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September 15, 2003
Bill Would Modify Pension Plan Rules
Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) plans to
sponsor legislation that would require operators of pension plans to
take into account the age of their workforce when computing pension
liabilities, the Washington Post reported. The proposal, which
Grassley aides said could be marked up by the committee on Wednesday, is
strongly opposed by companies that sponsor pension plans, though they
agree that present law needs to be revised. Grassley said through an
aide that his proposal has 'a solid core of bipartisan support' in the
committee and is important because 'workers need reliable funding of
their pensions and employers need a reliable basis on which to calculate
pension payments,' reported the Post.
The underlying issue involves funding of traditional pensions, called
defined-benefit plans, which are insured by the federal government
through the Pension Benefit Guaranty Corp. (PBGC). Many are underfunded
under current market conditions, and the PBGC has expressed concern that
a savings-and-loan-like crisis could emerge if nothing is done, reported
the newspaper.
Meanwhile, the Senate Governmental Affairs Committee this afternoon will
hold a hearing on defined pension benefit plans and the PBGC. Witnesses
include Peter Fisher, the Treasury undersecretary for domestic finance,
and Steven Kandarian, executive director of the PBGC,
CongressDaily reported.
Senate to Schedule FCRA Markup
Members of the Senate Banking Committee are preparing for a possible
markup this week of legislation to update the 33-year-old Fair Credit
Reporting Act, a version of which cleared the House last week,
CongressDaily reported. The draft legislation includes new provisions to
combat identity theft, improve consumers' access to credit information,
enhance the accuracy of consumers' credit information, and limit the
sharing of medical information. A committee spokesman said a markup
could be scheduled by the end of the week.
Retail Sales Rise in August
Sales at the nation's retailers rose by 0.6 percent in August, but
consumers backed away somewhat from July's buying spree, the Commerce
Department reported on Friday, CongressDaily reported. The rise in sales
came after a brisk 1.3 percent advance in July and marked the fourth
month in a row that sales went up. August's sales performance, however,
was weaker than the 1.5 percent gain that economists were forecasting.
Meanwhile, wholesale prices rose 0.4 percent in August, lifted by higher
food and energy prices, following a tiny 0.1 percent increase in July,
the Labor Department reported. The rise in wholesale prices in August
was slightly stronger than the 0.3 percent advance economists were
expecting.
Continental Adds Another $103 Million In Cash to Pension
Plan
Continental Airlines on Friday said that it would add an additional $103
million in cash into its workers' pension plan, after adding $100
million in stock in regional airline ExpressJet to the plan earlier in
the week, Reuters reported. Houston-based Continental said its pension
contribution for the year now stands at $372 million.
Most of the major U.S. airlines are facing billion-dollar shortfalls in
their pension plans. UAL Corp.'s United Airlines is looking for ways to
remedy its huge pension burden before emerging from bankruptcy. US
Airways, which rose out of bankruptcy in March, terminated its pilot
pension plan. Continental said on Friday it has contributed $283 million
more than its minimum obligation to the plan for 2003. Jim Moody, a
spokesman for Continental's branch of the Air Line Pilots Association,
said the union was happy with Continental's decision, reported the
newswire.
Smithfield Plans to Review Cargill's Farmland Bid
Smithfield Foods Inc., the nation's largest pork producer, on Friday
said it plans to review a rival bid from Cargill Inc. for the pork
operations of bankrupt Farmland Industries, Reuters reported. Earlier in
the day, privately held agriculture conglomerate Cargill bid $385
million for the Farmland business, called Farmland Foods, topping
Smithfield's July bid of $363.5 million. Smithfield said it will
consider all of its alternatives. It said it expects the bankruptcy
court to set an auction date for Farmland Foods within the next month,
Reuters reported.
McKesson to Take $30 Million Charge on Bad Debt
Drug wholesaler McKesson Corp. on Friday said it would take a $30
million charge to cover bad debt expense as part of the reorganization
of customer Snyder's Drug Stores Inc., Reuters reported. McKesson said
it will take the charge in the quarter ending Sept. 30 to meet expenses
incurred by Snyder's liquidation and bankruptcy of Drug Emporium.
The charge covers the write-off of loans made by McKesson to Snyder's
and Drug Emporium. Drug Emporium was acquired out of bankruptcy in
September 2001 by Snyder's Drug, which has been a customer of McKesson
since 1996. In a separate release, Snyder's said it will go through
chapter 11 bankruptcy to close out Drug Emporium, reported the
newswire.
Mirant Seeks OK Of Severance Plan For Some Executives, Others
Mirant Corp. is asking a bankruptcy court for the authority to
implement severance plans for some of its highly compensated employees
and others who are subject to collective bargaining agreements.
According to a filing late Friday with the U.S. Bankruptcy Court in Fort
Worth, Texas, the court in July approved Mirant to honor payments as
they become due to employees under existing severance plans for
non-collective bargaining unit employees. However, that authorization
excluded some of the energy company's highly compensated workers whose
2003 base compensation and actual bonus under Mirant's incentive plan
for 2002 or a 2002 trading and marketing incentive plan totaled at least
$200,000.
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Report Bolsters SEC's Proposal For Attorneys
A court-appointed examiner's report on retailer Spiegel Inc. and its
professional advisers, including law firm Kirkland & Ellis LLP,
provides new ammunition for advocates of the Securities and Exchange
Commission's proposed 'noisy withdrawal' rules for corporate lawyers
faced with clients committing fraud, the Wall Street Journal
reported. The report by examiner Stephen J. Crimmins criticizes
Spiegel's controlling shareholder and management as well as the
company's independent auditor, KPMG LLP. The report comes six months
after the SEC filed a partially settled securities-fraud complaint
against Spiegel in a Chicago federal district court. Terms of the
settlement included the court's appointment of Crimmins, a partner at
the Washington law firm Pepper Hamilton LLP, to review Spiegel's
accounting irregularities and financial condition. The Downers Grove,
Ill.-based retailer, which operates the Eddie Bauer clothing chain,
neither admitted nor denied wrongdoing. Spiegel filed for chapter 11
bankruptcy protection in March, reported the online newspaper.
3rd Circuit Revives WorldCom Lawsuit
A federal appeals court on Friday revived WorldCom's $3.4 million breach
of contract suit against Graphnet Inc., the Legal Intelligencer
reported. The ruling came just three days after a major break in the
bankruptcy case when two groups of dissident creditors abandoned their
legal challenge to the company's reorganization plan in return for a
combined payout of more than $400 million. In Friday's decision in
WorldCom Inc. v. Graphnet Inc., the 3rd U.S. Circuit Court of Appeals
found that a lower court erroneously held that WorldCom's failure to
file contracts with the Federal Communications Commission precluded it
from pursuing the claim. The unanimous three-judge panel found that the
issue was too complex to be decided in an early motion to dismiss
because the FCC exempts certain contracts from its filing requirements.
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Atlas Air Sees Prepackaged Chapter 11 Filing
Cash-strapped cargo airline Atlas Air Worldwide Holdings Inc. said on
Friday it expects to file a prepackaged chapter 11 bankruptcy by the end
of this year in a bid to restructure its debt, Reuters reported. The
company said it anticipates having agreements in place with its major
creditors and lessors at the time of the filing. Atlas, which had warned
of the possibility of a chapter 11 filing, said it could not anticipate
when it might emerge from bankruptcy.
In the same statement, Atlas said it was unlikely a previously announced
restatement of its 2000 and 2001 finances would ever be completed
because it was unable to locate certain financial records from the
period. The company had delayed filing its financial statements for 2002
as well as the first two quarters of 2003 because of the anticipated
restatement, but released those unaudited results on Friday, reported
the newswire.
Longview Smelter Trustee Seeks Buyer
Prospective buyers of the Longview primary aluminum smelter have until
Oct. 1 to step forward with a deposit and a letter of intent to purchase
the facility or it may never operate again, said Bill Brandt,
chapter 11 trustee for Longview Aluminum LLC, Reuters reported. While
Oct. 1 is not a hard deadline, Brandt said, if creditors, the judge and
other interested parties are saying Longview will never be a smelter,
and after a careful amount of time bidders are not stepping up to the
plate, the ability to keep paying holding costs will not last beyond
September, reported the newswire.
MCI Settlement Heads for Vote Next Month
MCI's settlement with two groups of creditors that objected to its plan
to exit bankruptcy will be put to vote early next month, a judge ruled
on Friday, Reuters reported. The settlement, reached earlier this week
with trade creditors and subordinated creditors, should hasten MCI's
emergence from bankruptcy since it clears away two of the strongest
objections to its reorganization plan. The amended plan will be
distributed next week and then voted on Oct. 8, according to a schedule
approved by Judge Arthur Gonzales on Friday. He set a hearing date for
the amended plan on Oct. 15, reported the newswire.
NorthWestern Plan to Issue New Shares Falls Short
Cash-strapped U.S. power company NorthWestern Corp. on Friday said it
has canceled a previously adjourned stockholders' meeting because it did
not receive enough votes on a proposal to issue new shares, Reuters
reported. The company said the meeting was adjourned on Aug. 26 to allow
for continued voting on the proposal. NorthWestern said it received
about 17 million votes for the proposal, which is short of the more than
18 million required for passage. The proposal sought to amend the
company's certificate of incorporation to include authorizing an
increase in the number of shares of common stock and issuance of new
preferred stock. NorthWestern repeated that it is examining the
possibility of chapter 11 bankruptcy protection, reported the
newswire.
GE Capital to Pay Montgomery Ward Creditors $58 Million
General Electric Co. finance arm GE Capital agreed to pay $58 million to
creditors of bankrupt retailer Montgomery Ward to settle a lawsuit, both
sides said on Friday, Reuters reported. The suit, which was brought by
unsecured creditors of Montgomery Ward, said GE's top executives
manipulated them into investing more money into the company even though
the executives knew the retailer would be forced to liquidate. The
agreement also waives some of GE's claims against Montgomery Ward,
bringing the total value of the settlement to $80 million, according to
Kronish Lieb Weiner & Hellman LLP, the New York-based law firm that
represented creditors. 'We can confirm that we have agreed to a
settlement, which is subject to approval by the bankruptcy court,' GE
Capital spokesman Peter Stack said. 'Part of that agreement stipulates
that we have not admitted any wrongdoing in this dispute,' reported the
newswire.
Air Canada Asks Creditors to Make Claims by Nov. 15
Air Canada asked the judge in charge of its restructuring on Friday to
set Nov. 15 as the deadline for all its creditors to submit their
claims, paving the way for a swift exit from bankruptcy protection by
year's end, court documents showed, Reuters reported. Air Canada could
face up to C$9 billion ($6.6 billion) of unsecured claims. But the
Montreal-based carrier has said it has no cash to pay its creditors and
will instead offer them stock in the restructured airline.
The settlement of claims would be the last step in Air Canada's
restructuring, which started when the company went into bankruptcy
protection on April 1. The airline has already obtained concessions from
its employees and aircraft lessors so it can reduce its fleet and its
operating costs, reported Reuters.
Cargill Bids $385 Million for Farmland Pork Unit
Agriculture conglomerate Cargill Inc. bid $385 million for the pork
operations of bankrupt Farmland Industries, a move that will force the
pork unit to be auctioned by mid-October, Cargill and Farmland officials
said on Friday, Reuters reported. Privately held Cargill joins
Smithfield Foods Inc. in the bidding. In July, Smithfield bid $363.5
million for the unit. Smithfield said it will review Cargill's bid and
it will consider all of its alternatives, reported the newswire.
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