June 62005

June 6, 2005

KB Toys Gets Court Approval for Bidding Procedures

KB Toys Inc. said on Friday it received court approval to proceed
with certain bidding procedures as the company gets ready for an auction
to fund its plan of reorganization, Reuters reported. Under the approved
procedures, qualified bids must be submitted by July 6. If any are
received, it would conduct an auction on July 11, the company said. The
company expects to emerge from chapter 11 bankruptcy protection before
the 2005 holiday season.

Kentucky Diocese to Pay $120 Million in Sex Abuse Case

The Roman Catholic Diocese of Covington, Ky. agreed on Friday to
set up a $120 million fund to compensate victims of child-molesting
priests and other employees, the Associated Press reported. The
settlement, which is subject to approval by a Kentucky judge, would
bring to a close a class-action lawsuit filed on behalf of more than 100
alleged victims. It accuses the diocese of a 50-year cover-up of sexual
abuse by priests and others.

Fibermark’s Chapter 11 Process Extended

Fibermark Inc. said on Friday that the timing for its chapter 11
process has been revised after a request by the independent examiner in
the case, Reuters reported. The maker of specialty materials such as
vacuum cleaner filters and wallpaper said the U.S. Bankruptcy Court in
Vermont has extended the examination period until June 30. A report is
due by July 6, and the court has scheduled a report review hearing for
July 12.

Jurors Deadlocked on Scrushy Charges

Jurors told a judge on Friday they were deadlocked on all charges
against fired HealthSouth Corp. CEO Richard Scrushy, the
Associated Press reported. Scrushy, accused of leading a
$2.7 billion earnings overstatement, is the first CEO charged with
violating the Sarbanes–Oxley corporate reporting law. Scrushy also
is accused of conspiracy, fraud, false reporting and money laundering.
The defense blames the fraud on Scrushy subordinates, including 15
one-time HealthSouth executives who pleaded guilty.

W.R. Grace Sued by Environmental Regulators

New Jersey environmental regulators have filed suit against chemical
maker W.R. Grace & Co. and two of its employees alleging false
statements and misrepresentations in a 1995 report on a chemical plant,
the company said on Friday, Reuters reported. The report was prepared by
an independent environmental consultant and involved the closing of a
plant in Hamilton Township, New Jersey, that made spray-on fire
protection products and vermiculite-based products, Grace said. In a
regulatory filing, Grace said it was unable to assess the effect of the
lawsuit on its operations or financial condition, the newswire
reported.

Judge Weighs Motion By Winn-Dixie Retirees

Winn-Dixie retirees asked a federal bankruptcy judge on Thursday to
appoint a committee to represent their interests as the supermarket
giant works to reorganize, the New York Times reported.
Their motion, opposed by Winn-Dixie Stores Inc., a creditors’
committee and the U.S. Trustee, was taken under advisement by U.S.
Bankruptcy Judge Jerry Funk. David McFarlin, an Orlando
attorney, argued that the regular creditors’ committee could not
adequately represent the interests of the management level retirees.
Funk did not say when he would rule, but McFarlin said later that he
expected a ruling within the next few days.

United CEO Predicts 2006 Profit

United Airlines will not only leave bankruptcy in the fall, but will
turn a profit in 2006, airline CEO Glenn Tilton predicted, the
Associated Press reported. Recent labor agreements will save the company
$700 million, but other strategies must be employed in the face of
rising fuel prices, Tilton told the Chicago Tribune. He
said the airline’s cash balance of $2.4 billion is encouraging,
despite the fact that the company has lost more than $1.2 billion so far
this year. “'The next chapter of our lives is to make good on the
investment that our employees have made and to compete with the
financial resilience that we’ve created for ourselves,”
Tilton said, the newspaper reported.

Bankruptcy Threat Spurs Budget Battle

Detroit’s political leaders will try again this week to save
the city from bankruptcy, the Detroit News reported. The
city council is expected today to override Mayor Kwame
Kilpatrick’s veto of the council’s cost-cutting budget for
the fiscal year beginning July 1. Both sides hope that the override will
be the start of budget negotiations involving many parties, rather than
the final word on how the city will get rid of a $302 million budget
deficit. Read the full article at
href='http://www.detnews.com/2005/metro/0506/05/B04D-204051.htm'>www.detnews.com/2005/metro/0506/05/B04D-204051.htm.

Northwestern’s Bankruptcy Ending, but the Fight Over the Bills
Continue

Judge John L. Peterson of Butte, who is in charge of NorthWestern
Corp.’s bankruptcy, has challenged dozens of invoices during
hearings this winter and spring, the billingsgazette.com reported. He
cut one investment banker’s bill in half, saying the work
duplicated another adviser’s work. The judge’s sharpest
comments, however, were over professional fees. Read the full article at

href='http://www.billingsgazette.com/index.php?id=1&ts=1&display=rednews/2005…'>http://www.billingsgazette.com/index.php?id=1&ts=1&display=rednews/2005….

Goldman Picked for Orange County Bankruptcy Debt Sale

Goldman Sachs Group Inc. was picked by Orange County, Calif., as the
top underwriter for a sale of $600 million of bonds to refinance debt
issued by the county after it filed the biggest municipal bankruptcy in
U.S.history, Bloomberg News reported. Citigroup Inc., Banc of America
Securities LLC, Stone & Youngberg LLC and two other underwriters,
which have yet to be picked, also will help manage the sale, said
countyTreasurerJohn Moorlach. Merrill Lynch & Co., which sought to
win its first bond business there since selling derivatives that led to
the bankruptcy, wasn’t among firms on an approved underwriting
pool invited to participate.

Actor Tom Sizemore Files for Bankruptcy

“Black Hawk Down” actor Tom Sizemore has reportedly filed
for bankruptcy—after spending more than $11 million on legal fees
to battle drug and domestic violence charges. The star was charged last
month with possession of the drug methamphetamine and violation of
probation for domestic violence towards his former fiancee Heidi Fleiss
in 2003, reported the Internet Media Database. He faces four years in
prison when he’s sentenced later this month, but could also risk
losing his Beverly Hills, Calif., mansion to creditors.

N.Y. Governor Introduces Bill to Raise Judges’ Pay

New York Gov. George E. Pataki on Friday introduced a judicial pay
raise bill that would increase the salaries of trial court judges by
18.6 percent while granting appellate judges raises averaging 16.9
percent, the New York Law Journal reported. Read the full
article at
href='http://www.law.com/jsp/article.jsp?id=1117789519789'>http://www.law.com/jsp/article.jsp?id=1117789519789.

Global Airlines Rise Above Crisis as U.S. Carriers Struggle

At a time when many U.S. carriers are still struggling to survive,
much of the rest of the global airline industry appears to have pulled
out of crisis and is entering the summer travel season in its best shape
in five years, the Wall Street Journal reported. Carriers
in Asia and Europe are starting to see cost savings from several years
of difficult restructuring. Passenger demand is increasing in many
markets. That means some airlines are able to reduce their losses by
raising fares—and some are even strongly profitable, the online
newspaper reported.

Bankruptcy Law May Present Opportunities for Banks to Improve
Customer Education and Relationships

In a recent InsightExpress study of more than 500 adults, only 37
percent of all participants stated they were familiar with the recently
passed Bankruptcy Abuse Prevention and Consumer Protection Act,
Moneyplans.net reported. Of those familiar with the legislation, most
(46 participants) participants state they are in favor of the Act with
less than one-third (32 percent) against it—leaving 22 percent
undecided. While few consumers cite the Act will impact them personally,
the survey reveals strong attitudes toward financial discipline and the
need for consumer education.

“It is essential that banks and card issuers deliver new forms
of consumer education to build stronger customer relationships as
participants expressed a strong desire to maintain good credit and to
achieve responsible spending,” said Lee Smith, president of
InsightExpress. “With 73 percent of consumers citing credit card
companies are not doing enough to help customers who are facing
bankruptcy, this Act may represent a unique opportunity for banks and
card issuers to enhance their reputation as consumer advocates and
consumer-friendly,” said John Kaminski, director of
InsightExpress’ Financial Service Practice.