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September 20, 2004
Fed Seen Sticking to Measured Rate Raises
The Federal Reserve will take another small step this week toward
raising interest rates to more normal levels, but may be getting rates
up to a point that allows for a pause in increasing them, analysts say,
Reuters reported. Fed officials will gather on Tuesday and are widely
expected to raise overnight borrowing costs, which influence rates
across the economy, by a quarter-percentage point to 1.75 percent. It
would mark the third small rate increase since the Fed began tightening
monetary policy in June. While the U.S. economy lost some momentum in
recent months, Fed policy-makers have expressed confidence it has
entered a self-sustaining expansion and no longer needs the low rates
that were used to battle recession and a weak recovery, the newswire
reported.
MCI Looks for Buyers, Seeks $6 Billion
Telecommunications provider MCI Inc., which just emerged from
bankruptcy in April, has begun to search for potential buyers, the
New York Times reported, citing executives involved in the
sale. According to unidentified executives, the company hopes to obtain
more than $6 billion on a sale, but with the industry still in turmoil
and MCI’s outlook weak, obtaining an acceptable price may be
difficult and there is no guarantee a buyer will emerge, the newspaper
said. The Times said that MCI has hired three investment
banks: Lazard, Greenhill & Company and J.P. Morgan Chase, as well as
the law firm Davis Polk & Wardwell, to help advise it for
buyers.
US Airways
US Airways May Ask Court for Pay Relief
US Airways may petition a bankruptcy court to impose temporary
concessions on its unionized workers in the event they fail to agree
quickly enough to cost savings, the Wall Street Journal
reported on Sunday. US Airways last week entered bankruptcy protection
for the second time in as many years. It is seeking to persuade its
unions to accept cuts as part of a broad restructuring plan. According
to the Journal, US Airways will probably ask the court to
impose emergency cuts on worker pay and benefits so it can stay afloat
and meet the requirements of a novel financing arrangement that is
providing the carrier with cash to cover its day-to-day expenses.
US Airways Loses Loans for 100 Jets
US Airways lost the financing for nearly 100 regional jets that were
to be a key part of the bankrupt airline’s restructuring plan, the
Washington Post reported on Saturday. With the carrier in
chapter 11 bankruptcy protection, its aircraft manufacturers Bombardier
and Embraer decided to terminate their financing contracts on the jets,
the paper said. US Airways had built part of its transformation plan
around the use of the 50- to 70-seat aircraft during its previous
restructuring in 2002. The carrier hoped to deploy the jets on many of
its shorter or less popular routes and use them to expand service to
short-haul destinations, the Post said.
United Airlines
United’s Mechanists Union Calls on Congress to Protect
Pension Plans
United Airlines’ machinists union on Thursday called on
Congress to take action to protect pension plans—as Treasury
Secretary Snow contended that domestic airlines must meet their
commitments to fund and pay pensions for their employees, the
Chicago Sun-Times reported. “We think those
commitments are binding.… Those commitments have to be lived up to
for the sake of the employees and the taxpayers,” Snow told
reporters during an appearance in Cincinnati. Meanwhile, the
International Association of Machinists and Aerospace Workers, which
represents more than 30,000 active and retired participants in
United’s pension plans, said if Congress does not act to protect
pension plans the consequences would be severe. The union called for a
nonpartisan response to avoid “another savings and loan
debacle” with taxpayers footing the bill. “Airlines are
attempting to use the bankruptcy courts to avoid making legally required
pension contributions,” Union President Tom Buffenbarger charged,
CongressDaily reported.
United Seeks $500 Million More in Cost Cuts
United Airlines on Friday said it will need about $500 million in
annual cost cuts above the $655 million now in the works and also
received court approval for more time to develop a reorganization plan
without interference from creditors, Reuters reported. The amount of
added annual cost cuts is still an early assessment, Jake Brace,
United’s executive vice president and chief financial officer,
told reporters after a court hearing in Chicago. The current
cost-cutting plan focuses on maintenance, airport operations and
distribution, the newswire reported.
UAL Gets Extension of Court Exclusivity
A bankruptcy court judge on Friday granted United Airlines another
30-day extension to file its reorganization plan, Reuters reported.
Judge Eugene Wedoff extended the deadline until Oct. 31 for United to
submit its business plan at the exclusion of any competing proposal that
creditors might want to put forward. Wedoff granted a similar motion by
United last month.
First Enron Criminal Case Set for Trial
Nearly three years after Enron Corp.’s collapse into
bankruptcy, the first criminal trial against the disgraced energy
company’s former employees is set to start today, Reuters
reported. Although the case against the two ex-Enron workers and four
former employees from Wall Street giant Merrill Lynch & Co. Inc.
concerns a 1999 deal to sell power-generating barges in Nigeria, it is
sure to garner attention from other Enron executives who are awaiting
trial. “I think this trial is going to set the stage for all the
cases coming down the line,” said Gene Murphy, a litigator with
law firm Bryan Cave in Chicago, the newswire reported. The trial,
originally scheduled to begin in June, is the first of three pending
criminal actions against Enron employees, and will shed light on how the
Justice Department plans to seek convictions against Enron’s top
brass.
Heilig–Meyers Files Plan of Reorganization, Disclosure
Statement
Heilig–Meyers Company and its wholly owned subsidiaries,
Heilig–Meyers Furniture Company, Heilig–Meyers Furniture
West Inc., HMY Star, Inc., HMY RoomStore, Inc., and MacSaver Financial
Services Inc., announced in a press release on Friday that they and the
Official Committee of Unsecured Creditors have filed a Joint Plan of
Reorganization and Disclosure Statement with the U.S. Bankruptcy Court
for the Eastern District of Virginia. The bankruptcy court will conduct
a hearing for the purpose of making a determination as to the adequacy
of the disclosure statement. Once the bankruptcy court approves the
disclosure statement, the companies will ask creditors to vote in favor
or against the plan. The RoomStore offers a wide selection of
professionally coordinated home furnishings in complete room packages at
value-oriented prices. The RoomStore operates 64 stores located in
Pennsylvania, Maryland, Virginia, North Carolina, South Carolina and
Texas.
SEC Probes WorldCom Creditors’ Committee Trades
The Wall Street Journal reports that the Securities and
Exchange Commission (SEC) is investigating potential insider-trading
violations by one or more firms that were part of the former WorldCom
Inc.’s creditors’ committee when the company was in chapter
11 bankruptcy-court protection, according to people familiar with the
probe. The inquiry, currently in a preliminary stage, could be broadened
to several firms trading in securities of several companies, these
people said, the newspaper reported.
The SEC is looking at whether creditors’ committee members,
including New York investment firm Blue River LLC, took adequate steps
to prevent their firms from trading on inside information that was
available to their officers serving on the committee, said people
familiar with the probe. The SEC has sent subpoenas to 11 current
committee members, according to documents filed with the U.S. Bankruptcy
Court for the Southern District of New York, the Journal
reported. The SEC’s inquiry came to light when Akin Gump Strauss
Hauer & Feld LLP, the law firm representing the creditors’
committee, filed documents with the bankruptcy court requesting that MCI
compensate the firm for costs related to complying with the extensive
subpoenas the SEC served on committee members in July. The matter is
scheduled for a hearing in bankruptcy court tomorrow.