July 242003

Submitted by webadmin on Thu, 2003-07-24 00:00

July 24, 2003

U.S. Pension Insurer Is 'High Risk' Operation, GAO
Determines

The U.S. General Accounting Office (GAO) added the Pension Benefit
Guaranty Corp.'s insurance program for corporate pensions to its list of
'high risk' government operations needing an overhaul, Bloomberg News
reported. 'Additional severe losses may be on the horizon,' the
accounting office said in a report. The pension agency 'estimates that
financially weak firms sponsor plans with over $35 billion in unfunded
benefits,' the report said. The pension agency, funded by employer
premiums, had a deficit of $5.4 billion as of April, the most in its
history, after a series of bankruptcies in the airline and steel
industries, the report said. The program insures 30,000 plans covering
34 million people.

The decision by the GAO prompted members of the U.S. House to
schedule a hearing to examine the financial health of the pension agency
when Congress reconvenes in September. 'Today's announcement confirms
the alarming trend of underfunded defined benefit pension plans that
threatens the retirement security of millions of workers who rely on the
safe and secure benefits that these pension plans provide,' said Rep.
John Boehner (R-Ohio), chairman of the House Committee on Education and
the Workforce. The committee will hold a hearing in the first week of
September, Boehner said, the newswire reported.

ENRON

U.S. FERC Approves Accord on Enron Wind-power Rates to
Edison

Edison International will save $52 million to $58 million on wind power
in a settlement resulting from allegations that Enron Corp. hid
ownership of its California wind farms through secret partnerships,
federal regulators said, Bloomberg News reported. Eight wind farms
agreed to reduce rates for Edison International unit Southern California
Edison after the Federal Energy Regulatory Commission questioned whether
Enron improperly sought favorable regulatory status for the generators.
The commission approved the settlement at its regular meeting in
Washington, D.C.

Suits Seek Return of Bonuses Paid to 286 Enron
Employees

The committee representing Enron Corp.'s former employees in its
bankruptcy case is attempting to recover $72 million in bonuses paid to
286 employees, officers and executives of the company in the final hours
before Enron filed for bankruptcy, the Associated Press reported. 'We
intend to hold 11th-hour bonus recipients accountable for their
self-dealing as Enron fell into bankruptcy,' said Richard D. Rathvon,
co-chair of the employees' committee, reported AP.

Four lawsuits, filed by the group earlier this year in federal
bankruptcy court in Houston and recently consolidated, say the
individual bonuses ranged from $200,000 to $5 million. The bonuses
infuriated laid-off employees, who received relatively small severances,
Rathvon said. 'Even as thousands of regular Enron employees and retirees
were facing the loss of life savings, health benefits, their jobs or
pensions, these favored few were scheming to get millions more for
themselves,' he said, reported the newswire.

The employees' committee says the checks paid to the employees did
not clear Enron's account until after the bankruptcy was filed, so the
payments were not authorized by the New York bankruptcy court handling
Enron's case and should be returned. Employees who lost most of the
value of 401(k) accounts packed with now-worthless Enron stock are suing
dozens of individual former Enron executives in a class-action lawsuit
in federal court in Houston, AP reported.

Enron Bankruptcy Judge Has Approved $161 Million in Fees Since
2001

The judge overseeing Enron Corp.'s bankruptcy approved an additional
$25.7 million in fees and expenses for work performed by lawyers,
accountants and other professionals hired to help reorganize the failed
energy trader, Bloomberg News reported. The July 18 order in New York
brings to $160.9 million the amount of fees and expenses U.S. Bankruptcy
Judge Arthur Gonzalez has approved since the company filed for
bankruptcy protection in December 2001. More than 30 professional firms
have requested more than $300 million in fees for work done in the
case.

The court didn't reduce any of the fee or expense requests authorized
in the order. Since Enron sought court protection, the court has reduced
some fee requests by double the average for past bankruptcies, said Lynn
LoPucki, a bankruptcy professor at the University of California School
of Law, the newswire reported. 'It's not at all unusual to have no
cuts,' LoPucki said. 'That's what usually happens.'

The New York law firm, Weil Gotshal & Manges, which is Enron's
main bankruptcy counsel, has been awarded $47.2 million in fees and
expenses for work completed through last summer, more than any other
professional group. Its total fees were 9 percent less than the $52.1
million requested by the firm, which bills $700 per hour for some of its
lawyers. Milbank, Tweed, Hadley & McCloy, the counsel for the
creditors' committee, has been awarded $20.7 million. Its total fees
were reduced 10 percent from the firm's original requests. Fee requests
in New York bankruptcy courts are reduced on average by 4.5 percent,
according to a July 18 study of bankruptcy fees, co-written by LoPucki.
The average reduction of fees in bankruptcy courts nationally is 2.3
percent. In the most popular bankruptcy jurisdiction, Delaware, the
average reduction of fees is 0.7 percent, LoPucki said.

Bankruptcy Court Approves Initial Bid by Callaway Golf to Buy
Top-Flite Assets

Callaway Golf Company yesterday announced in a press release distributed
by Business Wire that the U.S. Bankruptcy Court in Wilmington, Del., has
established a process and a timetable for the sale of substantially all
the assets of The Top-Flite Golf Company. Pursuant to the official order
approved by the court at a hearing held yesterday. Callaway Golf's
initial bid of $125 million will be the 'stalking horse' bid. Under the
court's approved bidding process, parties interested in submitting a bid
must become 'qualified' and submit a bid not later than August 27,
2003.

Green Tree Settles Lawsuit for $12.5 Million

Green Tree Financial Corp. has reached a preliminary $12.5 million
settlement in a long-standing class-action lawsuit filed by
shareholders, the Associated Press reported. The lawsuit alleged that
the mobile home lender and former officials engaged in questionable
accounting practices to artificially inflate the company's stock and
boost the former chief executive officer's compensation. Green Tree,
formerly Conseco Finance Corp., and its former officials did not admit
or deny any wrongdoing, according to documents filed last week in the
U.S. Bankruptcy Court in Chicago. A July 28 hearing has been scheduled
to approve the settlement, reported the newswire.

Asset-selling Com 21 Heads Into Bankruptcy

Com21 Inc. announced it has voluntarily filed for chapter 11 bankruptcy
and intends to sell off its lines of cable-modem termination systems to
Arris Group Inc., Multichannel News reported. The Milpitas, Calif.-based
company filed its reorganization plans with the U.S. Bankruptcy Court
for the Northern District of California this week. Under the
reorganization schedule, Com21 will have to present a reorganization
plan to its creditors, probably in late August. Meanwhile, Com21 has
frozen payments to its vendors and suppliers, pending court
authorization of payment.

NRG Must File Plan With FERC to Assure Power Units Keep
Running

NRG Energy Inc., a bankrupt unit of Xcel Energy Inc., must file a plan
with the Federal Energy Regulatory Commission spelling out how it
intends to keep its power plants running, Bloomberg News reported. NRG
must file the plan by the end of the business day tomorrow, the agency
said in a letter to John Boken, NRG's president and chief operating
officer. The letter is in response to an NRG filing on July 8 that said
continuation of its money-losing contract with Northeast Utilities'
Connecticut Light & Power would cause NRG's marketing unit, NRG-PMI,
to liquidate. The letter said NRG Energy Inc. and its affiliates 'have
legal responsibility for ensuring the continued availability of output
from its generating units,' the newswire reported.

NRG is reviewing the letter and has no comment at this time, said
spokeswoman Meredith Moore, according to Bloomberg. FERC ordered NRG in
today's letter to detail its plans for purchasing fuel and emission
allowances for the plants, scheduling transmission services and
marketing the power. FERC has ruled that NRG must continue supplying the
power to Connecticut Light until the federal agency makes a final
ruling. NRG says it is losing at least $500,000 a day serving the
four-year contract, which expires at the end of this year.

NRG has appealed the FERC stay three times, most recently with the
U.S. Court of Appeals, Second Circuit in New York, yesterday. A
bankruptcy court on June 2 said NRG can exit the contract. The case is
considered important to the power industry in determining whether
federal energy regulation overrides bankruptcy law.

CBA Files for Bankruptcy

The Continental Basketball Association (CBA) has filed for chapter 7
bankruptcy with the U.S. Bankruptcy Court in Grand Rapids, Mich.,
according to the Sports Network. IT Acquisitions, the body that owns the
CBA, has 15 days to disclose how much money it owes to each of its 1,469
creditors, which include players and coaches. Former CBA owner Isiah
Thomas, coach of the Indiana Pacers, is being contacted by former CBA
teams for money, the online news portal reported. The Fort Wayne (Ind.)
Fury claims that Thomas owes them $380,000, while La Crosse (Wis.)
Bobcats representatives assert that Thomas owes them over $300,000 and
more than one million dollars to league operators, fans and sponsors,
the Network reported. Thomas bought the CBA in 1999, and a provision in
the purchase required that he immediately pay off all of the league's
ownership groups if he sold the league or if it became financially
insolvent, the Sports Newswork reported. The CBA suspended operations on
Feb. 8 after eight of the league's 10 teams did not pay their players.
Since then, the Grand Rapids Hoops, Connecticut Pride, Sioux Falls
Skyforce, Gary Steelheads and Rockford Lightening of the CBA have joined
the International Basketball League.

Kistler Aerospace Files for Chapter 11 Bankruptcy
Protection

Faced with over $600 million in debt liabilities and a bleak market
outlook for its still-unfinished reusable rocket, Kistler Aerospace
Corp. filed to reorganize July 15 under chapter 11 of the U.S.
Bankruptcy Code, according to Space.com. The Kirkland, Wash.-based
company is developing the K-1 reusable launch vehicle with intentions to
launch commercial and government payloads into low Earth orbit,
initially from the Woomera Spaceport in Australia, and later the Nevada
Test Site, the online news portal reported. Papers were filed in the
U.S. Bankruptcy Court for the Western District of Washington in Seattle,
a move that will 'facilitate Kistler’s restructuring, which is
designed to restore the company to long-term financial health while
operating in the normal course of business,' the company said in a
statement. 'During the restructuring period, Kistler will focus on
preparing the K-1 contractor team and hardware for re-start, and will
work with NASA to prepare for demonstrating the ability of the K-1
vehicle to deliver and recover cargo from the international space
station,' the statement said.

UAL Seeks a Bill to Stretch Out Minimum Funding for
Pensions

United Airlines parent UAL Corp., weighed down by a big pension
shortfall as it begins seeking the financing it needs to emerge from
bankruptcy-court protection, is pushing for passage of legislation that
would allow the airline industry to stretch out minimum funding
contributions over a longer period, the Wall Street Journal
reported. Glenn Tilton, UAL chairman and CEO, told employees in an
internal bulletin this week that the lobbying campaign by airlines and
unions is encountering a mixed reaction in Washington. The joint
labor-management effort 'has made a very big difference,' he said, but
some members of Congress oppose an industry-specific fix.

The CEO noted that United is in a more favorable situation,
pensionwise, than it was before new labor contracts took effect in May.
That said, United's pensions 'are among the cash liabilities that our
business plan has to face' if the carrier is to prosper after it emerges
from chapter 11, he told workers, reported the Journal.

Manila Says Mirant to Beef Up Philippine Business

The bankruptcy of U.S. energy firm Mirant Corp has not affected the
operations of its Philippine subsidiary, which is expanding its
investments in the country, Philippine Energy Secretary Vincent Perez
said on Thursday, Reuters reported. 'We have spoken to them [Mirant
Philippines Corp.] and they have assured us that the bankruptcy
proceeding with regard to the Atlanta-based company would not affect the
Philippine operation,' Perez told reporters on the sidelines of a
conference. Atlanta-based Mirant Corp filed for chapter 11 bankruptcy
protection in the United States this month after failing to win
bondholder support for a debt restructuring. The company has said it
wanted to maintain its operations in the Philippines, where it is the
largest private power producer, with holdings in nine power plants with
2,500 megawatts of generation capacity, reported the newswire.

U.S. Junk Bond Defaults Plunge 47 Percent

The number of U.S. junk bonds defaults plunged by 47 percent in the
first half of the year, Fitch Ratings said on Wednesday, as a sharp
rally in junk bonds attracted investor cash and opened financing to more
low-rated companies, Reuters reported. Overall, just 57 issues defaulted
in the first half of this year, compared with 108 in the same period
last year, the ratings agency said.

A receptive funding environment has kept defaults in check, Fitch
said. About $90 billion of high-yield bonds were sold in the first six
months of the year, compared with $120 billion for all of 2002, as
companies took advantage of historically low interest rates to refinance
debt, the agency said. Junk bonds, posting their strongest rally in a
decade, have been a magnet for investors this year. Junk bond mutual
funds have pulled in a record $23 billion, according to AMG Data
Services, as investors chase double-digit returns in the market,
reported the newswire.

Texas Petrochemicals Gets Interim OK to Use Lenders' Cash

Texas Petrochemicals L.P. received temporary court approval to use the
cash collateral of lenders from which the company borrowed before it
filed for bankruptcy protection, according to a court order. U.S.
Bankruptcy Judge Letitia Z. Clark signed an interim order Tuesday,
allowing Texas Petrochemicals to use the cash collateral of the lenders,
which are led by Bank of America N.A. Texas Petrochemicals is authorized
to use the collateral under a budget until a final hearing. A final
hearing on the matter is slated for Aug. 5 before the U.S. Bankruptcy
Court in Houston. Interested parties may file objections to final
approval through 5 p.m. on July 31.

Acterna Gets Court OK for $2.7 Million Staff Retention
Plan

Acterna Corp. received bankruptcy court approval to pay retention
bonuses to key employees during its chapter 11 case. Judge Burton
Lifland of the U.S. Bankruptcy Court in Manhattan signed the order
Tuesday, which extends and expands a bonus program Acterna has had since
late 2002. The telecommunications company filed for chapter 11 in May.
Previously, the Maryland-based company in December and April paid out a
total of about $2.8 million in bonuses to 34 employees to keep them from
heading elsewhere, court papers said.

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