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August 10, 2005
Wall Street Gains; Interest Rates Raised
Wall Street enjoyed a solid advance yesterday after the
href='http://www.concordmonitor.com/apps/pbcs.dll/article?AID=/20050810/REPOS…'>Federal
Reserve raised short-term interest rates for the 10th time in more
than a year but changed its policy statement to say longer-term
inflation expectations are well contained, the Concord
Monitor reported today. The market saw the Fed statement as a
hoped-for sign that the central bank’s streak of rate hikes may be
nearing its end. Stocks bumped higher after the Fed’s announcement
although investors had expected the rate hike to 3.5 percent, a
four-year high. The Fed signaled that at least one more rate increase is
coming, but many investors expect three more. The market has spent most
of the year nearly flat, which suggests investors are worried about
energy costs, consumer spending, housing and the economy, in addition to
interest rates.
href='http://www.concordmonitor.com/apps/pbcs.dll/article?AID=/20050810/REPOS…'>Read
the full story.
New Bankruptcy Law Clamps Down on Bonuses
The way that some executives have been paid when their companies file
for bankruptcy, running a failing business may seem like a profitable
proposition. While workers often get fired and shareholders watch the
value of their investments sink when companies enter bankruptcy court
protection, corporate leaders have been known to secure large bonuses to
stay on while their companies reorganize, the Associated Press reported
today. But they won’t be able to get that kind of pay-to-stay cash
for long. Not only are the courts cracking down on overly generous
retention agreements, but such bonuses will become a lot tougher for
companies to give under the new bankruptcy law. “The money
isn’t going to be outlawed, but the new law will cut out lots of
the excess and bring some reality and rationality back to the process of
how to pay to retain executives during bankruptcy proceedings,”
said Anthony Sabino, associate professor at the Peter J. Tobin
College of Business at St. John’s University.
Louisiana Jury Awards $4.5 Million in Asbestos-related Death
Case
A $4.5 million jury award was delivered on behalf of the family of a
West Monroe, La. man who died from an asbestos-related cancer in 2000, a
news release on PR Newswire reported Monday. The jury delivered the
unanimous verdict late last week in the courtroom of Hon. James H.
Boddie Jr. Jurors deliberated for two hours before finding that Walter
Graves Jr.’s employer had failed to provide him with a workplace
free of the dangers of asbestos exposure. Mr. Graves worked for a paper
mill from 1943 until his retirement in 1985. His employer, the Brown
Paper Mill, was purchased in 1955 by the Olin Corporation, which was
later known as Riverwood International Corporation. It is currently
known as Graphic Packaging International Inc. Last week, New Jersey jury
awarded $10 million in a similar case.
Delta Airlines
Delta Stock Plunges on Downgrade, Bankruptcy Fears
Delta Air Lines Inc.’s stock fell again yesterday after a Wall
Street analyst advised clients to sell their shares on fears that the
nation’s third-largest carrier will file for bankruptcy within the
next two months, the Associated Press reported. Prior to the dip,
Delta’s stock was already at a 43-year low. Yesterday’s drop
came after a research note by Merrill Lynch analyst Michael Linenberg,
who lowered the airline’s rating from neutral to sell. On Monday,
Delta named a new treasurer after its previous treasurer left the
company. Late Monday, J.P. Morgan analyst Jamie Baker said in a research
note that “another potential shock” is close with
Delta’s quarterly filing to the Securities and Exchange Commission
expected this week. Baker said a Delta bankruptcy filing by the end of
the year is “all but assured” if the airline doesn’t
get a significant infusion of cash in the near term.
Delta Delays SEC Filing
Delta Air Lines has delayed a Securities and Exchange Commission
filing, saying it was exploring ways to reduce the cash it must pay up
front to secure a new credit card processor, Reuters reported today. The
No. 3 airline, struggling to avoid a chapter 11 filing, told the SEC
that its current contract for processing Visa and MasterCard charges
expires Aug. 29 and that the new processor is requiring a
“significant cash reserve” to begin service. The airline
cannot do business without a company to process its tickets, and says
there is “no assurance whether or when” it will find an
alternative to offset some of the new cash requirement.
Flyi Raises Possibility of Bankruptcy Filing
Financially troubled low-cost carrier Independence Air painted a
gloomy picture of its future yesterday, saying it may be forced to file
for bankruptcy protection, the Washington Post reported
today. The airline’s parent, Flyi Inc., said in its quarterly
filing with the Securities and Exchange Commission that it won’t
be able to pay its bills unless it soon raises “significant
funds.” Some Wall Street analysts have been predicting since last
fall that Flyi may be forced to file for bankruptcy protection.
US Airways Closer to Leaving Bankruptcy
A judge yesterday allowed US Airways to send its reorganization plan
to creditors for a vote, moving the airline one step closer to emerging
from bankruptcy, the Associated Press reported. U.S. Bankruptcy Judge
Stephen Mitchell scheduled a hearing for Sept. 15 to consider final
court approval of the plan. The hearing is scheduled for two days after
America West Airlines shareholders are scheduled to approve the
company’s merger with US Airways. The merger is the centerpiece of
US Airways’ reorganization plan. Mitchell approved the
airline’s disclosure statement, which will accompany the
creditors’ ballot on the proposed reorganization. Mitchell urged
the airline and unions to resolve their dispute before the Sept. 15
hearing.
Northwest Mechanics to Meet
Northwest Airlines and its mechanics union agreed to resume contract
talks on Aug. 15. The union has set an Aug. 20 strike deadline, the
Washington Post reported today. The airline and the
Aircraft Mechanics Fraternal Association were asked by the federal board
overseeing the talks to resume bargaining, the union said. The company
said a strike would increase the possibility of a filing for bankruptcy
protection.
Court Narrows Parmalat’s Fraud Suit Against Bank of
America
In two separate opinions, a federal judge Tuesday sharply narrowed
the scope of a lawsuit filed by Parmalat Finanziaria SpA against Bank of
America Corp. accusing the bank of aiding Parmalat’s financial
fraud, the New York Law Journal reported today. Southern
District of New York Judge Lewis Kaplan dismissed 10 of the 12 claims
made by the Italian dairy conglomerate, but allowed it an opportunity to
replead one of the charges.
Enron Settlement Approved
Enron received bankruptcy court approval of a settlement with the
Royal Bank of Scotland that gives the former energy trader’s
creditors $21.8 million, the Washington Post reported
today. Enron sued the bank and nine other financial institutions in
2003, accusing them of assisting in the accounting fraud that drove the
company into the second-biggest bankruptcy in U.S. history and cost
investors $68 billion.
Ex-WorldCom Exec Gets One Year in Prison
The former director of general accounting at WorldCom was sentenced
Tuesday to one year and one day in prison for his role in the
company’s record $11 billion fraud, the Washington
Post reported yesterday. The sentence for Buford
“Buddy” Yates, 49, came nearly three years after he pleaded
guilty to helping WorldCom overstate its earnings from 2000 to 2002 in a
scandal that bankrupted the telecom company.
Collins & Aikman Receives Buyout Bid
Collins & Aikman Corp., a supplier of automotive interiors that
filed for bankruptcy protection in May, has received a takeover bid from
Plastech Engineered Products Inc., a Collins & Aikman spokesman said
on Wednesday, according to Reuters reports today. Closely held
auto-parts supplier Plastech offered around $1 billion for the company
in a letter to the Collins & Aikman board. The Collins & Aikman
spokesman would not comment on the reported terms of the offer.
Delphi Shares Rise as Bankruptcy Unlikely
Investors of Delphi Corp. moved into the stock yesterday as Wall
Street became more convinced the nation’s largest auto-parts
supplier will be able to stave off bankruptcy, triggering a buying
opportunity for its downtrodden shares, the Associated Press reported
today. The company—which was spun off from General Motors Corp. in
1999—reported a second-quarter loss on Monday due to high costs
and production cuts by domestic automakers. Delphi said it’s
trying to work out a restructuring plan with GM and the United Auto
Workers union, but warned bankruptcy is an option if those talks fail.
But Goldman Sachs analyst Robert Barry believes that the company’s
former parent can almost single-handedly bail Delphi out of its
financial problems.
Steelmaker’s Plan Rejected by Ontario
Ontario’s minister of finance has rejected Stelco Inc.’s
restructuring plan and refused to give the steelmaker the leeway it had
asked for on pension funding requirements, the Canadian Press reported
yesterday. Without government cooperation, Stelco must make pension
payments in excess of $320 million per year once it emerges from
court-supervised bankruptcy protection. In a letter e-mailed to CEO
Courtney Pratt yesterday, Finance Minister Greg Sorbara said:
“[o]ur advisers informed you on July 27, 2005, that the plan
outline does not meet the province’s stated objectives for a
successful Stelco restructuring and, therefore, is not acceptable to
us.”
MCI Inc. Returns to Profitability in Second Quarter
Long-distance phone carrier MCI Inc., which is being acquired by
Verizon Communications Inc., yesterday reported its first quarterly
profit since emerging from bankruptcy in April 2004 on declining
expenses, the Associated Press reported. MCI, which changed its name
last year from WorldCom, reported net profit of $64 million, or 19 cents
per share, after a loss of $71 million, or 22 cents per share, in the
second quarter of last year.
Former Internet Crown Jewel Excite@Home to Sell Million Dollar
Domain Name Assets
The At Home Liquidating Trust, the successor to Excite@Home,
announced today the marketing and sale of Excite@Home’s entire
Internet domain name portfolio, PR Newswire reported today. The
portfolio consists of several valuable names, including the domain name
shoppingcart.com, which was sold to ecommerce company MonsterCommerce
for $285,000. Moniker.com will be
the exclusive agent for all domain name sales.