March 2, 2004
Industry Feels Jobs Ahead, Price Squeeze
U.S. manufacturers may finally be close to adding jobs after 42 straight
months of layoffs, a survey suggested on Monday, but they also face
escalating pricing pressures that could squeeze profits, Reuters
reported. The survey stirred hopes that the February payrolls report,
due on Friday, could show a revival in the labor market. Separate
figures showed consumer spending was held back in January by a cooling
in auto sales. But revisions still left consumption high this quarter.
'Essentially, the economy's on a roll,' said Ram Bhagavatula, chief
economist at RBS Financial Markets. 'We're looking for growth of 5.0
percent this quarter. At that pace, employment has to revive at some
point, and maybe soon.' With price pressures also on an upward trend, at
least at the production level, Bhagavatula sees a real chance the
Federal Reserve could consider increasing interest rates, reported the
newswire.
Greenspan, Decrying Deficits, Turns Focus to Social Security
Federal Reserve Chairman Alan Greenspan spoke yesterday before the
House budget committee on the fiscal problems expected in the coming
years when baby boomers begin to retire and when the number of retirees
collecting Social Security and Medicare aid begins to overwhelm the
payments to those programs from people still in the work force, the
Wall Street Journal reported. Greenspan acknowledged those
difficulties yesterday, as well as contentions that taxes could be
raised to make the difference. But he argued the tax burden would be too
detrimental to economic growth, and that 'we will eventually have no
choice but to make significant structural adjustments in the major
retirement programs,' he said, reported the online newspaper
.
Report: U.S. Government Plans to Announce Charges for Ex-MCI
(WorldCom) Chief
Attorney General John Ashcroft is expected to announce federal criminal
charges against Bernie Ebbers, the former chief of bankrupt
telecommunications company MCI today in New York, according to New York
television station WNBC, Reuters reported. Ashcroft is expected to
reveal federal criminal charges of securities fraud and conspiracy
related to MCI's $11 billion accounting scandal, according to a newscast
citing Justice Department sources. The report said Ashcroft is expected
to fly into New York to announce the charges at a press conference.
Citing investigators, WNBC said Ebbers is not expected to be arrested or
to surrender in the morning, as his arraignment will come at a later
date. In April 2002, Ebbers resigned from WorldCom amid a Securities and
Exchange Commission probe of the company's support of $400 million in
personal loans to him. This would mark the first federal criminal
charges against the former chief executive, reported the newswire.
Top Enron Investigator At Justice Is Stepping Down
Leslie Caldwell is resigning as head of the Justice Department's
Enron Task Force, after two years of investigations that culminated in
the indictment last month of former CEO Jeffrey Skilling, to seek
private-sector work, the Wall Street Journal reported. Caldwell
will be succeeded by her deputy, Andrew Weissmann. Weissmann said he
doesn't expect any significant changes in the operation of the task
force, which includes roughly a dozen federal attorneys and about 20
investigators from the FBI and other agencies. People familiar with the
federal probe had said for months that they expected Caldwell to leave
the task force before it completely finished investigating and
prosecuting all of the Enron-related cases. A trial date still needs to
be set for the recent indictment of Enron's former president and CEO,
Jeffrey Skilling, reported the online newspaper.
Prosecutors: Rigas Drove Adelphia Into Bankruptcy
Lies, greed and financial fraud by former Adelphia Communications CEO
John Rigas drove the cable company into bankruptcy, federal prosecutors
charged on Monday as they opened their case against Rigas, two of his
sons and a former company executive, Reuters reported. Both the
prosecution and the defense gave opening arguments in the federal fraud
trial against John Rigas and his sons, who served as top executives of
the company, and each face a minimum of 15 to 20 years in prison if
convicted. Also on trial is Michael Mulcahey, former director of
internal reporting for Adelphia.
The Rigas family is accused of using millions in company funds. The
family has denied the charges, arguing the loans were legitimate and
were taken out on the recommendation of their auditor and investment
bankers, reported the newswire.
Media 100 to Be Acquired in Bankruptcy Deal
The assets of Media 100 Inc. are being sold in a prepackaged bankruptcy,
with proceeds going to pay off the Marlborough-based company's debts and
shareholders likely receiving nothing, the Boston Business
Journal reported. Optibase Ltd. will lend Media 100 up to $1 million
in a debtor-in-possession loan. The Herzliya, Israel-based company will
also pay $2.5 million, less the final amount of the loan, for Media
100's assets. That money will cover operational expenses and debts to
creditors, according to Media 100's statement announcing the deal. The
agreement is nonbinding and needs approval by the bankruptcy court
before it is finalized. If the deal is not closed, Media 100 may cease
operations, the statement said.
Spiegel's European Owner Gets A Hard Lesson in U.S.
Business
German billionaire Michael Otto is facing tough questions about choices
he made when financial crisis struck two of his key American holdings:
Spiegel Inc. and its Eddie Bauer Inc. apparel unit, the Wall Street
Journal reported. In recent weeks, Otto has been questioned by the
Securities and Exchange Commission and has been struggling to negotiate
a deal with creditors. Both the SEC and creditors want to know why Otto
kept the company from filing quarterly financial statements for 15
months prior to filing for bankruptcy protection last year. The
creditors are intent on taking over Spiegel unless he pays them more
than $1 billion. Otto and his family own 89 percent of Spiegel, and Otto
is its sole voting shareholder. But the sliver Otto doesn't control is
owned by U.S. shareholders, opening Spiegel's practices to scrutiny by
the SEC, reported the online newspaper.
Hawaiian Bidding Process Established
With at least six competing bids to take Hawaiian Airlines out of
bankruptcy expected, the carrier's court-appointed trustee and the
unsecured creditors' committee have come up with a proposal to evaluate
and select the best offer, the Honolulu Advertiser reported.
Earlier this month, Corporate Recovery Group LLC, a Wyoming-based
turnaround company, filed a plan that included a $30 million cash
infusion to take Hawaiian out of bankruptcy. Robert Konop, a Hawaiian
Airlines pilot, submitted the second reorganization plan. Hawaiian
Holdings Inc., the parent company of Hawaiian Airlines; Vx Capital
Partners, a San Francisco-based airline investment company; Lonestar
Partners LP, which owns 5 percent of Hawaiian's stock; and the Hawaiian
reorganization committee are expected to file competing bids.
'To get what's best for Hawaiian, we need a fair process -- one that
gives those parties who are qualified and interested the information
they need to put their best proposal forward, and that gives that
proposal fair consideration when they do,' Trustee Josh Gotbaum said,
reported the newspaper.
Hawaiian Airlines filed for bankruptcy in March after John Adams, the
chief executive at the time, could not reach an agreement with Boeing
Capital Corp. to reduce the leases on Hawaiian's fleet. Adams had
intended to bring the airline out of bankruptcy, but the court removed
Adams on Boeing's request and appointed a trustee. Now the court is
accepting proposals to reorganize the carrier.
General Electric Gives Details of Its Exposure to Airlines
General Electric Co. said it has a total of $7.8 billion in exposure
through mostly secured loans and leases to four airlines, including US
Airways Group and United Airlines parent UAL Corp., according to its
2003 annual report released on Monday, the Wall Street Journal
reported. Of that, $2.5 billion is financing that GE's
commercial-financing unit has provided to US Airways, helping it to
emerge from bankruptcy in March 2003.
The biggest chunk of the exposure, $5.3 billion, is with Air Canada, UAL
Corp., and Atlas Air Worldwide Holdings, to assist them in reorganizing.
That includes investment securities, loans and leases, much of which is
secured with assets such as airplanes or engines, said GE spokesman
David Frail. Atlas is the latest airline to seek bankruptcy protection,
reported the online newspaper.
UNITED AIRLINES
UAL Corp. Plans To Contribute $1.1 Billion To Pension Plan In
2004
UAL Corp. said Tuesday that it plans to contribute about $1.1 billion to
its defined pension benefit plans in 2004, the online Wall Street
Journal reported. The airline concern also expects to contribute
about $200 million to its other benefit plans in 2004, according to an
annual report filed with the Securities and Exchange Commission. UAL
Corp. said it is required to pay about $4.1 billion into the pension
plan by 2008. UAL Corp. expects to emerge from chapter 11 bankruptcy
protection in the first half of 2004.
Small Airlines Oppose Plan for U.S. Aid to United
Alarmed at United Airlines' attempt to enter the low-fare market, an
organization representing low-fare airlines said yesterday that it
planned to fight United's effort to win $1.6 billion in federal loan
guarantees, which would be the centerpiece of its restructuring plan,
the New York Times reported. Their vow is the first sign of
public opposition within the industry to the revised bid by United,
which filed for bankruptcy protection in December 2002, only days after
its first application for a loan guarantee worth $1.8 billion was turned
down.
United, a unit of the UAL Corporation, is the nation's second-largest
airline behind American, a unit of the AMR Corporation. United wants to
emerge from bankruptcy by the end of June. It has arranged $2 billion in
exit financing, most of it contingent upon the federal guarantee. The
loan board does not face any deadline for deciding on United's
application, the Times reported.
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