January 17, 2006
Report: Bankruptcy Filings Remain Steady
The new bankruptcy law is reportedly doing to little to curb the number of
consumers filing for bankruptcy, according to the Washington Post,
CNNMoney.com reported today. Money Management International Inc., the
nation's largest credit counseling organization, told the Post that
in the first 13 weeks since the law took effect Oct. 17, only 4.5 percent of
the 14,907 debtors the company counseled were in a position to qualify to
pay back debts over a few years. Other credit counseling agencies likewise
said that few qualified for any plan other than bankruptcy. In addition, credit
counselors expect bankruptcies to climb steadily in the next few months as
consumers are faced with rising energy costs, higher interest rates and the
new federally mandated policy that raises the minimum due on credit card
bills. Advocates of the bankruptcy law said it's still too early to
determine how successful the new requirements are in curbing bankruptcies,
while financial industry officials said debtors will benefit from the
financial education given by credit counselors. Read more.
Delphi CEO Says GM Helping in Union Talks
General Motors Corp. will likely financially help bankrupt auto parts
supplier Delphi Corp. in negotiations with its union, Delphi's CEO said yesterday, Reuters reported today. "We are going
to need some financial assistance from GM," Delphi Chief Executive Steve
Miller said at the World Automotive News World Congress in Dearborn, Mich.
Delphi, which was spun off by GM in 1999, filed for bankruptcy protection in
October. Miller has said the company must cut wages, benefits and jobs for
hourly workers to reorganize its money-losing U.S. operations. Miller said
on Monday the company was in talks with the United Auto Workers union and
its former parent General Motors. Delphi had said earlier that failure to
reach a deal with its union would force it to ask the court to reject
current labor agreements. Such a motion could result in a strike at Delphi,
which would likely shut down a few plants. The closures could force GM,
Delphi's biggest customer, to burn through millions of dollars in cash each
week, analysts have said. Read more.
In related news, GM chief executive Rick Wagoner said Friday that results
for GM will "improve" this year and next, but he did not say when the
company would return to profit, Bloomberg News reported Saturday. G.M. will
increase cost cuts beyond the $7 billion annualized reduction expected by
the end of this year, Wagoner told analysts. Uncertainty about costs from
the Oct. 8 bankruptcy of G.M.'s former auto parts unit, Delphi Corp, and
other expenses make it difficult to say when losses will end, he said.
Wagoner made the announcement after the billionaire Kirk Kerkorian, G.M.'s
fourth-largest investor, stepped up pressure on the automaker this week.
Jerome York, an aide to Kerkorian, said in a Detroit speech that Mr.
Kerkorian wanted G.M. to cut its dividend in half, trim executive pay, set
clear financial goals and possibly sell the Saab and Hummer brands. To cut
costs, G.M. will close nine assembly plants and eliminate 30,000
manufacturing jobs by 2008 while getting about $1 billion in annual savings
from union health care concessions. Read more.
Collins & Aikman to Woo Buyers
Collins & Aikman Corp., the auto supplier in bankruptcy protection, has started to market itself to potential buyers, the Wall Street Journal reported Tuesday. The company has sent out an information pack to other auto parts companies as well as financial groups, the Journal said. It reported that Collins & Aikman CEO Frank Macher said in an interview that it will begin the marketing by testing interest in its auto-fabrics and convertible-tops businesses. Macher told the newspaper that the company expects to sell all or parts of itself, trying to get financing from an external investor or merge with another auto parts supplier, according to the report. One major financial investor, Wilbur Ross, recently told Reuters that he was reviewing the assets of all distressed U.S. auto parts companies. Read more.
Airlines
Radical Changes Brew for Northwest, Unions
Bankrupt Northwest Airlines and its unions could start battling it out in a New York courtroom as soon as this week, the Associated Press reported Sunday. If talks between Northwest and the unions fail, the company will ask a bankruptcy judge for permission to reject union contracts and impose new terms. Workers aren't pleased with Northwest's proposals and they're threatening a strike that could put the airline out of business. The centerpiece of the plan is a new regional carrier, called NewCo. Northwest wants subsidiaries to fly midsize jets and do some baggage handling, angering both pilots and ground workers. Another plan would shift thousands of U.S.-based union flight attendant jobs to nonunion foreign hires. Northwest also is calling for steep pay cuts and other givebacks.
In related news, the largest union at Northwest said Saturday that it would
vote on a contract proposed by the company, scuttling the threat of a strike
for now, Bloomberg News reported Sunday. "Our negotiators were able to
convince Northwest to move off some of their initial proposals," Bobby De
Pace, who leads members of the International Association of Machinists and
Aerospace Workers at Northwest, said in a statement. The union, which
represents 14,000 bag handlers, customer-service agents and other employees
at Northwest, could not be reached for further comment, and a Northwest
spokesman declined to comment. Read more.
Hearings in Delta Case Postponed
Two Delta Air Lines bankruptcy hearings were postponed Friday, a day after a
new judge was permanently assigned to replace the previous judge who stepped
down for health reasons, the Associated Press reported Friday. No reason was
given for the delay, but some legal experts had suggested there might be a
brief disruption to the proceedings after Judge Prudence Carter
Beatty's departure from the case was announced. The case had been
reassigned Thursday on a permanent basis to Judge Adlai Hardin.
Hearings scheduled for Jan. 19 and Feb. 2 have been rescheduled for Feb. 6,
at Judge Hardin's direction, court papers said. Some of the matters that
were to be taken up at those hearings, including a motion regarding
antitrust claims, will be heard at a later date that has not yet been
determined.
Large Scale Biology Corp. of Vacaville, Calif., one of the first biotechnology companies focused on genetically engineering plants to produce medicine, filed chapter 11 bankruptcy protection last week, the Sacramento Business Journal reported Sunday. The company ceased operations in December after failing to raise enough money from a bridge loan. The company has assets of $9.76 million and debts of $7.84 million. The company's restructuring plan could include selling its Predictive Diagnostics Inc. subsidiary, greenhouse and manufacturing operations in Kentucky, patents and product rights. The company's largest secured creditor is CEO Kevin Ryan, owed $4 million. Read more.
Former Refco Chief Resigns from Board
Phillip Bennett, the former chief executive of Refco, resigned from the
firm's board Friday after a federal bankruptcy judge directed Refco to
replace its board members, Bloomberg News reported Saturday. Judge RobertDrain of the U.S. Bankruptcy Court for the Southern District of New York
had said he would appoint a trustee to run the company unless Refco replaced
its board members. Bennett was fired as chief executive and arrested in
October after disclosing he hid $430 million in debt. Refco filed for
bankruptcy protection on Oct. 17. Bennett pleaded not guilty to federal
fraud charges in November. He sent Refco lawyers a letter of resignation
yesterday. All of the directors, including Thomas Lee, the billionaire
chairman of the buyout firm Thomas H. Lee Partners, have resigned. Read
more.
Receiver Files Chapter 11 for Mile High Capital
Hall Wells DiNardo LLC, the court-appointed receiver for Mile High Capital Group LLC, on Friday filed for chapter 11 bankruptcy protection on behalf of the troubled Englewood real estate investment company, the Denver Business Journal reported Friday. Meanwhile, a state investigation of possible securities law violations in connection with Mile High's operations will continue, said Fred Joseph, Colorado's commissioner of securities. In the bankruptcy form, assets for Mile High were estimated to be between $1 million and $10 million. Debts were listed at between $10 million and $50 million. Although a Denver district judge was supposed to make a determination about changing receivers on Friday, the evidentiary hearing was canceled because of the chapter 11 filing. Read more.
After Chapter 11, Trump Casinos' New Plan Pays Off
Luck is turning for Donald Trump's casino company, which emerged from bankruptcy last spring and is aggressively trying to regain lost ground, the Associated Press reported today. With new management in place and money to spend, Trump Entertainment Resorts Inc. is getting its houses in order: renovating rooms, adding restaurants and spending money on employee cafeterias and new uniforms. Most important, it's making money: In its first full quarter since the chapter 11 reorganization, Trump Entertainment earned $3.2-million, an indication the company's fortunes are looking up. Read more.
Sabres Go from Bankruptcy to Buoyancy in Three Years
In the winter of 2002-03, the Buffalo Sabres didn't have an owner, were run by the NHL on a shoestring budget and filed for bankruptcy, the Associated Press reported yesterday. That raised fears of the franchise folding or relocating. Things have changed for a franchise that, three years ago last week, declared bankruptcy. With new owner B. Thomas Golisano providing stability and the league's new salary-cap structure providing cost certainty, the Sabres are flourishing. The Sabres have emerged to rank among the NHL's best teams through the first half this season. They are projected to turn a profit this year, even if they don't make the playoffs. Read more.
U.S. Plastic Lumber Emerges from Bankruptcy as Trimax
U.S. Plastic Lumber Corp. has been reborn as Trimax Building Products Inc. after a troubled bankruptcy, WasteNews.com reported Friday. The U.S. Bankruptcy Court in Palm Beach, Fla., approved the sale on Jan. 6 to private equity firm American Pacific Financial Corp. of San Bernardino, Calif., despite opposition by creditors Siemens Financial Services Inc. and CIT Group/Equipment Finance Inc., which had claims on USPL equipment. Trimax will operate as a private company, according to a news release issued Jan. 12. American Pacific business unit Ampac Capital Solutions LLC was USPL´s debtor-in-possession (DIP) lender. American Pacific acquired USPL for $2.3 million in cash and by releasing $3.2 million from its DIP loan. It also agreed to assume liabilities totaling $582,000. Read more.
International
Australians Face Higher Bankruptcy Rates
The latest statistics from Insolvency and Trustee Services Australia (ITSA) paint a dire picture of the incidence of bankruptcies in the eastern states, brought on by rising petrol and household living costs, the Australian Financial Standard reported today. According to ITSA, bankruptcies in the quarter to December 2005 compared to the same period last year rose by 15.6 percent in New South Wales, 12.34 percent in Queensland and 17.86 percent in the Northern Territory. Paul Leroy, partner at accounting group Hall Chadwick, says the increase is due to higher cost of living, particular in the metropolitan centers, and a high number of people who have been funding their lifestyles by borrowing against their real estate investments. The Australian Bureau of Statistics (ABS) recently reported that average residential return for all capitals nearly halved from 6.2 percent in September 1999 to 3.8 percent in September 2005. Sydney in particular felt the pinch with below average yields of 3.3 percent for the September 2005 quarter. Read more.