June 252003

Submitted by webadmin on Wed, 2003-06-25 00:00

June 25, 2003

Consumer Confidence Better Than Expected

U.S. consumer confidence was broadly unchanged in June, contrary to
expectations, as cautiousness over business conditions tempered optimism
over rallying stocks, the Conference Board reported on Tuesday, Reuters
reported. The Conference Board's monthly consumer confidence index stood
at 83.5, marginally down from 83.6 in May, but outstripping market
expectations for a fall to 82.4. 'While consumers' assessment of current
conditions has lost ground since April, expectations for the next six
months are up,' said Lynn Franco, director of the Conference Board's
Consumer Research Center.

'In fact, consumers have grown increasingly optimistic over the last
three months. The recent turnaround in the stock market and an easing in
unemployment claims should keep consumer expectations at current levels
and may signal more favorable economic times ahead,' Franco said in a
statement, reported the newswire.

Fed Likely to Lower Rate to 45-Year Low

Federal Reserve policy-makers appeared ready to cut a key short-term
interest rate to its lowest level in 45 years in the hope that it will
energize consumer spending and business investment and give the economy
a boost, the Associated Press reported. The quick, postwar economic boom
that some economists had hoped for hasn't materialized. For the most
part, businesses have been reluctant to ramp up capital spending and
hiring-- major factors that are holding back the economy's ability to
return to full health. Consumers, meanwhile, have been the main force
keeping the economy afloat. Even they, however, have been more inclined
to spend cautiously. 'It's hard to escape the feeling that the economy
is just barely treading water,' said Carl Tannenbaum, chief economist at
LaSalle Bank. 'There isn't a lot of energy out there,' reported the
newswire.

U.S. Consumer Debt Balloons as Interest Rates Fall

Ever-lower interest rates are luring Americans to record debt levels,
setting the stage for a repayment crisis later, Reuters reported.
Spurred by the cheap money, consumers are borrowing like never before.
Household debt is rising about 10 percent a year while annual income
growth rose just 3.7 percent in April, the newswire reported.

Already consumer debtloads have helped produce a record 1.57 million
personal bankruptcies in the 12 months to March 31. Mortgage defaults
are also at a record high, while credit card delinquencies are up
sharply. Sam Gerdano, executive director of the American
Bankruptcy Institute, said policy-makers are not worried about how
lower interest rates will affect personal bankruptcies. 'But it is the
other side of the coin of consumer spending. You need consumers to spend
money, we need consumers to use credit to help drive the economy. But
bankruptcy filings are a frequent byproduct of that relationship,'
Gerdano said, reported the newswire.

Senators Agree on Medical Criteria for Asbestos Fund

Two U.S. senators working on the creation of a national fund to
compensate asbestos victims, said on Tuesday they had resolved
differences over the medical standards that would underpin compensation
levels, Reuters reported. Senators also agreed to ban most consumer uses
of asbestos. Still to be resolved are questions about what amounts to
assign the 10 categories of asbestos-linked lung scarring and cancer
that have been agreed upon and whether the $108 billion fund will be
sufficient.

The Senate Judiciary Committee gathered yesterday to continue work on
establishing the fund after the panel's leadership agreed last week to
include a ban of the use of asbestos as part of the bill. Sen. Orrin
Hatch (R-Utah), who chairs the panel, is keen to finish work on the bill
that would take hundreds of thousands of asbestos injury claims out of
the U.S. courts and limit the liability of industry and insurers. 'If we
don't get this bill done this week we are telling the victims they must
live with the broken system of today,' Hatch said. But Sen. Patrick
Leahy of Vermont, the ranking Democrat on the panel, urged more time to
resolve the remaining differences, saying the bill was unlikely to pass
the full Senate unless it got broad bipartisan support in committee,
reported the newswire.

FTC Offers Little Remedy To Lawmakers' Concerns On ID
Theft

House lawmakers determined to deal with identity theft when
reauthorizing the federal credit reporting law implored the head of the
FTC's Bureau of Consumer Protection on Tuesday for legislative
recommendations, but received little satisfaction, CongressDaily
reported. Testifying before Congress on extending the Fair Credit
Reporting Act (FCRA) for the fourth time in several weeks, the director
of the FTC's Bureau of Consumer Protection, Howard Beales, repeated
previous testimony that the agency was still developing its position on
the matter, the newswire reported.

Suggestions that House Financial Services Financial Institutions
Subcommittee members offered included free annual credit reports for
consumers, requiring credit bureaus to give notice about discrepancies
in their credit files, and requiring lenders to comply with fraud alerts
that consumers put on their credit reports. Jim Kallstrom, senior
executive vice president at MBNA America Bank, said identity theft
needed to be tackled with biometrics, reported CongressDaily. 'We
need [an] anticounterfeiting mechanism put into our identity documents.'
Kallstrom and the other industry witnesses urged re-extending the
federal pre-emptions of state law government credit reporting. Those
portions of the FCRA are set to expire at the end of the year, and
Financial Services Chairman Michael Oxley (R-Ohio) on Tuesday reiterated
his goal to mark up legislation to do so after they return from the July
Fourth recess. 'Most of the members understand the importance of
reauthorizing the FCRA,' said Oxley, calling it 'one of the most
successful pieces of legislation ever passed by any Congress,' reported
the newswire.

Dice Wins Judge's Approval of Recovery Plan

Dice Inc., an Internet job-search service whose stock sold for more than
$54 in March 1999, won a judge's approval of its plan to exit bankruptcy
as a private company and hand ownership to creditors and shareholders,
Bloomberg News reported. Under the recovery plan, approved yesterday by
U.S. Bankruptcy Judge Burton R. Lifland in Manhattan, Dice will
swap all of its $69.4 million of 7 percent convertible subordinated
notes due in 2005 for 95 percent of the shares in the reorganized
company. Dice

said it expects to come out of bankruptcy on June 30. 'We will emerge as
a privately held, essentially debt-free company with a solid financial
position,'' CEO Michael P. Durney said in a statement. New York-based
Dice sought bankruptcy protection on Feb. 14 after failing to make a
profit for 17 straight quarters. The company listed $38.8 million in
assets and $82.1 million in debts in chapter 11 papers, Bloomberg
reported.

Allegheny Energy Shares Drop on Bankruptcy Warning

Shares of U.S. power company Allegheny Energy Inc. fell as much as 13.7
percent on Tuesday, one day after the debt-laden company warned it might
seek bankruptcy protection if it could not raise new capital, Reuters
reported. The announcement aggravated Allegheny's already precarious
relationship with investors, whose confidence in the company's future
had increased since it struck a $2.4 billion financing deal with its
lenders earlier this year.

Industrywide, utilities such as Allegheny are struggling with a slew
of recent crises, including federal investigations into trading
practices and slashed credit ratings, sparked by the 2001 collapse of
Enron Corp. Many, including Allegheny, are counting on aggressive
asset-sale programs to help raise needed cash and analysts agreed that
such sales are now more critical than ever to Allegheny's survival,
Reuters reported. 'The increased pressure may accelerate asset sales
and, if that happened, then that would take some pressure off the need
to finance,' said Argus Research analyst Jeff Gildersleeve, who has a
'hold' rating on Allegheny shares and owns none, reported the
newswire.

UNITED AIRLINES

Atlantic Coast Air pilots OK Wage, Nonwage Cuts

Regional air carrier Atlantic Coast Airlines on Tuesday said its pilots
have ratified a five-year contract with wage and non-wage cuts, subject
to it reaching a new deal with bankrupt partner United Airlines, Reuters
reported. The 1,700 pilots have agreed to undisclosed pay cuts and work
rule changes that will take effect after Atlantic Coast and United reach
a revised agreement on United Express service that is approved by the
bankruptcy court, Atlantic Coast said. Dulles, Va.-based Atlantic Coast
Airlines Holdings Inc. is in talks with United on both setting the 2003
rates and over their long-term contract. Atlantic Coast has presented a
long-term proposal to United that would lower United's costs, spokesman
Rick DeLisi said. Discussions are active and ongoing, but the process
and timing of agreements is in United's hands, he said, reported the
newswire.

United Airlines Names Two Execs to Board

United Airlines named two new outside directors to its board on Tuesday,
the Associated Press reported. Board members Richard McCormick and John
Van de Kamp are retiring from the board after nearly 10 years, United
said. They are being replaced by executives Robert S. 'Steve' Miller Jr.
and George Weiksner Jr. United has now added three board members in less
than a month as it proceeds with its chapter 11 bankruptcy
restructuring. Dipak Jain, a marketing expert and dean of the Kellogg
School of Management at Northwestern University, was named to the board
on May 27.

Miller is the former chairman and chief executive of Bethlehem Steel
Corp., which emerged from chapter 11 bankruptcy this year. He also
played a central role in the financial recovery of Chrysler Corp. in
1980 and participated in several other

turnarounds, United said. Weiksner is vice chairman of Latin American
operations for

Credit Suisse First Boston Corp. and has three decades of global
investment banking experience.

Qwest to Give Touch America Loan, Resolves Disputes

Qwest Communications International Inc. will provide bankruptcy
financing to Touch America Holdings Inc. as part of an agreement that
resolves billing and other disputes between the phone companies,
Bloomberg News reported. Qwest will lend an undisclosed amount of money
to Touch America and the companies will continue to sell each other
network services, Denver-based Qwest said in a statement. The agreement
still needs approval by the court overseeing Touch America's
bankruptcy.

Touch America, owner of a 21,000-mile fiber-optic network, last week
sought protection from creditors, listing $554.2 million of debts in the
filing. The agreement settles billing disputes without any payment from
Touch America and relieves Qwest of the obligation to buy Touch
America's interest in a wireless joint venture for $23 million, the
companies said, reported the newswire.

WORLDCOM

Arthur Andersen Must Defend WorldCom Lawsuit, U.S. Judge
Rules

Arthur Andersen LLP must defend a lawsuit accusing the accounting firm
of ignoring signs that WorldCom Inc. was issuing fraudulent financial
statements, a judge said yesterday, Bloomberg News reported. Investors
claim in the suit that Andersen should have detected WorldCom's fraud
and not issued statements attesting to the company's fitness. U.S.
District Judge Denise Cote in New York didn't address the merits of the
claims, ruling only that the plaintiffs made sufficient allegations to
support their case.

Cote last month refused to dismiss claims in the same suit against
WorldCom's officers and directors, including former CEO Bernard Ebbers,
and the bankrupt long-distance carrier's investment banks, including
Citigroup Inc. She didn't rule at the time on Andersen's dismissal bid.
'The allegations identifying the steps Andersen should have taken and
failed to take, and the fraud it would have discovered if it had taken
those steps, create a strong inference that Andersen acted recklessly in
conducting the WorldCom audits,'' Cote said, reported the newswire.

Bill Aims to Block WorldCom Tax Benefit

WorldCom Inc. would stand to lose a tax benefit worth more than $2
billion under a change to tax law that may be introduced as early as
today, the Washington Post reported. Sen. Rick Santorum (R-Pa.),
a member of the Senate Finance Committee, has drafted a bill that would
effectively block WorldCom's ability to use more than $6.6 billion in
previous losses to offset taxes on future earnings.

Santorum's bill is the latest gesture by a member of Congress to
register dismay over WorldCom's ability to move through the bankruptcy
process after reporting the largest corporate fraud in history. WorldCom
filed for chapter 11 last July and is on track to emerge as a new entity
under the name MCI this fall, with its balance sheet freed of more than
$35 billion in debt. Santorum's bill would limit a company's ability to
avoid paying taxes on debt expunged by the bankruptcy process, reported
the Post.

Verizon Units Oppose Adelphia Communications CLEC Wind-down
Pact

The subsidiary telephone companies of Verizon Communications Inc.
objected to a request by Adelphia Communications Corp. to wind down some
local exchange carrier markets, according to court papers. Adelphia
Communications and Adelphia Business Solutions Inc. filed a joint
request in May asking a bankruptcy court to approve a wind-down
agreement for competitive local exchange carrier (CLEC) markets owned by
Adelphia Communications and managed by Adelphia Business Solutions. The
Verizon Communications units filed an objection in bankruptcy court
Friday that said that neither Adelphia Communications nor Adelphia
Business Solutions has paid the Verizon companies for 'millions upon
millions of dollars' of services in the proposed wind-down markets.
However, the objection said, Adelphia Communications is seeking to
compensate Adelphia Business Solutions for its help in the proposed
wind-down.

GLOBAL CROSSING

Icahn's XO Raises Global Crossing Bank-debt Offer to $495
Million

Carl Icahn's XO Communications Inc. raised to $495 million its offer to
buy debt held by bank lenders to Global Crossing Ltd. in a bid to win
control of the bankrupt network operator and scuttle a previous sale
agreement, Bloomberg News reported. XO said it began a tender offer in
which it will pay $220 per $1,000 of the $2.25 billion in senior bank
debt, according to a statement sent to news media. XO, which has said
it's Global Crossing's largest creditor, previously said it would offer
$472.5 million for the secured debt.

XO wants Global Crossing's 100,000-mile fiber-optic network for sending
phone calls and data at high speeds, and has said it would also pay $700
million for the company's assets. Global Crossing and its bondholders
had agreed to sell a 61.5 percent stake to Singapore Technologies
Telemedia Pte., with creditors getting the rest. That arrangement has
yet to win U.S. approval, reported the newswire.

Global Crossing Plan Exclusivity On Tap For Wednesday
Hearing

On Wednesday, the U.S. Bankruptcy Court in Manhattan will hold a hearing
on whether Singapore Technologies Telemedia Pte. Ltd. will be able to
maintain its hold over exclusive rights for Global Crossing Ltd., or
whether the process will be thrown open again. One interested party will
be XO Communications Inc., which last week filed its own set of
objections with the court. In its filings, XO argued that 'it appears
that time and money may soon run out of the ST Telemedia transaction.'
XO recently offered a $700 million cash bid for all the assets of Global
Crossing. The filings also noted that there could be a third investor
bidding on the firm. As reported, Global Crossing's reorganization plan
was thrown into disarray on Friday after a group of creditor banks filed
objections to an effort to preserve exclusive takeover rights for
investor ST Telemedia.

Hawaiian Airlines Trustee Resigns After Brief Tenure

John Monahan, the court-appointed trustee charged with overseeing daily
operations for financially strapped Hawaiian Airlines, resigned on
Tuesday for personal reasons, an airline spokesman said, the Associated
Press reported. Monahan was appointed trustee on May 30 by the U.S.
Trustee's Office and approved by the U.S. Bankruptcy Court to oversee
Hawaiian Airlines during its chapter 11 reorganization. Curtis Ching, an
attorney with the U.S. Trustee's Office in Honolulu, said Monahan's
resignation was accepted and the department would begin searching for a
replacement, AP reported. Ching noted that Monahan's resignation had
nothing to do with his ability to guide the carrier through bankruptcy,
reported the newswire.

Thanks for visiting
Today's Bankruptcy Headlines. New articles are posted here each business
day.