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September 2, 2003
Asbestos Bill Struggling on Capitol Hill
With Congress returning to town this week, the asbestos bill has not
been scheduled for Senate floor time and may have a hard time getting it
without compromise among the warring parties—business, insurance,
labor and trial lawyers, Reuters reported.
Insurers oppose the current bill. 'We are not negotiating. That would
imply that we thought the bill could be fixed, which we do not think,'
Julie Rochman of the American Insurance Association said. Hatch's
proposal would split trust fund costs equally between up to 8,500
industrial companies facing asbestos litigation and about a dozen
insurers, an allocation insurers consider unfair.
But Patrick Hanlon, a Washington attorney representing the Asbestos
Alliance, said he detected 'quite a bit of commitment' to doing
something on the issue. 'We will be trying to find a middle position...
I'm still confident that that place is there, but I don't know where it
is,' Hanlon said, reported the newswire. Jonathan Hiatt, general counsel
for the AFL-CIO labor federation, said he was uncertain about whether a
bill could pass this year. 'If the business and insurance community is
determined to get a bill like the one coming out of committee, I'd be
pessimistic. But if they are willing to make it more fair to victims, I
still think there's a chance,' Hiatt said, according to Reuters.
Consumer Credit Quality to Worsen Into 4th Quarter
Fitch anticipates consumer credit quality measures will continue to
worsen in late summer and into the fourth quarter following the current
period of seasonal adjustment, according to the rating agency's latest
edition of Credit Card Mover's & Shakers, a monthly report examining
consumer credit and credit card performance. Despite the revived
consumer spending and business confidence of recent months, overall
economic recovery still possesses lingering effects of a weak labor
market, according to a Fitch press release.
Chargeoffs fell 19 basis points to 6.6 percent, a level not seen
since March, according to the Fitch Credit Card Index. However,
chargeoffs remain 43 basis points above year-ago levels. As consumers
remain under pressure due to the economic landscape, performance is
expected to remain challenged over the near term and worsen later in the
second half of 2003.
United Expects to Exit Bankruptcy in 2004
United Airlines parent UAL Corp. said on Friday it now expects to exit
from bankruptcy protection in the first half of 2004 rather than any
time this year because the industry outlook remains uncertain, Reuters
reported. Executives at the world's second-largest airline had recently
indicated it might be able to exit from chapter 11 much earlier than the
18 months originally projected. United and UAL filed the largest
bankruptcy in aviation history last December.
UAL bankruptcy attorney James Sprayregen said at a court
hearing that the company intends to submit an updated business plan to
the Air Transportation Stabilization Board, but he did not give a
timeframe, the newswire reported. 'It still remains to be seen whether
the revenue recovery will be short- or long-lived,' Sprayregen said,
Reuters reported. A number of issues in the bankruptcy case remain to be
resolved, he said, including contributions to pension plans. Sprayregen
said lawyers for the company will soon submit a motion to the court to
extend the time period in which United has exclusive rights to file its
reorganization plan.
WORLDCOM/MCI
WorldCom Blocked from Future Tax Breaks by U.S. Tax
Ruling
The Bush administration moved to prevent WorldCom Inc. from using tax
breaks accrued before it declared bankruptcy to reduce future profits
when it completes a reorganization and changes its name to MCI as early
as October, Bloomberg News reported. The Treasury Department issued
temporary regulations barring companies that exit bankruptcy from
claiming losses and unused credits accrued by an affiliate against
post-bankruptcy profits. Treasury spokeswoman Tara Bradshaw said the
Treasury doesn't target specific companies with tax regulations while
acknowledging the rules might apply to the Mississippi company. 'We
don't know the specific circumstances for MCI, but because MCI has not
been discharged from bankruptcy, it is conceivable that it could be
affected,' Bradshaw said, reported the newswire.
U.S. Attorney Can Complicate Oklahoma's WorldCom
Case
U.S. Attorney James Comey may try to block Oklahoma authorities from
prosecuting WorldCom Inc. and ex-Chairman Bernard Ebbers to preserve his
own case in the largest fraud in U.S. corporate history, according to
former federal prosecutors, Bloomberg News reported. Comey has led the
U.S. probe of WorldCom's $11 billion accounting scandal for more than a
year, indicting the company's former chief financial officer and
securing guilty pleas and the cooperation of four former executives.
Oklahoma Attorney General Drew Edmondson on Wednesday charged the
company, Ebbers and five others, including Comey's cooperating
witnesses.
Comey, who said he was 'disappointed' Edmondson didn't notify him
that charges were imminent, may seek a court order to stop Edmondson
from proceeding until the federal investigation is completed, or refuse
to share evidence his office in Manhattan has gathered, the former
prosecutors said, reported the newswire.
WorldCom Names David Matlin, Four Others to Its
Board
WorldCom Inc. named David Matlin, one of its biggest investors, and four
others to its board, Bloomberg News reported. WorldCom also named Eric
Holder, Laurence Harris, W. Grant Gregory and Judith Haberkorn to its
board, the company said in a statement. WorldCom said the appointments,
which will bring its board to nine members, will be effective when it
emerges from chapter 11 bankruptcy protection.
TransTexas, Subsidiaries Successfully Emerge from Chapter 11
Reorganization
TransTexas Gas Corporation announced in a press release on Friday that
it and its subsidiaries—Galveston Bay Processing Corporation and
Galveston Bay Pipeline Company—have emerged from their joint
chapter 11 proceedings. In connection with the consummation of the
reorganization plan, the company has filed a Form 15 with the Securities
and Exchange Commission, thereby electing to terminate its reporting
obligations under §12(g) of the Securities Exchange Act of 1934.
Effectively, TransTexas will cease to exist as a public reporting
company. The company has notified the Depository Trust Company and the
OTC Bulletin Board of the Effective Date.
U.S. Bankruptcy Court Confirms Systech's Reorganization
Plan
Systech Retail Systems Corp., a leading provider of technology solutions
for the retail industry, announced on Friday that it and its
subsidiaries' consolidated amended plan of reorganization, as modified,
was confirmed by the U.S. Bankruptcy Court for the Eastern District of
North Carolina-Raleigh Division, according to Canada Newswire. On or
about Sept. 9, the company will be asking the Ontario Superior Court of
Justice to sanction and approve its amended plan of compromise and
arrangement under the Companies' Creditors Arrangement Act (CCAA). The
plan, when confirmed by the Ontario Court, will become effective and
binding. Following approval of the Ontario Court, the plan is expected
to become effective, and the company is expected to successfully emerge
from chapter 11 and CCAA protection, on or about Sept. 10, 2003, the
newswire reported.
Court Denies Fed-Mogul 90-Day Exclusive Negotiating Period
A bankruptcy judge has denied Federal-Mogul Corp.'s request for an
exclusive 90-day negotiating period with Citigroup Venture Capital
Equity Partners L.P., which had expressed interest in investing in the
automotive parts company. In the motion denied by U.S. Bankruptcy Judge
Randall Newsome, Federal-Mogul, Southfield, Mich., had also sought
approval to reimburse Citigroup Venture Capital, or CVC, for necessary
fees and expenses incurred in connection with such negotiations.
Newsome, in an order dated Thursday and posted Friday on the Web site of
the U.S. bankruptcy court in Wilmington, Del., said he was denying those
and related requests 'for the reasons stated in chambers on the sealed
record.'
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Copyright (c) 2003 Dow Jones & Company Inc. All Rights Reserved.
Adidas Director to Plead Guilty to Conspiracy in Just For Feet
Probe
Timothy R. McCool, director of apparel sales for Adidas-Salomon AG's
U.S. division, will plead guilty to conspiracy to commit false
statements to auditors of shoe retailer Just For Feet Inc. Just For Feet
filed for bankruptcy in 1999 and was sold to sports retailer FootStar
Inc. in 2000. In a press release on Thursday, the U.S. Attorney for the
Northern District of Alabama said McCool, 45, will also admit to
falsifying the books and records of Just For Feet.
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Copyright (c) 2003 Dow Jones & Company Inc. All Rights Reserved.
Enron's $2 Billion Contract Suits Bolstered by Bankruptcy
Ruling
A federal judge's ruling that Sierra Pacific Resources must pay Enron
Corp. under power agreements made during California's energy crisis
indicates Enron may prevail in similar payment disputes with AES Corp.,
Duke Energy Corp., El Paso Corp. and more than a dozen other companies,
Bloomberg News reported. U.S. Bankruptcy Judge Arthur Gonzalez in
Manhattan awarded $309 million to Enron's Power Marketing unit. Sierra
Pacific, owner of Nevada's two biggest utilities, had refused to pay,
arguing that the wholesale contracts were tainted by Enron's
manipulation of Western spot market prices. Judge Gonzalez upheld prior
rulings by federal energy regulators that the contracts were
enforceable, reported the newswire.
Midway Airlines Faces Liquidation by Court
A federal bankruptcy judge is threatening to liquidate Midway Airlines
because the carrier likely won't be able to emerge from bankruptcy on
Oct. 29, the Associated Press reported. U.S. Bankruptcy Judge A. Thomas
Small said he may convert Midway's chapter 11 bankruptcy to a chapter 7
liquidation on Sept. 24 unless the airline can quickly propose a
reorganization plan showing how it can continue as a successful business
operation. The changed status would force Midway, which filed for
bankruptcy protection two years ago, to cease operation and sell all
assets to pay creditors.
The airline also needs its pilot union to agree to amend its contract
to get US Airways to extend the terms of a $12 million loan. If not, the
loan will come due on Oct. 31 unless a reorganization plan has been
confirmed, Mr. Ferguson said, reported the newswire.
Kmart Loss Narrows on Cost Cuts
Kmart Holding Corp. on Thursday said its second-quarter loss narrowed to
$5 million from $293 million a year earlier, helped by deep
cost-cutting, marking the discount retailer's first results since it
emerged from chapter 11 bankruptcy protection in May, Reuters reported.
For the 13 weeks ended July 30, Kmart posted a loss of $5 million, or 6
cents per share. That compared with a loss of $293 million, or 58 cents
per share, in the same period last year. Kmart said second-quarter sales
fell 21.3 percent from a year earlier, to $5.65 billion. The retailer
closed 599 stores during fiscal 2002 and the first quarter of 2003 as
part of its bankruptcy reorganization, reported the newswire.
Consumer Class Action Over Credit Card Promises Gets New
Life
A federal appeals court has revived a consumer class action suit that
accuses Fleet Bank of misleading customers by promising a 'fixed' low
interest rate on its credit cards and then raising the rate just one
year later, the Legal Intelligencer reported. In Roberts v.
Fleet Bank, a unanimous three-judge panel of the U.S. Third Circuit
Court of Appeals found that 'Fleet's solicitation materials could cause
a reasonable consumer to be confused' about how long the low rate would
last. The decision revives a claim under the Truth in Lending Act that
was dismissed in June 2001 by Senior U.S. District Judge John P. Fullam.
But Fleet also scored a significant victory because the court upheld the
dismissal of a claim under the Rhode Island Unfair Trade Practices and
Consumer Protection Act, finding that such a law does not apply to
'activities and businesses which are subject to monitoring by state or
federal regulatory bodies or officers.' To read the full article point
your browser to
href='http://www.law.com/jsp/article.jsp?id=1061487955367'>http://www.law.com/jsp/article.jsp?id=1061487955367.
Mosaic Group Inc. Announces Appointment of Receiver and Extension
of Order
Mosaic Group Inc. announced that it and certain of its Canadian
subsidiaries and affiliated companies were granted an extension of
protection under the Companies' Creditors' Arrangement Act up to and
including Dec. 15, 2003, according to Canada Newswire. The company also
announced that KPMG Inc. has been appointed as interim receiver of the
company and its subsidiaries pursuant to an order of the Ontario
Superior Court of Justice under the Bankruptcy and Insolvency Act, the
newswire reported. KPMG Inc. was appointed as interim receiver to assist
in the realization process of the company's remaining assets.
Additionally, certain of the Mosaic's U.S. subsidiaries commenced
proceedings for reorganization under chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the Northern District of Texas in
Dallas.
Schrager Seeks Bankruptcy Protection for Clift Hotel
Ian Schrager, owner of London's Sanderson and St. Martin's Lane hotels,
has filed under chapter 11 bankruptcy protection for his five-star Clift
hotel in San Francisco, Calif., according to Reed Business Information.
The 374-bedroom hotel, which is burdened with $57 million (£36.1m)
in debt, has suffered from declining sales since the terrorist attacks
of Sept. 11, 2001. Under chapter 11, a majority of the hotel's
bondholders need to agree to a plan to refinance the property. A company
spokesman said the refinancing is expected to be completed within 90 to
120 days, the newswire reported. The hotel will remain open.
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