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U.S. June Consumer Credit Falls by $400 Million, Fed
Reports
U.S. consumers charged less on their credit cards in June than a month
earlier, the Federal Reserve said, suggesting Americans are still
spending money generated from refinancing mortgages, Bloomberg News
reported. Consumer debt fell 0.2 percent, or $400 million, to $1.76
trillion during the month, following a revised increase of $8.1 billion
in May, the Fed said. Consumers borrowed more from mortgage lenders and
less from credit card companies as mortgage rates reached record lows in
June. Household spending, which accounts for two-thirds of the economy,
has continued to expand even as manufacturing and business investment
have faltered during and after the 2001 recession. June was a 'monster
month for refinancing'' and consumers 'are folding other costs into
their mortgages,'' said Richard DeKaser, chief economist at National
City Corp. in Cleveland, before the report, reported the newswire.
Signs of Upbeat Economy Abound
Upbeat news about productivity, employment and sales of wholesale goods
provided more signs of a possibly improving U.S. economy, the Wall
Street Journal reported. Productivity soared to an annual rate of
5.7 percent in the second quarter, up from the 2.1 percent growth rate
in the first three months of the year -- and the fastest pace in nine
months, the Labor Department reported on Thursday. In addition, new
claims for jobless benefits fell by 3,000 last week to a seasonally
adjusted 390,000. The four-week moving average fell by 12,750 to
397,250, the lowest level since February, reported the
Journal.
Separately, the Washington Post reported that as a result of
signs of the improving economy, Federal Reserve officials, who cut
interest rates 13 times to fight the slump, aren't expected to cut rates
again when they meet next week. At the same time, the officials have
signaled strongly that in contrast to previous upturns, strong growth
won't trigger rate increases for a long time to come. The key reason for
this change is that Fed Chairman Alan Greenspan and his colleagues
remain concerned that inflation, which has been running around only 1
percent a year, could fall further despite the return of rapid
growth.
Federal Judge's WorldCom Ruling Breaks New Ground in Bankruptcy
Law
U.S. Bankruptcy Judge Arthur Gonzalez on Wednesday approved a $750
million settlement between WorldCom Inc. and the Securities and Exchange
Commission that resolves a historic civil fraud suit and breaks new
ground in bankruptcy law, law.com reported. The fine, approved at
a hearing on Wednesday, is the SEC's largest ever against a public
company and is the first to make use of provisions in the Sarbanes-Oxley
Act allowing the government to distribute proceeds to victimized
shareholders and bondholders. Such a move would upend the absolute
priority of bankruptcy claims by giving recoveries to shareholders
before creditors are compensated in full. To read the full article,
point your browser to
href='http://www.law.com/jsp/article.jsp?id=1059980432714'>http://www.law.com/jsp/article.jsp?id=1059980432714.
Amerco, U-Haul's Bankrupt Parent, Triples Its Debt
Estimate
Reno, Nev.-based Amerco, whose stock has doubled since its June
bankruptcy on speculation that it would be able to repay its debt,
reported liabilities three times larger than previously disclosed in a
court filing, Bloomberg News reported. Amerco, parent of the truck
rental company U-Haul, listed $1.78 billion in assets and $2.35 billion
in debts in court papers filed this week. When it filed to reorganize
under chapter 11 on June 20, it listed $1.04 billion in assets and $884
million of debts with the U.S. Bankruptcy Court in Reno, Nev., an
indication that creditors might be fully paid. The additional debt may
make it harder to pay creditors, lawyers said. According to Jay Taparia,
a finance professor at the University of Illinois at Chicago who has
studied the company, the equity is going to be worthless. The additional
debt includes obligations of Amerco subsidiaries that are guaranteed by
it and assets at book rather than market value, company spokeswoman
Jennifer Flachman said in an e-mail, reported the newswire.
Lockheed Martin Sells Its 10 Percent Stake in Bankrupt Loral
Space
Bethesda, Md.-based Lockheed Martin Corp. sold its stake in bankrupt
satellite maker Loral Space & Communications Ltd., which filed for
bankruptcy protection last month, for less than $750,000, Bloomberg News
reported. Lockheed held a 10 percent stake in Loral, which was sold
after June 30, Lockheed said in a regulatory filing. The shares were
sold on the open market at prevailing prices, company spokesman Jeff
Adams said.
Loral filed for chapter 11 bankruptcy protection on July 15, citing a
collapse in telecommunications investment. The value of Lockheed's
investment in Loral had been reduced to $3 million by the end of last
year, from $393 million at the end of 1999, James Ryan, Lockheed's vice
president of investor relations, said in an interview last month,
reported the newswire.
Jones Apparel Wins Kasper With $204 Million Cash Bid
Jones Apparel Group Inc. won a public auction for Kasper A.S.L. Ltd.,
beating out Kellwood Co. with a cash bid of $204 million for the
bankrupt owner of the Anne Klein brand, Bloomberg News reported.
Kellwood offered to pay $203 million in cash and stock, CEO Hal Upbin
said. Jones also will assume about $12 million in Kasper's prepaid
royalties, he said. Kellwood, which originally agreed to buy Kasper for
$163.6 million in June, is expected to receive a $4 million cash
break-up fee. 'We felt the price has gone beyond the economic value for
Kellwood,'' Upbin said in an interview, reported the newswire.
Trenwick Group May File for Chapter 11 Bankruptcy
Trenwick Group Ltd. may file for chapter 11 bankruptcy and will sell its
Lloyd's of
London operations to a company controlled by its management team,
Bloomberg News reported. Shareholders aren't likely to receive any
return on their investments, the Hamilton, Bermuda-based company said in
a press release distributed by Business Wire. A bankruptcy filing will
be made by Trenwick, one or more of its subsidiaries, or a combination
of both, the statement said. Trenwick stopped selling reinsurance in the
United States earlier this year in the aftermath of losses from the
Sept. 11, 2001, terrorist attacks, asbestos litigation, bad investments
and policies sold too cheaply in the late 1990s, reported the
newswire.
Delta's Retention Program Fails To Stop Some Executive
Departures
A special bankruptcy-proof pension program that Delta Air Lines
established to retain its top executives during the airline industry's
worst financial crisis hasn't kept some from leaving the company -- and
taking their pensions with them, the Wall Street Journal
reported. Already, three of the 35 employees in the retention plan have
left, taking along the initial chunk of their special pensions. And
under the trust rules, nothing keeps the remaining executives in the
plan from leaving the company, with full rights to their trusts, when
they are fully funded early next year. In all, the trusts are expected
to cost Delta, which is currently seeking concessions from its pilots,
about $65 million by early next year, reported the Journal.
United Putting Off Pensions to Pay Bonds
Sen. Peter Fitzgerald (R-Ill.) took a shot against a controversial $6.6
billion expansion of Chicago's O'Hare International Airport on Thursday,
questioning United Airlines' ability to pay for its share of the project
given the carrier's huge pension liability, Reuters reported. Fitzgerald
said he will attempt to block legislation this fall in Congress that
would allow United, a unit of UAL Corp., and other carriers to defer
required full payments to their employees' pension funds for up to 20
years, reported the newswire. He said United planned to use the
legislation in order to raise cash to pay off its share of bonds that
would be sold for the airport project. 'United employees have had to
make many sacrifices and concessions in order to keep the airline
flying,' Fitzgerald said. 'It's time for United management to get its
priorities straight -- pensions before pavement.'
Peregrine Emerges from Bankruptcy
Software maker Peregrine Systems Inc. said on Thursday it had emerged
from bankruptcy with new management and a pared-down set of offerings,
Reuters reported. Company executives said on Thursday that Peregrine was
the first publicly held enterprise software company to successfully
reorganize under chapter 11 and that many of its creditors will be
repaid in full. As a result, Peregrine bond holders will own about
two-thirds of the company. Equity holders will be left with 33 percent
of the reorganized software maker. According to regulatory filings,
Peregrine expects revenues to be $177.8 million in the coming 12 months.
Its profit for that period is seen at $14.4 million, reported the
newswire.
Group Warns U.S. on Blocking Global Crossing Deal
A trade group warned the Bush administration against blocking Singapore
Technologies Telemedia's plan to acquire a majority stake in Global
Crossing Ltd., saying such an action would undermine U.S. investment
policy, Reuters reported. The Organization for International Investment,
representing U.S. subsidiaries of foreign companies, expressed fear that
the United States would reject the bid by Singapore Technologies, owned
by an arm of the Singapore government, and would try to ban foreign
investment in any critical U.S. infrastructure. 'A blanket bar on
foreign investment in critical infrastructure would adversely impact
international investment and associated job creation, costing American
jobs and slowing the economic recovery,' said the group's Executive
Director Todd Malan in an Aug. 6 letter to President George W. Bush,
reported the newswire.
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