January 31, 2006
Pension Measure Simmers, But Moves to Back Burner
Negotiations to resolve the differences between the House and Senate versions of pension legislation are not expected to get under way until late February, aides and lobbyists said yesterday, according to a CongressDaily report. Although the bills picked up momentum late last year and some lawmakers had hoped for a quick resolution, pressing legislative and other business have put completion of the pension bill on a slower track. House Education and the Workforce Chairman John Boehner (R-Ohio) has been "so focused on that, there hasn't been time to focus on pensions," a House staffer said. Another factor in the lack of urgency: The deadline that lawmakers are aiming for is not until April 15, the date by which companies must make their first pension payments of the year. When the conference does begin, lawmakers must iron out sticking differing provisions on pension-funding rules, as well as regulations covering cash-balance pension plans.
USG Makes $3.95 B Asbestos Pact to Exit Bankruptcy
USG Corp., the top maker of gypsum wallboard, agreed to pay as much as $3.95 billion to settle asbestos liability claims and emerge from 4 1/2 years of bankruptcy, Bloomberg News reported yesterday. USG's shares rose as much as 24 percent after it said the settlement would be financed by selling $1.8 billion in new shares, underwritten by Warren Buffett's Berkshire Hathaway Inc., owner of 14.6 percent of Chicago-based USG. Berkshire Hathaway will buy whatever stock isn't purchased by current shareholders (who will be offered shares at $40 each) USG said. The accord will enable USG to exit bankruptcy this year, the company said. Since 1982, at least 77 companies have cited asbestos liability in filing for bankruptcy. Compensating present and future asbestos plaintiffs may cost companies between $140 billion and $300 billion, according to private and public studies. Congress is weighing whether to establish a national asbestos trust to erase the related personal injury suits. Read more.
Appeals Court Hears Ebbers Case
Ex-WorldCom chief Bernard Ebbers' fraud and conspiracy convictions should be overturned because witnesses that may have exonerated him were kept out of reach by the government, his lawyer argued before a federal appeals court yesterday, Reuters reported. "This would have been powerful circumstantial evidence," Reid Weingarten, Ebbers' lawyer, told the three-judge panel. Weingarten urged the Second Circuit U.S. Court of Appeals here to set aside the guilty verdicts, saying a lower court should have forced the government to grant immunity to three prospective exculpatory witnesses. The government should have charged the three former WorldCom employees that could have helped exonerate Ebbers or let them go, Weingarten told the panel. Instead, the government has kept potential witnesses under investigation, and effectively out of the reach of the defense. The three have never been charged in connection with the WorldCom fraud. Ebbers' sentence was five times as long as that given to ex-WorldCom financial chief Scott Sullivan, who pleaded guilty to fraud charges and was the government's star witness at Ebbers' trial. Weingarten also told the panel that the jury was wrongly instructed that it could convict Ebbers on the basis of so-called "conscious avoidance" of knowledge of the fraud at WorldCom. The jury was improperly permitted to vote for a conviction even if the telecommunications company's underlying accounting entries fully complied with applicable accounting standards, he argued. Read more.
Jury Chosen in Enron Fraud Trial
A jury of 12 Houston-area residents was selected yesterday for the trial of former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling, the Associated Press reported today. Ten women and six men were chosen to serve as jurors and alternates in the trial, but it was not immediately clear which 12 would be the jurors. The jurors were picked after just one day of jury selection in Houston federal court. Further details about the jurors' backgrounds were not immediately available because their jury questionnaires, filled out weeks ago, have not been made public, and the judge conducted individual questioning of potential jurors on Monday at the bench. Read more.
Airlines
Pension Agency Hires Deutsche Bank to Sell 10% of UAL
The Pension Benefit Guaranty Corporation (PBGC) confirmed yesterday that it
had hired Deutsche Bank to sell a 10 percent stake in the UAL Corporation,
the parent of United Airlines, hoping to collect more than $500 million, the
New York Times reported today. The federal agency is trying to take
advantage of a higher-than-expected price on UAL shares ahead of the
airline's anticipated exit from bankruptcy on Wednesday. The agency took
over United's pension plans last year with a funding shortfall of about $10
billion. UAL's new stock — its old shares are being canceled as part of the
bankruptcy — was trading Monday on a when-issued basis at about $43 a share,
nearly triple the price expected when UAL put together its plan to exit
bankruptcy late last year. With 125 million shares to be issued, that
implies a market capitalization for UAL of about $5.4 billion. The PBGC
holds unsecured debt in UAL with a face value of about $5.6 billion; this
converts into a 20 percent stake in the new shares. The pilots received the
claims — a way to participate in any future fortunes of the company — in
exchange for wage and benefit concessions. Pilots and other workers still
hold billions of dollars in claims and will receive new shares in exchange
for them. Read more.
Judge OKs ATA to Emerge from Bankruptcy
A federal judge yesterday cleared the way for ATA Airlines and its parent company, ATA Holdings Corp., to emerge from bankruptcy after more than 14 months of federal financial protection, the Associated Press reported yesterday. The Indianapolis-based carrier is expected today to announce the date it will emerge after paperwork is filed. Officials at the carrier have said they hope to end bankruptcy protection in late February. Judge Basil H. Lorch III said he thinks the carrier will be in a good financial position this spring. "I don't see any indication we won't be dealing with a solvent entity in April," he said during Monday's three-hour court hearing.
Delta, Northwest Chug Along in Bankruptcy as United Nears Exit
While United Airlines is about to emerge from bankruptcy, two of its biggest rivals are still in the early stages of restructuring their own finances under chapter 11, the Associated Press reported yesterday. Airline experts don't expect Delta Air Lines and Northwest Airlines to take as long to reorganize as it took based United. But the carriers do face some of the same issues that helped extend United's case. That includes grappling with the fate of their employee pension plans. United spent 38 months on a chapter 11 case that's scheduled to end with its emergence on tomorrow. The company's stay in bankruptcy was complicated by difficulties in obtaining two rounds of cost concessions from its unions and its failure to secure a federal loan guarantee.
Kansas Respiratory Co. Seeks Bankruptcy
Olathe, Kan.-based CareFore Medical Inc., whose past achievements in exporting caught the governor’s attention, has entered bankruptcy, the Kansas City Star reported today. CareFore markets respiratory accessories, equipment and supplies. The company filed for chapter 11 bankruptcy last week in Kansas City, Kan. Bankruptcy attorney Greg Garvin, who represents CareFore, said yesterday that the company planned to continue operating. Garvin said CareFore now had eight to 10 employees, down from about 20 in 2004. At least twice — in 2003 and 2004 — CareFore was a finalist for the Governor’s Exporter of the Year award, which recognizes Kansas companies that demonstrate exceptional marketing prowess outside the United States. Garvin said CareFore’s debts exceeded $2 million. He said information about the value of the company’s assets was being gathered. Additional information about the company’s finances will be filed with the bankruptcy court. Read more.
Orchestra Will Try Mediation to Fend off Bankruptcy
The management of the Louisville, Ky., Orchestra says the group is headed toward chapter 7 bankruptcy liquidation by early April unless it can reach "a complete rethinking" of its relationship with its 71 musicians, the Louisville Courier-Journal reported today. Late yesterday afternoon, however, representatives of management and the players agreed to seek a mediator to help bring them closer to agreement. Earlier yesterday, the orchestra's board heard from its bankruptcy attorney, John S. Egan, who laid out strategies for the orchestra as its cash runs out over the next two months. Yesterday's board meeting was only to hear information. The full board would have to vote to explicitly authorize any bankruptcy filing. "Our legal counsel advised us not to take a vote until closer to the date where we will run out of cash which would be early April," said Executive Director Scott Provancher. Read more.
International
Subsidizing Economic Growth Pushing India Towards Bankruptcy
Oil and Natural Gas Corp, India's most profitable company, reported an 11 percent decline in net profit to Rs 38.87 billion (U.S. $881 million) for the quarter ended Dec, 31, 2005, and the decline was reportedly due to subsidy payouts for LPG and kerosene, a press release in India Daily said today. The government has barred fuel retailing firms from raising prices in line with increases in crude oil costs. The freeze on prices resulted in Indian Oil Corp., the nation's largest refiner, and its state-run rivals, Hindustan Petroleum Corp. and Bharat Petroleum Corp reporting their first-ever losses this fiscal year. To partly compensate retailers for their revenue losses, the government has asked ONGC and GAIL India Ltd., the nation's biggest gas distributor, to share the losses.
Tokyo Residents Ask Court to Place Huser under Bankruptcy Protection
Residents of defective buildings asked a court today to seize the assets of Huser Co., a condominium developer increasingly being criticized as ducking its responsibility in the scandal over falsified quake-resistance reports, the Asahi Shimbun reported today. The residents, from 309 households at nine condominium complexes built by Huser in Tokyo, and Kanagawa and Chiba prefectures, filed papers requesting that the Tokyo District Court start bankruptcy proceedings against the company and place its assets under court protection. The residents apparently fear that Huser, which has fallen on difficult times since the scandal broke in November, will be unable to pay full refunds for the structurally unsound buildings. Read more.