'Sadly, today's action is unavoidable,' said Montgomery Ward CEO
Roger Goddu in a statement yesterday, citing weak holiday sales as the
clincher for the decision. The statement came hours after scores of
Montgomery Ward employees began filing out of the company headquarters
with boxes in hand. Several said they had been told at a meeting that
General Electric Co.'s GE Capital Unit, the owner of Montgomery Ward,
was pulling financial support in the wake of sluggish holiday sales.
Retail analysts also said they had heard the end of the company was
near. Founded in 1872, Ward pioneered mail-order catalogs when it came
out with a single sheet of dry-good items for sale. It was the first
U.S. mail-order house to sell general merchandise. Sears, Roebuck &
Co. was not founded until 1886 and did not put out its first general
merchandise catalog until a decade after that.
Ward, which opened its first store in Plymouth, Ind., in 1926, has
been financially unstable for years. In 1999, it emerged from chapter 11
bankruptcy, announcing a plan to revamp many of its stores. But some
analysts said it was too little too late.
'Wards has not established themselves as anything distinctive in the
marketplace,' said George Whalin, president of the California-based
Retail Management Consultants. 'There's just no reason to go there
– unless maybe they're the closest store to your house.' Whalin
said it had become increasingly difficult for Wards to survive in a
retail market swamped with competitors – everything from Home
Depot to Best Buy and Target. News of Wards’ demise comes two days
after Massachusetts-based discount retailer Bradlees Inc. announced that
it is going out of business.
GE Capital Sees 'No Material Effect' from Ward Bankruptcy
GE Capital, the financial services arm of General Electric Co., on
Thursday said it sees no material effect on its earnings from the
recently announced bankruptcy filing by struggling retailer Montgomery
Ward Inc., which is a fully owned unit of GE Capital, according to
Reuters.
'With our company-wide strength and the previously disclosed one-time
gain from the PaineWebber transaction, today's filing by Montgomery Ward
of a voluntary petition for chapter 11 protection will have no material
effect on GE Capital Services' ability to meet our anticipated
earnings,' the company said in a statement. 'We are on [target] to
achieve our numbers.'
Officials Seek Court Order to Force Bradlees to Honor
Certificates, Returns Connnecticut and Massachusetts officials are
seeking a federal court order that would force troubled retailer
Bradlees Inc. to honor gift certificates and merchandise returns during
its bid for bankruptcy. Connecticut Attorney General Richard Blumenthal
announced Thursday that he filed a motion with the U.S. Bankruptcy Court
in New York, where Bradlees has filed for chapter 11 bankruptcy
protection.
Massachusetts Treasurer Shannon P. O'Brien said Thursday that her
office would file a claim in the same court to hold Bradlees responsible
for all abandoned property held by the company, including gift
certificates, layaway deposits, credit balances and outstanding payroll
checks. Bradlees, based in Braintree, Mass., confirmed Tuesday that it
will go out of business, putting nearly 10,000 people out of work. The
company operates 105 stores and three distribution centers in
Connecticut, Massachusetts, New Hampshire, Maine, New York, New Jersey
and Pennsylvania.
'This company's actions represent the height of hypocrisy,'
Blumenthal said. 'Bradlees sold millions of dollars worth of gift
certificates during the holiday season while planning for possible
bankruptcy.' Blumenthal said the decision not to honor gift certificates
or accept returns was a business decision made by Bradlees officials.
'It was not a court order, as Bradlees might have customers believe,'
Blumenthal said. Blumenthal urged
consumers to be cautious when shopping at Bradlees. He said no
merchandise purchased after Dec. 26 can be returned or exchanged.
LTV to File for Bankruptcy, But Secured Loan Will Allow It to
Continue Operations
LTV Corp., the third-largest U.S. steel producer, will file for
bankruptcy protection today, but a last-minute financing deal with Chase
Manhattan Corp. averted the shutdown of any facilities, according to the
Wall Street Journal.
'We will be continuing operations until we work out a more formal
financial arrangement,' LTV Chairman William Bricker said. He made the
announcement after an hour-long meeting with Cleveland Mayor Michael R.
White and U.S. Reps. Dennis Kucinich and Stephanie Tubbs-Jones.
At the same time, LTV lawyers were wheeling six boxes of documents
into federal court in Youngstown, Ohio, where they prepared to file for
chapter 11 bankruptcy protection. The filing would give LTV time to
reorganize its finances. LTV emerged in 1993 from seven years of U.S.
Bankruptcy Court protection.
Like many other steelmakers nationwide, LTV has struggled recently,
posting a loss of $80 million in its third quarter. The company has
blamed its losses on low-cost steel imports cutting into its sales and
pricing. LTV has 18,000 employees and hasn't turned a profit since
1997.
Bricker had said Thursday in a letter to city officials that LTV had
expected to secure $225 million in loans from Chase in order to prevent
shutdowns, but that the bank had backed out. He did not disclose details
of the new financing agreement, nor did he say why the bank decided to
go ahead with it. Chase officials also declined to comment. Chase holds
more than $1.2 billion of LTV collateral to cover $600 million in debts,
Bricker said.
The U.S. International Trade Commission decided Thursday there was
'reasonable indication' that the nation's steel industry is 'materially
injured' by subsidized and underpriced imports from 11 countries. The
commission is considering whether to impose additional duties on imports
from Argentina, China, India, Indonesia, Kazakstan, the Netherlands,
Romania, South Africa, Taiwan, Thailand and Ukraine.
'Without enforcement of our trade laws by the administration our only
hope of survival was to reorganize LTV under chapter 11 of the U. S.
Bankruptcy Code, and emerge as a lower cost operation capable of
competing successfully in the global steel market,' Bricker said in a
letter.
The steel producer's board met late Thursday to decide whether the
company should file a chapter 11 petition. LTV will be the ninth U.S.
steelmaker to enter bankruptcy in the past two years, including
Wheeling-Pittsburgh Corp., which also is taking its second turn under
bankruptcy-court protection. And given the dim prospects of any sort of
pricing relief and the problems steelmakers face in obtaining credit,
analysts expect other steel producers to follow.
Charles Bradford of Bradford Research Inc., an independent research
group, said big issues for LTV are inefficient operations and high debt.
Last year, LTV paid about $650 million to buy Copperweld, which makes
tubular products for the construction and automotive industries.
Bradford estimates the company's long-term debt and retiree liabilities
at $3.3 billion. Meanwhile, the company's market capitalization is about
$34 million.
Accord Advanced Technologies Subsidiary Files Voluntary Chapter
11
Accord Advanced Technologies yesterday announced that they have
filed a voluntary petition under chapter 11 of the U.S. Bankruptcy Code
for its wholly owned subsidiary, Accord SEG (Semiconductor Equipment
Group), according to the business wire. Accord called the filing a
necessary component of its strategy to create a sustainable capital
structure with improved cash flow, enhance its manufacturing operations,
and improve its profitability.
'While the decision to file a chapter 11 petition was not an easy
one, the board of directors determined that it was the best means of
obtaining the financial flexibility to address our economic and
competitive challenges,' said CEO Travis Wilson. 'We are committed to
using the ‘breathing room’ provided under chapter 11 to
implement a strategic plan designed to ensure the long term viability of
our company for the benefit of our employees, customers, vendors, and
our shareholders.'
Accord cited a number of reasons for the filing, including the
shelving of about $2 million in contracts with Chinese companies due to
market conditions, damage from an unforseen rupture of a water supply
line which suspended manufacturing operations for several weeks causing
further delays in scheduled shipments, and difficulties with the
landlord that resulted in a temporary lockout of the facility and
further delays.
SystemOne Technologies Says Deal With Safety-Kleen Is Fully
Effective
SystemOne Technologies Inc., formerly Mansur Industries Inc.,
yesterday announced that the marketing and distribution agreement
between SystemOne and industry leader Safety-Kleen had ended without any
appeals being filed and, as a result, the agreement became fully
effective yesterday, according to a company press release. The company
expects to begin initial deliveries in January of the first year's
minimum of 10,000 units.
Founded in 1990, SystemOne Technologies designs, manufactures, sells
and supports a full range of self-contained, recycling industrial parts
washing products for use in the automotive, aviation, marine and general
industrial markets. The company has been awarded 10 patents for its
products, which incorporate innovative, proprietary resource recovery
and waste minimization technologies. SystemOne is headquartered in
Miami, Fla.
Quepasa.com Approves Asset-Sale Plan
Online Spanish-language portal Quepasa.com said Wednesday that its
directors have approved a plan to sell the company's assets and
distribute the proceeds to shareholders in a few months, according to
Reuters. The site was already strapped for cash and in November laid off
two-thirds of its staff.
The company will hold a shareholders' meeting for a formal vote on
the plan in three to four months. Quepasa's assets include its namesake
web site as well as RealEstateEspanol.com, Etrato.com and Creito.com.
Its assets also include furniture, fixtures and equipment. Quepasa said
it would continue to operate the sites until the liquidation is
completed.
The company will continue to reduce its staff of 20 employees during
the liquidation, down from 58 employees before the November round of
cuts. Founded in 1998, the Phoenix-based Quepasa.com is a Spanish and
English language web portal designed for U.S. Hispanics, which make up
10 percent of the U.S. online population, and are expected to account
for 20 percent within five years, the site said. The company was
delisted from the Nasdaq last week, and the company's shares last traded
on Dec. 18 at 12.5 cents.
Coram to Convert Debt to Equity
Coram Healthcare Corp. and Coram Inc. yesterday announced that
Judge Mary Walrath of the U.S. Bankruptcy Court for the District
of Delaware approved the company's emergency request to allow its note
holders to convert approximately $122 million in debt to equity in the
form of preferred stock.
Judge Walrath also extended for an additional 90 days the company's
exclusive right to submit a plan of reorganization to the court. 'We are
very pleased with these timely decisions,' said Coram Healthcare Corp.
Chairman, President and CEO Daniel D. Crowley. 'This will allow us to
work on the debt restructuring process in an orderly fashion. Meanwhile,
Coram's operating subsidiaries continue to generate adequate cash flow
and are meeting all obligations to patients, vendors, and
employees.'
Under the terms of the note exchange agreement, Coram's note holders
will exchange up to $122 million of the principal and unpaid accrued
interest of their Series A and B notes for preferred stock, which will
pay a cumulative compounding annual dividend at the rate of 15 percent
payable quarterly in arrears. Payments made before the effective date of
a plan of reorganization will be made in additional shares of preferred
stock. Payments made after the effective date of a plan of
reorganization will be made in cash or in shares of common stock equal
to the fair market value of the dividend payment.
Subject to approval by the court, the preferred stock may be
restructured under a plan of reorganization. The final amount of
preferred stock to be issued is subject to ongoing financial analysis.
The preferred stock will be subject to the same covenants as the
company's Series A and B notes. The company's remaining Series A and B
notes of approximately $136 million will be amended to reflect a
maturity date of June 30, 2001 and an annual interest rate of 9 percent
payable quarterly.
The preferred stock initially will have 47.5 percent of the voting
rights of Coram Inc. and will entitle the holders to select not less
than three of seven directors on Coram Inc.'s Board. However, the
preferred stockholders have agreed to suspend their corporate governance
rights for the duration of the chapter 11 process. Coram filed voluntary
petitions with the U.S. Bankruptcy Court for the District of Delaware
under chapter 11 of the U.S. Bankruptcy Code on Aug. 8, 2000 with the
support of the lenders holding the company's principal debt.
Nader: Calif. Utilities Should Be Allowed to Fail
Green party leader Ralph Nader stepped into California's power
crisis on Thursday, urging consumers to resist what he called a 'coerced
bailout' of the state's utilities and saying the financially strapped
companies should be allowed to fail, according to Reuters.
'It's clear that deregulation has failed ... California consumers now
face a coerced bailout of the utilities or their bankruptcy,' he told
reporters outside hearings on rate hikes the utilities say are needed to
preserve their ability to fund operations and buy power.
Bankruptcy by the public utilities need not disrupt electric service
in California since their operations would be taken over by the courts,
and ultimately the state, Nader said.
The comments came on the second day of hearings by the California
Public Utilities Commission during which the two major utility companies
continue to hammer away at their case for rate hikes of up to 30
percent.
Earlier on Thursday Calif. Gov. Gray Davis, who has blamed the threat
of utility bankruptcies for disrupting power sales to the state, spoke
by telephone with the top executives of Pacific Gas and Electric,
Southern California Edison and consumer groups who remain strongly
opposed to the proposed rate hikes.
'It was a frank exchange of views,' said Mike Florio, attorney for
consumer group The Utility Reform Network (TURN), who said further
meetings are likely. 'A bailout is unacceptable. The ratepayers of
California should not pay a penny more for the mistakes made by
utilities,' said Harvey Rosenfield of The Foundation for Taxpayer and
Consumer Rights, who said the utilities should look to their parent
companies for help. Southern California Edison is a unit of Edison
International while Pacific Gas and Electric is a subsidiary of PG&E
Corp.
Nader, who drew 4 percent of the California vote in his failed
presidential bid, said Davis' political career 'hangs by a few kilowatt
hours' and said the governor and the state legislature must return to a
form of price controls for electricity based on costs.
Wholesale power prices have skyrocketed in California this year and
Pacific Gas and Electric is seeking to raise rates for customers by an
initial average of 26 percent while Southern California Edison wants a
30-percent hike. The California Public Utilities Commission opened
hearings on Wednesday on whether to lift a freeze on the rates the two
utilities charge. That freeze was imposed as part of the landmark
legislation which deregulated California's markets.
T&W, Subsidiary File Joint Plan of Liquidation
T&W Financial Corporation announced that the company and its
subsidiary, T&W Financial Services Company L.L.C., have filed a
joint plan of liquidation in their bankruptcy proceedings, jointly
administered, in the U.S. Bankruptcy Court for the Western District of
Washington, according to the business wire.
On Dec. 21, 2000, the Hon. Paul B. Snyder approved the company's
disclosure statement on the plan. Shareholders reportedly rejected the
plan and will not be required to vote.
The plan of liquidation provides for appointment of a plan
administrator to liquidate assets and provides for payments to priority
and general unsecured creditors from proceeds of specified assets
pursuant to settlement with certain financial institutions. These
financial institutions hold large secured and unsecured claims against
the debtors. The bankruptcy estates of the company and its subsidiary
hold disputed bankruptcy litigation claims against these financial
institutions.
Under the plan, the estates will release claims against the financial
institutions in exchange for contribution of assets, partial release of
security and other interests, and assignment of proceeds of certain
causes of action by the financial institutions. Although the plan is
expected to generate a partial distribution to general unsecured
creditors, the plan expressly provides for no distribution to
shareholders of the company and all stock will be cancelled as of the
effective date of the plan.
Japan's No. 1 N. Korean Credit Union Reportedly Being Forced into
Bankruptcy
The largest North Korean-linked credit cooperative in Japan may be
forced by the Japanese government to go into bankruptcy after its own
efforts to restructure failed, reported Reuters yesterday. Kobe-based
Chogin Kinki Shinyo Kumiai, which is burdened with a large portfolio of
bad loans, will be liquidated under Japanese government supervision, the
Jiji Press said. It was not immediately clear if any particular
development triggered the Japanese government's move.
According to the report, Japan's Financial Reconstruction Commission
may make an announcement about the credit cooperative as early as
Friday. All deposits will be fully protected, it added. Chogin Kinki
inherited operations of the failed Chogin Osaka Shinyo Kumiai in 1998
with the infusion of about 260 billion yen in public money.
