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December 16, 2002
Sensenbrenner To Make Another Bankruptcy Reform
Try
House Judiciary Chairman Sensenbrenner (R-Wis.) intends to 'take another
shot' at comprehensive bankruptcy reform in the 108th Congress,
notwithstanding a dispiriting loss for the bill's proponents on the
House floor this year, reported CongressDaily. 'There's been too
much effort [spent] to let it go away,' Sensenbrenner said in an
interview on Thursday. With GOP majorities in Congress and a Republican
in the White House, some industry sources have suggested they might try
to persuade lawmakers to roll back some concessions they were forced to
make to lock up needed Democratic support this year. However,
Sensenbrenner said he would reintroduce this year's version of the bill
- except for an abortion-related compromise brokered by Sen. Charles
Schumer (D-N.Y.) and Rep. Henry Hyde (R-Ill.).
'I will use the conference report as is, take the Schumer language
out, and then it will be up to the financial services industry to
… break a Senate filibuster,' Sensenbrenner said, reported the
newswire. He expressed hope that the House and then the Senate would
take up and approve identical versions of the bill, negating the need
for a conference. While acknowledging there might be a temptation on the
part of some bill proponents to remake the measure in a more
industry-friendly form, Sensenbrenner suggested he prefers a more
cautious route. 'Every rework of the bill is going to mean it's much
more likely the bill will be put in a conference committee,' he said.
'It would be much simpler if it was left untouched.' And he noted that
Senate Democrats also stand to lose if the measure goes to conference
committee. 'It will be a much different conference committee …
when we have a majority,' he said, reported CongressDaily.
US Airways Pilots Ratify Agreement to Cut Costs by $100
Million
US Airways Group Inc.'s pilots union approved an agreement aimed at
cutting costs by $100 million, part of the carrier's plan to win a U.S.
loan guarantee and emerge from bankruptcy, Bloomberg News reported. The
Airline Pilots Association's Master Executive Council, representing more
than 4,000 US Airways pilots, ratified changes to pay, pensions and
benefits, the company said in a statement on PR Newswire. US Airways is
still in talks with other unions on cost savings, it said.
The seventh-largest U.S. airline needs another $100 million from flight
attendants, baggage handlers and mechanics to gain a $900 million
federal guarantee. US Airways raised its cost-cutting target to $1.6
billion from $1.2 billion after low air fares and weak demand crimped
revenue, the newswire reported.US Airways reached the savings agreement
with pilots, including work-rule changes, on Wednesday. It wants to
include the cost reductions in a recovery plan to be submitted to
bankruptcy court. US Airways on Thursday won an extension that pushed
the deadline for the plan to Jan. 31.
UNITED AIRLINES
United Lobbies Its Unions for Further Concessions
UAL Corp.'s United Airlines, which filed for bankruptcy-court protection
a week ago and must meet stringent financial conditions imposed by its
interim lenders, told its unions on Friday it needs to secure agreements
on $2.4 billion in annual labor concessions by mid-February, according
to one union, the Wall Street Journal reported. That figure
significantly eclipses the $1 billion in annual savings the unions
earlier agreed to provide in the hope of winning a government bailout
and avoiding chapter 11.
The nation's No. 2 airline told its unions that without arranging those
savings quickly, it won't be able to tap the second tranche of a $1.5
billion debtor-in-possession financing package that is allowing it to
continue to operate, reported the Journal. Without a sharp
reversal in its daily cash-burn rate and the achievement of positive
cumulative cash flow by next spring, its lenders could find UAL in
default and sell the collateral backing the loan, which would push UAL
into liquidation. The U.S. Bankruptcy Court in Chicago has granted
preliminary approval for UAL to draw down the first $800 million of the
interim financing, augmenting the company's $800 million in unrestricted
cash on hand.
Airbus, 3 Unions Named to UAL Creditors Committee
A Chicago U.S. Bankruptcy trustee late Friday named 13 of United
Airlines parent UAL Corp's creditors to serve on a formal committee to
help devise a financial recovery plan as part of its chapter 11
reorganization, Dow Jones reported. Airbus North America Holdings, Inc.,
a unit of French airplane manufacturer Airbus Industrie, was named
chairman on the committee on an interim basis. Other members include
United's three major unions, the Association of Flight Attendants, the
Air Line Pilots Association, and the International Association of
Machinists. In addition, Pension Benefit Guaranty Corp, Bank of New
York, HSBC Bank USA, US National Bank Assn., and R Squared Investments
LDC were named as representatives of financial companies. Engine maker
Pratt & Whitney, Goodrich Corporation, Galileo International, Inc.,
and Deutsche Lufthansa AG were also named to the committee. Committee
members were asked to select attorneys and financial advisers, and will
submit their choices for approval by Judge Eugene Wedoff in the
next few days.
Rep. Hyde Urges ATSB To Give UAL Another Shot At U.S.
Aid
Rep. Henry Hyde (R-Ill.) on Friday asked the Air Transportation
Stabilization Board (ATSB) to take a second look at United Airlines'
request for federal assistance once airline officials have revised their
application, Dow Jones reported. UAL, the world's second largest air
carrier, filed for bankruptcy on Monday after the ATSB refused to
approve government aid. The board has indicated it would consider a
revised application from United for loan guarantees to back up financing
to help the airline emerge from reorganization. Rep. Hyde said he was
assured on Thursday by board and UAL officials that the door wasn't
closed to federal assistance, reported the newswire.
Critics of U.S. Bankruptcies Point to Australian System
Like many large companies that seek to reorganize under U.S. bankruptcy
protection, UAL Corp. may well emerge from the process a stronger player
in the U.S. airline industry, the Wall Street Journal reported.
But should it? Or, more precisely, does every company deserve another
chance? The questions revive an old debate in economics about whether
the U.S. system -- one that follows a 'rescue' approach to corporate
bankruptcies that favors creditors -- wastes economic resources, diverts
funds to hefty legal and consulting fees and slows down overall economic
growth. Increasingly, critics of the U.S. system are pointing to
countries such as Australia to prove their point. To read the full
article, point your browser to
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Converse Files for IPO to Raise as Much as $86.3 Million
Converse Inc., the athletic shoemaker sold in bankruptcy last year to
investors led
by the Perseus LLC private equity firm, filed for an initial public
offering estimated to raise as much as $86.3 million, Bloomberg News
reported. The North Andover, Mass.-based company filed with the
Securities and Exchange Commission for an IPO without specifying the
number or price of common shares being sold. The estimated
value of the sale was given to calculate the registration fee.
Converse is seeking to go public again 94 years after its founding
and 85 years since introducing its signature All Star canvas sneakers.
It's also almost two years after the company sought chapter 11
bankruptcy protection, reported the newswire. Perseus, a private buyout
and investment firm with offices in Washington and New York, led an
investment group that bought the Converse brand out of bankruptcy for
$117.5 million in April 2001. Now, the reorganized Converse plans to
build on its 'sports classics'' casual shoes, like its Chuck Taylor All
Stars, and develop new models for basketball and other sports, today's
IPO filing said, Bloomberg reported.
US Judge Seen Approving Planet Hollywood Reorganization Plan
Trying to regain its star power, Planet Hollywood International Inc. is
getting a makeover as it emerges from bankruptcy protection for the
second time in more than two years, the Associated Press reported. The
movie-themed restaurant and retail store company will be a leaner
company, having slimmed down from 22 to 10 restaurants. It will be
privately held, having been publicly traded since 1996. U.S. Bankruptcy
Judge Arthur Briskman is expected to confirm the company's
reorganization plan during a hearing today, despite some objections from
companies and local governments that claim they're still owed money and
back-taxes. If the plan isn't approved, Planet Hollywood's only options
would be to find a buyer or liquidate.
ELECTRONIC DATA SYSTEMS
EDS to Pay WorldCom $187 Million to Settle Dispute
WorldCom Inc. said Electronic Data Systems Corp. will pay it $187
million to settle a dispute over a networking services agreement and pay
overdue telephone bills, Bloomberg News reported. Under the terms of the
settlement, disclosed in court documents, Electronic Data will pay the
$187 million over the next 12 months and release 'numerous alleged
claims'' against WorldCom. Electronic Data, the world's second-largest
computer services company, also renegotiated lower rates in its
contracts with WorldCom, the newswire reported. Electronic Data has
missed profit forecasts because of the bankruptcies of clients including
WorldCom and UAL Corp. In July, it set aside $101 million to cover
payments it didn't expect to get from WorldCom under a separate $6.4
billion contract to run the phone company's computer systems. 'The
settlement will have a slightly positive, but not material effect, on
our earnings for 2002 and they're not expected to have an impact on
earnings for 2003,'' said Electronic Data spokeswoman Kristin
Dobrowolski, Bloomberg reported.
Electronic Data Systems Deals Boost Investor
Confidence
Electronic Data Systems Inc. (EDS) stock rose 14 percent this week after
the computer services firm announced deals that many believe will
confidence in its ability to win large contracts, Dow Jones reported.
Soundview Technology Group analyst John Jones raised his rating on EDS
shares on Friday to outperform from neutral, and boosted his 12-month
price target to $28 from $18, reported the newswire. He cited Thursday's
announcement that EDS received a 10-year, $4.5 billion technology
outsourcing pact from Bank of America Corp., the biggest deal EDS has
landed since last year.
The Bank of America deal came as a relief to investors who had witnessed
EDS's failure to snare a comparably large pact from J.P. Morgan Chase
& Co. last month; rival International Business Machines Corp. won
instead, reported Dow Jones. Also, EDS ended talks for a large contract
with Procter & Gamble Co.; P&G instead will outsource its
operations in smaller pieces to different vendors.
Corning Inc. Concludes Sale of Precision Lens Unit to 3M
Corning Inc. said a bankruptcy court judge upheld a plan that prevents
additional litigation against the company and its joint venture partner
Dow Chemical Co., as related to a series of lawsuits against Dow Corning
Corp., Dow Jones reported. In a press release on Friday, the
fiber-optics company said the court approval clears a major hurdle for
Dow Corning's $4.5 billion reorganization plan. Dow Corning, which is
equally held by Corning and Dow Chemical, has been operating under
chapter 11 bankruptcy protection because of thousands of claims by women
alleging that the company's silicone-gel breast implants caused a slew
of health problems. Corning now is evaluating the court's latest
findings, as it considers whether it should recognize the venture's
equity earnings.
Court OKs Aetna Industries' Chapter 11 Disclosure Statement
Aetna Industries Inc. received court approval of an amended disclosure
statement to its chapter 11 liquidation plan, setting the stage for a
plan-confirmation hearing early next year, Dow Jones reported. Through
the plan, Aetna Industries would pay unsecured creditors between 23
percent and 25 percent of their claims, according to the disclosure
statement. Chief Judge Peter J. Walsh of the U.S. Bankruptcy
Court in Wilmington, Del., signed the order on Monday that said the
disclosure statement contains adequate information under terms of the
Bankruptcy Code. The order scheduled a hearing on Jan. 16, 2003, to
consider confirmation of the plan. Judge Walsh set Jan. 10 as the
deadline for eligible creditors to submit votes on the plan. Aetna
Industries made metal stampings and subassemblies for the automotive
industry. Its Zenith Industrial Corp. affiliate, also under bankruptcy
protection, supplies engineered metal-formed components for automotive
equipment manufacturers.
Halliburton Asbestos Case Continued
A Pittsburgh judge on Friday continued until Wednesday a hearing
regarding plaintiffs' efforts to have a stay on filing asbestos lawsuits
against Halliburton Co. lifted, law.com reported. As a result,
Wednesday becomes a likely 'drop-dead deadline' for a settlement between
the Dallas, Texas-based energy services company and thousands of
asbestos plaintiffs, said Steven Kazan, a plaintiffs' lawyer at Oakland,
Calif.-based Kazan, McClain, Edises, Abrams, Fernandez, Lyons &
Farrise. Judge Judith Fitzgerald in the U.S. Bankruptcy Court for the
Western District of Pennsylvania is really presiding over
Harbison-Walker Refractories Corp.'s chapter 11 case, but Halliburton is
involved because Harbison was once a unit of Dresser Industries, which
Halliburton purchased. To read the full article, point your browser
to
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$55 Million in Enron Legal, Consulting Fees Approved
U.S. Bankruptcy Judge Arthur J. Gonzalez has approved more than $55
million in fees and expenses billed to Enron Corp. by lawyers, financial
advisers and other consultants during the first four months of the
company's year-old bankruptcy, law.com reported. The fees were reviewed
by a court-appointed committee headed by retired bankruptcy Judge Joseph
Patchan, which approved about 95 percent of the charges. There were no
objections to the committee's recommendations at the Thursday hearing
before Gonzalez, of the Southern District of New York. To read the full
article, point your browser to
color='#000080'>http://www.law.com/jsp/article.jsp?id=1039054450067.
Lincoln Hospital, Ex-National Century Client, Gets Financing
Lincoln Hospital Medical Center, an insolvent client of failed
health-care financier National Century Financial Enterprises Inc.,
expects to remain open after receiving financing from Sun Capital
HealthCare Inc., Bloomberg News reported. A ruling from the U.S.
Bankruptcy Court in California will allow Sun Capital to buy the
hospital's bills during its reorganization under chapter 11 bankruptcy
protection. Lincoln Hospital is one of several health-care providers
that lost revenue when National Century filed for chapter 11 protection
in November. National Century, bought unpaid bills from health-care
providers and packaged them for sale as bonds.
Debt Crunch Expected for U.S. Power Sector
A debt crisis will dominate the U.S. power sector in 2003 and could last
well in to 2004, according to an analysis by Fitch Ratings expected to
be released on Tuesday, the Wall Street Journal reported. With
more than $25 billion of debt coming due next year and an inhospitable
lending environment, the credit-rating agency said nearly 40 percent of
the utility-holding companies and half of the merchant generators it
rates face possible ratings downgrades. Companies that specialize in the
sale of wholesale energy are coping by stretching out debt maturities,
retaining the assets they can manage, shedding the rest and hoping they
will stay afloat long enough for energy demand and prices to strengthen.
To read the full article, point your browser to
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