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September 9, 2003
U.S. July Consumer Credit Rises by $6 Billion, Fed Reports
U.S. consumer debt expanded in July as Americans took out loans to buy
more cars, Federal Reserve statistics showed, Bloomberg News reported.
Borrowing through credit cards, auto loans and other non-mortgage
personal debt increased 4.1 percent, or $6 billion, to $1.77 trillion,
the Fed said. In June, consumer credit rose by a revised $151.3 million,
or 0.1 percent. Consumer spending climbed in July even as the economy
lost 49,000 jobs. Household purchases, which account for 70 percent of
the economy, increased at the fastest pace in four months, led by a jump
in sales of autos and other durable goods, the Commerce Department
reported earlier. 'If the economy were just made up of consumer
expenditures, we could say there has been a full recovery from
recession,'' said Chris Rupkey, an economist at the Bank of
Tokyo-Mitsubishi in New York, before the report, reported Bloomberg.
Economists expected a $5 billion rise in debt in July, based on the
median of 43 forecasts in a Bloomberg News survey.
WorldCom Reaches Settlement With Dissident Creditors
WorldCom Inc. reached a settlement with dissident creditors that
resolves one of the largest obstacles in the long-distance telephone
carrier's effort to end the biggest bankruptcy case in history,
Bloomberg News reported. Creditor groups holding about $750 million in
preferred securities known as 'Quips'' issued by WorldCom's MCI
Communications unit and some $235 million in MCI trade claims reached
the accord at around 3:45 a.m., New York time, and will present it to a
federal bankruptcy judge at 9:00 a.m., according to Ed Weisfelner,
lawyer for the MCI trade creditors.
Bankruptcy Judge Arthur Gonzalez in Manhattan halted a hearing yesterday
on the company's recovery plan, to give the parties time to resolve
their differences. Under terms of the deal worked out last night, Quips
holders would get about 45 cents on the dollar, Weisfelner said. The
original plan would have given them nothing. Holders of MCI trade claims
would get 50 cents on the dollar, up from 36 cents. WorldCom will have
to amend the recovery plan and have creditors vote on it, he said. 'The
deal was cut at 3:45 a.m. and we're feeling a little tired today,'' said
Weisfelner. 'We're going to ask the judge to adjourn the confirmation
plan hearings to Thursday,'' he said, reported the newswire.
GE Looms Large at Malden Mills
General Electric Co. is less than a week away from holding the biggest
equity stake in Polartec maker Malden Mills Industries Inc. after the
privately held company's chairman missed a crucial deadline to buy back
control from creditors, Reuters reported. Malden Mills is set to emerge
from chapter 11 bankruptcy protection on Sept. 10 with the family of
Aaron Feuerstein, the company's 77-year-old chairman, holding only a 5
percent equity stake. The Lawrence, Mass.-based company has been
controlled by Feuerstein's family for nearly a century. GE Capital, the
financial arm of General Electric, will have the largest equity interest
-- a little less than 15 percent -- once the Malden Mills reorganization
plan becomes effective next week, GE Capital spokesman Richard Jones
said, reported the newswire. Malden Mills filed for bankruptcy
protection in November 2001.
Survey Shows Eight in Ten Americans Want Schools to Teach Personal
Finance
As students head back to school this week and begin studying math,
science and English, 80 percent of Americans believe schools should also
be teaching personal finance education, according to a recent nationwide
survey conducted by InCharge® Institute of America, the non-profit
organization specializing in personal finance education and credit
counseling announced in a press release. The nationwide survey of 1,200
Americans, conducted in July 2003, comes at a time when Americans are
facing personal finance concerns of their own. An unstable economy,
layoffs, skyrocketing personal debt, and an unprecedented number of
people in bankruptcy raise important questions about who is truly the
most qualified to teach the next generation about personal finance.
InCharge Institute has formed educational partnerships with national
groups such as 4-H and the Jump$tart Coalition in an effort to reach the
maximum number of children with its message.
Weirton Seeks Time to Plan Reorganization
Weirton Steel Corp. has asked a federal bankruptcy judge for more
time to submit its chapter 11 reorganization plan, saying it must
negotiate with workers and retirees before it can rewrite a business
plan, the Associated Press reported. In documents filed with U.S.
Bankruptcy Court in Wheeling, the nation's No. 2 producer of tin says
its request to extend the deadline from Sept. 16 to Dec. 15 is
'relatively modest,' given
the complexity of the case. The company also asked Judge Edward Friend
for an additional 60 days to seek approval of the plan by creditors, or
until Feb. 13.
Weirton Steel, the nation's sixth-largest integrated steel maker, sought
bankruptcy protection in May after accumulating more than $700 million
in losses over five years. The company, which employs about 3,500
people, is operating under a $225 million debtor-in-possession financing
package while it reorganizes, reported the newswire.
Consumer Group Bids California Court Rehear Edison Pact
A San Francisco-based consumer group on Monday said it filed a petition
at the California Supreme Court for a rehearing of its August decision
to uphold a 2001 agreement that kept utility Southern California Edison
(SCE) out of bankruptcy, Reuters reported. The Utility Reform Network
(TURN) consumer group had challenged the agreement, in part on grounds
it was made in secret meetings between the California Public Utilities
Commission (CPUC) and SCE, a unit of Edison International, at the height
of the state's energy crisis, the newswire reported.
The state Supreme Court ruled on Aug. 21 that the agreement, which
raised consumers' electricity rates as much as 40 percent, did not
violate California laws on deregulation of the state's power market and
provisions requiring holding meetings and making decisions in public.
The settlement agreement between the CPUC and SCE allowed the utility to
collect through higher power rates about $3.3 billion of debts amassed
during the power emergency in 2000-2001, reported the newswire.
PG&E Calls for Limit on Bankruptcy Case Hearing
Pacific Gas & Electric Co. urged a federal judge to limit a key
hearing in the PG&E bankruptcy case to two weeks to stay on track to
emerge from bankruptcy by March 31, 2004, Reuters reported. In papers
filed on Friday with the U.S. Bankruptcy Court in San Francisco, the
PG&E Corp.-owned PCG.N utility said a time limit is needed because
objectors to a rescue plan 'intend to continue their delaying tactics.'
U.S. Bankruptcy Judge Dennis Montali is presiding over the PG&E
case. The utility filed for bankruptcy protection in April 2001 after it
ran out of cash buying power for its customers during the California
energy crisis.
PG&E lawyers and the staff of the California Public Utilities
Commission (CPUC) have negotiated a proposed settlement agreement that
would pay creditors about $12 billion and rescue the utility from
bankruptcy by next March 31. The CPUC will hold hearings on the plan
beginning on Wednesday and the five-member commission is expected to
vote on the agreement in December. The utility said a two-week hearing
beginning Nov. 10 or Nov. 12 is sufficient time to decide whether the
plan can be approved, reported the newswire.
AboveNet, Formerly Metromedia Fiber, Exits Chapter 11
AboveNet Inc., formerly Metromedia Fiber Networks Inc., said it emerged
from chapter 11 bankruptcy protection with $80 million in cash and plans
to raise more, Bloomberg News reported. Telecommunications pioneer Craig
McCaw, Franklin Mutual Advisers and billionaire John Kluge will be among
the largest shareholders, AboveNet said in a statement on its web site.
The company sought bankruptcy protection in May 2002 after it was unable
to pay debt incurred in building its fiber-optic network. Metromedia
Fiber blamed the telecommunications industry's decline for being unable
to pay creditors and vendors. The company listed $7.02 billion in assets
and $5.35 billion in debts, reported the newswire.
Seitel Gets Another Interim DIP Loan Extension
Seitel Inc. and its lenders agreed Monday to another extension of
borrowing power under a debtor-in-possession loan deal approved on an
interim basis by the bankruptcy court overseeing its chapter 11 case.
The final hearing on the DIP loan is scheduled for Sept. 19, the same
day U.S. Bankruptcy Chief Judge Peter J. Walsh is to determine
whether Seitel's disclosure statement is acceptable. The company filed
for chapter 11 protection with a plan to become a unit of Berkshire
Hathaway Inc. as part of the reorganization of $255 million in debt.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
FirstEnergy One Of Creditors Against NRG Plan Disclosure
An affiliate of FirstEnergy Corp.and a contruction company that built
several generating plants for NRG Energy Inc. said that the disclosure
statement outlining NRG's plan of reorganization still needs some work.
FirstEnergy said in its objection to the disclosure that NRG had dealt
with most of its concerns by amending some language in the document, but
that it still needs more information about how voting for the plan would
affect future claims it may have. The disclosure doesn't provide enough
information about how third-party suits would be affected by approval of
the plan, said the objection filed on Friday. In a chapter 11 case, a
disclosure statement must be approved by the court before it's sent to
creditors, along with ballots to vote on the proposed plan. Disclosure
statement approval is generally considered a substantial step toward
confirmation of a plan.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Probe of Enron Ex-officers Intensifies
After some 18 months of investigation and a fistful of indictments in
the Enron Corp. scandal, federal prosecutors are increasing their
efforts to determine whether former company Chief Executives Kenneth Lay
and Jeffrey Skilling should face criminal charges, the Wall Street
Journal reported. Federal officials have expressed the belief that
they have identified individuals who possess evidence that could help
provide the basis for criminal charges against one or both of the men,
says a person familiar with the matter. Much of the work in the coming
weeks will be focused on trying to get those individuals to cooperate.
Prosecutors are hoping to be able to reach decisions concerning the two
former CEOs within the next couple of months, reported the online
newspaper.
Bush Likely to Okay STT, Global Crossing Deal
U.S. President George W. Bush is likely to approve Singapore
Technologies Telemedia Pte. Ltd.'s plan to take control of U.S.-based
telecommunications firm Global Crossing Ltd., the Wall Street
Journal said on Tuesday, citing sources. The U.S. Defense Department
has opposed the deal and the Department of Homeland Security also has
had reservations. The economic team of the Bush administration, however,
has supported the deal. The two companies have tried to ease these fears
by offering a network security agreement in which they would abide by
conditions to protect the communications infrastructure, such as
maintaining network control and data storage in the United States. The
deadline for the administration's decision is Sept. 19. The two
companies and government agencies on Friday reached a general
understanding about the possible approval, sources told the
Journal.
United Low-cost Operation to Start in 2004
United Airlines' parent UAL Corp. plans to launch its low-cost airline
operation in the first quarter of 2004, said Chief Executive Glenn
Tilton, beginning with 40 airplanes as previously outlined, Reuters
reported. The airline, which filed for bankruptcy in December, 2002, is
beginning to work on various marketing tasks, including the potential
name for the low-cost carrier, said Tilton. Delta Air Lines Inc. has
already started a low-cost unit called Song for the New York-to-Florida
market. Executives at Atlanta-based Delta have said the carrier is doing
very well, but no separate financial details have been released.
Low-cost airlines like Southwest Airlines Inc. and newer rival JetBlue
Airways Corp. have been taking market share from major network carriers
including United, AMR Corp.'s American Airlines and Delta, reported the
newswire.
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