May 21, 2004
Rates Likely to Rise in
Small Steps
The Federal Reserve, which has signaled that it will soon
increase interest rates, probably will do so in a series of small steps
over many months or even a few years, one of the central bank's
policymakers said yesterday, the Washington Post reported. A
variety of forces, including small increases in interest rates, should
keep inflation very low, 'in the zone of price stability,' for the rest
of this year and into next year, Fed Governor Ben S. Bernanke said in a
speech yesterday. However, the pace and size of the increases could vary
depending on the strength of the economic expansion, particularly the
behavior of inflation and the labor market, he said, the newspaper
reported.
Air Canada Reaches Pact With
7th Union
Air Canada
face='Times New Roman' size='3'>cleared a crucial obstacle in its
restructuring yesterday by reaching an agreement with the last of seven
unions on wage concessions and other cost cuts, Reuters reported. The
deal was reached after meetings that lasted most of the day between Buzz
Hargrove, the president of the Canadian Auto Workers union, Robert
Milton, Air Canada's CEO and an Ontario judge who has helped oversee the
airline's restructuring since it sought protection from creditors in
April 2003. The airline is expected to apply to a court in Toronto today
for an extension of its protection under the Companies' Creditors
Arrangement Act, the newswire reported.
Edison International Sees
Deregulation Dangers
Edison International CEO John
Bryson yesterday said that 'further experiments' with deregulating
California's electricity markets could be disastrous for the state,
Reuters reported. California deregulated its power markets in 1996 under
a scheme which ultimately contributed to blackouts in parts of the state
and the bankruptcy of its largest utility, San Francisco-based Pacific
Gas & Electric. Bryson said his company's utility unit, Southern
California Edison, was ready to invest $9 billion to $10 billion over
the next five years to improve its electric system under the right
regulatory conditions, the newswire reported.
Global Crossing Stock Up As
Slim Eyes Bigger Stake
Global Crossing Ltd. shares
jumped 16 percent on Thursday after Mexican billionaire Carlos Slim said
he and his family seek to boost their stake in the U.S. fiber optic
network operator to as much as 20 percent, Reuters reported. Slim and
his six children started buying shares of Global Crossing shortly after
the fiber optic network operator emerged from bankruptcy in December.
The Slims 'seek authority to acquire in excess of 10 percent, but less
than 20 percent, of the company's voting securities,' said the filing
received on Wednesday by the Vermont Public Service Board.
Delta Shares Rise After
Lehman Analyst Upgrade
Shares of Delta Air Lines rose 11 percent on Thursday after Lehman
Brothers analyst Gary Chase upgraded the stock but cited major risks if
the company cannot achieve a cost-saving deal with its pilots, Reuters
reported. Shares of the Atlanta-based airline increased nearly 13
percent to a near two-week high of $5.83. Chase upgraded the stock to
'overweight' from 'equal weight.' 'We believe Delta has a lot of
potential upside, but the company must resolve its pilot cost issues
before it can address many of those opportunities,' he wrote in a
research note, the newswire reported. Still, 'If the company fails to
negotiate concessions from its pilots, we believe the company will head
quickly to the courthouse,' Chase wrote.
United Methodist Church Bucks
the Trend on Employee Pensions
More than 17,000 employers in
the United States have discontinued their traditional pension plans in
the last 10 years, the New York Times reported. Countless others
have scaled them back. Such pensions, with their promise of guaranteed
income, are considered by many companies to be too costly, and it is
only a matter of time before they disappear completely. But one big
employer is resisting the tide. Earlier this month, the United Methodist
Church voted at its quadrennial meeting to start an old-fashioned,
defined-benefit pension plan for its 25,000 American pastors and lay
employees. The United Methodist Church appears to be the first big
employer to create such a pension plan in many years. Read the article
at
href='http://www.nytimes.com/'>www.nytimes.com.
Adelphia Deception
Detailed
Adelphia Communications
regularly hid a list of fraudulent financial data from its auditors,
said former vice president James R. Brown, the government's star witness
in the fraud trial of founder John J. Rigas, the Washington Post
reported. Brown, who pleaded guilty to fraud and conspiracy charges,
said that executives at the cable television operator feared telling the
truth to its former auditors, Deloitte & Touche. 'We regularly
prepared a schedule we referred to as 'exposure items' that if Deloitte
came across them, we wouldn't be able to defend,' Brown told federal
jurors in New York during his 12th day of testimony against John Rigas
and his sons.
N.Y. Court Allows Etoys Suit Against
Goldman Sachs
A New York appeals court on
Thursday cleared the way for Goldman Sachs & Co. to face trial on
charges it mishandled the initial public offering of eToys Inc., Reuters
reported. EToys had sued Goldman, the lead underwriter of its May 20,
1999 IPO, in May 2002. It said the Wall Street bank intentionally
underpriced the offering so that it could win kickbacks -- in the form
of investment banking business, brokerage commissions and other benefits
-- from customers who profited when the shares rose. Goldman priced
eToys' IPO at $20 per share. The shares nearly quadrupled to $76.56 in
their Nasdaq debut, after hitting an intraday high of $85. EToys filed
for bankruptcy protection in March 2001.
Isle Of Capri Still
Aims For Chicago Casino
Isle of Capri Casinos Inc. aims
to build a Chicago casino despite a disagreement between Illinois
gambling regulators and the state attorney general about whether there
is a license to sell, Reuters reported. A bankruptcy court overseeing
the sale of Emerald Casino, which owns the license that Isle wants to
acquire, approved that process this week. Isle won an auction for the
license run by the Gaming Board in March with a bid of $518 million, the
newswire reported.
U.S. Court Dismisses Claims
In Texas Power Case
Texas Commercial Energy (TCE) said on Thursday a U.S. District Court in
Corpus Christi, Texas, dismissed two of its federal claims accusing TXU
Corp. and other power companies of manipulating the state's power
market, Reuters reported. TCE filed an antitrust suit in February
alleging that TXU had sold electricity into the Texas market at inflated
prices and withheld power to push prices higher. The retail company,
which got out of bankruptcy in December after an 18-fold rise in power
prices in February 2003 had forced it to file for protection from
creditors, said the court did not address or dismiss its state law
claims but focused on 'a narrow point of law relating to jurisdiction.'
TCE attorney Mikal Watts said TCE will appeal the decision to the Fifth
Circuit federal court in New Orleans and at the Texas Public Utilities
Commission 'to level the playing field for healthy competition among
electricity providers that can ultimately benefit Texas consumers,' the
newswire reported.
Loral Shareholders To Fight
Reorganization Plan
Out-of-the-money shareholders
in bankrupt Loral Space & Communications are taking their claims to
court, saying they deserve more in the satellite company's restructuring
plan, Reuters reported. Loral said May 10 that it plans to cancel its
common and preferred stock as part of a reorganization plan it is
pursuing. The battle over Loral comes amid what some experts say is
rising shareholder activism in bankruptcy court, the newswire reported.
Some, like Tony Christ, who holds some 400,000 shares in Loral, say the
bankruptcy court has become a venue for vast wealth transfer to
bondholders who often unfairly end up with much of the equity in a
company when it emerges from bankruptcy. He argues that bondholders are
disproportionately rewarded for the risks they take, according to
Reuters.
Why RCN Corp. Will File Chapter 11
A commentary in the Wall Street Journal by McCourt, chairman and CEO of
RCN Corporation, focuses on why in the next week or so, one of RCN
companies, the cable, phone and video provider RCN, will file for
pre-arranged chapter 11 bankruptcy. The author notes that since 2000,
nearly 70 major telecom companies have filed for bankruptcy, but that he
believes that the wave of bankruptcy filings will help launch a new era
in telecom. Read the article at
href='http://www.wsj.com/'>
size='3'>www.wsj.com (subscription
required).