelly said that the job cuts were part of the planned 7-9,000 reductions that the airline had said it would make through 2007. The No. 3 U.S. carrier announced its plan for the cuts soon after it filed for chapter 11 bankruptcy protection in September as part of its efforts to raise $3 billion through cost savings and revenue increases.
Read more.
Bank Earnings Decline on Bad Loans
Bank of America, the country's largest consumer bank, said yesterday that
fourth-quarter earnings fell 2 percent, its first quarterly decline in more
than four years, after a surge in personal bankruptcies and poor trading
results damped its performance, the New York Times reported yesterday. "It's
first in a long time when we failed to meet our own expectations," said
Alvaro G. de Molina, chief financial officer of Bank of America. Bank of
America is the latest big bank to announce softer-than-expected earnings
after J. P. Morgan Chase and Citigroup reported their results last week.
Credit card profits have been hurt by an unexpectedly large rise in bad debt
write-offs taken after a tougher new bankruptcy law caused consumer
bankruptcy filings to spike this fall. Retail banking has been challenged by
steep competition and a flattening yield curve, as the narrowing gap between
short-term and long-term interest rates puts pressure on margins. Read more.