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September 19,
2005
U.S.
Asbestos
Fund Would Quickly Go Broke
A $140-billion
asbestos compensation
fund being considered in the U.S. Senate would be swamped by more than
double
that amount in claims and go broke within three years, according to a
study
released today, Reuters reported. The proposed fund would face claims
of between
$301 billion and $561 billion, as people with lung and other cancers,
who historically
had not been compensated by asbestos lawsuits, file for their new
entitlements,
the study said. Hundreds of thousands of injury claims have pushed
many companies
into bankruptcy. Senators Arlen Specter (R-Pa.) and Patrick Leahy
(D-Vt.) are
sponsoring a bill to take asbestos injury claims out of the courts and
pay them
from a fund financed by asbestos defendant companies and insurers.
href='http://today.reuters.com/news/newsArticleSearch.aspx?storyID=33940%2B19…'>Read
the full story.
id='2'>Legislators
Differ on Easing Bankruptcy Law for Katrina Victims
Senator Russ
Feingold (D-Wis.)
and Congressman F. James Sensenbrenner Jr. (R-Wis.) are on opposite
sides of
a debate over whether victims of Hurricane Katrina should get relief
from the
nation’s strict new bankruptcy law, the Wisconsin
Journal-Sentinel
reported yesterday. Feingold has introduced a bill to delay and soften
bankruptcy
rules for people harmed by the disaster. Sensenbrenner, chairman of
the House
Judiciary Committee, authored the bankruptcy overhaul and helped guide
it through
a long and contentious fight in Congress. The Menomonee Falls
Republican
said that he opposes any changes in the measure, which takes effect
Oct. 17.
Critics of the law say that the new provisions will make it harder for
individuals
of all incomes and for businesses to deal with their financial losses
after
the catastrophe that struck the Gulf Coast. Feingold said that he
hopes Sensenbrenner
"might listen to reason" and not block an effort to exempt
disaster
victims from some of the law’s provisions.
href='http://www.jsonline.com/news/state/sep05/356653.asp'>Read
the full story.
id='3'>Housing
Holding Up Even as Growth Slows
Interest rates are
still
low enough to bolster home construction even as soaring fuel costs
after Hurricane
Katrina slow the rest of the economy, economists said in advance of
reports
this week, Bloomberg News reported yesterday. Builders likely broke
ground on
more than 2 million homes at an annual rate last month, keeping
construction
on pace to surpass last year’s total as the highest since 1978.
The index
of leading economic indicators dropped for the first time in five
months in
August, signaling a moderation in growth, economists said.
href='http://quote.bloomberg.com/apps/news?pid=10000006&sid=aSN.izLDZDj8&refe…'>Read
the full story.
id='4'>Credit
Cards: Not the Root of All Consumer Debt
Overspending has
gotten millions
of Americans in trouble— and using credit cards is one of the
easiest
ways to get stuck, the Arizona Republic stated yesterday. But
cards also
provide many benefits to people who use them prudently: making
Internet purchases
possible, generating reward points, providing grace periods, freeing
consumers
of the need to carry cash and providing an emergency source of
financing. Are
credit cards a culprit or great convenience? In truth, they’re a
bit of
both. One thing is certain: Americans rely more on credit cards than
ever before.
Today, more than 76 percent of households have at least one credit
card, up
from 16 percent in 1970. Access has extended down the economic ladder,
with
36 percent of low-income families using credit cards, up from just 2
percent
in 1970.
href='http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20050918/BUSIN…'>Read
more.
id='5'>Autoworkers
Forced into Bankruptcy
Now that vehicle
production
in the auto industry has declined, the workers who depended on
once-abundant
overtime pay are increasingly facing financial difficulties, The
Detroit
News reported yesterday. The United Auto Workers’ legal
department
has handled about 10,000 bankruptcies for its members, retirees and
their families
in Michigan since 2002, according to a study of court records. UAW
lawyers estimated
that bankruptcy filings by union workers in Michigan have been growing
at a
10 percent annual rate in recent years.
href='http://www.kansas.com/mld/kansas/business/12680386.htm'>Read
more.
id='6'>Chapter
11: Not Abused
Most businesses
ultimately
fail, and the ideas that executives deliberately steer their firms
into bankruptcy
as an ordinary planning technique and that chapter 11 coddles them are
unfortunate
myths, USA Today said in an opinion piece yesterday. Most
businesses
that file for bankruptcy end up liquidate their assets. Most managers
who bring
their companies into chapter 11 end up losing their jobs. Bankruptcy
is not
a particularly happy place, and executives typically strive to avoid
it. Such
cases as Enron and other spectacular corporate failures have helped
fuel the
misperception that bankruptcy is most often a self-inflicted wound,
brought
about by gross incompetence, corruption or greed. But these cases are
hardly
the norm. Largely unreported are the vast majority of chapter 11
proceedings
involving far less dramatic tales of economic ruin. The reality is
that many
businesses run by perfectly ordinary people taking perfectly ordinary
business
risks just cannot make a go of it. For the vast majority of these
businesses,
insolvency is an accident brought about by such diverse events as a
tragic hurricane,
unforeseen market shifts, or changes in the law that alter how the
company must
conduct its business.
href='http://www.usatoday.com/news/opinion/editorials/2005-09-18-oppose_x.htm'>Read
more.
id='7'>Tucson
Diocese Bankruptcy Effectively Over
A year ago Tuesday,
the Roman
Catholic Diocese of Tucson was driven to bankruptcy by claims of
clergy sex
abuse, but the anniversary of the filing could also be the day the
diocese emerges—a
quick resolution to a difficult case, bankruptcy experts say, the
Associated
Press reported yesterday. U.S. Bankruptcy Judge James M. Marlar
approved the
diocese’s chapter 11 reorganization plan in July, which will
make $22.2
million available to settle court-approved claims by 31 victims of
sexual abuse
by priests.
href='http://seattlepi.nwsource.com/local/aplocal_story.asp?category=6420&slu…'>Read
more.
Airlines
id='8'>U.S.
Air Woes Persist Despite Aid
Despite billions of
dollars
in financial aid granted by the government since the Sept. 11, 2001,
attacks
in New York and Washington, D.C., four of the seven major U.S.
carriers are
now in bankruptcy proceedings, Reuters reported yesterday. "The
government
pumped an awful lot of liquidity into an industry that was already
suffering,"
said Darryl Jenkins of Embry-Riddle Aeronautical University. "We
should
have just taken the hit then and gotten it over with." Congress
approved
a $15 billion bailout of cash and loan guarantees in 2001 after the
Sept. 11
attacks crippled the U.S. travel industry.
href='http://www.cnn.com/2005/TRAVEL/09/18/us.airlines.reut/index.html'>Read
more.
id='9'>Judge
OKs US Airways’ Chapter 11 Plan
US Airways received
final
approval to exit bankruptcy protection for the second time in three
years and
merge with America West Holdings Corp, the Associated Press reported
Friday.
The ruling allows the airline to be purchased by America West, the
nation’s
eighth-largest airline, as soon as Sept. 27. Bankruptcy Judge
Stephen Mitchell
approved the airline’s reorganization plan of which the merger
is the
centerpiece, after allowing the airline to provide $12 million in
severance
pay to 11 executives who will not be given jobs at the merged airline.
Unions
had said that the package was excessive given the cut in pay and
benefits absorbed
by rank-and-file workers.
href='http://abcnews.go.com/Business/wireStory?id=1134575'>Read
the full story.
id='10'>Delta
Bankruptcy Cascades onto Digitas
It’s
"business
as usual" for folks on the Delta Air Lines account at
Digitas’ Modem
Media, although the airline’s bankruptcy filing may bring the
agency a
write-off of up to $4 million in bad debt, Clickznews.com reported
today. Delta
is Digitas’ third-largest client, accounting for around five
percent of
the company’s fee revenue, or $13.6 million in the first half of
2005.
A Digitas spokesman said that it was "business as usual," as
the company
will continue to service the account as it has in the past. Modem
handles Delta’s
interactive marketing efforts, including Delta.com and flysong.com,
and its
Delta SkyMiles affinity program.
href='http://www.clickz.com/news/article.php/3549631'>Read
more.
id='11'>Airlines
Hide Out In Bankruptcy Court
U.S. Bankruptcy
Court is
an all-too-frequent stop for the nation’s airlines, a routine
refueling
and refinancing station on the way to whatever may be the final
destination
for the embattled industry, a Washington Post opinion article
stated
today. The airlines would become what they want to be—a strong,
profitable
industry—a lot faster if they stopped flying through bankruptcy
court
and made some tough decisions on their own. But they can’t
resist. Bankruptcy
court is so irresistible to airlines that this week, about half the
travelers
flying in America are riding on planes of companies operating under
the protection
of chapter 11 of the federal bankruptcy law, the provision that gives
companies
that can’t pay their bills time to work out deals with their
creditors.
In a first—even for the bankruptcy-prone airline
industry—Delta
Air Lines and Northwest Airlines filed for chapter 11 on the same day.
Among
the big carriers, they joined US Airways, which won a judge’s
approval
Friday to merge its way out of bankruptcy, and United Air Lines.
Chapter 11
is so irresistible that Northwest Airlines flew into it last week even
though
it is not broke or even close to it. Northwest had more than $1
billion in cash
and credit lines it could tap when it filed the paperwork. In fact,
Northwest
says that it doesn’t need to borrow money to keep operating,
which is
what most companies operating under chapter 11, including Delta, are
forced
to do.
href='http://www.washingtonpost.com/wp-dyn/content/article/2005/09/18/AR20050…'>Read
the full article.
id='12'>Bankruptcy
Judge OK’s Delta Financing
The judge
overseeing Delta
Air Lines’ bankruptcy case in New York tentatively approved the
airline’s
$2 billion financing deal crafted to help the carrier survive the
chapter 11
process, the Cincinnati News-Enquirer reported Friday. U.S.
Bankruptcy
Judge Prudence C. Beatty allowed the company to access $1.4
billion of
the $1.7 billion debtor-in-possession financing provided by General
Electric,
Morgan Stanley and American Express—a move that will allow the
carrier
to continue operations as normal. The overall deal will give Delta
more than
$1 billion in new credit.
href='http://news.enquirer.com/apps/pbcs.dll/article?AID=/20050916/BIZ01/3091…'>Read
more.
id='13'>Epiq
Unit to Handle Airlines
Delta Air Lines and
Northwest
Airlines have retained a subsidiary of Epiq Systems Inc. to administer
their
reorganization proceedings, the Kansas City Star reported
Saturday. Epiq,
based in Kansas City, Kan., confirmed that its BSI subsidiary, which
administers
chapter 11 cases, had been hired to serve as the bankrupt
airlines’ administrator.
Based on pre-petition assets, Delta represents the eighth-largest
bankruptcy
ever filed, and Northwest the 16th largest. Analyst Peter J. Heckmann
of Stifel
Nicolaus & Co. on Thursday called the retention of BSI by the
airlines “two
significant wins for Epiq and the largest cases won since Epiq’s
Poorman-Douglas
subsidiary was retained in the United Airlines case in December
2002.”
href='http://www.kansascity.com/mld/kansascity/business/12668144.htm'>Read
more.
id='14'>Airline
Finance Meeting
The Bureau of
Transportation
Statistics will host “Airline Financial Data, 2nd Quarter
2005,”
today at 11 a.m. at 400 7th St., SW, in Washington, D.C. For more
information,
contact (202) 366-5580.
id='15'>Pa.
Health Center Files for Chapter 11
Ellen Memorial, one
of Wayne
County, Pa.’s largest employers, filed for chapter 11 bankruptcy
protection,
citing the need for “some breathing room to restructure”
its debt,
the Scranton Times-Tribune reported Friday. Ellen Memorial
Health Care
Center will remain open for business while a federal bankruptcy court
works
with creditors and the facility to develop a plan to pay off nearly $3
million
it owes, said Robert Zabady, owner/administrator of the 33-year-old
nursing
home. The chapter 11 filing was a result of two financial situations
coming
to a head at once. The facility owes $400,000 in real estate taxes and
a sheriff’s
sale was pending on the property. In addition, the state of New York
tacked
on a $1 million interest charge to bring the total it expects to
receive to
$2 million. The facility averages about 10 New York State residents
per day,
with the additional 95 residents coming from Pennsylvania.