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More Americans Late on Credit Card Payments in June
More Americans fell behind on their credit card payments in June than a
year ago due to a sluggish economy that has led to a weak job market and
a flood of bankruptcy filings, Moody's Investors Service said on
Thursday, Reuters reported. If these credit cardholders do not begin
paying soon, banks and credit card issuers will be forced to write off
the bad accounts as losses, Moody's said. 'Compared with this time last
year, more credit card borrowers fell behind in their payments and more
loans were written off as uncollectible,' the bond rating agency said in
a statement.
But there have been signs that the U.S. labor market is bouncing back
with the rest of the economy. The government reported that the number of
Americans filing unemployment claims for the first time fell to 386,000
in the week ended Aug. 16, down 17,000 from the upwardly revised 403,000
the prior week. The latest weekly claims figure is the lowest since
378,000 for the week ended Feb. 8, reported the newswire.
Fed Officials Play Down Recovery, Suggesting Continued Low
Rates
Several Federal Reserve officials are playing down signs of a
strengthening recovery and emphasizing the central bank's willingness to
keep interest rates low much longer than is typical during an economic
rebound, the Wall Street Journal reported. 'You could hardly call
this recovery 'robust,'' Federal Reserve Bank of San Francisco President
Robert Parry said in a speech to the Rotary Club of San Diego yesterday,
the online newspaper reported. While there have been 'encouraging' signs
on growth, he said, they 'have not been sustained long enough to be
conclusive,' and there remain 'some downside risks,' such as the recent
jump in mortgage rates. Meanwhile, Federal Reserve Bank of St. Louis
President William Poole told a group in Philadelphia that growth remains
'modest' and said that the economy is 'operating below potential,' the
Post reported.
Since cutting the target for the benchmark federal funds rate,
charged on overnight loans between banks, to a 45-year low of 1 percent
from 1.25 percent on June 25, Fed officials have repeatedly signaled a
willingness to hold rates low much longer than is typical in expansions.
Despite those reassurances, long-term interest rates have steadily
marched higher, partly because some investors were disappointed the Fed
didn't cut rates half a point or promise unconventional measures to
stimulate growth such as purchasing bonds, which would push down bond
yields, the newspaper reported.
California High Court Upholds SoCalEdison-CPUC Pact
The California Supreme Court on Thursday upheld a 2001 agreement between
state energy regulators and Southern California Edison that kept the
utility out of bankruptcy by raising consumers' electricity rates,
Reuters reported. The Utility Reform Network, a San Francisco-based
consumer group, had challenged the agreement, in part on the grounds it
was made in secret meetings between the California Public Utilities
Commission (CPUC) and Southern California Edison, a unit of Edison
International, at the height of the state's energy crisis. Investors and
the electricity industry have kept close watch on the case since an
overruling would have been a financial blow to Southern California
Edison and undermined the CPUC's authority to set energy rates. The
seven-member court ruled 6-to-1 that the agreement did not violate
California laws governing deregulation of the state power market and
holding public meetings, reported the newswire.
U.S. Junk Bond Default Rate Falls in June
The U.S. junk bond default rate fell to 7.7 percent in July from 10.3
percent in June, Fitch Ratings said on Thursday, Reuters reported. The
rate, a trailing 12-month average, fell below 10 percent for the first
time since mid-2001, Fitch said in a statement, attributing the
improvement in part to low interest rates that allowed companies to
refinance debt. The dollar value of bonds defaulting rose to $8.4
billion in July from $3 billion in June, in large part because of the
bankruptcy filing of Mirant Corp., Fitch said. The 12-month default rate
fell, however, because the massive default last year by WorldCom Inc. is
no longer included in the average, it said, reported the newswire.
'While defaults may fluctuate from month to month this year, not wholly
surprising given the still vulnerable state of the high-yield market,
defaults have nonetheless clearly decelerated,' Fitch said, reported
Reuters.
Creditors Object To Exide Technologies Disclosure
Statement
Several of Exide Technologies' creditors want to slow the battery
maker's surge toward emerging from chapter 11, saying the document
outlining how the company will reorganize and pay them off is
incomplete. A number of objections were filed against Exide's chapter 11
disclosure statement by the committee of Exide's unsecured creditors, by
federal and state environmental agencies and by companies that did
business with Exide. A hearing on approval of the disclosure statement
is scheduled for Monday in the U.S. Bankruptcy Court in Wilmington, Del.
In its objection to the disclosure, the creditors committee said that
the document is complex and confusing and that it is impossible for a
typical unsecured creditor to understand and cast an informed vote on
the company's plan.
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Reserved.
Court Confirms AboveNet Plan of Reorganization
AboveNet Inc., Metromedia Fiber Network Inc.'s recently announced brand
name, today announced on PR Newswire that the U.S. Bankruptcy Court for
the Southern District of New York has confirmed its plan of
reorganization, allowing the company to emerge from bankruptcy
protection in early September. Craig McCaw through Fiber LLC, funds
managed by Franklin Mutual Advisers and John Kluge through the Kluge
Trust will be among the largest equity holders of the new company,
according to the press release.
Since filing for bankruptcy protection in May 2002, AboveNet has
significantly reduced its expenses and increased its cash position. Upon
emergence the company said it expects to have approximately $70 million
in senior bank debt and $73 million in cash by the end of the year.
AboveNet continues to win new customers as it has throughout the
bankruptcy, including new contracts with the New York Mercantile
Exchange, Xerox and Sprint.
Conseco Settles U.S. Trustee Concerns as Part of Reorganization
Plan
Bankrupt Conseco Inc. reached an agreement with the U.S. Trustee's
office in Chicago on the nature of release provisions between Conseco
and preferred debt holders in the insurer's proposed settlement plan,
according to BestWire. The company is operating under chapter 11
bankruptcy protection. The agreement, filed Aug. 20 with Judge Carol A.
Doyle of the U.S. Bankruptcy Court for the Northern District of Illinois
in Chicago, raised certain threshold levels that would allow Conseco to
back out of the settlement should too many of its creditors opt out so
they can preserve their right to sue, said company spokesman Jim
Rosensteele. 'The U.S. Trustee had objected to certain points of our
plan, and we modified the section they were concerned about,' he said,
reported the newswire. Conseco Inc. recently filed its fifth amended
bankruptcy plan with a federal court in Indiana, saying it hopes to
emerge from chapter 11 bankruptcy proceedings shortly after a Sept. 9
court date set to consider the plan (BestWire, Aug. 19, 2003).
Bankruptcy Court Approves CTC-Columbia Investment
Agreement
CTC Communications Group Inc. announced today that the U.S. Bankruptcy
Court approved its previously announced investment agreement with
Columbia Ventures Corporation and Columbia Venture Broadband LLC,
subject to the confirmation of a plan of reorganization, according to
the Business Wire. The investment by Columbia Ventures forms the basis
of CTC's forthcoming plan of reorganization. 'The bankruptcy court
approval of the selection of Columbia Ventures as plan investor is an
important step forward for CTC and its dedicated employees,' said
Michael Katzenstein, CTC's interim CEO, according to the press release.
With the investment and the support of Columbia Ventures, CTC will
maintain its position as the preeminent competitive telecom provider in
the northeast. CTC thanks its customers for their continued belief in
our company.' He noted that CTC expects to emerge from chapter 11 with
funding for growth, a reinvigorated business plan and a substantially
unlevered balance sheet. CTC also announced that all regulatory filings
required to consummate the transaction have been made by CTC and
Columbia Ventures.
WORLDCOM/MCI
WorldCom Appoints Roscitt as President
WorldCom Inc. appointed a former AT&T Corp. executive as its new
president and chief operating officer to oversee the embattled
telecommunications company's sales, product development and network
operations, according to The Washington Post. WorldCom officials
said Richard R. Roscitt will start Sept. 1 and split most of the duty of
running the Ashburn-based firm's operations with chairman and chief
executive Michael D. Capellas, who is ceding the president's title to
Roscitt. All of WorldCom's business units, including business, consumer,
international and network operations, will report to Roscitt. WorldCom
is expected to make the appointment public today, the online newspaper
reported.
MCI Creditors Want to See Rivals' Proof on Routing
MCI's creditors on Thursday said they wanted AT&T Corp. and other
carriers to produce any evidence that supports accusations that the
bankrupt telephone company improperly routed telephone calls to avoid
paying hefty connection charges, Reuter reported. The creditors
contended that MCI's rivals choreographed an elaborate mud-slinging
campaign to damage the No. 2 U.S. long-distance telephone and data
services company just weeks before its reorganization plan would be
heard by the bankruptcy court. The creditors also said they want copies
of any communication among AT&T, SBC Communications Inc. and Verizon
Communications Inc. regarding any cooperative effort to spread negative
information about MCI, or to intervene in the award of government
contracts to the bankrupt company.
'This smear campaign has led to widespread adverse press coverage
about the company quite clearly aimed at imperiling these cases and
frightening the company's customers into the arms of its accusers,' the
official committee of unsecured creditors said in a bankruptcy court
filing, the newswire reported. Federal regulators are probing MCI's
routing practices. The company had denied any wrongdoing.
United Airlines Executive Says Turnaround Is Beginning
A top United Airlines executive said Wednesday that the bankrupt company
has 'turned the corner' in its battle to boost revenues and staunch
crippling losses, the Denver Post reported. 'The revenue
turnaround has begun,' said John Tague, United's executive vice
president for customers, the online newspaper reported. 'We're seeing
the company's financial situation gain a great deal of stability.' Tague
also said the airline's cash flow has 'improved dramatically' in recent
months. United must increase the cash it generates from operations each
month to satisfy covenants in the loans that are keeping it in business
during bankruptcy.
He noted that the positive trends 'are not strong enough to give us
indications of profit,' reported the Post. The carrier lost a
staggering $623 million in the second quarter, in part due to an 18
percent drop in revenue and despite receiving $300 million in government
aid. Analysts predict a loss of more than $300 million in the third
quarter, which ends Sept. 30. On Tuesday, an industry group reported
positive July revenue-growth numbers for the entire industry. U.S.
airlines lost nearly $11 billion in 2002 and have struggled this year
through the SARS epidemic in Asia, the Iraqi war and prolonged
sluggishness in the economy.
Court Approves Sale of Certain Eagle Stores
Eagle Food Centers Inc., which owns and operates supermarkets in
Illinois and Iowa, announced yesterday that the U.S. Bankruptcy Court
for the Northern District of Illinois approved the sale of certain Eagle
stores, according to a press release on PR Newswire. The court approved
two separate purchase agreements for certain assets related to three of
its stores to Hy-Vee and one store to J.B. Sullivan Inc. Hy-Vee
purchased certain of the assets related to stores in Dubuque, Iowa;
Bettendorf, Iowa and Moline, Ill. for about $10.83 million in cash.
Under a separate agreement, J.B. Sullivan Inc. purchased certain assets
of the store in Rochelle, Ill. for $800,000 plus an amount to be
determined for inventory. Completion of the transactions remain subject
to certain conditions with a final closing expected by Sept. 22, 2003,
for the Hy-Vee transaction and Sept. 5, 2003, for the J.B. Sullivan
purchase, according to the press release.
As previously announced, a court hearing has been scheduled for Sept.
11, 2003, to consider the sale of certain stores as determined in
yesterday's auction to The Kroger Company, SVT LLC, and Harold E.
Wisted. In addition, the company selected J.B. Sullivan Inc. as the
highest and best offer in connection with the Eagle store located in
Freeport, Ill., and the sale is anticipated to be approved at the Sept.
11 hearing.
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