December 17, 2003
Job Prospects Looking Up
According to temporary staffing firm Manpower Inc.'s most recent survey,
20 percent of U.S. employers plan to hire more staff during the first
quarter of 2004, CNN.com reported. 'There seems to be traction in the
labor market, which will make it slightly easier for people to find a
job,' said Jeffrey Joerres, chairman and CEO of Manpower. 'But we're
still in a marketplace where people need to search for a good job.'
Things will look brighter nationwide, and across most industries,
according to the firm. Jobs in 9 of 10 sectors - from construction to
retail to manufacturing and finance - should become more plentiful
compared to the final quarter of 2003.
Inflation at 38-year Low
U.S. consumer prices fell last month, dragging the underlying inflation
rate to a nearly 38-year low, even as industrial output and ground
breaking for homes surged, reports showed on Tuesday, Reuters reported.
Recent data suggested the economy was stronger than most analysts had
thought. But with signs that inflation was slowing, economists said the
Federal Reserve could keep interest rates at basement levels for a long
stretch. Prices for inflation-sensitive U.S Treasury securities rose on
the inflation report, but fell back after the strong industrial
production figures were released. A broad range of price declines drove
the Consumer Price Index, the most widely used gauge of U.S. inflation,
down 0.2 percent in November, the Labor Department said. Closely watched
core inflation has risen just 1.1 percent over the past 12 months, the
slowest rate of advance since the 12 months ended January 1966. 'It
supports the Fed's own internal forecast that over the next six months
inflation should grind a little bit lower,' said Cary Leahey, senior
U.S. economist at Deutsche Bank Securities in New York. 'That supports
the notion that the Fed might not have to raise interest rates at all
next year,' he said, reported the newswire.
Early Snows Create Few Optimists in Retailing
Snowstorms continue to wreak havoc with analysts' projections for the
holiday shopping season, Reuters reported. Richard E. Jaffe, a retail
analyst with UBS said snowstorms the last two weekends had cost the
nation's retailers more than 1 percent of total sales for the holiday
season.The NPD Group, a market research firm, projects a 1.5 percent
reduction in sales by retailers because of the storms. As of yesterday,
estimates for holiday sales were for an increase of 3 percent to 5.7
percent from last year's dismal performance. 'If there's another
snowstorm this weekend, because it's so close to Christmas, it could
knock as much as 4 percent off -- putting the holiday into the red
compared with last year,' said Marshal Cohen, a senior analyst with NPD,
which has already lowered its estimate to growth of 3.5 percent from 5
percent before Thanksgiving, reported the newswire.
UAL Has Secured New Financing
The UAL Corporation said yesterday that it had obtained $2 billion in
financing, which it called a major step toward emerging from bankruptcy
protection, Reuters reported. UAL said the loan package was obtained
from J.P. Morgan Chase & Company and Citigroup. The two banks will
each underwrite $200 million of the nonguaranteed portion of the loan
and $800 million of the guaranteed portion. The airline said the package
required a guarantee from the federal Air Transportation Stabilization
Board. The Wall Street Journal reported today that the airline is
expected on Thursday to file with federal officials for a $1.6 billion
loan guarantee, which if successful would clear the way for $2.0 billion
in loans it received, the online newspaper reported.
The air board rejected United's initial request last year for backing of
most of a $2 billion loan. United sought protection from its creditors
after the board's decision. Since then, the airline has sharply reduced
operating costs by renegotiating union contracts, aircraft leases and
deals with suppliers, among other actions, Reuters reported.
FAO Gets Extension to Find Toy Store Buyer
Toy retailer FAO Inc. on Tuesday said it was granted permission to
withhold its Right Start stores and up to three of its namesake stores
from liquidation through Wednesday, sparking speculation that it has a
buyer, Reuters reported. The bankrupt retailer previously had until Dec.
15 to sell both the FAO Schwarz and Right Start businesses or face
liquidation.
'If they took those assets off the table it's very likely they have a
buyer and they're in the middle of negotiation,' said Jacques Roizen,
director with turnaround and restructuring firm Alvarez & Marsal.
'And if they're not done in two days, they'll ask for another two.'
Roizen said the likely FAO Schwarz leases excluded from liquidation are
its flagship store on New York's Fifth Avenue and the Las Vegas and
Chicago stores, Reuters reported.
Halliburton Units File for Bankruptcy
Halliburton Co. on Tuesday said its Kellogg Brown & Root and DII
Industries units filed for chapter 11 bankruptcy protection in a
Pittsburgh court to resolve asbestos claims against the company, Reuters
reported. Houston-based Halliburton, its energy services group and
Kellogg Brown & Root's government services unit, which is providing
support services to the U.S. military in Iraq, are not included in the
bankruptcy filings, the company said. Those units in the pre-packaged
bankruptcy filings will continue normal operations while in chapter 11.
The bankruptcies have been expected for a year as Halliburton negotiated
details of a plan to settle hundreds of thousands of asbestos injury
claims. As part of the plan, over 400,000 claimants agreed cash required
to pay them would not exceed $2.78 billion. Halliburton will take a $1
billion pretax charge in the fourth quarter for the settlement, Reuters
reported.
PG&E, Consumers Join Forces on Plan
In a surprise move, Pacific Gas & Electric Co. and a powerful
consumer group late on Monday jointly filed a revised plan with
California utility regulators to pull PG&E out of bankruptcy,
Reuters reported. PG&E and San Francisco-based The Utility Reform
Network sent the joint proposal to the five-member California Public
Utilities Commission (CPUC), which is scheduled to vote on six different
options on Thursday with three votes needed for adoption. It is rare for
California utilities to join forces with a consumer advocacy group in an
effort to hammer out a compromise in regulatory cases, a development
that could enhance the plan's likelihood of approval by the majority of
the CPUC's commissioners. The PG&E-TURN deal to reorganize PG&E
and pay off about $12 billion in creditors' claims would save utility
customers about $1 billion in lower interest rates and tax savings,
reported the newswire.
Pilots Want Removal of US Airways CEO
US Airways pilots called on Tuesday for the removal of company CEO David
Siegel, saying they have lost confidence in his management team's
ability to save the ailing carrier, Reuters reported. 'US Airways pilots
have supported this management through two restructuring plans and our
management still is unable to produce positive results,' said Bill
Pollock, a US Airways captain and chairman of the pilots' union
executive council. 'In bankruptcy, these senior executives had every
tool, every advantage they needed, to turn the airline around -- yet
they've failed,' Pollock said.
Key unions at Arlington, Va.-based US Airways agreed to massive wage
and other concessions last year. But the 5,000 active and furloughed
pilots, represented by the Air Line Pilots Association, had their
pension plan terminated as well and have fought the company in recent
months for detailed information about the airline's finances. The pilots
said they would not agree to another round of concessions if Siegel were
still running the airline, but would not rule out more givebacks if a
new management team took over and asked for help, reported the
newswire.
Court Approves Extension Of Federal-Mogul CEO's Contract
The U.S. Bankruptcy Court in Wilmington, Del., approved
Federal-Mogul Corp.'s plan to extend CEO Charles McClure's employment
contract and give him a raise. McClure's contract had been scheduled to
expire Jan. 11, 2004. When it sought the extension in November,
Federal-Mogul said it wanted to keep its leadership in place, while the
official committee of its unsecured creditors, the committee of asbestos
claimants and the representative of future asbestos claimants in its
case debate who should lead the company once it emerges from chapter 11.
Should McClure be selected, court papers said, the company would
negotiate a new, long-term deal with him. The court order approving the
extension was signed Dec. 9 by Judge Randall Newsome.
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Fleming Cos. Sues Insurers For Failing To Pay Legal Fees
Fleming Cos. filed a lawsuit against nine insurance companies for
allegedly failing to pay under the company's liability policies for its
directors and officers, according to court papers obtained Tuesday. The
lawsuit, filed last Tuesday with the U.S. Bankruptcy Court in
Wilmington, Del., names Greenwich Insurance Co., AIG Europe (UK) Ltd.,
Underwriters at Lloyd's Syndicates, Zurich Specialties London Ltd., RLI
Insurance Co., Twin Cities Fire Insurance Co., Starr Excess Liability
International Insurance Ltd., Gulf Insurance Co. and Lumbermen's Mutual
Casualty Co. A hearing on the lawsuit hasn't been scheduled.
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Pension Agency Takes Control of Kaiser Fund
The government's pension insurance agency said yesterday that it will
take over the management pension plan at troubled Kaiser Aluminum Corp.,
which has been hit by a 'run on the bank' -- officials taking their
benefits in lump sums as the company slid toward bankruptcy, the
Washington Post reported. Kaiser managers withdrew $77 million
from the plan last year, reducing its assets so severely that by the end
of 2002 it failed to meet federal liquidity requirements and lump-sum
distributions to employees who were cut off. In some cases, the plan
promised pensions higher than the Pension Benefit Guaranty Corp.'s
(PBGC) maximum guarantee of $44,000 a year, so taking a lump sum was the
only way to be sure of getting the full amount. Those left in the plan
will receive only annuities that cannot exceed that amount.
'The rules requiring companies to set aside enough money in advance to
pay for their pension promises clearly did not work in the case of the
Kaiser salaried plan,' Steven A. Kandarian, executive director of the
PBGC, said in a statement. 'The burden of paying for these unfunded
promises' now falls on other companies who pay premiums to finance the
government fund, he added. The federal agency often is forced to take
over the pension plans of bankrupt companies, but the Kaiser case is
unusual because only the management plan has been taken over so far,
officials said, reported the Post.
Monsanto Sees Possible Liability in Solutia Chapter 11
Agricultural chemicals maker Monsanto Co. today said it could face some
liability stemming from the bankruptcy filing of its former unit,
Solutia Inc., but it is prepared to manage it, Reuters reported.
Monsanto, maker of Roundup herbicide, said the major categories of
potential liability stemming from Solutia's bankruptcy include
post-retirement benefit costs, environmental remediation expenses and
litigation expenses.
Separately, Reuters reported that chemicals maker Solutia Inc. filed
for voluntary bankruptcy protection today, citing hefty legal
liabilities to its former parent, Monsanto Co. St. Louis-based Solutia,
which earlier this month battled with Monsanto over a $3 million legal
bill due to plaintiffs in two asbestos personal injury cases, said that
it and 14 of its U.S. subsidiaries filed petitions for reorganization
under chapter 11. The company said its worldwide operations would
continue uninterrupted, and that it had received a commitment for up to
$500 million in debtor-in-possession financing.
Air Canada Restructuring Hanging on Creditor Appeal
The complex restructuring of Air Canada stalled on Tuesday after an
Ontario judge said he would wait until an appeal hearing is finished
before ruling on how a financial partner for the insolvent airline will
be chosen, Reuters reported. Air Canada wanted Justice James Farley of
Ontario Superior Court to give clear guidance on how the auction for a
leading equity stake in the restructured airline should be concluded.
But the judge postponed his decision on Air Canada's request until after
the Ontario Court of Appeal considers a motion by Mizuho International
PLC, a financial creditor seeking to reopen the bidding process,
reported the newswire.
NYC Pension Funds Sue Banks Over National Century
New York City's pension funds on Tuesday sued several banks, accusing
them of aiding bankrupt health care finance company National Century
Financial Enterprises in a 'ponzi scheme' that cost the funds more than
$89 million, Reuters reported. The lawsuit, the latest in a series of
suits stemming from National Century's collapse, names as defendants
J.P. Morgan Chase & Co. , Bank One Corp., Credit Suisse Group's
Credit Suisse First Boston, accounting firm Deloitte & Touche and
ratings agency Fitch Inc., among other parties. 'The underlying
scam...was not possible without critical actions on the part of
defendants,' the suit, filed in the U.S. District Court for the Southern
District of New York, said, Reuters reported.
