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House to Vote on Measure To Fix Bankruptcy Quirk
The House is scheduled to vote on a measure today that would require
credit-reporting agencies to change the way involuntary bankruptcy
petitions -- which allow a creditor, rather than a debtor, to file for
bankruptcy -- are reported and require the agencies to expunge
information related to false or fraudulent cases, the Wall Street
Journal reported. It also would bar them from circulating details of
the dismissed cases. House Judiciary Chairman F. James Sensenbrenner Jr.
(R.-Wis.) introduced the legislation earlier this year after hearing the
plight of 36 officials from his home state.
Retailers Gear Up for Tax Rebate Sales
Family-oriented retailers and restaurants may get a lift in sales this
summer as millions of consumers with children receive tax-rebates in the
mail, Reuters reported. But the extent of that boost is tough to predict
as it is unclear how the rebate from a hike in the child tax credit will
be spent. 'Some are going to spend it; some are going to save it; some
are going to use it to pay down debt,' said Steve Pfister, vice
president of government relations for the National Retail Federation,
the newswire reported. Retailers are strategizing on how to get parents
to spend the extra money on their products, particularly those aimed at
the back-to-school selling season. Stores may spend money on ads that
specifically target the rebate dollars, in some cases making it easy for
consumers to cash checks on site, and also by coming up with special
promotions, reported the newswire.
WORLDCOM
Reports Detail WorldCom Execs' Domination
Former WorldCom Inc. executives Bernard Ebbers and Scott Sullivan ruled
with unquestioned authority, steering the telecommunications company
into multibillion-dollar acquisitions on a whim, while the board of
directors and senior managers sat by silently, according to a report
released on Monday, the Associated Press reported. The 263-page report
by former Attorney General Richard Thornburgh outlined a corporate
culture dominated by two individuals, fostering an environment that led
to the largest-ever U.S. bankruptcy and an $11 billion accounting
scandal. 'WorldCom was dominated by Ebbers and Sullivan, with virtually
no checks or restraints placed on their actions by the board of
directors or other management, according to the report, which was
prepared at the request of a bankruptcy judge in New York, reported the
newswire.
The Wall Street Journal reported that the reports, which were
released yesterday, conclude that WorldCom's management worked to
falsify financial results in increasingly desperate bids to keep its
sagging fortunes concealed from investors. The reports blast not only
top management, but also fault a breakdown in the cornerstone of the
company's corporate-governance structure, including failures by its
external and internal auditors, lawyers and board members.
To read the bankruptcy court examiner's report, point your browser to
href='http://news.findlaw.com/wsj/docs/worldcom/bkexmnr60903rpt2d.pdf'>http://news.findlaw.com/wsj/docs/worldcom/bkexmnr60903rpt2d.pdf.
To read the report of the investigative committee of the Board of
Directors of WorldCom, point your browser to
href='http://news.findlaw.com/wsj/docs/worldcom/bdspcomm60903rpt.pdf'>http://news.findlaw.com/wsj/docs/worldcom/bdspcomm60903rpt.pdf.
WorldCom Settlement Appropriate, SEC Says
The Securities and Exchange Commission told a federal judge that a
proposed $500 million fraud settlement with WorldCom Inc. is a steep
penalty that will harshly punish the telecommunications company without
threatening its viability or the jobs of its 55,000 employees, Newsbytes
reported. Since the settlement was first disclosed last month, it has
come under fire from critics, including many of WorldCom's competitors,
as being too lenient. Some have said the penalty unfairly punishes the
company's creditors instead of the former executives who orchestrated
the accounting fraud that may ultimately total as much as $11
billion.
'A $500 million payment for the largest corporate fraud in history is
certainly not commensurate with the scale and scope of the fraud and
represents only a paltry fraction of the hundreds of billions of dollars
in losses suffered by innocent shareholders, honest competitors and debt
holders,' said AT&T General Counsel James Cicconi. In a 35-page
filing to Judge Jed S. Rakoff of the U.S. District Court in New York,
the SEC defended the fine, saying its size will deter future violations
of securities law. 'The largest financial fraud in history merits the
largest civil penalty ever imposed in an SEC action,' the SEC wrote,
reported the newswire.
Congressman, Panel Urge Federal Judge to Refuse WorldCom
Settlement
Rep. Gregory Meeks (D-N.Y.), former Public Advocate Mark Green, and
three other experts, who participated in a New Democracy Project/Demos
panel in New York City, urged the federal judge reviewing the
WorldCom-MCI settlement with the Securities and Exchange Commission
(SEC) to overturn the deal in favor of more stringent remedies that
would send a clear signal to 'morally challenged CEOs and concerned
shareholders,' the panel announced yesterday in a press release.
The five stakeholders representing consumers, labor, shareholders and
Congress spoke out at a 'Forum on Corporate Accountability: The SEC-MCI
Proposed Settlement -- Perspectives on Adequacy.' All of the speakers
agreed on the need for tougher action to be applied against
WorldCom-MCI, which has admitted to committing more than $11 billion
worth of accounting fraud.
United Air Looking for Exit Financing
Bankrupt United Airlines on Monday said it has started preliminary talks
to secure financing for its eventual exit from bankruptcy protection,
but so far the amount it may want is unknown, Reuters reported.
Potential options for money include using loan guarantees from the
federal government or private equity funds including possibly from
banks, said sources familiar with the matter. Jeff Green, a spokesman
for United, confirmed to Reuters that initial discussions about exit
financing have begun. 'We've had conversations with [financial backers]
on both the debt and equity sides, but it's really been just that --
conversations,' Green said, reported the newswire.
Green said how much, if any, money United will seek is unclear at this
point. The airline is on record saying it is considering both the fourth
quarter of 2003 and the first quarter of 2004 to emerge from court
protection. 'We're looking at the fourth quarter,' he said. 'We haven't
made any determination,' Reuters reported.
SkyWest in Expanded Deal with United
SkyWest Inc. on Tuesday said it signed an expanded 11-year deal to fly
regional service for United Express, Reuters reported. The deal provides
for a multi-year rate agreement, the terms of which were not disclosed.
SkyWest will be reimbursed for operating costs plus a base margin and
performance-based incentives. United is a unit of UAL Corp. that filed
for bankruptcy in December. St. George, Utah-based SkyWest said the deal
calls for it to operate a fleet of 140 jets, including 55 turbo-prop
aircraft currently serving the United Express fleet.
Metromedia Fiber to Change Name
Bankrupt Metromedia Fiber Network Inc., under investigation by
regulators for its accounting, said it will seek a judge's approval of
its recovery plan in mid-August and change its name to AboveNet Inc.,
Bloomberg News reported The provider of high-speed data links for AOL
Time Warner Inc. and other Internet companies filed for bankruptcy in
May 2002 after amassing more than $5.35 billion in debt. Metromedia,
controlled by billionaire John Kluge, is among dozens of fiber-optic
network operators, such as Global Crossing Ltd. and Genuity Inc., to
have sought chapter 11 protection.
Under Metromedia Fiber's recovery plan, the White Plains, N.Y.-based
company's unsecured creditors will get about 90 percent of the
reorganized company's shares, court papers show. Current Metromedia
shareholders would get nothing. The company is to seek court permission
on July 2 to send the plan to creditors for a vote. Metromedia Fiber
said it intends to seek final court approval at an Aug. 14 hearing in
White Plains, N.Y., that would clear the way for the company to come out
of chapter 11, reported the newswire.
Mosaic Group Inc. Announces Extension of Order
Mosaic Group Inc. announced that it has sought and obtained from the
Ontario Superior Court of Justice an order granting it and certain of
its Canadian subsidiaries and affiliated companies an extension of
protection under the companies' creditors arrangement act up to and
including July 15, 2003, Canada Newswire reported. The order of the
Ontario Superior Court of Justice also accepted and approved the report
dated June 2, 2003, of KPMG Inc., in its capacity as monitor of
Mosaic.
In December 2002, Mosaic Group Inc. and certain of its Canadian
subsidiaries and affiliated companies obtained an order from the Ontario
Superior Court of Justice to initiate the restructuring of its debt
obligations and capital structure. Additionally, certain of Mosaic's
U.S. subsidiaries commenced proceedings for reorganization under chapter
11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Texas in Dallas. Pursuant to these filings, Mosaic
and its relevant subsidiaries continue to operate under a stay of
proceedings, reported the newswire.
Connecticut Official Urges Regulators to Defend Ruling against
NRG
Connecticut Attorney General Richard Blumenthal on Friday urged the
Federal Energy Regulatory Commission to stand by its previous ruling
that NRG should fulfill contract obligations to provide electric
services to the Connecticut Light and Power Co. (CL&P), the
Connecticut Post reported. Earlier this week, a bankruptcy judge
in New York ruled that NRG Energy Inc. could slip out of the final
months of a four-year contract that froze prices below 1996 levels. NRG
filed for chapter 11 bankruptcy protection in New York on May 14. 'The
termination of this contract would dramatically increase the rates paid
in Connecticut and would severely undercut Connecticut's electric
restructuring efforts,' Blumenthal said. Blumenthal also said that
allowing NRG to terminate its contract with CL&P would have
'profoundly adverse effects across the Connecticut and New England
regional whole-sale power markets,' reported the newspaper.
QWEST
Qwest Closes on $1.75 Billion Loan, Will Use Proceeds to Pay
Debt
Qwest Communications International Inc. raised $1.75 billion through a
syndicated loan and will use the proceeds to refinance debt due this
year, Bloomberg News reported.
Merrill Lynch & Co., Credit Suisse First Boston and Deutsche Bank,
the loan's arrangers, broke the debt into parcels and sold it to more
than 100 institutional investors and lenders, Qwest spokesman Steve
Hammack said. The loan was increased from an initial $1 billion.
Qwest, which can't sell bonds publicly because of U.S. probes into
its accounting practices, boosted the size of the loan twice because of
investor demand for the debt. The proceeds will give the Denver-based
company more time to meet payments on about $22 billion in borrowings.
Qwest has $990 million of bonds maturing today, according to Bloomberg
data.
Qwest Units Object To Leap Wireless Int'l Disclosure Statement
Two units of Qwest Communications International Inc. objected to
the disclosure statement to Leap Wireless International Inc.'s chapter
11 plan, saying the filing fails to identify some contracts and the cure
amounts necessary for the contracts, according to court papers. The U.S.
Bankruptcy Court in San Diego is slated to consider the adequacy of the
disclosure statement at a hearing on June 17. In a joint objection filed
on Thursday, Qwest Corp. and Qwest Communications Corp., said they have
numerous contracts with Leap Wireless International, including
interconnection agreements and a wholesale services pact. The debtor
company also orders services from the two Qwest units, the filing
said.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Seitel's Ex-CEO Used Company Funds For Personal Use, SEC
Alleges
Federal authorities on Friday charged the former chief executive of
Seitel Inc. with deceiving the company into paying his persona expenses
and then recording them as company costs. Paul Frame, Seitel's former
CEO, faces criminal charges filed by federal prosecutors and related
civil charges brought by the Securities and Exchange Commission (SEC).
According to the SEC, Seitel paid Frame more than $3.5 million while he
was the top executive of the company. Frame allegedly received $1.2
million to resolve personal litigation brought by his former girlfriend
and to fund his participation in a private Ferrari racing club. He then
intentionally misrepresented these expenses as company costs, the SEC
said.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
FAO Inc. Restructures Board, Names New CFO
FAO Inc. on Monday named four directors in connection with its recent
emergence from chapter 11 bankruptcy and named a new chief financial
officer, Reuters reported. The directors are Douglas Coltharp, Brian
McDermott, Charles Norris and David Walsh. Previously, the company
accepted the resignations of directors Andrew Feshbach, Robert Hollman
and Howard Zelikow.
Raymond P. Springer, chief financial officer, will leave the company
later this year to pursue other opportunities. Springer, who has been
with the company nearly four years, had stayed to assist with its
emergence from bankruptcy and reorganization. Jerome A. Kollar, senior
vice president-finance, will assume Springer's responsibilities. FAO
Inc. emerged from chapter 11 in April, reported the newswire.
Kmart Stock to Begin Trading on Nasdaq
Kmart Holding Corp.said its stock would begin trading on the Nasdaq
National Market today, Reuters reported. The Troy, Mich.-based company
said its stock would trade under the symbol 'KMRT.' Since last month,
the company has traded on the over-the-counter market. It was delisted
from the New York Stock Exchange in December, reported the newswire.
Florida Executive to Take Reins at Allegheny Energy
Hagerstown, Md.-based Allegheny Energy Inc. announced yesterday that
veteran Florida energy executive Paul J. Evanson will take charge as
chairman and chief executive next week, the Washington Post
reported. Evanson is now president of Florida Power & Light Co. in
Juno Beach. Officials at Allegheny, which is grappling with a
multibillion-dollar debt burden and extended delays in calculating its
financial results, are hoping that Evanson will help restore the
company's credibility on Wall Street.
Allegheny's problems began last year when the energy-trading market,
which Allegheny entered by buying Merrill Lynch's energy-trading
operations, collapsed. In addition to the costs of exiting that
business, Allegheny found accounting errors associated with it. The
energy-trading problems led to a cash crunch until lenders agreed in
February to refinance $2.4 billion in debt, alleviating the immediate
threat of a chapter 11 filing. But it faces hundreds of millions of
dollars in debt payments due beginning in December, reported the
Post.
Congoleum Delays Chapter 11 Bankruptcy Filing Until
September
Congoleum Corp., a maker of sheet and tile flooring whose shares have
fallen 74 percent in the past 12 months, said it will postpone its
planned chapter 11 bankruptcy filing until September, Bloomberg News
reported. The delay is the result of amendments to its settlement
agreement with lawyers representing more than 75 percent of the asbestos
claims filed against the Mercerville, N.J.-based company, Congoleum said
in a release distributed by Business Wire.
The amendments give people more time to review and respond to
information required to participate in the settlement, the company said.
As part of the agreement, Congoleum will file for bankruptcy protection.
The company still hopes to complete its reorganization by the end of the
year, it said in the statement, reported the newswire.
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