May 5, 2004
Fed: Future Rate Hikes to Be
'Measured'
The Federal Reserve signaled yesterday that it was
preparing to raise interest rates for the first time in four years,
though it left borrowing costs at 1958 lows for now and said it would
move at a 'measured' pace, Reuters reported. The central bank's policy
panel said risks to prices were balanced between a pickup and a
potential slowing in inflation. It also said it would lift rates only
gradually. 'At this juncture, with inflation low and resource use slack,
the committee believes that policy accommodation can be removed at a
pace that is likely to be measured,' the Federal Open Market Committee
said in a statement, Reuters reported.
Asbestos Negotiations to Continue
Senate Majority Leader Bill Frist (R-Tenn.) yesterday cited 'real
progress' in the talks aimed at reaching a deal among stakeholders on
asbestos litigation legislation and told reporters in his office that
he'd 'like to continue working on it quietly for as long as we're making
progress,' Reuters reported. While
Frist gave no details on the negotiations, he indicated they may be the
only remaining hope for the legislation. 'If it breaks down, just can't
be done,' Frist said.
So far, Edward Becker, the former chief justice of the
U.S. 3rd Circuit Court of Appeals, moderating the negotiations, has been
credited with settling some of the questions of how the fund should be
administered. The bill would replace the current litigation with a trust
fund used to compensate asbestos victims. But disagreements over funding
have prolonged the negotiations, the newswire reported.
Frist Outlines Agenda for Next 65 Legislative
Days
Senate Majority Leader Bill Frist (R-Tenn.) yesterday
said he believes the Senate can complete work on a number of bills over
the next 65 legislative days, including class action overhaul, among
others, according to CongressDaily.
Bankruptcy reform legislation was not among the reported bills to be
considered by the Senate. Frist also said Republicans have agreed to a
Democratic demand that Senate Health, Education, Labor and Pensions
ranking member Edward Kennedy (D-Mass.) be allowed to propose his
minimum wage increase legislation to the class action
bill.
Separately, CongressDaily
reported that House GOP leaders today will attempt to push the blame
onto Senate Democrats for Congress's failure to pass a series of bills
this session. The event is an attempt to counter the perception that
Congress has been ineffective in passing major legislation this year.
The House has passed several bills this year that have stalled in the
Senate, such as the bankruptcy bill, due to Democratic opposition
or filibuster, according to the newswire.
Trade Groups Seek Bankruptcy
Trading Change
Investors could get relief from
trading halts in bonds and shares of bankrupt companies under a proposal
unveiled on Tuesday by two U.S. credit market trade groups, Reuters
reported. The proposal, developed by the Bond Market Association and the
Loan Syndications and Trading Association, would allow trading of a
bankrupt company's securities to continue without jeopardizing its tax
credits. Before filing for bankruptcy protection, companies often
generate sizable operating losses, but they can lose tax credits for
those losses if there is a significant change in company ownership, the
Bond Market Association said in a release.
To preserve the tax credits, bankruptcy courts have
increasingly halted trading of all securities at bankrupt companies,
said Michele David, assistant general counsel at the Bond Market
Association. 'These initial orders are often quite restrictive and halt
all trading in the debt and equity securities, leaving investors frozen
until it's renegotiated,' said David. 'We've tried to cut out all that
uncertainty and expense and time of renegotiating these orders by trying
to get a reasonable order put in place from the get-go,' she said, the
newswire reported. As an alternative, the trade groups developed a model
court order that could be submitted by attorneys and issued by a
bankruptcy court.
Some Cities Struggling to Keep
Pension Promises
A few years ago, the city of Houston decided to offer
its workers retirement benefits from special city pension fund accounts,
along with the workers’ traditional pensions, the
face='Times New Roman'>New York Times reported. Now the city
pension fund cannot support the payouts and has about $1.5 billion less
than the benefits it owes the workforce.
At the heart of the matter is a type of pension
benefit that has generally been avoided by corporations but embraced by
state and local governments. Known as a DROP, for deferred retirement
option program, the strategy has been viewed as a way to keep
hard-to-replace teachers, engineers and other public workers on the job
as they near retirement. Read the
href='http://www.nytimes.com/2004/05/05/business/05PENS.html?hp'>full
article.
Air Canada Restructuring Ruling
Delayed
Air Canada could start searching for an equity
partner, but a bankruptcy court judge delayed his ruling on Tuesday on
whether the airline could go ahead with an C$850 million ($620 million)
restructuring deal, Reuters reported. Ontario Superior Court Judge James
Farley said the insolvent airline could start looking for an investor
willing to invest about C$250 million into the airline, but put off
giving his assent to a plan that the airline struck last week with
Deutsche Bank AG. 'With respect to the (Deutsche Bank) matter, I will
reflect on that and let you know sooner rather than later,' Farley said.
Tightening the timeline even further was a threat by GE Capital on
Tuesday to withdraw its C$1.5 billion financing package for the airline
if the Deutsche Bank deal isn't approved by May 7, the newswire
reported.
Push Toward Creditor
Protectionism in Bankruptcy Law May Damage Intellectual Property
Rights
The rise of corporate bankruptcies over the last few
years has prompted legislators and academics alike to push for
bankruptcy law reform, calling for increased creditor protectionism
through the weakening of limited liability and the reversal of 'judgment
proof' transactions, according to a Washington University in St. Louis
news bulletin. 'Letting intellectual property (IP) assets slip into a
bankruptcy estate is a dangerous idea,' says Troy Paredes, associate
professor of law at Washington University. Bankruptcy raises a central
problem for IP rights that it does not raise for other assets such as
land or commercial paper. Read the
href='http://news-info.wustl.edu/tips/page/normal/852.html'>full
article.
Fleming Moving Forward With Reorganization Plan
During a hearing held yesterday in the U.S. Bankruptcy
Court in Delaware, Fleming Companies Inc. announced in a press release
that it reached an agreement in principle with the official committee of
reclamation creditors and the official committee of unsecured creditors
regarding the treatment of reclamation claims, which resolves the
objections of the reclamation committee to Fleming's proposed plan of
reorganization. Fleming expects to file with the bankruptcy court later
this week its third amended plan of reorganization and disclosure
statement, which will reflect the terms of this agreement. A hearing to
approve the disclosure statement and solicitation procedures to vote on
the pending third plan of reorganization is currently scheduled for May
25 in the Delaware Bankruptcy Court, according to the press
release.
MCI To Pay Government $27 Million to Settle Fraud
Claims
MCI has agreed to pay $27 million to settle claims
that it defrauded the federal General Services Administration by
charging excess costs and fees under a government contract, the Justice
Department announced, the Associated Press reported. The settlement was
approved yesterday by the bankruptcy court, which is presiding over
the financial restructuring of the company. The civil settlement
resolves Justice Department allegations that MCI knowingly passed to the
government certain fees and costs from 1999 to 2004 that were in excess
of the amounts allowed under its contract, the newswire
reported.
ISG
Two Creditors Approve Weirton Steel
Sale
Two of the largest creditors of bankrupt Weirton Steel
Corp. have signed a proposed settlement that would allow the sale of the
company to Ohio's International Steel Group (ISG), but others have not
decided whether to approve the agreement, the Associated Press reported.
Corsair Partners and Ritchie Capital have agreed to the financial
settlement but a significant number of other creditors were still
reviewing the proposal on Tuesday, Weirton Steel spokesman Gregg Warren
said. The amount of the proposed settlement has not been disclosed but
the creditors would get a payment toward what they say is a $145 million
debt, the newswire reported.
International Steel
Group to Buy Georgetown Steel
International Steel Group Inc. on Tuesday said it
agreed to buy the Georgetown Steel facility for $16 million in cash plus
assumed liabilities, Reuters reported. Georgetown Steel filed for
bankruptcy in October 2003 and ceased production. International Steel
said it expects the acquisition to close in June and plans to restart
operations at the plant in the third quarter.
Bankruptcy Court Approves
Reorganization Plan for National Energy & Gas Transmission
Inc.
National Energy & Gas Transmission Inc. (NEGT) yesterday announced
in a press release that the U.S. Bankruptcy Court for the District of
Maryland confirmed the company's plan of reorganization, paving the way
for NEGT to emerge from bankruptcy. The company expects the plan to
become effective by the end of May or early June. Under the plan, NEGT
will issue to its unsecured creditors 100 percent of the equity of the
reorganized company, $1 billion in notes and cash. In addition, NEGT
will become unaffiliated with PG&E Corporation, which will no longer
have any equity interest in the company. NEGT's creditors will become
the new equity holders, according to the press release.
Witness Tells of Dual
Accounting at Adelphia
Top executives at the Adelphia
Communications Corporation knew that its published financial
results were misleading because they regularly received reports that
compared those figures with the company's real financial condition, a
former Adelphia official testified yesterday, the New York Times reported. James
R. Brown, the company's former vice president for finance, said that the
real results were needed to make operating decisions. He described the
public disclosures as filled with 'accounting magic,' the newspaper
reported.
Netexit, a Unit of
NorthWestern, Files Chapter 11
Netexit Inc., a unit of
electricity and natural gas provider NorthWestern Corp., has filed for
chapter 11 bankruptcy protection in Wilmington, Del., NorthWestern said
on Tuesday, Reuters reported. NorthWestern said the filing is intended
to help wind down the business of Netexit and its subsidiaries. Last
November, Netexit, which at the time was known as Expanets Inc., sold
substantially all of its assets and businesses to Avaya Inc., while
retaining some liabilities. NorthWestern said Netexit's chapter 11
filing will have no material effect on its own reorganization plans.
NorthWestern sought chapter 11 protection from creditors last September,
the newswire reported.
MDU-Led Group Ends
Efforts To Buy NorthWestern Utility Ops
An alliance led by MDU
Resources Group Inc. said it ended efforts to acquire the utility assets
of NorthWestern Corp. after the electricity and natural-gas provider
failed to respond favorably to the alliance's proposal. A MDU spokesman
said Tuesday that the members of the alliance have agreed not to
disclose the offer price or other details.
The Alliance for a Secure
Energy Future announced last November that it was considering buying
power assets from NorthWestern. MDU said the alliance expected to offer
a 'superior plan' to NorthWestern's stakeholders than reorganizing the
existing entity under chapter 11.
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Court Stops Creditors
From Firing Allegiance Telecom Executives
Unsecured creditors won't get
to utter Donald Trump's now famous phrase after a bankruptcy judge
stopped efforts to unseat two Allegiance Telecom Inc. executives for
allegedly draining the company's estate of funds. Last week the official
creditor panel in the case filed papers asking the court to fire
Chairman and Chief Executive Royce J. Holland and Executive Vice
President Thomas M. Lord, saying their continued employment would
deplete payments to unsecured creditors by $150,000. But at a hearing
Monday, the U.S. Bankruptcy Court in Manhattan rejected the request on
the grounds that the executives' employment didn't cause irreparable
harm to the company, according to Allegiance Telecom General Counsel
Mark Tresnowski.
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Review (
href='http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2'>http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2)Copyright
(c) 2003 Dow Jones & Company, Inc. All Rights
Reserved