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August 16, 2005
Growth in Tax Receipts Prompts Rosier Deficit Forecast
The nonpartisan CBO today forecast a $331 billion deficit for the
fiscal year ending Sept. 30, down sharply from previous estimates
released in March. If the projection holds, it would mark an $81 billion
improvement over the previous year. “The upshot of our analysis is
that the budget outlook has improved noticeably for this year,”
CBO Director Douglas Holtz-Eakin said. “And the economy remains in
very good shape, characterized by a robust cyclical recovery and good
long-term growth prospects.” But Holtz-Eakin stressed that
“there are some important details under the surface” that
Congress would have to address to reverse the trend of red ink. The
surge in tax receipts in FY05 is “largely a temporary
phenomenon” from higher-than-expected corporate tax revenues, as
well as the “one-time” impact of repatriation of
international profits to the United States as a result of the 2004
corporate tax bill, he said. While economic growth is projected to
remain steady, rising at 3.7 percent of GDP in FY05, that would be down
from a 4.4 percent growth rate last year and is set to drop to about 2.6
percent by 2015.
Key Bankruptcy Provision Upset
In a significant development that could force Owens Corning’s
bankruptcy lawyers back to the drawing board, a federal appeals court
yesterday
href='http://toledoblade.com/apps/pbcs.dll/article?AID=/20050816/BUSINESS03/5…'>overturned
a key provision of the firm’s plan for exiting chapter 11, the
Toledo Blade reported. The effect of the ruling, if left
standing, would be to greatly improve banks’ position in the
debate over how to divide the cash, bonds and new stock the company will
distribute to creditors as part of its emergence from bankruptcy. In the
short term, however, the ruling by a three-judge panel of the Third
Circuit Court of Appeals in Philadelphia could further delay a
multibillion-dollar chapter 11 case that soon will enter its sixth year,
a creditor lawyer said.
href='http://toledoblade.com/apps/pbcs.dll/article?AID=/20050816/BUSINESS03/5…'>Read
the full story.
U.S. Stocks Flat on Oil Price; Delta Drops on Report
U.S. stocks were little changed yesterday, with oil prices near
record levels stirring concerns economic growth and companies’
earnings would suffer in the second half of the year, Reuters reported
yesterday. “The earnings outlook for the remainder of the year is
not so strong,” said Brian Piskorowski, a market analyst at
Wachovia Securities LLC in Richmond. “Investors may not be willing
to commit new cash into stocks, given that outlook and the fact [that]
we have oil prices at record levels.” Delta Air Lines was the
worst performer in the S&P 500. The stock plunged 14.91 percent to
$1.37 after the New York Times reported on Saturday that
the struggling air carrier has begun arranging the financing it would
need should it seek bankruptcy protection.
Monomoy Capital Partners Completes Purchase of Awrey Bakeries
Monomoy Capital Partners LLC today announced that it has completed
its acquisition of Awrey Bakeries Inc. for approximately $25 million in
partnership with Hilco Equity Management LLC, Business Wire reported
yesterday. The purchase is the first by Monomoy since the firm was
founded in March 2005 to make controlling investments in distressed,
underperforming or orphan businesses in the smaller company market.
Awrey Bakeries Inc., headquartered in Livonia, Mich., and founded in
1910, is a national premium foodservice bakery serving markets ranging
from national food service distributors to the U.S. military. Awrey
filed for bankruptcy protection on February 2, 2005.
Foamex Indicates Chapter 11 a Possibility
Foamex International Inc. has made progress on its efforts to
strengthen its balance sheet and enhance long-term value while
continuing normal business operations, the Philadelphia Business
Journal reported yesterday. But the company said that it is
making certain arrangements in case it files for chapter 11 bankruptcy.
This comes after Foamex, which makes plastics and cushioning for beds,
carpets and cars, indicated last month that volatility in raw materials
prices and a difficult operating environment have contributed to
weaker-than-expected performance in its businesses. The company did not
make a required $51.6 million payment due yesterday on its senior
subordinated notes. The company also indicated that its primary
operating subsidiary, Foamex LP, reached an agreement with its senior
lender groups, Bank of America and Silver Point Finance, to amend its
credit agreements. The amendments will provide additional committed
liquidity by allowing Foamex to access the remaining proceeds from the
sale of its rubber and felt businesses for working capital.
ATA Airlines Founder and CEO Mikelsons Announces Retirement
The head of ATA Airlines announced that he will retire from the
company he founded and built into the nation’s 10th largest
airline, then allowed to slip into bankruptcy protection, the Associated
Press reported yesterday. John G. Denison will take over as CEO, company
officials said. The news comes a day after ATA asked a judge to allow it
to void its contract with 833 pilots and flight engineers so it can cut
wages by 20 percent. ATA said that the cuts are needed to help it secure
$100 million in new capital needed to exit bankruptcy.
Enron
J.P. Morgan Settles with Enron
href='http://money.cnn.com/2005/08/16/news/midcaps/scandal_enron.reut/index.h…'>J.P.
Morgan Chase & Co. and Enron Corp. agreed today to a roughly $1
billion settlement to Enron’s claims that the bank had played
a role in the one-time energy trader’s collapse four years ago,
Reuters reported. In the case, Enron has asserted that 10 banks had
aided and abetted the company’s collapse.
href='http://money.cnn.com/2005/08/16/news/midcaps/scandal_enron.reut/index.h…'>Read
the full story.
$130 Million Settles Enron Suit
TD
Bank Financial Group has agreed to pay out $130 million to settle
its part of the “megaclaims” lawsuit filed by Enron Corp,
CBC News reported. Toronto-based TD also announced Tuesday it will add
$300 million to its reserve for a securities class-action suit pending
in Texas, resulting in an after-tax charge of $238 million (Cdn), to be
recorded in the third quarter.
href='http://toronto.cbc.ca/cp/business/050816/b081606.html'>Read the
full story.
Delta
Delta Still Facing Bankruptcy Despite Sale of Feeder Carrier
Delta Air Lines Inc.’s decision to sell one of its regional
carriers gives it some desperately needed cash, but the company is
warning that a
href='http://www.fortwayne.com/mld/newssentinel/12392810.htm'>bankruptcy
filing remains a distinct possibility, the Associated Press
reported. Airline analyst Ray Neidl of Calyon Securities said
Delta’s $425 million sale of Atlantic Southeast Airlines Inc. to
SkyWest Inc. is a good start, but more needs to be done.
href='http://www.fortwayne.com/mld/newssentinel/12392810.htm'>Read the
full story.
Delta Stock Drops to All-time Low
href='http://atlanta.bizjournals.com/atlanta/stories/2005/08/15/daily10.html?…'>Delta
Air Lines Inc.’s stock dropped to an historic low Monday, the
same day it filed a delayed quarterly report to the Securities and
Exchange Commission and reported the sale of its ASA subsidiary, the
Atlanta Business Journal reported.
href='http://atlanta.bizjournals.com/atlanta/stories/2005/08/15/daily10.html?…'>Read
the full story.
FiberMark Cuts Losses
href='http://timesargus.com/apps/pbcs.dll/article?AID=/20050816/NEWS/50816031…'>FiberMark
Inc. has slashed its losses in the first half of the year to $3.7
million, less than a quarter of what it lost during the similar period a
year earlier, the Associated Press reported today. The bankrupt producer
of paper and cloth products lost $16.3 million during the first six
months of 2004, it reported. The company, which plans to emerge from
bankruptcy by year’s end, credited its reorganization for the
improvement.
href='http://timesargus.com/apps/pbcs.dll/article?AID=/20050816/NEWS/50816031…'>Read
the full story.
Northwest Talks Resume
Negotiators for Northwest Airlines Corp. and the union that
represents its mechanics resumed talks yesterday with a hope of heading
off a strike that could begin early Saturday, the Times and
Democrat reported. The two sides were meeting at the headquarters
of the National Mediation Board in Washington after nearly two weeks
with no face-to-face meetings. Officials with the Eagan,
Minn.–based airline said they were hopeful for progress, but a
union official said it would only come if the airline makes an offer
that advances the talks.
Fundraiser Files Chapter 7
A Valhalla, Calif. company whose t-shirts and gifts brought
environmental consciousness to the task of school fundraising is going
out of business, after a year of struggling to emerge from bankruptcy,
the Westchester Business Journal reported today.
Human-i-Tees Inc.’s filing followed a 30 percent year-over-year
drop in revenue, to about $7.2 million for the year ending in June. That
month, Human-i-Tees replaced its CEO Lori Genaro with Paul DiPrato, and
developed a new management team. Human-i-Tees filed for chapter 11
reorganization a year ago, blaming a lack of capital to withstand the
slowdown in orders that occurs during the summer when schools are
closed. It emerged from chapter 11 last February.
Pension Board Plans New Review
href='http://www.signonsandiego.com/news/metro/pension/20050816-9999-1m16pens…'>San
Diego’s pension board will hire a private firm to examine
records the City Council has pushed the board to release to
investigators, the San Diego Union-Tribune reported. The
board of San Diego City Employees Retirement System voted 7–1
yesterday to have an independent consultant conduct an examination that
would go “above and beyond the financial audit” or standard
annual analysis of the fund’s records, said board President Peter
Preovolos.
href='http://www.signonsandiego.com/news/metro/pension/20050816-9999-1m16pens…'>Read
the full story.
Parmalat Turns to Risky Legal Theory
href='http://www.law.com/jsp/article.jsp?id=1124109331986'>Parmalat
Finanziaria SpA has employed a damages claim rarely used in
Italy’s civil courts in its latest lawsuit seeking €4.4
billion ($5.5 billion) from local lender UniCredito Italiano SpA and
U.S. bank J.P. Morgan Chase & Co., The Deal reported.
Lawyers say the suit filed by the bankrupt Italian dairy group is based
on “deepening insolvency,” a concept largely used by local
magistrates in criminal proceedings rather than plaintiffs in civil
ones. Read
the full story.
Heating Oil May Seek Bankruptcy Protection
U.K.–based
href='http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20050816…'>Heating
Oil Partners Income Fund units fell yesterday after the trust
announced that it may seek bankruptcy protection because its main
business had defaulted on debt payments, the Globe and Mail
reported. Units fell by more than 71 percent on the Toronto Stock
Exchange, closing down 86 cents to 34 cents a unit. The fund also
reported a third-quarter loss of $96.1 million, or $4.47 a unit,
compared with a loss of $6.3 million, or 35 cents last year.
href='http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20050816…'>Read
the full story.
Ontario’s Pension Demand Risks Stelco Liquidation
Stelco Inc. and its debt holders say that the government of Ontario
is
href='http://www.bloomberg.com/apps/news?pid=10000082&sid=aXk5xOCQSN4M'>risking
the liquidation of the company with its demand that a C$1.3 billion
pension shortfall be paid back in half the 10 years proposed by the
company, Bloomberg News reported. Ontario Finance Minister Greg Sorbara
rejected Stelco’s restructuring plan Aug. 8 and said he’d
seek to remove a government exemption from the requirement that Stelco
pay off the debt in five years.
href='http://www.bloomberg.com/apps/news?pid=10000082&sid=aXk5xOCQSN4M'>Read
the full story.
Trump Resorts Posts Loss in Bankruptcy During Q2
Trump Entertainment Resorts Inc. yesterday posted a loss of 28 cents
per share in the six weeks following its emergence from bankruptcy
reorganization, Reuters reported. The period represented the last half
of the company’s fiscal second quarter. The company changed its
name after reorganization and presented its second quarter report in two
sections, one for when it was in reorganization and the other for after
it had emerged as a recapitalized company.
Agency Sues Debt Advisory Firms
Alabama financial regulators said Monday that they want to increase
scrutiny of credit counseling firms that promise to consolidate monthly
bills and lower interest rates for people in debt, the Birmingham
News reported today. The Alabama Securities Commission has asked
a Montgomery Circuit Court judge to stop the agencies from doing
business until they comply with a little known state law called the Sale
of Checks Act, commission Director Joe Borg said. The law, on the books
since 1975, regulates companies that aren’t banks but take custody
of third-party money. It applies because the debt consolidators take
checks from people, distribute the money to multiple creditors and
usually keep a percentage for themselves, Borg said.