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September 4, 2002
Social Conservatives Reiterate Stand on Bankruptcy Measure
As Congress gears up to begin its latest round of bankruptcy reform bill
negotiations, a Republican Conference divided over a section of the bill
that many anti-abortion lawmakers believed would impede the rights of
nonviolent clinic protestors promises to make the process difficult.
Although the votes to pass the bankruptcy measure are all but
guaranteed, leaders are concerned that Republican support might be
insufficient to ensure passage of the rule. A leadership source told
CongressDaily that any decision about how to proceed on the bill
would not be made until later this week at the earliest, when lawmakers
return in force from the August recess.
According to the newswire, several congressional sources said House
GOP leaders already have begun urging opposing Republicans to vote for
the rule, even if they choose to vote against the bill on final passage.
However, defeating the rule is probably the only way to stop the bill,
which has enjoyed overwhelming support by both parties in the
House—a fact not lost on Republicans who are in the opposing camp.
'We're not out to make a point, but to preserve equity and fairness,' an
aide to one such Republican said Tuesday.
A spokesman for House Judiciary Chairman Sensenbrenner, who has been
shepherding the bankruptcy legislation, reiterated his desire Tuesday
that leadership bring up the bill 'as is. That's been relayed to them,'
the spokesman said, reported CongressDaily. The Sensenbrenner
spokesman noted that the language at issue has the blessing of Rep.
Henry Hyde (R-Ill.), whose 'pro-life' credentials are considered
sterling. Some sources have suggested that House leaders should consider
bringing up a new bill that tracks with the bankruptcy conference report
but omits the offending section. Senate leaders already have made it
clear that is unacceptable.
Hearing on Durbin-Delahunt Bill Cancelled
CongressDaily reported that the hearing on the Durbin-Delahunt
bill, scheduled for tomorrow, has been cancelled. In a related
development, a group of prominent practitioners and academics has
released an analysis
critical of the Durbin-Delahunt bill. Senate Democrats had hoped to
attach all or part of the bill to the forthcoming pension reform
legislation, in response to the corporate and accounting scandals of
2002.
More Lawyers Snared in Enron Trap
Dozens of law firms have been roped into the ever-widening bankruptcy
probe of the Enron Corp. as targets of an ambitious new discovery
campaign launched by a court-appointed investigator, Law.com reported.
R. Neal Batson, who in May was tapped by the U.S. Trustee
overseeing Enron's bankruptcy to unearth the roots of the company's
failure, revealed in an Aug. 1 court filing that he aims to subpoena
Enron-related documents from 45 law firms. According to Law.com,
Houston's Vinson & Elkins and Chicago's Kirkland & Ellis, the
two law firms that already have been sued by Enron shareholders for
their work for Enron or on Enron-related deals, are on Batson's list of
discovery targets. Both firms have denied wrongdoing, and Batson's court
filing does not accuse any law firm of malfeasance. But for many others,
the filing marks the first time they have been publicly identified with
the disgraced company. The newswire reports that Batson wants virtually
every scrap of information the firms harbor that touches on Enron and
its infamous special purpose entities, or SPEs. Along with the law
firms, Batson also named dozens of financial institutions, insurers, and
Enron insiders.
The court filings also signal an escalation in Batson's work. As the
examiner in Enron's bankruptcy, the Alston & Bird partner is charged
with finding any misappropriated assets that can be recouped by the
company. Batson is slated to produce a report on his investigation later
this month. At hearing on Thursday, Judge Arthur Gonzalez of the
U.S. Bankruptcy Court for the Southern District of New York, indicated
he would grant Batson's discovery request. That ruling is expected this
week.
According to lawyers familiar with the matter, firms that knew or had
strong reasons to suspect that any Enron-related deals were designed to
mislead investors or unjustly enrich company insiders could face
shareholder suits and government investigations, as well as malpractice
claims by Enron's creditors. Lawyers from a few of the firms identified
by Batson say their dealings with Enron were minor and totally
legitimate. Several other firms declined comment. To see a list of the
firms targeted by Batson, click
here.
Enron Fees: $64 Million and Counting
In the first four months of the Enron bankruptcy case, 12 law firms
amassed nearly $64 million in fees and expenses, Law.com reported.
Unique in size, complexity, scope and visibility, the Enron case and its
fees are not off the charts, at least not yet, say bankruptcy experts.
Counsel have already poured tens of thousands of hours into the case,
some of them billing at rates topping $700 an hour. According to
Prof. Randal Picker, who has just wrapped up teaching a course on
the Enron bankruptcy at the University of Chicago Law School, it is a
mistake to simply focus on these numbers in the abstract. He points out
that corporate dissembling and labyrinthine partnerships created the
Enron scandal, and lawyers are now trying to unravel the morass of
deals.
According to Law.com, four firms account for roughly three-fourths of
the $64 million tab submitted to the U.S. Bankruptcy Court for the
Southern District of New York. Three of them are New-York-based Weil,
Gotshal & Manges, which represents Enron, at $26,010,376; Milbank,
Tweed, Hadley and McCloy, which represents the unsecured creditors'
committee, at $8,998,237; and Skadden, Arps, Slate, Meagher & Flom,
which also represents Enron, at $6,578,598. The fourth firm, also
representing Enron, is Houston's Andrews & Kurth, Mayor, Day,
Caldwell & Keeton, which billed $6,894,336.
Whether these fees are being well spent is difficult to say at this
point in time, according to Law.com. Prof. Robert Ramussen, Vanderbilt
University School of Law, said Enron differs from other massive
bankruptcies because of the murkiness of the company's deals. Prof.
David Skeel, University of Pennsylvania, said Enron's value is a moving
target because nobody yet knows whether the lawyers' fees are out of
line.
U.S. Manufacturing Activity Grows for the Seventh Straight Month
in August
U.S. manufacturing activity grew for the seventh straight month in
August, but at a much slower pace than analysts expected, which helped
spark a selloff that sent stock prices tumbling in early trading
yesterday, CongressDaily reported. The Institute for Supply
Management based in Tempe, Ariz., said its index of business activity
remained steady at 50.5 in August compared with July. Analysts had been
expecting a reading of 51.8 in an index where anything above 50
indicates growth in manufacturing.
Bankruptcy Judge Blocks Sale of Napster to Bertelsmann
Judge Peter J. Walsh blocked the sale of Napster Inc. to
Bertelsmann AG on Tuesday, citing conflicting loyalties by Napster's top
executive, reported the Associated Press. The newswire reported that
Napster CEO Konrad Hilbers said the judge's decision likely would force
Napster to change its reorganization effort into a chapter 7
liquidation. Bertelsmann had sought to purchase the remains of the
defunct Napster network for an additional $8 million after having
already sunk $85 million into the Redwood City-based company to keep it
afloat. Napster filed for bankruptcy protection in June.
Court Gives Kasper More Time to Get Votes for Reorganization
Plan
Kasper A.S.L. LLC received a 90-day extension of the exclusive period in
which it can seek creditor votes for its chapter 11 reorganization plan,
reported Dow Jones. Judge Allan L. Gropper of the U.S. Bankruptcy
Court in Manhattan extended the exclusive period through Nov. 5,
according to an order obtained Tuesday by Dow Jones Newswires. During
this period, no other parties may propose competing plans for the
company. New York-based Kasper filed for chapter 11 on Feb. 5, listing
assets of $308.8 million and debts of $255.2 million.
U.S. Unit of SAirGroup AG Files for Chapter 11
SAirGroup Finance Inc., a unit of SAirGroup AG, filed for chapter 11
bankruptcy protection Tuesday in the U.S. Bankruptcy Court in Manhattan,
Dow Jones reported. The company said it intends to continue operating
while under chapter 11 protection. SAirGroup AG, Swissair and a number
of affiliates filed for bankruptcy protection in Switzerland last fall
after facing liquidity problems after a failed expansion strategy.
Former regional airline unit Crossair took over two-thirds of Swissair's
fleet at the end of March after a bailout by the Swiss government and
many Swiss companies. SAirGroup Finance listed its total debts at $582.9
million and its assets at $460.2 million.
IRS Opposes Pentacon Plan Confirmation Without Tax Return
The Internal Revenue Service has opposed bankruptcy court confirmation
of Pentacon Inc.'s chapter 11 reorganization plan, saying the company
hasn't filed its 2001 corporate income tax return, reported Dow Jones.
The IRS asked that Pentacon file its Form 1120 for tax year 2001 before
the court confirms the plan. The agency also asked that Pentacon make it
clear whether or not the IRS tax debt would be assumed by Anixter
International Inc., which would purchase Pentacon's assets, reported the
newswire. The plan, which centers around the company's pending sale of
assets to Anixter International, calls for Anixter to pay any allowed
priority unsecured tax claims assumed by the purchaser. The U.S.
Bankruptcy Court in Corpus Christi, Texas, will consider confirmation of
the plan at a hearing next Monday, reported Dow Jones.
Metromedia Fiber Gets Cash Collateral Use Through Sept. 27
Dow Jones reported that Metromedia Fiber Network Inc. will be able to
continue using cash, subject to the liens of its senior creditors,
through Sept. 27, reported Dow Jones. The bankruptcy court order, signed
Thursday by Judge Adlai S. Hardin Jr. of the U.S. Bankruptcy
Court in White Plains, N.Y., requires that by Sept. 16, the company
provide the senior creditors' agent with a proposed list of non-core
assets it will sell by year-end, reported the newswire. Net proceeds
from the sales should allow the company to repay at least $80 million of
the senior note debt, the order said. The fiber-optic network builder
owed at least $150 million under the notes when it filed for chapter 11
protection in May. Metromedia Fiber filed for chapter 11 protection on
May 20, saying it had overbuilt while growing its businesses. The
company listed assets of $7.02 billion and debts of $4.26 billion in its
chapter 11 petition.
Adelphia Communications Gets Court OK to Move on California
Appeal
Adelphia Communications Corp. said it has won bankruptcy court approval
to go ahead on its appeal of a ruling that prevents it from using
valuable cable assets it bought from Verizon Americast in February,
reported Dow Jones. Adelphia Communications in May appealed against a
preliminary injunction issued by a U.S. District Court in California
that prohibited the integration of the companies' cable system assets,
reported the newswire. The assets serve subscribers in the City of
Thousand Oaks, Calif., and Ventura County. Judge Robert E. Gerber
of the U.S. Bankruptcy Court in Manhattan on Friday lifted the
Bankruptcy Code's automatic stay provision to allow the appeal to go
forward, according to court documents, reported the newswire. Adelphia
may also seek to have the case transferred to New York and referred to
the bankruptcy court, the order said.
WorldCom Plans to Seek Smaller DIP Loan
Dow Jones reported that WorldCom Inc. plans to seek a smaller
debtor-in-possession loan than the $2 billion it previously asked a
bankruptcy court to approve. A WorldCom spokesperson said the company's
cash position is better than at first thought, and as a result the
company will seek DIP funding of between $1.25 billion and $1.5 billion.
U.S. Bankruptcy Judge Arthur J. Gonzalez has approved interim
financing of $750 million for WorldCom Inc., while the final hearing on
the loan has been pushed back from Sept. 4 to Oct. 1. The financing is
being provided by a group of lenders led by Citigroup Inc., J.P. Morgan
Chase & Co. and General Electric Co.'s financial-services arm, GE
Capital.
Consolidated Freightways Confirms Bankruptcy, Says It Can't
Satisfy Creditors' Claims
Consolidated Freightways Corp. confirmed that it filed for bankruptcy
today, and said its shareholders will probably get no money for their
shares as a result of going out of business, reported Dow Jones. The
trucking company on Monday that it was filing for bankruptcy and ending
its operations with 80 percent of its 15,500 employees receiving
immediate termination notices, reported the newswire. In a press release
Tuesday, Consolidated Freightways said it doesn't expect it will be able
to fully satisfy creditors' claims from any sale or liquidation
proceeds.
U.S. Regulators Take Control of Anchor Glass Pension Plan
Federal regulators on Tuesday assumed control of the pension plan for
more than 14,000 current and former workers of bankrupt Anchor Glass
Container Corp., reported Dow Jones. Anchor Glass has a pension plan
that is underfunded by $219 million, according to the Pension Benefit
Guaranty Corp., reported the newswire. The plan has assets of $336
million and liabilities of $555 million. The agency will take over the
assets and pay guaranteed benefits earned under the plan. Anchor Glass
is emerging from chapter 11 bankruptcy reorganization.
Pilots, Midway Air Reach Tentative Working Pact
Pilot union negotiators representing the cockpit crews of bankrupt
Midway Airlines Corp. reached a tentative contract agreement Sunday with
management, which is planning to resume the airline's operations as a US
Airways Group Inc. Express carrier, reported Dow Jones. In a press
release Tuesday, the Air Line Pilots Association (ALPA) said the pilots'
agreement will become effective pending final approval from the ALPA's
president and the union custodian for the Midway Airlines pilots' unit
of the Air Line Pilots Association.
Midway Airlines filed for bankruptcy protection Aug. 13, 2001, and
ceased operations Sept. 12 in the aftermath of the terrorist attacks.
Last month, the U.S. Bankruptcy Court gave preliminary approval to
Midway Airlines' plan to operate as a commuter affiliate of US
Airways.
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