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February 3, 2006
id='1'>Northwest Aims to Replace U.S. Flight Attendants
Northwest Airlines wants to replace 30 percent of flight attendants on
its international flights with non-U.S. flight attendants, roughly 800
people, to cut costs so that it can emerge from bankruptcy, a company
executive testified in a New York bankruptcy court Thursday, the
Associated Press reported yesterday. Northwest, which filed for chapter
11 protection in September, seeks to save $1.4 billion in wage and
benefit costs. Thursday was the seventh day of hearings devoted to the
airline's request to toss out collective bargaining agreements with the
unions. 'Outsourcing would be a misnomer,' said Michael Becker,
Northwest's senior vice president of human resources and labor
relations, in response to a cross-examination by Thomas Ciantra,
attorney for the pilots union. Becker was referring to the carrier's
plans to replace U.S. flight attendants with foreign workers. He also
testified that the foreign flight attendants would not be part of the
U.S.-based flight attendants union, the Professional Flight Attendants
Association, or PFAA. He said Northwest would save $20.2 million by
hiring non-U.S. flight attendants.
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In related news, Northwest Airlines has asked a bankruptcy judge to
delay an antitrust class action lawsuit brought against the carrier, on
the grounds that the lawsuit could potentially stall its emergence from
bankruptcy, according to Portfolio Media today. The lawsuit
accuses Northwest, Delta Air Lines Inc. and US Airways Group Inc. of
price-fixing by eliminating the practice of 'hidden-city ticketing.' In
a motion filed in U.S. Bankruptcy Court in Manhattan on Wednesday,
Northwest pleaded that its chapter 11 proceedings cannot be delayed, as
the airline hopes to exit bankruptcy by the end of 2006.
id='2'>Enron Witness Faults Profit Reports
Presenting prosecutors' first evidence that former Enron Corp.
executives Jeffrey Skilling and Kenneth Lay knew about financial
misdeeds at the company, the leadoff witness in their federal criminal
trial recounted talking to them about last-minute earnings manipulations
intended to meet or exceed Wall Street expectations, the Wall Street
Journal reported yesterday. Former Enron investor-relations chief
Mark Koenig testified that such changes to reported earnings were
'wrong,' because the company wasn't reporting the actual results from
operations. Koenig also described several cases in which investors were
misled about revenues at two high-profile operations during conference
calls with Wall Street analysts. Koenig is the first of several former
Enron senior executives expected to testify for the government against
Skilling, the company's former president, and Lay, the former chairman.
The two are charged with leading a years-long conspiracy to cook Enron's
books and lie to the public about the financial condition of the
Houston-based energy titan, which collapsed into bankruptcy proceedings
in December 2001.
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In related news, Enron said yesterday that Lehman Holdings had agreed
to pay the company $69.9 million in cash to settle equity transactions
proceedings, Reuters reported today. As part of the settlement, Lehman
agreed to withdraw its $173 million claim against the Enron estate,
Enron said. Equity transactions cases remain pending against other
banks, including Bear Stearns, Credit Suisse and UBS. The proposed
settlement is contingent on approval by the U.S. Bankruptcy Court in
Manhattan.
id='3'>Aloha Air to Exit Chapter 11 Bankruptcy
A judge on Thursday accepted a motion by Aloha Airlines to modify its
reorganization plan, as well as an agreement worked out between the
airline and the federal Pension Benefit Guaranty Corp., the Associated
Press reported today. With the rulings by U.S. Bankruptcy Court Judge
Robert Faris, the airline is now expected to leave bankruptcy
protection in mid-February, Aloha President David Banmiller said. The
exact date hasn't been decided, he said. Besides the official transfer
of ownership, emerging from bankruptcy will also entail paying a debt of
about $62 million to Goldman Sachs Credit Partners LP, Banmiller said.
The new plan approved by Faris reworks the deal to $63 million in equity
and $35 million in debt financing, Banmiller said. Yucaipa will fund an
additional $10 million and some local investors will make a $2.2 million
investment. The company, which guarantees basic pension benefits, had
opposed the airline's plan to terminate pensions, but a tentative
agreement was worked out last month. As stated in the initial
reorganization plan, defined pension benefit plans covering pilots,
mechanics and clerical workers will be terminated, Banmiller said. But
under the agreement with the corporation, the defined pension benefit
plan for dispatchers and schedulers represented by the Transport Workers
Union will be carried forward by the new investors, he said.
id='4'>Asbestos Bill Maneuvers Heat Up; Specter Wary of Tactics
Sponsors of legislation that takes aim at the explosion of asbestos
litigation warned today that their bill represents the only opportunity
to address the issue and predicted opponents will erect procedural
hurdles on the floor next week, CongressDaily reported yesterday.
Opponents of the bill, which would replace asbestos lawsuits with a $140
billion trust fund to compensate asbestos victims, mobilized in
anticipation of a floor fight. Senate Judiciary Chairman Specter said he
was concerned that senators opposed to the substance of the bill would
use procedural tactics to kill it. 'There are procedural ways to block
this that do not go to the merits,' he said, noting that the bill might
not meet the 60-vote threshold needed to overcome a filibuster on a
motion to proceed to the bill or to waive a budget point of order that
Budget Chairman Gregg is considering raising against the bill. But
Specter and Judiciary ranking member Patrick Leahy, D-Vt., said if
Congress does not pass their bill, lawmakers likely will not have
another chance to fix the troubled asbestos litigation system. That,
they said, would lead to more bankruptcies of companies facing large
asbestos payouts and victims who get little compensation because of
clogged courts and bankrupt defendants.
id='5'>New United Airline Stock Tumbles
Shares of United Airlines parent UAL Corp. sank on their first day of
trading yesterday, a day after the nation's No. 2 airline emerged from
bankruptcy, according to a Reuters report today. UAL shares tumbled 7
percent from their opening price in early Nasdaq trading (down $3.10 to
$36.90). The Chicago-based airline's old shares were canceled and no
longer trade. Most of the new stock started in the hands of former
unsecured creditors, including the employees. Management employees were
to receive about 8 percent of the shares. 'I know there's a lot of
investor interest in United,' said Standard & Poor's analyst Jim
Corridore. 'They've done a lot of hard work in bankruptcy. It remains to
be seen whether their costs are low enough.'
id='6'>Aura Systems, Inc. Emerges from Chapter 11
Aura Systems, Inc.
announced today that it has emerged from chapter 11 proceedings,
according to a company press release. The recapitalized company will
have approximately 22,600,000 common shares outstanding and no preferred
shares. In accordance with the reorganization plan that has been
confirmed by the bankruptcy court and became effective on January 31,
2006, each stockholder of old Aura common stock will receive one new
share for every 338 old shares. No fractional shares will be issued and
the new shares issued will be rounded down to the nearest whole share.
Therefore, stockholders will have to own a minimum of 338 old common
shares in order to receive one new share, and a minimum of 676 old
common shares in order to receive two shares. Aura Systems designs,
assembles and sells the AuraGen(R), an integrated mobile power generator
that for motor vehicles for industrial, commercial, recreational and
military applications.
id='7'>Northwest Ohio Reports Plummeting Bankruptcy Filings
Only 110
bankruptcies were filed in a 21-county northwest Ohio region in January,
just over one-sixth the 602 filed in the same month a year ago, court
records show, the Toledo Blade reported yesterday. The numbers are
considerably fewer than the record pace of last year, when more than
1,000 cases were filed in each of eight months. 'It's a temporary lull,'
said David Fickel, clerk of the U.S. Bankruptcy Court in Toledo. Filings
across the country have plummeted after the new law. Records show that
the court hasn't had a month with fewer than 200 cases in at least 11
years. Last year, 16,883 cases were filed, nearly half of which came in
the weeks prior to the reform law. Many attorneys have filed 'emergency'
bankruptcies to stop a foreclosure, repossession, or utility shutoff,
Fickel said, but are telling other prospective filers to wait until
there's more experience with the new Bankruptcy Code. Still, he expects
filings to bounce back, given the economic conditions that prompted last
year's cases.
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id='8'>Utah Furniture Maker LoveSac in Bankruptcy
Salt Lake-based
LoveSac Corp. on Monday filed for chapter 11 bankruptcy protection in
U.S. Bankruptcy Court for the District of Delaware, the Utah Desert
Morning News reported. Shawn Nelson, who founded the company that
makes 'oversize' stuffed furniture, similar to bean bags, with some
friends in 1998 from the basement of his mother's Millcreek home, touted
his product line as 'hard-core leisure.' According to court documents,
LoveSac's 30 largest unsecured claims total more than $3.2 million,
including a number of Utah firms owed tens of thousands of dollars.
Estimated assets of the company are less than $500,000. Wayne Schmirler,
president of Sino China Trading Limited, a Hong Kong registered company
and one of LoveSac's unsecured creditors, said his company will end up
losing roughly $1.2 million from LoveSac's bankruptcy filing.
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id='9'>Pension Battle May Entangle Mogul's Home
Ira L. Rennert's colossal house in the Hamptons, built with the riches
from his sprawling industrial empire, has withstood lawsuits from angry
neighbors, appeals to the local zoning board, even an attempted
documentary filming by Michael Moore. But now a new challenge is
looming. The federal agency that insures pensions appears poised to lay
claim to Mr. Rennert's 29-bedroom oceanfront estate, along with other
assets, to make sure he delivers on hundreds of millions of dollars in
pensions promised to a group of steelworkers in Ohio, the New York
Times reported today. In most pension failures, the federal Pension
Benefit Guaranty Corporation has little choice but to absorb the
liabilities of the pension fund itself, but Mr. Rennert's business
empire, according to Carol Connor Flowe, a former general counsel for
the pension agency, presents a rare opportunity: a bankruptcy with a
deep pocket.
href='http://www.nytimes.com/2006/02/03/business/03pension.html'>Read
more.
id='10'>January U.S. Payrolls Rise 193,000; Jobless Rate Falls to
4.7 Percent
American employers added 193,000 workers in January and the unemployment
rate fell to 4.7 percent, the lowest since July 2001, as the U.S.
economy strengthened and builders took advantage of unseasonably warm
weather to start projects, according to Bloomberg News today. The
economy also added 81,000 more jobs than the government previously
reported for December and November, the Labor Department said today. The
jobless rate fell from 4.9 percent. Improving job prospects are lifting
consumers' spirits and will help propel spending and growth in coming
months, economists said. Job gains and low unemployment are signals that
capacity is being used up and may prompt the Federal Reserve to raise
the target interest rate again in coming months. Economists also
projected the unemployment rate would hold at 4.9 percent. December's
payroll gain was raised to 140,000 in today's report and November's
increased to 354,000 from 305,000.
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id='11'>Calpine Appeals to Get Out of Energy Contracts
Gearing up for a nasty fight with California's attorney general, Calpine
Corp. has challenged a bankruptcy judge’s rejection of the company's
request last week to cancel eight long-term electricity contracts,
Portfolio Media reported today. The bankrupt power provider's
appeal motion seeks to reverse the judge's decision that only the
Federal Energy Regulatory Commission (FERC), and not the bankruptcy
court, has authority to handle Calpine's request. Calpine’s reasoning is
simple: If the request ends up in the hands of the commission, it will
almost certainly be rejected. The appeal is certain to be resisted by
California Attorney General Bill Lockyer, who has fought tooth and nail
to prevent the company from tearing up its contracts with the state. If
the energy giant succeeds in breaking the deal, it would cost rate
payers more than $600 million to buy the same energy on the open market,
said Tom Dresslar, a spokesman for the California attorney general's
office. San Jose-based Calpine has argued it should be relieved from its
obligations under the contracts, which are set to expire between
December 2006 and June 2025, in order to cut its losses. The company
estimates it will lose $1.2 billion if it is forced to honor the
contracts, making it more difficult to repay $18 billion in debt—but
business partners are not convinced.
id='12'>Refco Creditor Devises Plan For Customer Asset Recovery
In what could be a windfall for Refco customers, one of the commodities
broker's creditors has come up with a proposal that would resolve the
question of what to do with the assets customers had kept in accounts at
Refco Capital Markets, Portfolio Media reported yesterday. Refco
creditor Abadi & Co. has proposed a plan that would allow those who
invested in Refco Capital Markets, Refco's unregulated broker-dealer
arm, to recover up to 100 percent of their assets. The plan would return
all investments to customers if they agree to accept payment in the form
of common shares in a new company. Under the plan, Abadi and several of
its partners would arrange $200 million in financing for Refco Capital.
Abadi drafted the plan after customer compensation quickly became one of
the most contentious issues of the Refco bankruptcy. Refco has argued
that it has control over customer assets and that customers should be
treated no differently than the firm’s unsecured creditors. But
customers argue that they have the right to recover all of their assets,
and have begun calling for Refco Capital Markets to liquidate under
chapter 7 in order to pay them back.
id='13'>Delphi's Unsecured Creditors to Retain Jefferies & Co.
The unsecured creditors committee of auto parts maker Delphi Corp. has
asked a federal court to retain Jefferies & Company Inc. as its
investment banker and financial adviser in a deal that could lead to a
huge bonus payout for the global investment bank, Portfolio Media
reported today. The request arrives as the scandal-ridden bankrupt
company presses on with its restructuring efforts, seeking to find its
way out of a sea of red ink. The company saw losses that topped $1
billion last December, and total liabilities exceeding $19 billion. The
committee filed the request at the U.S. Bankruptcy Court in Manhattan on
Tuesday. It is asking a federal judge to name William Q.
Derrough, co-head of the firm's Recapitalization and Restructuring
Group, as the
lead attorney.
International
id='14'>Axion Announces Bankruptcy Court Approves Litigation
Settlement
Axion Power International, Inc., Woodbridge, Ont., announced yesterday
that following a hearing on Jan. 5, the U.S. Bankruptcy Court for the
District of Nevada has approved the settlement agreement between Axion,
William M. Noall, chapter 11 trustee for the Estate of Mega-C Power
Corporation, Sally A. Fonner, trustee of the Trust for the Benefit of
the Shareholders of Mega-C Power Corp., and others, according to a
Business Wire report yesterday. In the findings of fact accompanying the
order dated Feb. 1, the bankruptcy court stated that under all the
circumstances in the record, Axion is best situated to continue to raise
capital research and develop the (e3 Supercell technology) and
ultimately bring the results to market if its efforts are successful,
and that it is in the best interests of Mega-C's chapter 11 estate to
enhance Axion's ability to obtain capital by resolving the pending and
threatened litigation.
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