March 26, 2004
Fed Continues on 'Patient' Path
Federal Reserve officials will have to decide 'in coming years' when to
raise interest rates from low levels that spur economic growth, being
careful not to brake the expansion by acting too soon, Fed Governor
Donald L. Kohn said yesterday, the Washington Post reported. A
principal challenge facing the Federal Reserve in coming years will be
to return monetary policy from its current, stimulative stance to a more
neutral posture,' Kohn said in a speech to the National Association for
Business Economics. Kohn echoed other Fed officials who in recent days
have repeated that the central bank will be 'patient' in deciding when
to start raising rates because inflation remains very low, hiring has
been sluggish and businesses continue to have plenty of unused
production capacity, the newspaper reported.
Income Up 0.4 Percent, Outpaces Spending
U.S. personal income growth outpaced consumer spending in February, the
Commerce Department said today, as shoppers cut back on their purchases
of long-lasting durable goods, Reuters reported. The department said
personal income grew 0.4 percent in February, up from January's revised
0.3 percent gain. Consumer spending rose by a less-than-expected 0.2
percent in the month. January spending was revised upward, however, to a
0.5 percent increase from the previously reported 0.4 percent
advance.
The February spending data may cause some Wall Street forecasters to
downgrade their estimates of economic growth in the first quarter.
Analysts had expected a stronger 0.4 percent gain in spending and a
smaller 0.3 percent increase in incomes, the newswire reported.
Conferees Inch Toward Deal On Pension Reform Legislation
House and Senate conferees yesterday adjourned their closed-door meeting
without reaching an agreement on a final pension bill, although
negotiators said they were close to finding a compromise that would
target relief to the multi-employer pension plans most in need of
financial help, CongressDaily reported. One option under
consideration would target the help to about 20 percent of
multi-employer plans, a staffer said. Under the expected agreement, the
bill would include waivers of accelerated pension payments for airline
and steelmakers, industries whose pension systems lawmakers say were
most harmed by the recent downturn in the economy. That change is
expected to save companies $16 billion over the next two years. However,
conferees agreed the bill would not include a general waiver allowing
companies outside those two industries to apply to the Treasury
Department for the same relief, a Senate staffer said, the newswire
reported. Lawmakers warned that no final decisions have been made and
that all the bill's provisions are subject to further talks.
Air Canada Needs More Time to Restructure
Air Canada wants more time in bankruptcy protection to solve a pension
dispute between its unions and its key equity investor that threatens
the insolvent airline's restructuring plans, Reuters reported. On
Monday, the Montreal-based carrier will ask the Ontario court overseeing
its restructuring to extend its protection from creditors by one month
to April 30. Air Canada obtained bankruptcy protection on April 1, 2003.
The judge overseeing Air Canada's court process has warned that failure
to resolve the pensions issue could jeopardize the airline's
restructuring and that raises the specter of liquidation, the newswire
reported.
Thailand Acts to Curb Lending to Consumers
In recent weeks, the Bank of Thailand has issued a series of regulations
aimed at curbing Thai credit-card companies, including strict new limits
on how long card issuers can roll over delinquent debts, and new
requirements for card issuers that convert overdue credit-card accounts
into longer-term personal loans, the Wall Street Journal reported
yesterday. Central bank Gov. Pridiyathorn Devakula also has pledged to
start regulating all nondeposit-taking financial institutions -- many of
which issue credit cards -- after the passage of a new Banking Act,
expected this year. Many Thai finance companies that cater to low-income
earners currently operate outside of the Bank of Thailand's regulatory
umbrella. Read the full article at
href='http://www.wsj.com/'>www.wsj.com (subscription required).
Air Travel Forecast to Grow in 2004
Passenger traffic aboard U.S. airlines is expected to grow this year for
the first time since 2000, according to government data released
yesterday, Reuters reported. The projection was included in the Federal
Aviation Administration's annual industry forecast that estimated growth
in 2004 of more than 4 percent to 686 million passengers, for all
flights aboard U.S. carriers. This includes the biggest airlines and
their regional affiliates as well as low-cost carriers. The agency's
economic and other industry financial experts also expect that by 2005,
the number of passengers on flights aboard U.S. airlines will reach
levels not seen since before the 2001 hijack attacks.
UAL Posts February Operating Loss
United Airlines' parent UAL Corp. on Thursday reported a February
operating loss of $112 million and a net loss of $259 million, including
expenses from its bankruptcy, Reuters reported. The airline said it
ended February with a cash balance of $2.5 billion. Mainline unit
revenue, or the amount of money taken in per available seat mile, rose
12 percent during the month, the newswire reported.
Calais Offers $550 Million for MCI's Embratel Stake
Calais Participacoes S.A., a consortium of Latin American phone
companies, on Thursday said it had offered to buy MCI's stake in
Brazil's Embratel Participacoes SA for $550 million, 53 percent more
than the price offered by Telefonos de Mexico, Reuters reported.
Bankrupt telephone company MCI earlier this month agreed to sell its
stake in Brazil's long-distance operator to Mexico's telecommunications
firm for $360 million. The U.S. Bankruptcy Court in New York set an
April 8 deadline for objections to that deal, the newswire reported. MCI
has said there was a significant risk the consortium's plan would not
get regulatory approval because its members are the dominant wire-line
operators in each of their respective regions in Brazil, according to
Reuters.
Footstar To Sell Remaining Athletic Shoe Stores
Bankrupt shoe retailer Footstar Inc. on Thursday said it would sell its
remaining athletic-shoe stores as quickly as possible after failing to
extend a supply agreement with Nike Inc., its biggest supplier, Reuters
reported. West Nyack, N.Y.-based Footstar said the move allowed it to
focus on its Meldisco division, which operates about 2,496 licensed
footwear sections in department stores such as Kmart Holdings Corp.
Meldisco also offers its own Thom McAn brand and private labels through
Kmart, Wal-Mart Stores Inc. and other retailers. Footstar's leased
footwear departments operations also have struggled since Kmart closed
some 600 stores as part of its own chapter 11 reorganization, the
newswire reported.
Banks Agree to Loan Adelphia $8.8 Billion
A consortium of four banks have agreed to underwrite $8.8 billion in
loans to bankrupt cable operator Adelphia Communications Corp. as part
of its plan to emerge from bankruptcy, according to court filings,
Reuters reported. The banks, including J.P. Morgan Chase & Co.,
Citigroup, Credit Suisse First Boston and Deutsche Bank are committed to
loan Adelphia a quarter of the 'exit financing' package, according to
filings that Adelphia submitted, the newswire reported. Under the plan,
each bank would underwrite $1,375,000,000 in senior secured credit
facilities and another $825 million in bridge loan facilities, Reuters
reported.
Enron Chapter 11 Plan Continues To Draw Objections
Enron Corp.'s proposed Chapter 11 reorganization plan continues to draw
objections from creditors and others, including former court-appointed
examiner Neal Batson. While expressing no comment on the substance of
the plan, Batson said in a court filing Tuesday that it should be
modified to reflect court orders governing his duties, rights and powers
as examiner, and to provide that his rights will continue after the plan
is confirmed. The U.S. Bankruptcy Court in Manhattan appointed Batson as
examiner in 2002 to investigate various aspects of the
financially-troubled energy giant, which filed for Chapter 11 protection
in December 2001.
Provided by Daily Bankruptcy Review
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