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December 17, 2002
Retailers Bank on Last-minute Sales
Major U.S. retailers reported another week of lackluster sales on
Monday, driving them to discount everything from popular compact discs
to designer clothing in a last-ditch effort to meet holiday targets,
Reuters reported. Just nine shopping days remain until Christmas and
retailers such as J.C. Penney Co. Inc. are bombarding consumers with
television and print advertisements promising big sales on popular
music, clothing, diamonds, electronics and even kitchen appliances, the
newswire reported.
Analysts expect more of the same this week as retailers fill newspapers
with coupons for extra discounts. Many stores are offering additional
savings if shoppers use store credit cards -- which bolster retailers'
profits with fat interest rates -- while some are selling holiday goods
such as designer clothing at 70 percent below usual prices. But this
year's holiday season has stalled after getting off to a strong start
over Thanksgiving weekend, with consumers putting off shopping until the
last minute in hopes of finding even bigger bargains. To read the full
story, point your browser to
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INSILCO
Insilco Files for Bankruptcy, Agrees to Sell Assets for $60
Million
Insilco Holding Co. sought bankruptcy protection from creditors owed
more than
$611 million and agreed to sell all of its assets for about $60 million,
Bloomberg News reported. Majority-owned by investment bank Credit Suisse
Group, Insilco is the parent of Insilco Technologies Inc., a maker of
telecommunications equipment and electronic components. Insilco hasn't
had a profitable quarter since 1999 and it reported losses of about $209
million last year, reported the newswire. The Dublin, Ohio-based company
said it has agreed to sell its passive components unit to Bel Fuse Ltd.
for about $35 million, most of its custom assembly unit to Amphenol
Corp. for about $10 million, a custom assembly unit to private investor
group LL&R Partnership for $1.7 million and its stamping business to
private investor group SRDF Acquisition Company LLC for about $13
million, according to Dow Jones.
Insilco listed $144.3 million in assets and $611.3 million in debts
in chapter 11 papers filed in the U.S. Bankruptcy Court in Wilmington,
Del., reported Bloomberg. Wachovia Bank Corporate Trust Group,
representing bondholders owed more than $138.4 million, is listed in the
filing as Insilco's largest unsecured creditor.
Bel Fuse to Buy Passive Components Business from Insilco
Tech
Bel Fuse Inc. agreed to acquire the passive components business of
Insilco Holding Corp.'s Insilico Technologies Inc. unit for about $35
million in cash, plus the assumption of certain debt, Dow Jones
reported. In a press release on Monday, Bel Fuse said the acquisition
includes Insilco's Stewart Connector Systems Inc., InNet Technologies
Inc. and Signal Transformer Co. units. Insilco's passive-components
business, which sells products such as transformers and connectors, had
$52.6 million in sales for the nine months ended Sept. 27, reported the
newswire. If Bel Fuse is the successful bidder in the bankruptcy
process, it expects the transaction to close in the first quarter,
subject to customary closing conditions, according to Dow Jones.
UNITED AIRLINES
UAL Workers' Trust Manager Objects to Freeze on Trading
Shares
State Street Bank & Trust Co., investment manager for UAL Corp.'s
Employee Stock Ownership Plan, objected to a bankruptcy court's
suspension of trading in the airline company's stock by large
shareholders, contending the order might cost the workers as much as $37
million, Bloomberg News reported. UAL Corp., the parent of United
Airlines, sought the trading freeze last week, when it filed the largest
airline bankruptcy
ever. UAL said the suspension was needed to prevent an ownership shift
that might affect the company's tax liability, according to court
documents, Bloomberg News reported.
State Street, which has requested a hearing today before U.S.
Bankruptcy Judge Eugene Wedoff, is seeking a court finding that
the employees' plan isn't bound by the trading suspension or an order
that UAL must post a bond or cash equivalent for $37 million in case the
value of the trust's equity declines to less than it was last Tuesday,
reported the newswire. State Street Bank & Trust is a subsidiary of
Boston-based State Street Corp., reported the newswire.
United Gets Court OK to Drop Some Plane Leases
The U.S. Bankruptcy Court on Monday approved United Airlines' request to
break lease deals on 10 older airplanes and their engines as the carrier
looks to shed costly contracts following last week's historic bankruptcy
filing, Reuters reported. United and its UAL Corp. parent grounded 90
planes in October 2001 following the Sept. 11 hijack attacks. It said in
court documents that the planes and engines involved were not in
service, and that more planes and engines are expected to be retired in
the future. Leases severed on Monday covered seven Boeing Co. 727s and
21 Pratt & Whitney engines, all leased from various parties with
Bank of New York as the trustee, reported the newswire. Pratt &
Whitney is a unit of United Technologies Corp. The lessors still may
object to United's decision to break the leases, termed rejecting leases
under bankruptcy law. Those objections would be heard in mid January,
reported the newswire.
United Pilots Union 'Stunned' by Request
United Airlines' pilots union said on Monday it was 'stunned' by a new
wage cut proposal the world's second-largest carrier put forth less than
a week after filing for bankruptcy, signaling possible litigation ahead,
Reuters reported. United late last week presented its labor unions with
requests for wage cuts that were more than double what it was seeking
before filing the biggest bankruptcy case in aviation history. Of
United's 83,000-member workforce, about 80 percent is unionized. Nearly
half of the workforce is represented by the International Association of
Machinists.
Four large institutions have put up a total $1.5 billion in
debtor-in-possession financing to keep United flying during bankruptcy.
But in return for getting the second half of the money -- $700 million
-- United must meet specific cash flow targets that require cuts in
expenses quickly. If negotiation is ruled out, bankruptcy lawyers say
the next step would be a series of measures under Section 1113 of U.S.
bankruptcy law that could leave unions with pay scales and work rules
not of their choosing, reported the newswire. United's bankruptcy
attorney, James Sprayregen, said in court last week that the
airline would use that vehicle if necessary to keep the airline alive,
reported the newswire.
UAL Retirement Plan Bars Employees from Buying Stock
United Airlines employees have been prohibited from buying UAL Corp.'s
stock for their 401(k) retirement plans until the owner of the world's
second-largest airline emerges from protection from creditors and new
stock is issued, Dow Jones reported. The decision to bar stock purchase,
made by Aon Fiduciary Counselors Inc., which manages the Chicago
company's 401(k) plans, is aimed at shielding UAL employees from losses
resulting from investing in the bankrupt company's stock. The value of
UAL shares is expected to be entirely wiped out during the proceedings
of the company's chapter 11 bankruptcy-court protection, as is typical
of shares of a company in bankruptcy.
US AIRWAYS
US Airways Pilots Back Cuts In Bankruptcy-exit Program
The leadership of the pilots union at US Airways Group approved an
agreement that will cut $100 million a year in pilot costs for six
years, part of a plan to help the company try to emerge from
bankruptcy-court protection next year, the Wall Street Journal
reported. The Air Line Pilots Association, which represents 4,000 pilots
at the seventh-largest U.S. airline, has already agreed to $465 million
in annual concessions. The latest reductions take the form of additional
pay cuts, reductions in pensions and benefits, and improvements in
productivity.
US Airways is trying to win an additional $100 million in cost savings
from its other unions. The company insists it needs the extra
belt-tightening if it is going to land a $900 million federal loan
guarantee that would back a $1 billion financing package and serve as
exit financing from chapter 11. Receipt of that government aid also
would allow US Airways to tap the final $200 million of its interim,
debtor-in-possession financing pledged by its lead financial backer, the
Retirement Systems of Alabama, reported the Journal.
Antitrust Lawsuit Against US Airways Can Proceed
A plaintiff class will be allowed to continue with its $950 million
antitrust lawsuit against US Airways Group Inc. by mid-April, the court
overseeing the airline's chapter 11 case ruled on Friday, Dow Jones
reported. The plaintiffs had been prevented from proceeding against US
Airways in August, when the airline filed for chapter 11 protection. The
lawsuit, which relates to discount ticketing practices known as
hidden-city ticketing, was also filed against several other airlines. On
Friday, Judge Stephen Mitchell of the U.S. Bankruptcy Court in
Alexandria, Va., modified the stay to allow the suit to proceed against
US Airways to class notification, trial and final judgment, reported the
newswire. His ruling allows the plaintiffs to begin proceeding on April
15 or the date on which a reorganization plan for US Airways goes into
effect, whichever date is earlier. US Airways will be permitted to
continue appealing certification of the plaintiff class.
ENRON
Enron Sells Limbach Construction Unit for $80 Million
Limbach Facility Services, a 101-year-old specialty construction
business owned by Enron Corp., has been purchased by a management-led
investor group for $80.7 million, Dow Jones reported. New York
private-equity firm FdG Associates, which acquired the business in
partnership with 50 members of Limbach's management, announced the deal
on Monday. Limbach, which has annual sales of more than $500 million,
was one of Enron's last remaining businesses operating outside
bankruptcy. The now fallen energy giant acquired the Pittsburgh-based
company in 1998 from Vivendi Universal SA. The business, put on the
block early this year by Enron in an effort to raise much-needed cash,
was expected to fetch between $80 million and $120 million, reported the
newswire. The new company, Limbach Facility Services LLC, will continue
to operate under its current management team, including its chief
executive, Stephen Wurzel, reported Dow Jones.
Enron Unit to Plead No Contest to Filing False Record
Entry
Enron Corp.'s broadband unit will plead no contest to a charge that it
failed to properly account for millions of dollars in equipment stored
in a Houston warehouse, Bloomberg News reported. The plea will be
entered through an attorney at a hearing today, Enron spokesman Mark
Palmer said. Enron has also agreed to pay more than $1 million to cover
back taxes, he said. A Harris County, Texas, grand jury indicted Enron
Broadband Services yesterday on a charge of making a false entry in a
government record. The unit is among the subsidiaries that filed for
bankruptcy protection last year along with Enron, reported the
newswire.
More Former NRG Energy Officials Join Bankruptcy Push
Two more former top officials at NRG Energy Inc. are joining a petition
to force the beleaguered Xcel Energy Inc. power generation and trading
subsidiary into bankruptcy, their lawyer said on Monday, Dow Jones
reported. Five former executives, including former NRG Chief Executive
David Peterson, filed an involuntary chapter 11 petition against the
merchant energy trader in late November, reported the newswire. The
executives claimed NRG owed them more than $23 million in payments for
deferred compensation, pensions and severance. Two more top-level NRG
employees, including former General Counsel Jim Bender and former Vice
President of Administrative Services Roy Hewitt, are joining the case,
said Bill O'Brien, a Minneapolis lawyer and representative for the
workers, reported Dow Jones. They are claiming to be owed nearly $4
million.
The petition, to include the two new officials, will likely be filed in
the U.S. Bankruptcy Court for the District of Minnesota on Monday,
O'Brien said. Monday is also the deadline by which NRG must respond to
the initial involuntary bankruptcy claim, if it wants to try to get it
dismissed. Debt-laden NRG is among the worst off in the troubled
merchant power generating sector. The company is currently trying to
arrange a prepackaged bankruptcy deal with its many creditors and has
said that it hopes to conclude such an arrangement by mid-December,
reported the newswire.
American Express Adjusts Third Quarter Delinquent Account
Data
American Express Co. adjusted data related to delinquent accounts and
charge-off information for the third quarter ended Sept. 30, according
to a Form 8-K filed on Monday with the Securities and Exchange
Commission, Dow Jones reported. American Express said the changes have
no impact on its consolidated financial statements for the quarter
except for an 'insignificant impact' on credit reserves on Sept. 30,
reported the newswire. The company said that during the third quarter it
changed the system it uses to track past due accounts sent to outside
collections agencies. Due to this change, there was a delay in American
Express receiving data related to card accounts that had entered
bankruptcy protection. American Express said that because of the delay,
some accounts were reported as delinquent on Sept. 30 instead of being
charged-off when they entered bankruptcy, as is the normal practice of
the company, reported Dow Jones. American Express said that the actual
net loss ratio for its charge card portfolio was 0.32 percent during the
two months ended Nov. 30, and its actual accounts over 90 days past due
were 2.4 percent, reported the newswire.
Verso Tech to Acquire Clarent Corp.
Verso Technologies Inc. signed a definitive agreement to acquire
substantially all of the assets of Clarent Corp. for about $9.8 million
in cash and notes, Dow Jones reported. In a press release on Monday, the
companies said Clarent plans to file for voluntary reorganization under
chapter 11 bankruptcy as part of the agreement. Clarene said it chose to
sell nearly all its assets to Verso due to the current state of the
telecom industry, litigation and other obligations. Clarent, which
expects to close the transaction within 90 days, provides softswitch and
enterprise convergence services. Verso Technologies, which reported
revenue of $10.4 million for its third quarter ended Sept. 30, provides
integrated switching services for communications service providers.
Constellation 3D Inc. Files for Chapter 11
Constellation 3D Inc. filed for chapter 11 protection on Friday in the
U.S. Bankruptcy Court in Manhattan, Dow Jones reported. In court papers,
the New York City-based maker of data storage devices listed assets of
$1 million and debts of $14 million. It said it had 51 million
outstanding common shares held by 7,000 holders. Those with 5 percent or
more of the voting shares are Constellation 3D Technology Ltd. and
Halifax Fund L.P., reported the newswire. The company's chapter 11 case
has been assigned to U.S. Bankruptcy Judge Prudence Carter
Beatty.
AMR CEO: Airline Not Facing Chapter 11
As a financially depressed airline industry scrambles for cover in the
wake of No. 2 carrier United's bankruptcy filing, the head of American
Airlines said the company is facing a cash crisis, but has the power to
avoid declaring bankruptcy through cost-cutting, Reuters reported. 'We
have a cash crisis on our hands: more money is going out the door every
day than is coming in,' said Don Carty, chairman and chief executive of
American's parent company AMR Corp., in a taped message to employees,
reported the newswire. The head of the leading global carrier said there
is no intention to use bankruptcy protection as a way to aid the
airline, and the company has launched a massive cost-cutting campaign in
order to avoid the path to chapter 11 taken by UAL Corp.'s United and US
Airways Group Inc.
WORLDCOM
WorldCom Revises CEO's Pay, Breeden Endorses Package
WorldCom Inc. revised the $50 million pay package of Chief Executive
Officer Michael Capellas, withholding $6 million in restricted stock
awards and giving court-appointed monitor Richard Breeden more say on
the new CEO's bonuses, Bloomberg News reported. Breeden, who was
appointed by U.S. District Judge Jed Rakoff to oversee the
telephone-service provider through its bankruptcy, said he endorsed the
agreement, according to a court filing. Under the pact, Breeden required
Capellas to sign a pledge that WorldCom will cooperate fully with
investigations into the company and prevent violations of the law.
WorldCom Bond Underwriters Ask Court to Dismiss Investor
Suit
WorldCom Inc.'s bond underwriters, including Citigroup Inc. and Bank of
America Corp., asked a federal judge on Dec. 13 to dismiss a lawsuit
filed against them by the long-distance company's bondholders and
shareholders, Bloomberg News reported. The investment banks claim that
the state pension fund directing the lawsuit, which stems from
WorldCom's $9 billion misstatement of expenses and reserves, cannot lead
the suit against them on the bonds because it only owns WorldCom stock.
Dismissal of the suit would not end investors' claims against the banks,
lawyers said. A new lead plaintiff would probably be appointed, delaying
current settlement talks in the process, reported the newswire.
PG&E Says Its Utility Plan Won't Hurt Environment
PG&E Corp. said California wants 'veto power'' over the
reorganization of its
Pacific Gas & Electric utility as state regulators told a federal
judge that the company's proposal could harm the environment, Bloomberg
News reported. Lawyers for PG&E's Pacific Gas & Electric,
California's largest utility, said its plan to spin off energy
generation and transmission operations into separate companies regulated
by federal agencies wouldn't significantly reduce California's role in
overseeing the utility's adherence to state health, safety and
environmental laws.
PG&E's attorney and lawyers for the California Public Utilities
Commission presented conflicting views of rival plans to dig Pacific Gas
& Electric out of bankruptcy at a trial, now in its fourth week, to
determine whether the proposals are viable. Both plans call for raising
billions through debt securities to pay creditors owed $13 billion. The
state's plan would keep Pacific Gas under state regulation. Pacific Gas
filed for chapter 11 protection in April 2001 after incurring $9 billion
in debts buying power for more than it could charge customers under
California's deregulation plan.
FAO to Close Stores, Raise Cash As Net Loss More Than Doubles
FAO Inc., facing slower-than-expected holiday sales and a liquidity
crunch, plans to close some stores and raise additional funds in
January, the Wall Street Journal reported. The company, which
owns FAO Schwarz, Zany Brainy and Right Start stores, said its net loss
more than doubled for its fiscal third quarter ended Nov. 2, to $23.6
million, or 66 cents a share, from $9.9 million, or $4.07 a share, for
the year-earlier quarter.
In a conference call, Chief Executive Jerry Welch told analysts that
same-store sales for December were down in the 'mid-single digits' this
year compared with 1996, the last year with such a short shopping
season. He declined to make a sales comparison with last year. Also, the
King of Prussia, Pa., toy retailer's bank, Wells Fargo Retail Finance
LLC, has placed new borrowing restrictions on its credit line, Welch
said, limiting the company's spending ability, reported the
Journal.
Planet Hollywood Emerges from Bankruptcy Protection
Planet Hollywood International Inc. emerged from bankruptcy proceedings
for the second time in two years, winning approval in bankruptcy court
of its reorganization plan, the Associated Press reported. Four years
ago, Planet Hollywood and its franchises and licensees had 95
restaurants in 31 countries. The company emerged from its first
bankruptcy in 2000 with 22 restaurants. But Planet Hollywood again filed
for bankruptcy protection last year, saying the Sept. 11, 2001, attacks
and subsequent decline in tourism had damaged sales. Planet Hollywood
must whittle unsecured claims to $28 million from the current $31
million by the end of March. In return, Planet Hollywood will pay
unsecured creditors $2.4 million minus any fees if they agree not to
pursue legal action against the company.
Hayes Lemmerz Files Reorganization Plan With Bankruptcy Court
Bankrupt automotive supplier Hayes Lemmerz International Inc. filed a
plan of reorganization in bankruptcy court as it continues its push to
emerge from chapter 11 in the first half of 2003, Dow Jones reported. In
a press release late on Monday, Hayes Lemmerz said the plan includes
streamlining manufacturing capacity, reducing fixed costs, divesting
some assets, strengthening oversight and financial reporting and
renegotiating or rejecting unfavorable contracts and leases. Hayes,
which lists on the over-the-counter Bulletin Board, also plans to apply
for listing on a national exchange.
The automotive wheels and brakes supplier filed for chapter 11
bankruptcy protection on Dec. 5, 2001, citing declining market
conditions and excessive debt burdens. It reported $2.8 billion in
assets and $2.66 billion in liabilities as of April 30, 2001, in its
bankruptcy filing.
Bethlehem Steel: PBGC to Terminate Company Pension Plan
Bethlehem Steel Corp. said one of its creditors, Pension Benefit
Guaranty Corp.(PBGC), will terminate the company's pension plan as
originally planned, Dow Jones reported. In a press release on Monday,
the company said the termination, which is expected to be announced on
Wednesday, will hurt its ability to restructure its workforce in an
orderly manner. Bethlehem, which filed for chapter 11 bankruptcy
protection in Oct. 2001, had been seeking court approval to guarantee a
$70 million loan restructuring by one of its nonbankrupt units. The
request was opposed by the
PBGC, which said the deal would unfairly leave the unit on the hook for
its parent's $450 million debtor-in-possession loan.
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