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December 29, 2004
New Petition for Argentine Power Company
Argentine power transporter Transener SA (TRAN.BA) was hit with
another bankruptcy petition yesterday by a disgruntled bondholder, Dow
Jones Newswires reported. The latest bankruptcy petition involves the
holder of $70,000 worth of Transener bonds. Transener, which controls
all of Argentina’s high-voltage power lines, has been battling
various creditors in local courts this year as it struggles to
restructure $520 million in debt. Without progress on its debt
restructuring, the company has been left vulnerable to lawsuits and
bankruptcy petitions from creditors. The company paid another creditor
ARS8.7 million ($1=ARS2.9625) in August. In May, a court ruling in favor
of that same creditor blocked two payments worth ARS11.5 million that
Transener was supposed to collect from Cammesa, the national grid
operator.
Enron Bankruptcy Reaching End
As Enron headed toward Chapter 11 closure in 2004, the second-largest
bankruptcy in history behind WorldCom Inc. seemed almost secondary as
the public’s focus shifted to criminal proceedings against Enron
founder Kenneth Lay and former CEO Jeffrey Skilling, the ContraCoasta
Times reported. Both were indicted this past year, pleading innocent to
charges that include conspiracy and fraud, and are awaiting trial. The
bankruptcy case reduced the former energy-trading conglomerate first to
an operator of pipelines and power plants, and ultimately to a holding
company responsible for paying off debts. “Shareholders are gone,
and the company is different. What people associate with Enron now is
Lay and Skilling,” said David Skeel, a University of Pennsylvania
bankruptcy law expert. As 2005 approaches, trial dates for Lay, Skilling
and former Enron chief accounting officer Richard Causey have not yet
been set. Skilling and Causey each face more than 30 counts, including
fraud, conspiracy and insider trading, on charges of being in on various
schemes to fool investors into believing Enron was financially healthy
so they could pocket millions from sales of inflated stock.
href='http://www.contracostatimes.com/mld/cctimes/business/10520567.htm?1cBond'>Read
the full article.
Delay For Mortgage Lender
American Business Financial, which originated around $1 billion in
mortgage loans during its last fiscal year, said late last week it may
have to file for bankruptcy unless the Securities and Exchange
Commission allows it to sell $280 million in unsecured debt soon,
according to Dow Jones Newswires. Bondholders who purchased around $500
million in unsecured debt directly from the company are expected to deal
with the consequences of a looming bankruptcy. The company’s stock
declined from just over $3 last week to hit a low of 61 cents Monday. As
of Tuesday morning, it was trading at $1.28. The decline raises the
prospect of a delisting which could further derail the company’s
efforts to raise debt. For more than a year, mounting losses, borrowing
from small investors and forbearance by the company’s lenders and
bond insurers that have guaranteed certain of the companies
mortgage-backed bonds kept it afloat. But, in recent weeks, its cash has
reached critical levels as short-term debt continues to mature while the
company is prevented from issuing new debt. The company has said that
its ability to continue to manage delinquencies in its securitization
trusts hinges on its access to cash, either through its operations or
through the sale of debt. American Business Financial faces a lawsuit
filed in August in the United States District Court for the Eastern
District of Pennsylvania alleging its forbearance and deferment
practices enabled it to lower delinquency rates on its mortgages to
facilitate the securitization of loans, to collect interest income from
the securitized loans and to inflate its financial position and common
stock, according to the documents filed with the SEC. Management have
said its investment bankers decided not to underwrite a planned
securitization after an inquiry by the Civil Division of the U.S.
Attorney’s Office in Philadelphia into the company’s
forbearance policies. Also affecting its underwriters’ decision to
pull out of the deal was the receipt by the underwriters of an anonymous
letter, though the company didn’t provide details on the contents
of the letter. Now, the company is scrambling to shore up its liquidity
position and stave off a default. On Dec. 21, it entered into a complex
repurchase agreement, using $87 million in interest-only mortgage backed
securities that it holds to obtain short-term cash, in a transaction
with Patriot Capital LLC.
Adelphia Offers $300 Million to Resolve U.S. Probe
Adelphia Communications Corp., the fifth-largest U.S.
cable-television operator, said it offered $300 million to settle
federal fraud investigations as it tries to exit bankruptcy, Bloomberg
News reported late yesterday. Securities and Exchange Commission lawyers
have told Adelphia they might seek “billions of dollars” in
penalties, the company said in an SEC filing. The Justice Department
might seek to indict the Greenwood Village, Colorado-based company or
pursue additional fines, the Dec. 23 filing said. Adelphia Chief
Executive William Schleyer wants to settle the probes to allow the
company to recover from the ninth-largest bankruptcy in U.S. history.
Adelphia may sell some of its cable systems to bidders including Comcast
Corp. and Time Warner Inc. as it tries to raise money for creditors,
such as W.R. Huff Asset Management Co., owed more than $20 billion. The
SEC alleged in 2002 that the company, then headed by founder John Rigas,
fraudulently concealed $2.3 billion in bank debts. Rigas, 80, and son
Timothy, 48, were convicted in July of conspiracy and fraud for looting
$3.2 billion from Adelphia and lying about its finances prior to the
bankruptcy filing. Adelphia has recorded a $175 million reserve to help
fund its settlement offer, and expects to receive another $125 million
from litigation against unspecified defendants, its filing said. The
company plans to either sell its assets and exit bankruptcy, or
reorganize and emerge as an independent company. The SEC case, filed in
U.S. District Court in New York, is set to resume in April. David
Friedman, lawyer for a panel of Adelphia’s largest creditors that
includes Huff, didn’t immediately return a phone call seeking
comment. Shares of Greenwood Village, Colorado-based Adelphia rose 5
cents to 43 cents at 4:05 p.m. in over-the-counter trading. They had
traded as high as $32.66 in the six months before the company filed for
bankruptcy. Adelphia last week restated financial results and said the
Rigas family had caused the company’s bankruptcy by issuing
misleading statements and increasing debt. Rigas family members held all
of the senior executive positions at Adelphia prior to May 2002 and
accounted for five of the nine board members.
YUKOS Developments
YUKOS Vows to Seek Damages
Bankrupt Russian oil major YUKOS on Tuesday said it would place ads
in newspapers worldwide declaring its intention to seek damages of over
$20 billion from parties involved in the sale of its key energy
production unit, according to Reuters.com. In a statement, YUKOS
reiterated its contention that the auction of its Yuganskneftegas unit
was a violation of U.S. bankruptcy law. YUKOS said advertisements would
be placed in Thursday’s global editions of newspapers including
the Financial Times, Wall Street Journal,
New York Times and International Herald
Tribune. The ads will also appear in Vedomosti,
Russia’s daily business newspaper, and the Moscow
Times, an English-language daily newspaper in Russia.
Bank Asks Court to Dismiss Yukos Bankruptcy
Deutsche Bank sought to have a federal judge dismiss the bankruptcy
protection filing in Houston by the Russian oil giant Yukos, the
Associated Press reported on Tuesday. In a court filing, Deutsche Bank
said that Yukos had no Texas ties beyond a few million dollars in bank
accounts and a displaced chief financial officer and should not be able
to seek protection in Houston. The bank contended that Yukos filed for
bankruptcy protection earlier this month in Texas in a desperate, and
unsuccessful, bid to stave off the Dec. 19 auction of its top subsidiary
that stems from a tax dispute with the Russian government. Deutsche Bank
said in Tuesday’s filing that Houston was “a jurisdiction in
which Yukos owns no real or personal property and conducts no business
operations.” The bank suggested the European Court or an
international arbitration tribunal as appropriate jurisdictions.
Deutsche Bank was one of a consortium of banks that had intended to
finance a $10 billion to $13 billion bid by Gazprom, a government-owned
natural gas company, to buy Yuganskneftegaz, which produces 60 percent
of Yukos’s oil and 11 percent of Russia’s oil. The
consortium froze the money after Letitia Z. Clark, a federal bankruptcy
judge in Houston, granted an emergency injunction to block the auction
on Dec. 16, two days after the oil company filed its chapter 11 case.
Yukos claimed the bankruptcy was properly filed in Texas because the
chief financial officer, Bruce K. Misamore, was conducting company
business from his home in Houston. Also, Yukos put $7 million in two
Houston bank accounts to cover legal fees and Mr. Misamore’s
costs.