December 15, 2003
Measure of Consumer Mood Fell Sharply in Early December
Consumers' moods fell strongly in the middle of December, as
assessments of current conditions staged a big and unexpected retreat,
according to a survey by the University of Michigan, the Associated
Press reported. The preliminary index on consumer sentiment for December
was said to have shown a decrease to 89.6 from 93.7 in November. The
report was well below what economists had expected, and its decline was
particularly surprising given the recent economic reports. Forecasters
surveyed by Dow Jones Newswires and CNBC had expected to see a reading
of 95.2 for mid-December. The Michigan index on current conditions
plummeted to 93.6 as of the middle of the month, from 102.5 in November
and 99.9 in October. Economists were unsure about how to interpret the
Michigan data. 'Clearly the news seems to be at odds with recent data,''
said Joe Lavorgna, economist with Deutsche Bank in New York.
Fleming Files Bankruptcy Exit Plan
Grocery distributor Fleming Cos. Inc. said on Friday it filed its
plan for emerging from bankruptcy, and it had the support of its
creditors' committee, Reuters reported. The Dallas company said holders
of common shares would receive no distribution under the reorganization
plan, and the stock would be canceled. Fleming would instead be owned by
unsecured creditors, who would get shares in the reorganized business.
Fleming filed for chapter 11 bankruptcy protection in April, shortly
after its biggest customer, Kmart, canceled a contract. Fleming said it
would evaluate any binding offers that it expects to receive soon for
its convenience division, which distributes food and other supplies to
convenience stores.
Despite Probe, Halliburton Up on Asbestos News
Halliburton Co. shares rose Friday after it announced an important
step toward resolving its asbestos disputes, outweighing concerns over
Pentagon allegations that it overcharged the government for some Iraq
work, Reuters reported. 'The news on the asbestos front will overpower
any concerns about the overcharging,' said Jefferies & Co. analyst
Stephen Gengaro, who maintains his 'buy' rating on Halliburton's stock
and a price target of $27 per share. On Friday, the Houston-based
oilfield services company announced that more than 97 percent of
asbestos claimants accepted its reorganization plan, which will provide
up to $2.78 billion for claimants. That approval by claimants clears the
way for a bankruptcy filing by its DII Industries and Kellogg Brown
& Root units during the first quarter, analysts said, lifting a
burden weighing on the company for two years.
Analysts say Halliburton next must validate the claimant votes,
review the reorganization plan and submit the plan to the board. The
company could then file its prepackaged plan under chapter 11 bankruptcy
rules. 'It's slowly and gradually moving toward the Holy Grail, which is
an asbestos settlement,' Gengaro said, which would finally clear 'the
cloud of uncertainty over the company.'
Northwest Pilots Are Exploring Possible Investment in Carrier
Leaders of the pilots union at Northwest Airlines told negotiators
to explore a possible investment in the carrier in return for
concessions, the Air Line Pilots Association said late Friday, the
Wall Street Journal reported. The union, which represents nearly
5,400 active pilots and is in contract negotiations with the St. Paul,
Minn.-based carrier, also said any possible interim concessionary
agreement 'would involve, at a minimum, participation by management,'
said Capt. Hal Myers, a union spokesman.
Northwest is seeking concessions from all of its employees to bring
down its expenses and return to sustained profitability. A company
spokesman said on Sunday that Northwest looks forward to studying a
proposal from the Air Line Pilots Association. The spokesman noted that
Northwest CEO Richard Anderson earlier this year said management would
be expected to share in labor-cost restructuring, reported the online
newspaper.
El Paso Plans to Cut Debt, Sell Assets
El Paso Corp. today set a plan that includes reducing its debt by
nearly one-third and selling as much as $3.9 billion in assets by the
end of 2005, Reuters reported. The Houston company also said it will
raise about $1 billion in cash from the sale of a 50 percent stake in
natural gas pipeline and processing company GulfTerra Energy Partners
L.P. to Enterprise Products Partners L.P. El Paso -- which announced a
similar plan to cut debt and sell assets shortly after energy trader
Enron Corp. filed for bankruptcy in December 2001 -- will now have three
primary businesses: U.S. and Mexico natural gas pipelines, U.S. and
Brazil oil and natural gas production and marketing and trading. As part
of the reorganization, El Paso expects to sell an additional $3.3
billion to $3.9 billion of assets, sell restructured power contracts,
and recover $500 million to $600 million of working capital, reported
the newswire.
Court Approves Pacific Gas Reorganization
California's largest utility, Pacific Gas & Electric, said on Friday
that a U.S. Bankruptcy Court had approved its reorganization plan,
clearing the way for state regulators to act on it, Reuters reported.
PG&E filed for bankruptcy in April 2001 at the height of
California's energy crisis. Last spring, an agreement was negotiated
between PG&E and the California Public Utilities Commission (CPUC)
staff to settle rival reorganization plans that threatened to lead to
years of litigation. The CPUC is due to review the settlement agreement
on December 18. The settlement aims to restore the utility's investment
grade credit rating, pay creditors' claims and enable PG&E to resume
paying common stock dividends in 2005, reported the newswire.
AIR CANADA
Air Canada Seeking to Resume Pension Payments
The move is another step in the complex restructuring of Air Canada, but
it leaves unresolved a dispute over the funding of the overall C$1.5
billion deficit in the pension regime, Reuters reported. 'We are quite
happy that they are paying us our dues, but the pension deficit remains
nonnegotiable,' said Serge Beaulieu, the interim president of the Air
Canada Pilots Association. Earlier this week, Air Canada obtained court
approval to pay back C$15 million in withheld contributions into the
pension plans of the employees of its regional subsidiary Jazz. 'Our
request to the court for a timely contribution of current service costs
to the pension plans is a reflection of our commitment to preserve
existing benefits for employees and retirees,' Air Canada President and
CEO Robert Milton said in a release, Reuters reported.
Air Canada Creditor Wins Right to Argue for Appeal Against
Bidding Process
An Air Canada creditor has won the right to argue for an appeal of the
process that led to court approval of a $650-million investment from
Hong Kong businessman Victor Li while another offer was in the wings,
the Associated Press reported. Justice Robert Blair of the Ontario Court
of Appeal ruled on Friday that Mizuho International should get an
'expedited' hearing next week. If the court of appeal rules that the
lower court made a mistake in approving the offer from Li's Trinity Time
Investments, it could jeopardize the Trinity deal. An agreement allows
Trinity to cancel the deal if it isn't approved by the court by
Saturday, Dec. 20. Mizuho International - a British hedge fund and
subsidiary of Mizuho Financial Group- holds about $112 million in Air
Canada debt. On Monday, Ontario Superior Court Justice James Farley
approved a $650-million investment offer from Trinity, plus a
$450-million rights offering led by Deutsche Bank, reported the
newswire.
DirecTV Latin America Files Reorganization Plan
The stage was set this week for DirecTV Latin America to emerge from
bankruptcy protection in early 2004 when a plan for its reorganization
was filed in the U.S. Bankruptcy Court in Delaware, Reuters reported.
The plan reflects an agreement between its majority owner, Hughes
Electronics Corp., and its creditors, in which they agreed to take 20
cents on the dollar for allowed claims. 'The actions we have taken
during the course of the chapter 11 reorganization, together with other
profit-enhancing initiatives that are underway, will strengthen DirecTV
Latin America,' Larry N. Chapman, president and COO, said in a statement
on Friday. DirectTV Latin America filed for chapter 11 bankruptcy
protection last March after losing subscribers because of recessions,
political unrest and currency fluctuations in Argentina, Venezuela and
Brazil. The company has lost 100,000 subscribers since 2002, reported
the newswire.
