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March 8, 2006
id='1'>
Treasury Official Says
w:st='on'>
size='3'>Pension
face='Times New Roman' size='3'>Legislation
size='3'>Falls
size='3'>Short
Treasury Assistant
Secretary Mark Warshawsky said that
w:st='on'>
size='3'>U.S.
size='3'>pension overhaul legislation before Congress still falls short
of guaranteeing that workers will receive promised retirement pay and
shielding taxpayers from a bailout, Reuters reported yesterday. 'The
administration is concerned that the reforms currently being considered
by Congress are inadequate and that stronger action is needed to improve
the protection of pension benefits,' Warshawsky said in remarks prepared
for delivery to the District of Columbia Bar. Warshawsky said that
without changes to the proposals, workers would face increased risks of
losing pension benefits their employers had promised them. To be
acceptable to the administration, any pension bill would have to reduce
expected claims to the pension agency, the Pension Benefit Guaranty
Corporation, over 10 years, he said.
face='Times


New
Roman' size='3'>Bills before Congress include phase-in periods that are
too long and fail to take into account expected longer lifespans of
retirees, Warshawsky said.
href='http://today.reuters.com/investing/financeArticle.aspx?type=fundsNews2&storyID=2006-03-07T174843Z_01_N07384179_RTRIDST_0_ECONOMY-TREASURY-PENSIONS-UPDATE-1.XML'>Read
more.
id='2'>Senate Panel Explores Credit
Rating Industry Competition
Witnesses including
finance professionals, an academic and a labor official told the Senate
Banking Committee that lawmakers should take action to bring more
competition and oversight to the bond credit rating industry,
CongressDaily
size='3'>reported yesterday. Witnesses at the hearing said the industry
was essentially a duopoly controlled by Moody's Investors Service and
Standard and Poor's Rating Service that had garnered tremendous profits
but was slow to spot the financial mismanagement at Enron Corp. and
WorldCom Inc. 'Now is the time to allow more high-quality institutions
in to compete and push the incumbents to do a better job,' said Glenn
Reynolds, chief executive officer at CreditSights Inc., an independent
credit and equity research company. Those views were shared by Banking
Chairman Shelby, who wants to move a bill later this year that would
revamp oversight of the industry. Shelby and other lawmakers are
frustrated by inaction at the SEC as the agency since 1975 has allowed
only five companies to become 'nationally recognized' rating firms while
leaving as many as 100 other firms ineligible to gain such status since
1975. Vickie Tillman, executive vice president for Standard and Poor's,
told lawmakers that legislation was not needed because the SEC last year
issued a preliminary rule to redefine how a firm could become a
nationally recognized rating organization. The definition has been a
constant source of controversy in the industry because the SEC has never
defined what specifically would constitute a 'nationally recognized'
firm.
id='3'>Commentary: The Asbestos
Mess
The Senate recently
rejected the best solution to the asbestos mess yet devised, according
to an op-ed piece in today’s
size='3'>Wall Street Journal. The proposed
legislation is very far from perfect, but something like it is essential
for two reasons. First, the victims of asbestos exposure -- some of whom
already have or will develop extremely serious and often fatal illnesses
-- are being shortchanged because of the failures of the current tort
system as applied to mass injuries of this kind. Second, the tort system
has become a graveyard even for companies with tenuous or nonexistent
links to asbestos, as the older firms with more direct responsibility
(more than 70 so far) descend into the great maw of bankruptcy. However,
as a political logjam in the movement of the legislation developed, the
federal government refused to break it by contributing anything to the
proposed fund, leaving everyone else holding the bag. The government's
intransigence is also politically and economically irresponsible as its
refusal to contribute its fair share to a congressionally mandated trust
fund may permanently doom that solution. Leaving asbestos-related harms
in the tort system will predictably bankrupt even more companies whose
links to asbestos are far more peripheral than those of the
government.
href='http://online.wsj.com/article/SB114179185106992318-email.html'>Read
more.
id='4'>Lawyer for Jeweler
Named to
face='Times New Roman'
size='3'>Philadelphia
size='3'>Bankruptcy Bench
Jean K.
FitzSimon, senior vice president and general counsel of
Whitehall Jewellers Inc., has been selected to fill the vacancy on the
U.S. Bankruptcy Court in
w:st='on'>
size='3'>Philadelphia
according to the
size='3'>Philadelphia Business Journal.
FitzSimon will fill the opening created by Judge Kevin
Carey moving to the
w:st='on'>Wilmington
size='3'>Del.
bench earlier this year. FitzSimon will now be subject to a comment
period until March 24, then an FBI background check.
Carey was one of four judges
selected to fill new positions in
w:st='on'>
size='3'>Delaware. Eric
Frank of DiDonato & Winterhalter was named to fill a new position
created in
face='Times New Roman'
size='3'>Philadelphia
FitzSimon's appointment would give the court five judges, including
Frank, Chief Judge Diane Weiss Sigmund, Bruce Fox and
Stephen Raslavich.
href='http://www.bizjournals.com/philadelphia/stories/2006/03/06/daily20.html?from_rss=1'>Read
more.
Judge
Approves Naming
Examiner in Refco Bankruptcy
A federal bankruptcy judge
authorized the appointment of an independent examiner to investigate
fraud and other misconduct at commodities and futures broker Refco Inc.,
Reuters reported yesterday. U.S. Bankruptcy Judge Robert
Drain's ruling is a defeat for Refco creditors as they had
argued that naming an examiner would increase Refco's reorganization
expenses, leaving less money for creditors. The U.S. Justice Department
had in January asked Drain to name an independent examiner. Drain's
order takes effect after March 14. Drain said the examiner will review
other investigations into Refco, including by federal regulators and
prosecutors, and cooperate with government agencies and the creditors'
committee to minimize overlap. Separately, Drain said he plans on March
14 to rule whether there will be a 'stockbroker liquidation' for the
Refco Capital Markets unit.
href='http://asia.news.yahoo.com/060307/3/2gyzy.html'>Read
more.
id='6'>Bankrupt Biotech
Company Selling
w:st='on'>Kentucky
Large Scale Biology Corp.
of
size='3'>Vacaville, Calif.,
a deal to sell its
face='Times New Roman' size='3'>Owensboro
size='3'>,
size='3'>Ky.
manufacturing plant for $6.4 million, the Sacramento Business
Journal reported yesterday. Large Scale Biology voluntarily filed
for chapter 11 protection Jan. 9. The
w:st='on'>
size='3'>Owensboro
subject to approval of the bankruptcy court and an auction March 27. The
potential buyer, Kentucky BioProcessing LLC, would pay in cash, cash
equivalents or assumption of Large Scale's debt, Large Scale said in a
document filed with the Securities and Exchange Commission. Kentucky
BioProcessing is a 'designee' of Owensboro Medical Health System Inc. in
the planned sale hearing, according to a document filed with the
bankruptcy court by Large Scale. The health system, which owns a
hospital and a center for outpatient care and physical therapy, pledged
to lend Large Scale $25,000 per week to keep the bioprocessing plant
running temporarily after the bankruptcy filing, according to the court
document. It had loaned Large Scale Biology $150,000 as of Feb.
27.
href='http://sacramento.bizjournals.com/sacramento/stories/2006/03/06/daily19.html?jst=b_ln_hl'>Read
more.
Lucent
Denies Fault in Winstar
Bankruptcy
Telecommunications gear
maker Lucent Technologies Inc. has appealed a bankruptcy court ruling
that found the company partially to blame in the collapse of former
business partner Winstar Communications Inc.,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. In court papers filed on Monday, Lucent
listed 15 grounds of error in the December 2005 ruling, pleading with a
federal judge in
face='Times New Roman' size='3'>Delaware
to overturn the decision. Beginning in 1998, the company
served as both lender and supplier for Winstar, a partnership that ended
after the smaller telecom filed for bankruptcy in 2001. As part of the
court’s ruling, Lucent was slapped with a massive fine, including
$55.7 million for contractual breach and $188.2 million, plus interest.
In its recent appeal, Lucent promised to challenge the bankruptcy
court’s conclusion that Winstar was insolvent as of Dec. 2000, a
crucial date in the dealings between the companies. Lucent indicated
that it would revive its fraud and
size='3'>negligent-misrepresentation counterclaims against Winstar as
well.
No
Expense Spared as Dana
Navigates Bankruptcy
Southern District of New
York Judge Burton R.
Lifland will likely approve tens of millions
of dollars in fees in the bankruptcy of auto parts manufacturer Dana
Corp., court documents show, challenging those charged in other recent
high-profile insolvency cases, Portfolio Media reported
yesterday. Leading the way is Dana’s New York-based bankruptcy
counsel, Jones Day, which tasked attorney Corrine Ball
with heading up the effort at $825 per hour, according to court
documents. Ball will be joined on the case by
face='Times New Roman'>three lawyers from the
firm’s
face='Times New Roman' size='3'>Cleveland
office. Dana has already paid Jones Day more than $2.2
million on top of a $750,000 retainer. Michigan-based crisis manager
AlixPartners LLC, hired as Dana’s restructuring firm, has already
received a $400,000 retainer and will receive a $4 million contingency
fee if the filing wraps up successfully. Shortly before the bankruptcy was triggered, the
firm received more than $20 million from Dana for services rendered over
the past few years. The bankruptcy is case number 06-10354 in the U.S.
Bankruptcy Court for the Southern District of New York.
In related news, the
repercussions of Dana Corp.’s bankruptcy for
w:st='on'>
size='3'>U.S.
size='3'>automakers will be anything but positive, according to an op-ed
piece in Bloomberg News today. Ford doesn't yet know how much Dana's
bankruptcy might cost it as the automaker could be asked to lend the
Toledo, Ohio-based supplier money, pay higher prices for parts or it
might have to offer more generous payment terms. Ford, General Motors
Corp. and other
w:st='on'>
size='3'>U.S.
size='3'>automakers are getting a taste of their own medicine as Dana's
woes reflect the constant pressure from automakers for lower prices and
more flexible payment terms. '
size='3'>The demands made by domestic automakers on their suppliers have
been excessive,'' said John Henke, a professor of marketing at
size='3'>Oakland
face='Times New Roman' size='3'>University
size='3'>in
face='Times New Roman' size='3'>Rochester Hills
size='3'>,
size='3'>Mich.
haven't been concerned enough about suppliers' financial health, and
it's come back to bite them.''
href='http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_levin&sid=aCF3rIi6mnzo'>Read
more.
id='9'>Hedge Fund,
Milbank
face='Times New Roman' size='3'>Battle
Shrouded in Secrecy
Amid the accusations
surrounding Meridian Automotive System Inc.’s bankruptcy case,
U.S. Bankruptcy Judge Mary Walrath ruled to close a
hearing on New York hedge fund Stanfield Capital Partners Inc.’s
earlier request to eject Milbank, Tweed, Hadley and McCloy from the auto
parts maker's chapter 11 proceedings, Portfolio Media reported
yesterday. Last month, Stanfield accused Milbank Tweed of exploiting
insider information in the case and working against the fund’s
interest, charges that Milbank denies. In its bid for closed-door
proceedings, Milbank asserted that various e-mails that 'portray
certain professionals in an unflattering light' should be concealed from
the public as well as the Office of the U.S. Trustee, which monitors
bankruptcy cases. In
her decision, Judge Walrath pointed to Bankruptcy Code rules for keeping
scandalous material off the public record as justification for the
sealing. Stanfield allegedly discussed with Milbank a financial plan
that would enable holders of $175 million in second-lien debt to provide
more secured financing to
w:st='on'>
size='3'>Meridian, the
hedge fund said in its filing.
size='3'>Milbank Tweed is representing the first-lien debt-holders, who
oppose the plan because it requires them to ease up on their control of
the company’s assets.
GM
to Freeze Pension Plans
of White-Collar Workers
General Motors Corp. said
it will freeze the traditional pension plans it provides white-collar
workers, setting the stage for the auto maker to seek pension
concessions from the United Auto Workers in contract talks next year,
the Wall Street
Journal reported today.
face='Times New Roman'>GM said that starting Jan. 1 it
will freeze accrued pension benefits for its approximately 42,000
size='3'>U.S.
size='3'>salaried employees under the current defined-benefit plan
formula and begin a shift toward defined-contribution plans, such as
401(k) plans. The company expects the shift to result in a $1.6 billion
reduction in its pension liability by the end of this year and savings
on its pension expenses of about $420 million next year.
href='http://online.wsj.com/article/SB114174809645891521-email.html'>Read
more.
Airlines
id='11'>Northwest’s Labor
Deals May Pave Way to Bankruptcy Exit
Analysts said the prospects for
Northwest Airlines exiting from bankruptcy have improved dramatically
after tentative agreement on two labor deals last week, Reuters reported
yesterday. If union members approve the tentative deals as analysts
expect, then the No. 4 U.S. airline has only non-labor costs to cut. One
expert said the hard part is over and that the carrier almost certainly
will be out of bankruptcy in 2006. 'The next big obstacle would be
financing the exit,' said Bill Warlick, an airline analyst at Fitch
ratings. 'Presumably they would be looking for debt financing and some
equity financing.' Northwest has never given a target date for exiting
bankruptcy. The carrier has said only that it expects its bankruptcy to
be shorter than that of UAL Corp's United Airlines, the No. 2 U.S.
airline, which ended a more-than-three-year stay in court protection on
Feb. 1.
href='http://asia.news.yahoo.com/060307/3/2gymf.html'>Read
more.
id='12'>Enron Executive Points a
Finger at Former Chiefs
Andrew S. Fastow, the
former chief financial officer and the Enron figure most vilified for
the secretive transactions that artificially bolstered Enron's earnings
while making tens of millions of dollars for himself, wasted no time by
quickly pointing a finger at former chief executives, Jeffrey K.
Skilling and Kenneth L. Lay, according to the
face='Times New Roman' size='3'>New York Times
size='3'>today. Fastow testified that Skilling was fully aware of how
Enron was using off-the-books partnerships to manipulate earnings and
encouraged Fastow to create more and better-capitalized partnerships to
produce even more artificial earnings. Fastow also said that Skilling
disdained detailed disclosure of the partnerships to the public. 'I
thought I was being a hero for Enron,' Fastow said. 'At the time, I
thought I was helping myself and helping Enron to make its
numbers.'
href='http://www.nytimes.com/2006/03/08/business/businessspecial3/08enron.html?_r=1&oref=slogin&pagewanted=print'>Read
more.
International
w:st='on'>
size='3'>
id='13'>Taiwan
face='Times New Roman' size='3'>Consumers' Foundation Calls for Help for
Debtors
A series of bailout
measures should be implemented in
w:st='on'>
size='3'>Taiwan
size='3'>to solve the snowballing social problem of credit and cash card
debt, a consumer advocacy group said, according to the Taipei
Times. Currently, the nation's estimated 500,000 to 700,000 'card
abusers' can make use of the card-debt negotiation mechanism, put in
place by the Financial Supervisory Commission and the Bankers
Association of the ROC with several lower interest-rate payback programs
available for those heavily in debt. From Jan. 1 to March 1, the
mechanism received more than 14,000 applications, in which 8,773 cases
were qualified for debt negotiations and 7,323 cases reached an
agreement on a payback plan, representing a success rate of 80 percent,
the commission said last week. However, only a small percentage of the
nation's debtors have been helped, according to the Consumers'
Foundation.
href='http://www.taipeitimes.com/News/biz/archives/2006/03/07/2003296193'>Read
more.
href='http://www.taipeitimes.com/News/biz/archives/2006/03/07/2003296193'>