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October 17, 2002
Lobbyists Push Congress Over Bankruptcy Laws
Some lawmakers suspect that financial industry lobbyists are holding
back on contributions to put pressure on congressional leaders who
oppose certain revisions to federal bankruptcy law. But trade group
officials deny the claim, although they admit to supporting provisions
that make it easier to file for bankruptcy. Some lobbyists say their
failure to attend fund-raising events on Capitol Hill isn't personal. To
listen to the full story, point your browser to
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House Sets Lame Duck
The U.S. House of Representatives voted 229-172 to extend temporary
funding to federal agencies so lawmakers can leave Washington until the
Nov. 5 election, stalling action on bankruptcy, energy and
terrorism-insurance legislation, Bloomberg reported. Bills put in limbo
by a congressional recess include legislation to overhaul U.S.
bankruptcy law to make it tougher for consumers to avoid repaying their
debts, the top goal of Bank of America Corp., Wells Fargo & Co. and
other creditors. The final version has been on hold in the House since
July when some Republicans objected to an abortion-related
provision.
House Republicans mapped their exit plan during a meeting on
Wednesday of the House Republican Conference, CongressDaily
reported. House Majority Leader Richard Armey (R-Texas) said the House
is likely to return Nov. 12 for a week of work in a post-election
lame-duck session, depending on the availability of conference reports.
However, Armey said he would assign 'the lowest probability' to chances
the House would be in session during the following week, Nov. 18-22.
Senate leaders did not have detailed plans for sessions beyond next
Wednesday's. House Speaker Dennis Hastert (R-Ill.) said the House could
reconvene next week if the Senate moved homeland security legislation to
a conference committee, a prospect that appeared possible but grew more
unlikely during talks Wednesday. 'I have put my members on notice to be
here Wednesday,' said Hastert. 'We have a lot of legislation we are
anxious to do.' House leaders had hoped to break for the elections at
the end of last week, but reconsidered after about 20 GOP members said
they were uncomfortable about recessing while the Senate continued to
work. The Senate is still expected to be in next week, although probably
not for a full week or to consider a full schedule of business, the
newswire reported.
Williams Group Emerges from Chapter 11 With New Name
Williams Communications Group Inc., completing a six-month bankruptcy
reorganization, changed its name to WilTel Communications Group Inc. and
said Howard Janzen resigned as chief executive officer, Bloomberg
reported. The fiber-optic network operator's old shares were canceled,
and 50 million WilTel shares were issued to pay creditors, including
about 54 percent for bondholders and suppliers owed some
$5 billion.
The company, which switched its place of incorporation to Nevada from
Delaware, repaid most of the $975 million owed to secured lenders. That
leaves WilTel with $375 million of bank debt. It said it has no other
substantial debts other than those related to its Tulsa, Okla.-based
headquarters building that it will buy from Williams Cos. for $145
million. Williams Communications, amid waning demand for phone services
and a glut of capacity, filed for chapter 11 in April to protect itself
from creditors owed more than $7.2 billion. Last month, the company won
a federal judge's approval of its recovery plan, clearing the way for
its emergence from bankruptcy. Bank lenders, bondholders and Williams
Cos. had agreed to support the
plan.
Court Approves Desa International's Employee Payment Plan
Desa International Inc. received bankruptcy court approval to make
payments to employees under a severance and retention plan, Dow Jones
reported. The order last Friday from the U.S. Bankruptcy Court in
Wilmington, Del., allows the company to award retention bonuses to its
chief executive and make severance payments to its management team.
Court papers estimated the total cost of the plan at $1.5 million. Desa
filed for chapter 11 protection on June 8, listing $235 million in
assets and $370 million in liabilities.
Medicalogic/Medscape Gets Third Exclusivity Extension
Medicalogic/Medscape Inc. received a third extension to file its chapter
11 liquidation plan, excluding other parties from filing plans for
roughly two more months, Dow Jones reported. Chief Judge Peter J.
Walsh of the U.S. Bankruptcy Court in Wilmington, Del., signed an
order on Friday that extended the company's exclusive plan-filing period
through Dec. 17. If Medicalogic/Medscape files a plan by that date, it
will then have until Feb. 18, 2003, to solicit plan votes without the
threat of competing plans. Medicalogic/Medscape said in its motion that
although it hasn't had any ongoing business since it sold its Digital
Health Records segment, an exclusivity extension is necessary to allow
the firm to negotiate a plan with a committee of equity holders and file
a plan that's acceptable to that committee. The Hillsboro, Ore.-based
company filed for bankruptcy protection on Jan. 24. The company listed
between $10 million and $50 million in both assets and liabilities in
its chapter 11 bankruptcy petition.
Stocks of Companies That Make Subprime Loans Getting
Crushed
Rising delinquency rates at Capital One Financial Corp. set off a flurry
of credit concerns on Wednesday, dragging down shares of companies that
make loans to subprime borrowers, Dow Jones reported. Late on Tuesday,
the major issuer of Visa and MasterCard credit cards reported that
delinquencies jumped to 5.36 percent from 4.54 percent at the end of
June and 5.2 percent a year ago. Credit quality-particularly among
seasoning or maturing, sub-prime accounts-continued to deteriorate.
Capital One said that charge-offs, or 'bad loans,' are expected to rise
in the fourth quarter and the early part of next year due to seasoning
of subprime assets as well as slowing loan growth.
Credit card companies, especially subprime lenders, have come under
increasing pressure this year as the weak economy has forced more and
more consumers to default on payments. Personal bankruptcies increased
over the past quarter, and were about 4 percent higher than a year ago
at the end of September. Not surprisingly, companies are reporting that
subprime borrowers, being the least creditworthy, are something of a
weak spot. To protect investors, U.S. regulators in July issued a
proposal requiring banks to start reporting information on subprime
loans in their quarterly loan reports.
Kasper A.S.L. Seeks OK of $1.6 Million Pact with Herbert
Kasper
Kasper A.S.L. Ltd. has asked the court handling its chapter 11 case for
approval to pay $1.6 million to Herbert Kasper under a settlement, Dow
Jones reported. The company, which has been in chapter 11 since
February, said the deal would give it the exclusive rights to its
trademarks and revenue generated from them. Also, Herbert Kasper would
waive $12 million in potential claims, according to a court filing Dow
Jones Newswires obtained on Wednesday. A hearing on the proposed
agreement is scheduled for Oct. 31 before Judge Allan L. Gropper
of the U.S. Bankruptcy Court in Manhattan. According to the court
filing, Kasper A.S.L. acquired trademark rights from Kasper and his
affiliate Forecast Designs Inc. in 1997.
Kasper A.S.L. is a New York women's branded-apparel company whose brands
include Kasper and Anne Klein. The company was separated from Leslie Fay
Cos. as part of Leslie Fay's chapter 11 reorganization in 1997. Kasper
A.S.L. said in recent court documents that it's getting exit financing
and expects to file an amended reorganization plan after the financing
terms have been negotiated. The company's original plan provides for
unsecured claims to be converted into just about all of the reorganized
company's new equity.
WorldCom Won't Pursue Pact to Sell $101 Million Property In
Virginia
WorldCom Inc. decided not to proceed with a proposed $101 million deal
to sell its office complex in Arlington, Va., to real estate firm
TST/Pentagon City LLC, an affiliate of Tishman Speyer Properties, Dow
Jones reported. Court documents didn't provide much information on the
matter. It remains unclear why WorldCom decided not to move forward with
the proposed deal and bidding procedures providing for an auction of the
complex. WorldCom signed a sale contract with TST/Pentagon City Aug. 28.
The telecommunications giant is seeking the court's approval to hire a
joint venture of real estate consultants to explore options for its
properties, including the Pentagon City site in Arlington, Va. That
joint venture consists of Hilco Real Estate LLC, Hilco Industrial LLC,
New America Network Inc. and NodeCom Inc., and the group is led by Hilco
Real Estate. The U.S. Bankruptcy Court in Manhattan will consider
WorldCom's request to hire the real estate consultants, retroactive to
Sept. 3, at a hearing on Nov. 12. Interested parties may file objections
through Nov. 7.
Conference Board's Blue-ribbon Commission Calls for Major Reforms in
Corporate Compensation Practices
The Conference Board's Blue-ribbon Commission on Public Trust and
Private Enterprise proposed a wide-ranging series of reforms to
strengthen corporate compensation practices and help restore trust in
America's corporations and capital markets, the Conference Board and the
Pew Charitable Trusts announced in a joint press release today. The
12-person Blue Ribbon Conference Board Commission on Public Trust and
Private Enterprise is comprised of major business leaders, major
investors, former senior government and regulatory officials as well as
a university professor of business ethics. The work of the Commission is
supported by The Pew Charitable Trusts. This report, the first in a
series of three reports, focuses on executive compensation. Subsequent
reports will deal with reforms on other areas of corporate governance as
well as accounting and auditing issues. To read the Commission's
recommendations, point your browser to
href='http://www.pewtrusts.com/ideas/ideas_item.cfm?content_item_id='>http://www.pewtrusts.com/ideas/ideas_item.cfm?content_item_id=
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Former eToys Nears Confirmation of Liquidation Plan
The entity formerly known as eToys Inc. on Wednesday neared confirmation
of a liquidation plan for its chapter 11 case, Dow Jones reported. The
debtor company will submit a revised order seeking the signature of
Judge Mary F. Walrath of the U.S. Bankruptcy Court in Wilmington, Del.,
on Wednesday afternoon. Judge Walrath can sign an order confirming the
liquidation plan without further need of a hearing. The plan calls for a
liquidation of the debtor company's remaining assets. The liquidation
proceeds will be distributed to creditors of eToys' chapter 11 estate,
the newswire reported. The debtor company has already sold substantially
all of its assets in various sale agreements. More than 87 percent of
the former eToys' voting creditors support confirmation of the
liquidation plan, according to court documents.
Senior unsecured creditors holding almost $20.9 million in claims voted
unanimously in favor of confirmation. Slightly more than 83 percent of
the debtor company's noteholders, which have a total claim of just under
$75 million, voted to support confirmation, Dow Jones reported. The
largest voting class, made up of general unsecured creditors holding
roughly $37.6 million in claims, supported the plan, according to court
documents. 'This plan has the overwhelming support of the creditors and
should be confirmed,' said Gregory W. Werkheiser, an attorney
with Morris Nichols Arsht & Tunnell, the firm representing the
chapter 11 debtor. The company's committee of unsecured creditors will
continue to be dissolved when the liquidation plan takes effect,
according to the disclosure statement. A post-effective-date committee
will be created. The company filed for chapter 11 bankruptcy on March 7,
2001, listing assets of $418.9 million and liabilities of $285
million.
Impulse Media Files for Chapter 7 Liquidation in Las Vegas
Impulse Media Technologies Inc. filed a voluntary petition for chapter 7
liquidation in the U.S. Bankruptcy Court in Las Vegas, listing up to
$50,000 in assets and up to $500,000 in debt, Dow Jones reported. The
company said in a Form 8-K filed late on Tuesday with the Securities and
Exchange Commission that its board decided to terminate business
operations as a wireless technology software provider and enter
bankruptcy to explore the possibilities of a merger, sale or other
financial transactions. Impulse Media's bankruptcy petition contained a
letter that said a wholly owned unit in British Columbia with the same
name as the company will start its own bankruptcy proceedings soon.
Impulse Media helped radio and television stations to synchronize their
broadcasts directly with listeners and viewers through wireless devices
such as web-enabled cellular phones and personal digital assistants.
Acme Metals Seeks More Time to Develop Turnaround Plan
Acme Metals Inc. is seeking court approval for a 45-day extension of its
exclusive right to file a reorganization plan and lobby for creditor
support, Dow Jones reported. Court papers said the company wants up
until Nov. 29 to file a plan and until Jan. 31 to solicit creditors for
support. A hearing date on the issue hasn't been scheduled in the U.S.
Bankruptcy Court in Wilmington, Del.; objections are due no later than
Oct. 28. Acme Metals said that it filed a plan and related disclosure
statement with the court on Aug. 27; a confirmation hearing is scheduled
for Nov. 1. The company said it needs the extension to gain court
approval for the plan and to allow time for creditors to cast votes on
the proposal. The company also said it's working with various creditor
groups to resolve remaining differences under the plan. Acme Metals has
been under bankruptcy protection since Sept. 28, 1998. The company is
among nine major U.S. steel companies that have filed for bankruptcy
since 1998. Its petition listed assets of $813 million and liabilities
of $541 million.
LTV to Reorganize Copperweld
LTV Corp. plans to reorganize its Copperweld unit, which makes welded
steel tubing and bimetallic wire products, as a stand-alone company, Dow
Jones reported. In a press release on Wednesday, the bankrupt steel
company said it is developing with its creditors a separate plan of
reorganization through which Copperweld would emerge from bankruptcy at
the earliest opportunity. LTV said the restructuring effort would focus
on preparing Copperweld, which has maintained profitable operations
throughout its parent company's bankruptcy, to achieve long-term success
as an independent business. Copperweld operates 17 facilities in the
United States, Canada and the United Kingdom. and employs about 2,900
people. The unit has debtor-in-possession financing from GE Commercial
Finance, separate from that of LTV and LTV Tubular Products. LTV, once
the nation's fourth-largest steel maker, filed chapter 11 petitions for
itself and 48 subsidiaries in January, 2001.
Pacific Basin Food Files for Bankruptcy Protection
Steakhouse Partners Inc.'s Pacific Basin Foods Inc. unit filed for
bankruptcy protection under chapter 7 of the U.S. Bankruptcy Code, Dow
Jones reported. Pacific Basin has total assets of $200,000 and total
liabilities of $1.4 million, according to the newsletter. In a press
release on Wednesday, Steakhouse said Southwest Traders Inc. would
assume responsibility for supplying food and other product to
Steakhouse's West Coast units from Pacific Basin, which filed for
liquidation in the Central District of California. Steakhouse doesn't
anticipate any disruption in service to its West coast restaurants
during the transition.
Ames, Jamesway Were Looted By Liquidators, NYC Prosecutors
Say
Ames Department Stores Inc., Jamesway Corp. and about a dozen other
bankrupt companies were looted by liquidators, Manhattan prosecutors
said in announcing indictments of nine people and four businesses
accused of stealing almost $28 million, Bloomberg reported. The
defendants rigged bids to secure liquidation contracts, stole auction
assets and underreported auction proceeds, according to an 82-count
indictment made public today. Manhattan District Attorney Robert
Morgenthau said at least 13 bankrupt companies were defrauded by the
group, from large retailers such as Ames and Jamesway, to Internet
startups and small neighborhood stores. Morgenthau said the amount
stolen was probably much more than the indictment alleges.
'There are more companies victimized here and considerably more money
involved,' Morgenthau said. Among those indicted are Michael J. Sherman
and associates Oleg Ostrofsky and Frank Carone. Sherman's company, MJS
Associates, oversees the sale of assets for bankrupt companies. A second
company, Consolidated Auctioneers & Liquidators Inc., conspired with
Sherman to rig bids to ensure that Consolidated would be hired to run
bankruptcy auctions, authorities said. Morgenthau said the group stole
more than $16 million from Jamesway during its 1995-1997 liquidation.
Secaucus, N.J.-based Jamesway, which once operated about 100 stores in
the Northeast, shut its doors and sold assets after filing for
bankruptcy for a second time in October 1995. Rocky Hill, Conn.-based
Ames got a bankruptcy judge's permission in August to liquidate and
close its 327 remaining stores. It was Ames' second bankruptcy filing
since 1990. Authorities did not say how much was stolen from Ames or
whether the theft occurred during the first or second bankruptcy case,
the newswire reported.
Arthur Andersen Probed for Shredding Papers at American
Tissue
Arthur Andersen LLP is being investigated by the U.S. Justice Department
for its role in the shredding of documents of bankrupt tissue maker
American Tissue Inc. to block a potential government probe, Bloomberg
reported. American Tissue accused Andersen in a $300 million lawsuit
last month of driving the company into bankruptcy last year by issuing
two years worth of bogus financial statements. American Tissue, then the
fourth-largest U.S. tissue maker, defaulted in August 2001 on more than
$144 million in loans and more than $160 million in senior secured
notes.
SpectraSite Misses Interest Payment as Grace Period Expires
SpectraSite Holdings Inc., which builds and manages
wireless-communications towers, said it hasn't made a $10.8 million
bond-interest payment due Sept. 15, Bloomberg reported.The expiration of
the 30-day grace period means SpectraSite is considered in default on
its 10 3/4 percent coupon note maturing in 2010. That could allow owners
of that note and other SpectraSite debt issues to demand early
repayment, the company said last month. Cary, N.C.-based SpectraSite
reported a net loss of $580.1 million on sales of $225.9 million in the
first half of 2002, compared with a net loss of $250.9 million on sales
of $219.2 million in the year-earlier period. The company has about $2
billion of notes outstanding and the debt matures in 2008, 2009 and
2010, according to Bloomberg data.
Business Lobby Objects to Plan on Deferred Compensation Tax
Business lobbyists are fearful of a proposal that could result in some
executives' deferred compensation plans being immediately taxed, Dow
Jones reported. House Ways and Means Chairman Bill Thomas (R-Calif.) has
proposed allowing the Treasury Department to develop new regulations on
some types of deferred compensation. Industry lobbyists fear this could
open the plans to immediate taxation. The proposal applies to a type of
retirement account for senior and midlevel executives where a company
agrees to pay the worker in the future, so-called nonqualified deferred
compensation plans. Most large companies offer such plans. Rep. Thomas
and other lawmakers are looking at these plans, following disclosures
that dozens of Enron Corp. executives withdrew millions of dollars from
their deferred compensation accounts in the months before the company
slid into bankruptcy. Earlier this year, Rep. Thomas proposed a similar
but more dramatic plan to close loopholes on executive compensation that
would raise $5.2 billion over 10 years, but backed off in the face of
industry opposition.
Lenders Willing to Enter Restructuring Talks
Amerco said late on Wednesday that its lenders agreed to work with the
company in its attempt to restructure debt, Dow Jones reported. Earlier
on Wednesday, the holding company saw its debt rating again lowered by
Fitch, Moody's Investor Service and Standard & Poor's. In a press
release, the holding company said 'speculation about a bankruptcy filing
is unfounded. No such action is necessary, contemplated or planned.' In
a release with its debt downgrade, Moody's speculated that the company's
restructuring may include filing for protection under chapter 11 of the
Bankruptcy Code. Subsequently, Moody's downgraded the company's debt so
that even in the event of a bankruptcy filing, the asset values should
provide reasonable recovery for debtholders.
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