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October 18, 2002
Senate Calls It Quits Until After Election; Lame-duck Session
Planned
Under pressure from senators of all political stripes, Senate Majority
Leader Tom Daschle (D-S.D.) agreed to effectively adjourn the Senate on
Thursday until after the elections, giving senators from both parties a
little over two weeks to campaign for re-election, CongressDaily
reported. After a meeting in Daschle's office, Daschle and Minority
Leader Trent Lott (R-Miss.) announced that the Senate would enter a
series of pro forma sessions stretching until Nov. 12, when the House
returns for a lame-duck session. The pro forma session, which allows the
Senate to convene with short notice, gives Democrats political cover
from the inevitable GOP charges that the Senate is leaving Washington
without finishing work on key priorities. Daschle said if senators
strike improbable deals on legislation from homeland security to energy
legislation, the Senate will return to session to vote on the issues.
Earlier in the day, House Speaker Dennis Hastert (R-Ill.) put his
members on notice that the House, too, could return to Washington to
approve the homeland bill or other pressing matters if deals are
brokered before the election. However, a return to Capitol Hill before
Election Day is doubtful. Work during the lame- duck session would
consist mainly of approving another continuing resolution, voting on any
conference reports that have emerged from negotiations and taking
another crack at approving homeland security legislation
Credit Unions to Press for Bankruptcy Reform During Lame-duck
Session
The Credit Union National Association (CUNA), which has emerged in
recent months as an aggressive champion of a stalled bankruptcy reform
conference report, pledged on Thursday to press for the bill during the
post-election session, CongressDaily reported.
'We will be ready to press for action -- and the sooner the better,'
said John McKechnie, CUNA's senior vice president of governmental
affairs. 'As the bankruptcy bill is in the form of a conference report,
it can be brought up at any time. We will vigorously make that point to
the Congress.' Although by most counts there are ample votes to pass the
measure, it has been stalled in the House for months over a
controversial provision related to abortion clinic protestors.
Some observers believe the House's best shot at passing the bill will
occur during the lame-duck session, the newswire reported. However,
other bill watchers noted this week that the chaotic nature of a
post-election session would not be conducive to taking up any
controversial bills not deemed 'must-pass' legislation -- especially in
the Senate, where filibusters have been threatened against the
bankruptcy bill. Senate Majority Leader Tom Daschle (D-S.D.) has said he
would bring the bankruptcy bill to the floor if the House were able to
pass it.
Meanwhile, Sen. Charles Grassley (R-Iowa), a leading proponent of the
bankruptcy bill, has placed a hold on any measures to create new
bankruptcy judgeships, saying those changes should be enacted as part of
the comprehensive conference report. Grassley last week put his
colleagues on notice that he would object to any efforts to extend
chapter 12 bankruptcy protections for farmers. A permanent extension of
those protections is in the pending conference report.
Judicial Conference Approves Recommendations of the Committee on
Rules of Practice and Procedure
On Sept. 24, 2002, the Judicial Conference approved the recommendations
of the Committee on Rules of Practice and Procedure that the following
proposed rule amendments and revisions be approved and transmitted to
the Supreme Court for its consideration: appellate forms 1, 2, 3 and 5;
bankruptcy rules 1005, 1007, 2002, 2003, 2009, 2016 and new rule 7007.1;
bankruptcy official forms 1, 5 and 17 (effective December 1, 2002);
bankruptcy official forms 1, 3, 5, 6, 7, 8, 9,10,16A, 16C, 17 and 19
(effective December 1, 2003); civil rules 23, 51, 53, 54 and 71A; and
evidence rule 608. The latest information on the proposed rules and
amendments is available at
href='/legis/newlegfront.html'>http://www.abiworld.org/legis/newlegfront.html.
Housing Construction Rebounded in September
Housing construction had a significant rebound in September, rising
sharply by 13.3 percent to the highest level in 16 years,
CongressDaily reported. The substantial increase boosted the
number of housing units that builders broke ground on in September to a
seasonally adjusted rate of 1.84 million. On Wall Street yesterday
stocks were up more than 200 points in mid-morning trading. At 2 p.m.,
the Dow Jones Industrial Average had risen 216 points to 8,252.70 and
the Nasdaq was up 42 points to 1,274.48.
Global Crossing Seeks OK for Agreement to Finish Network
Global Crossing Ltd. is seeking court approval of a settlement with Tyco
Telecommunications Inc. that will allow Global Crossing to finish
construction of its fiber-optic network and comply with requirements
connected to the sale of its assets to an Asian telecommunications
consortium, Dow Jones reported. Global Crossing said in court papers
filed on Wednesday that it will pay Tyco Telecommunications, a
subsidiary of Tyco International Ltd., about $5.12 million and reimburse
the company for the value-added tax, or VAT, paid on its behalf in
exchange for Tyco Telecommunications' agreement to complete portions of
the network and transfer ownership of it to Global Crossing.
Judge Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan
will consider approval of the settlement at a Nov. 8 hearing. Objections
are due Nov. 5. At the company's request, Judge Gerber agreed to allow
Tyco to file the settlement under seal, rather than allowing it to be
viewed publicly. Upon court approval of the settlement, Global Crossing
will pay Tyco an initial $2.6 million in cash as well as tax
reimbursements received since settlement negotiations with Tyco began.
The company will also pay $1.5 million for additional equipment and
services to be provided by Tyco in 2002, and $2.6 million if and when it
emerges from chapter 11 or if the Tyco agreements are assigned to a
purchaser. Bermuda-based Global Crossing filed for chapter 11 bankruptcy
protection on Jan. 28, listing assets of $22.4 billion and debts of
$12.4 billion.
DSL.net Reaches Pact to Buy Network Access Assets,
Customers
DSL.net Inc. signed a definitive agreement to buy the network assets and
subscriber lines of Network Access Solutions Corp. for $7 million cash
and assume up to $10 million in debt, Dow Jones reported. In a press
release on Thursday, DSL.net said Network Access filed for chapter 11
bankruptcy protection in June, so the agreement is subject to approval
of the U.S. Bankruptcy Court of Delaware and may face competing bids.
Network Asset Solutions, a broadband company based in Herndon, Va., has
a network that extends from Virginia to Massachusetts and includes about
13,000 subscriber lines. It listed $58.2 million in assets and $84.9
million in debt in its bankruptcy papers. DSL.net, an Internet services
provider with 2001 revenue of $42 million, expects the deal to be
completed in 2002.
ANC Rental Corporation Names Doug Laux Financial Chief
ANC Rental Corp. tapped a consultant with expertise in helping
businesses operating under chapter 11 for its chief financial officer
post, Dow Jones reported. In a press release on Thursday, ANC said it
named Doug Laux as senior vice president and chief financial officer,
replacing Wayne Moore. Laux has been a consultant for ANC since December
2001 and has been chief financial officer at several private companies
and is CPA and former partner at Ernst & Young LLP. ANC also named
Travis Tanner executive vice president. Tanner will be responsible for
worldwide sales, marketing, operations, business systems development,
brand integrity, information technology and reservations and revenue
management. Tanner had been senior vice president of sales and
marketing. ANC, the owner of Alamo and National rental brands, filed for
bankruptcy protection in November shortly after last year's Sept. 11
terrorist attacks.
ENRON
Judge OKs SEC, Enron Creditors' Settlement on Kopper's
Cash
A federal bankruptcy judge approved on Thursday a settlement reached
between Enron Corp.'s creditors and the Securities and Exchange
Commission, under which bondholders of the failed energy company will
get the $8 million turned over to the regulatory agency by former
executive Michael Kopper, Dow Jones reported. But the compromise is 'not
precedential' for future disputes as to who should be entitled to other
potential disgorgements by the SEC in Enron-related cases, said
Alistaire Bambach, a lawyer for the agency, the newswire reported. The
SEC proposes that all parties-including shareholders, bondholders and
other creditors-have an opportunity to argue for distribution of
forfeited funds held by the agency, Bambach said. The compromise, which
was reached last week, ended a tug-of-war between the creditors and the
SEC over who should get the money surrendered by Kopper.
Ex-Enron Trader to Admit Manipulating Energy Market
Former Enron Corp. energy trader Timothy Belden will plead guilty to
conspiracy for
manipulating the California energy market during the state's power
crisis and is cooperating with prosecutors, Bloomberg News reported.
Belden, former chief of now-bankrupt Enron's trading office in Portland,
Ore., will plead guilty today in federal court in San Francisco to one
count of conspiracy to commit wire fraud, said his lawyer, Cristina
Arguedas. He entered a not-guilty plea during a hearing yesterday,
though his lawyer said he will plead guilty at a second hearing
scheduled for noon California time.
A federal grand jury is considering criminal charges related to the
California energy crisis in 2001, when consumers coped with power
blackouts. A California Senate panel is investigating whether energy
companies manipulated the market, and the Justice
Department is probing Enron's bankruptcy and the energy trader's role in
the California crisis.
EOTT Gets Ok From Court For $575 Million DIP
Financing
EOTT Energy Partners LP said it has received interim approval from the
bankruptcy court to tap its $575 million debtor-in-possession financing
package, Dow Jones reported. EOTT, a crude-oil marketing affiliate of
Enron Corp., said in a press release on Thursday that the order allows
it to continue business without interruption. It also said the
financing, which includes $325 million for letters of credit and $250
million of loans, will allow it to get back to the level of business
that it was operating at before Enron filed for bankruptcy late last
year. Earlier this month, EOTT filed for chapter 11 bankruptcy, an
action the company said was supported by its lenders, a majority of its
bondholders and Enron.
Cedar Chemical Gets Court Approval to Sell Assets
A bankruptcy court has approved an agreement allowing Cedar Chemical
Corp. and its unit Vicksburg Chemical Co. to sell their assets in an
effort to pay off creditors, Dow Jones reported. A ruling on Oct. 8 by
the U.S. Bankruptcy Court in Manhattan positions Control Solutions Inc.
as the lead bidder in an auction process intended to bring the largest
value to the estate. Court papers said the purchase price for the assets
is $1 million and Cedar Chemical has already been paid a deposit of
$100,000. The balance would be paid in cash when the sale is completed.
Under the agreement, Cedar Chemical's assets would be sold free of any
liens or claims, reported the newswire. In addition, Control Solutions
preserved the right to end the deal if a sale order was not entered by
the court by Oct. 31. Court papers said that Cedar Chemical's
pre-petition lenders have a lien on all of the company's assets,
including the property that is central to the Control Solutions deal.
Memphis-based Cedar Chemical produces and markets plant protection
products, primarily herbicides, and other organic chemicals under
contracts with other chemical companies. Vicksburg, Miss.-based
Vicksburg Chemical makes specialty-plant nutrients, chlorine and
nitrogen tetroxide-an aerospace fuel additive.
Adelphia Communications Seeks to Stop Insurers' Suit Versus
Rigases
Adelphia Communications Corp. has asked the court handling its
chapter 11 case to stop its insurers from proceeding with a lawsuit
against the Rigases, Dow Jones reported. In court papers filed late on
Wednesday, Adelphia said the suit-which seeks to revoke $50 million in
insurance coverage for members of the Rigas family and other company
officers and directors-could interfere with the company's reorganization
prospects. Adelphia said it has financial interests in the policies that
could be hurt by the suit's outcome. It also said the suit would require
its chairman and chief executive and some of the other defendants to use
their time and energy to defend themselves, even though they weren't
implicated in any of the alleged wrongdoing on the part of the Rigases.
A hearing on Adelphia's request is scheduled for Oct. 31 before Judge
Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan.
Sears Credit Woes Drive Earnings Shortfall
Sears Roebuck & Co. stock plummeted 29 percent on Thursday after the
company reported an unexpected shortfall in third-quarter profits and
reduced estimates for the rest of the year because of uncollectible
credit-card debt, the Associated Press reported. The surprise warning
and 26 percent profit drop came just 10 days after Sears said it
expected to roughly break even for the third quarter and was on track to
meet fourth-quarter profit targets. CEO Alan Lacy told analysts
additional problems were discovered in the credit-card unit, already
under pressure from the deteriorating economy, after he fired credit
chief Kevin Keleghan early this month for a 'loss of credibility' about
what was going on in the business. As a result, Sears increased its
allowance for uncollectible accounts by $189 million for the quarter,
skewing previous estimates. Lacy insisted that the credit business,
which he headed before becoming chief executive in 2000, remains 'highly
profitable' and that the change has nothing to do with the retail
business. He noted that the company still expects to finish 2002 with 15
percent profit growth.
More Bad News from Airlines, Future Grim
Delta Air Lines said on Thursday it will cut an additional 8,000 jobs as
major airlines reported losses and even perennially strong Southwest
Airlines could not guarantee a fourth-quarter profit, Reuters reported.
Atlanta-based Delta, the No. 3 U.S. airline, plans to cut about 13
percent of its staff, saying survival requires tight cost control.
Airlines from coast to coast are generally suffering from depressed
revenue, the lowest fares in about two decades and high costs. Worries
about airline bankruptcies, which roiled the industry right after the
Sept. 11 attacks, are becoming widespread, experts said, with the U.S.
government unwilling to hand out direct cash aid a second time.
Lernout & Hauspie Files New Chapter 11 Liquidation
Plan
Lernout & Hauspie Speech Products NV filed a new chapter 11
liquidation plan late Wednesday, reported Dow Jones. The plan, which
must be approved by the former speech and language technology company's
creditors and the bankruptcy court handling the two-year-old case,
distributes proceeds from the company's previous asset sales and
provides for the liquidation of any remaining assets. Also, under the
plan a trust would be formed to handle potential litigation claims
against third parties, according to a disclosure statement filed with
the court that describes the plan for creditors. The claims potentially
include causes of action against former officers, directors, auditors,
financial advisers and other professionals and financial institutions
involved in the company's alleged accounting fraud, the newswire
reported. Lernout & Hauspie, or L&H, filed for chapter 11 in
November 2000 in the U.S. Bankruptcy Court in Wilmington, Del., and
about a year later sold a substantial part of its speech and language
technologies business to ScanSoft Inc.
Conseco Arranges Extension to Restructure $1.5 Billion in
Credit
Conseco Inc., the insurance and finance company trying to restructure
more than $6
billion in debt, said it reached an agreement with creditors to give it
more time to negotiate $1.5 billion in loans, Bloomberg News reported.
The extension gives Conseco until Nov. 26 to come to terms on the credit
facility. A previous deadline expired today. The Carmel, Ind.-based
company said it had also reached similar agreements to restructure loan
guarantees made to company directors and officers.
Sirius Up 70 Percent; $1.2 Billion Recapitalization Seen Staving
Off Bankruptcy
Sirius Satellite Radio Inc. shares shot up 70 percent on Thursday after
the company said it reached an agreement with holders for a $1.2 billion
recapitalization, Dow Jones reported. The deal is believed to be staving
off bankruptcy. Previously, New York City-based Sirius said it had only
enough cash to fund operations through the second quarter of 2003. With
the recapitalization under its belt, Sirius says it will have sufficient
cash to operate into the second quarter of 2004. Analysts pointed out
that the recapitalization will help Sirius save on interest costs. The
company was paying more than $20 million in interest on its debt every
quarter. Under the recapitalization plan, Sirius will convert $700
million of debt and $525 million of preferred stock into common stock.
The company will also raise $200 million from the sale of newly issued
common stock.
Amerco Up 5 Percent after Winning Reprieve on Debt
Payments
Shares of Amerco Inc., the parent company of U-Haul International, rose
4.6 percent on Thursday on news that the company's lenders were willing
to renegotiate its debt, Dow Jones reported. However, the gains barely
dented heavy losses a day earlier when the shares lost more than half
their value after a major credit ratings agency downgraded the company's
credit to junk status after Amerco missed a $100 million principal debt
payment. The company insisted it was in sound financial standing. 'My
observations are the company's operations are doing quite well,' Dennis
Simon, an adviser with Crossroads, hired by Amerco to help restructure
its debt, said on Wednesday. 'The decision not to make the payment on
the bonds is part of the company's overall plan to recapitalize its
financial obligations.' The company was unable to complete a planned
$275 million public unsecured debt offering, proceeds of which were to
be used to pay the maturity. Company officials dismissed suggestions
that Amerco might consider filing for chapter 11 bankruptcy protection.
'The company is making payments on all of its credit facilities with the
sole exception of this one bond, which was a principal repayment of $100
million,' Simon said, adding that interest payments are being met.
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