February 25
House on Recess; No Further Action Taken to Name Conferees on
Bankruptcy Bill
With the House of Representatives on recess this week, Congress
took no formal action to begin the House-Senate bankruptcy conference.
Staff members of likely conferees continue to discuss areas of
disagreement, such as the means test, reaffirmations and the homestead
exemption, among others. Pending still is a resolution by Senate leaders
on how to avoid having S. 625 be subject to a point of order in the
House, due to the revenue provisions contained in the bill. These
business tax breaks were added by the Senate as part of the minimum wage
increase package and are not contained in the House bill (H.R. 833).
Under Article I, Section 7 of the Constitution, all such tax provisions
must originate in the House. House Ways and Means Committee Chairman
Bill Archer (R-Texas) could object to S. 625 on that basis. Also eagerly
awaited is a letter from the White House, giving the Clinton
administration's views of its goals for bankruptcy reform, going into
conference. Administration spokesmen have said positive things about the
consumer provisions in S. 625, and they appear to prefer this bill to
H.R. 833. It is not clear how much leverage the White House will have to
insist on certain provisions, however, given the fact that both bills
passed by veto-proof margins.
Consumer Confidence Down Since January
According to an ABC News /Money poll of 1,035 adults
conducted in the month ending February 20, the Consumer Comfort Index
'stands at +29 on its scale of +100 to -100; this is nine points below
the all-time record set last month. Seventy-five percent of those
surveyed said 'the state of the nation's economy these days' was
'excellent' or 'good'; 25 percent said 'not so good' or 'poor.' Also, 66
percent rated the state of their own personal finances as 'excellent' or
'good,' and 34 percent said 'not so good'or 'poor.' The poll shows that
52 percent said that considering costs today and their own personal
finances, now is 'an excellent time' or 'a good time' to 'buy the things
you want and need,' whereas 48 percent said it was 'a not so good time'
or a 'poor time.'
Penney's Reports $12 Million Loss and Plans to Close
Stores
J.C. Penney Co. reported a fourth-quarter loss of $12 million,
compared with a net income of $207 million in the same period a year
ago, The Wall Street Journal reported. Penney's also announced
that it will close 289 of its Eckerd drugstores and as many as 45 of its
department stores under its new restructuring plan. Based in Plano,
Texas, the department store, drugstore and catalog operator will take
charges of $581 million for the fourth and first quarters as a result of
a restructuring to be implemented. Penney aggressively marked down
merchandise for clearance and changed how it accounts for catalog and
licensed-department sales. In addition, there were higher expenses
resulting from new and relocated Eckerd drugstores. The company opened
or relocated 102 such stores in the quarter, up from 70 the year before.
Penney said the stores to be closed are those that are underpeforming
and that the restructuring is expected to generate as much as $120
million in annualized savings. There is the potential for additional
savings of $200 million more during the next several years if the
company can improve its buying, it said.
SystemSoft® Emerges from Chapter 11
SystemSoft® Corp., a leading Windows utilities provider,
announced that on Feb. 22 the Bankruptcy Court for the District of
Massachusetts confirmed the company's chapter 11 reorganization plan,
according to a newswire report. Under the plan, SystemSoft, which
designs and sells proprietary PC card and diagnostic software-related
products, will be acquired by Rocket Software of Natick, Mass. Rocket
Software agreed to retire SystemSoft's outstanding bank debt and to
provide funding for a trust to be established for the benefit of
SystemSoft's unsecured creditors. The plan is expected to become
effective on or before March 4.
World Bank Likely to Delay Loan to Russia, Partly Because of
Bankruptcy Law
The World Bank is likely to delay the next installment of its
loan to Russia for at least two additional months because the Russian
government has not met loan conditions, according to a newswire report.
To date, the World Bank has released $400 million of the $1.5 billion
loan, and it was expected to issue the next $100 million installment
last fall. Michael Carter, World Bank Country Director for Russia, said
that the Russian government has not made any progress in boosting cash
collection from a natural gas monopoly and a power grid operator. Carter
also said the World Bank is waiting for parliamentary approval of
amendments to the bankruptcy law and changes to the civil code. The
International Monetary Fund set similar conditions for resuming
lending.
Bipolarization in Japanese Consumer Finance Industry
Rapid changes occurring in Japan's consumer finance sector will
accelerate bipolarization within the industry, separating strong
companies from the weak, Standard & Poor's said yesterday. The major
consumer finance companies offering unsecured, small-lot loans will
benefit from new funding regulations and should survive intense pricing
pressures. These companies should be able to maintain profitable
operations, even under the stress scenario Standard & Poor's
anticipates for the next few years. Currently high levels of
profitability are likely to drop to international norms in the medium
term. Several significant developments changed the landscape of the
Japanese consumer finance industry last year, amid an operating
environment characterized by intensifying competition and declining
margins, as well as ongoing high levels of personal bankruptcy. These
developments included the implementation of the long-anticipated law
enabling finance companies to issue bonds or commercial paper for
lending purposes, reduction of the legal maximum lending rate for
finance companies from 40.004 to 29.2 percent, to take effect from June,
the announcement by some major banks of their entry into the market for
unsecured, small-lot loans through joint ventures with major consumer
finance companies, and a movement to open a part of the consumer finance
credit bureau database to other industries, although this may not take
place immediately.
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