May 4, 2004
Fed Considers End of Low
Interest Rate Era
Federal Reserve policy-makers
meet today to consider the beginning of the end for the lowest U.S.
official interest rates in 46 years, Reuters reported. Just when the
policy-setting Federal Open Market Committee will decide to raise rates
remains unclear. But as the economy shows signs of improving,
policy-makers have signaled their readiness to take whatever action is
necessary to stop potential inflation. 'We have to recognize that
maintaining the current level of the funds rate for too long will
eventually result in an unwelcome increase in inflationary pressures,'
Fed Vice Chairman Roger Ferguson said in San Francisco a month ago, the
newswire reported.
As Household Debt Rises, New Risk in
Higher Rates
After a three-year
period during which the Federal Reserve cut interest rates to
their lowest level since 1958, Americans have become far more willing to
borrow and banks have become far more willing to let them, the New
York Times reported. Household debt climbed at twice the pace of
household income from the beginning of 2000 through 2003, according to
data at the Federal Reserve. Americans took on $2.3 trillion in new
mortgage debt during that period -- an increase of nearly 50 percent.
Consumer credit, from zero-interest auto loans to the much more
expensive debt on credit cards, climbed 33 percent, rising to $2
trillion in 2003 from $1.5 trillion in 2000. Read
href='http://www.nytimes.com/2004/05/04/business/04debt.html'>the
article.
US Airways CFO Steps
Down
US Airways on Monday said that
CFO Neal Cohen has resigned, following CEO David Siegel's departure in
April, a year after the carrier emerged from bankruptcy, Reuters
reported. Dave Davis, previously the airline's senior vice president of
finance, will replace Cohen, effective immediately, the carrier said.
Cohen had an option in his employment contract, similar to the one
exercised by Siegel, that permitted him to leave the company with
certain benefits. US Airways pilots were not happy with Siegel and his
management team and had called for the removal of the two executives
last December, the newswire reported.
Penn Traffic Gets Chapter 11
Court Nod To Hire Chapman As CEO
The bankruptcy court overseeing
the chapter 11 case for supermarket owner Penn Traffic Co. authorized
the company to hire a new chief executive, according to court papers. An
order Tuesday from the U.S. Bankruptcy Court in White Plains, N.Y.,
allows the company to hire Robert Chapman as president and chief
executive. Court papers said Chapman has spent his entire 34-year
professional career at Penn Traffic. He has been the vice
president of the company's wholesale and franchise business since 1999.
Chapman is slated to receive a $450,000 salary, court papers
said.
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AIR CANADA
Union Cautiously
Optimistic On Air Canada Investor Plan
Air Canada's largest union
greeted the airline's plan to seek out a new equity investor to inject
C$250 million in the airline with cautious optimism Sunday, according to
an Associated Press article. Dave Ritchie, Canadian head of the
International Association of Machinists and Aerospace Workers, said he
was pleased to see the new process involves a deal that doesn't have
conditions requiring changes to the union's court-approved pension plans
or contracts. 'I think that's extremely important to all of us in that
process,' Ritchie said.
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Air Canada Seeks
Court Approval of New Restructuring Deal
Air Canada will seek court
approval today for key restructuring agreements, Reuters reported. The
new agreements 'will provide the certainty and speed to facilitate Air
Canada's exit from (bankruptcy) proceedings,' said the court-appointed
monitor, Ernst & Young, in a report filed over the weekend. The
airline's creditors are now likely to end up owning up to 85 percent of
Air Canada, thanks to a C$850 million agreement with Deutsche Bank AG
last week, the newswire reported. Air Canada said it would still try to
find an equity partner, but it added that failure to do so would no
longer jeopardize its survival.
PG&E Posts 1st-quarter
Profit Vs. Year-earlier Loss
PG&E Corp. today reported a
quarterly profit, helped by one-time non-cash gains after it added two
assets to its balance sheet, Reuters reported. The San Francisco parent
of utility Pacific Gas & Electric reported first-quarter net income
of $3.03 billion, or $7.21 a share, compared with a net loss of $354
million, or 93 cents a share, in the year-earlier period. The assets
were created with the approval of California regulators to help the
utility unit raise funds needed to help it emerge from chapter 11
bankruptcy, a goal achieved last month.
RCN Extends Forbearance
Agreement With Lenders
Cable and telephone operator
RCN Corp. yesterday said it has extended forbearance agreements with its
lenders, and reiterated a commitment to file for bankruptcy, Reuters
reported. The new agreement expires on May 17. The Princeton, N.J.-based
company, which is in default on $493 million of its debt, had missed
interest payments since January, fueling speculation it would declare
bankruptcy. Wall Street expects the company to file for bankruptcy this
week, the newswire reported.
NRG Seeks To Replace PriceWaterhouseCoopers
NRG, which emerged from
bankruptcy in December, said there have been no disagreements with
PriceWaterhouseCoopers (PwC) on matters related to 'accounting
principles or practices, financial statement disclosure or auditing
scope or procedure' for the two most recent fiscal years and through
April 27, Reuters reported. PwC will complete its review of NRG's 10-Q
for the quarter ended March 31, 2004, NRG said. The company is already
in discussions with other accounting firms.
Global Crossing Faces
Delisting, Hit With Suits
Five months after leaving
bankruptcy, telecommunications firm Global Crossing Ltd. is involved in
another accounting scandal that threatens the company's future, Reuters
reported. Global Crossing said on Monday said it named Deloitte &
Touche to review its accounting, and said it faces a possible delisting
of its shares from Nasdaq. Three law firms also launched lawsuits
against Global Crossing, accusing the company of fraud and seeking to
create a class action of shareholders, the newswire reported.
HealthSouth Names New
CEO
HealthSouth Corp. on Monday
said HCA Inc. executive Jay Grinney would be its new chief executive, a
move meant to help the company's turnaround after a massive accounting
scandal, Reuters reported. Grinney said in an interview he hopes to
present a strategic plan to the company's board in the third or
fourth quarter of this year.