January 152002

January 15, 2002

Markets Decline Amid Uncertainty About Economy

Stocks fell yesterday, with tech shares feeling much of the pressure,
amid continuing concerns about the health of the U.S. economy, The
Wall Street Journal reported.  In midafternoon trading, the Dow
Jones Industrial Average was down 56 points to 9932, after shedding
80.33 Friday. The Nasdaq Composite Index fell 28.50, or 1.4 percent, to
1994, after declining 24.78 in the previous session.  Other major
stock indexes also lost ground Monday. 

Yesterday’s market jitters appeared to carry over from
Friday’s session, when stocks fell following some cautious
comments about the economy from Federal Reserve Chairman Alan Greenspan.
Greenspan told an audience that the economy shows signs of stabilizing,
but still faces major risks — including weak profits and business
investment — before a sustainable recovery can begin.

America West to Receive Federal Backing for Loan

Cash-strapped America West Airlines yesterday announced that it has met
the government’s conditions to receive federal backing for a $429
million loan, the CongressDaily reported.  The deal is
expected to be signed and the money made available by the end of the
week, the airline said. America West is one of only two airlines to
apply for part of the $10 billion in loan guarantees approved by
Congress to help airlines following the Sept. 11 terrorist attacks. The
loan guarantees essentially make the government a co-signer on the
company’s loan.  In America West's case, the government would
agree to pay back up to $380 million if the airline defaults.  The
Air Transportation Stabilization Board approved the federal aid on Dec.
28.   

Dunlap Agrees to Pay $15 Million to Settle Lawsuit Filed by Sunbeam
Shareholders

Former Sunbeam Corp. chief executive Al Dunlap has agreed to pay $15
million to settle a shareholder lawsuit accusing him and other
executives of inflating stock prices, according to the Associated
Press.  The civil trial was scheduled to begin yesterday.  The
settlement was reached on Friday.  The lawsuit had accused the
appliance maker and its officers of misleading investors about the
company’s sales and earnings in 1997 and 1998.  Shareholders
alleged that Sunbeam used inflated stock prices to complete mergers with
Coleman, Signature Brands USA Inc. and First Alert Inc.

Dunlap was fired as chief executive in 1998. The Boca Raton,
Fla.-based company was forced to restate financial results for the six
quarters before Dunlap was fired, triggering the shareholder litigation
and an investigation by the Securities and Exchange Commission of
Sunbeam’s accounting practices. Sunbeam filed for bankruptcy
protection in February 2001.

Comdisco Sells Units to GE Capital for About $415 Million

Technology services provider Comdisco Inc. agreed to sell its
electronics- and laboratory-and-scientific leasing businesses to a unit
of General Electric Co. for $415 million, The Wall Street Journal
reported.  GE Capital Commercial Equipment Financing also will
assume $250 million in secured debt as part of the sale, a spokesman for
Comdisco said. The sale is subject to approval of the bankruptcy court,
with a hearing scheduled for Jan. 24. Comdisco said if the sale is
approved, the deal could close by March 31.  Comdisco also will be
entitled to additional payments based on performance criteria for the
units it is selling.  Rosemont, Ill.-based Comdisco said it would
receive future contingent payments based on various portfolio
performance criteria.  The firm also said it expected to complete
its review of its other equipment leasing businesses by Jan. 31.

ENRON UPDATE

Letter Written By VP of Communications Warned of Enron
Debacle

Enron yesterday confirmed that the letter written to Enron Corp.
Chairman and Chief Executive Ken Lay last August, warning that
irregularities relating to Enron’s off-balance sheet partnerships
could bring about the company’s demise, was written by the
company’s vice president of communications, Sherron Watkins, Dow
Jones reported.  The House Commerce and Energy Committee, which is
investigating the one-time market leader’s collapse, disclosed the
existence of the letter yesterday afternoon.  Watkins had worked
for former Chief Financial Officer Andrew Fastow, whose involvement with
some of the off-balance sheet partnerships raised conflicts-of-interest
questions. Enron removed Fastow from his position in October after
reporting losses related to transactions involving the Fastow
partnerships.

The letter released by the House Committee raised questions about
secrecy and accounting treatment related to the off-balance sheet
partnerships.  “I am incredibly nervous that we will implode
in a wave of accounting scandals,” the letter said.  She said
in the letter that other Enron officials “consistently and
constantly” had questioned the accounting methods to senior Enron
officials, and directly to Jeff Skilling, Enron’s former president
and chief executive, regarding the partnerships.

Congress’s Labor Agenda For 2002 Tinted By Enron
Debacle

When Congress returns to work next week, legislators, staffers and
lobbyists will find the Washington labor agenda transformed by
investigations into employee 401(k) and pension investment programs
brought on by the Enron scandal, CongressDaily reported. But they
also face questions about reviving an economic stimulus package,
ergonomics, and a renewed call to increase the minimum wage.  Enron
“will dominate the conversation for the coming months,”
predicted Ann Combs, assistant secretary for the Pension and Welfare
Benefits Administration, which handles employee benefit issues for the
Labor Department.  The pension administration launched an
investigation in November into how Enron employees lost most of their
savings intended for retirement when Enron stock plummeted last year,
and whether the companies’ investment trustees fulfilled their
duties to employees.



BG Remains In Talks With Enron for Indian Upstream Assets

U.K. oil and gas concern BG Group PLC said on Monday that it
remained in talks with Enron Corp. to renegotiate a $388 million deal to
acquire the financially-stricken U.S. company’s upstream assets in
India, Dow Jones reported.  “We are continuing to negotiate a
new deal with Enron,” said BG spokesman Robin O’Kelly. 
Johan Zaayman, a spokesman for the bankrupt Enron said, “We are
still trying to iron out the details” and declined to
elaborate.  The two sides have been forced to rework the original
transaction, signed on Oct. 3, when BG missed a Dec. 20 deadline to
clinch a separate, but related, agreement with Indian partners on
management rights to three offshore oil and gas fields. 
O’Kelly has expressed concern that with Enron under chapter 11
bankruptcy protection, the process of renegotiation could become
complicated as it will involve a bankruptcy judge.

L&H to Pay $1 Million Cash to Unit’s Ex-owners Under New
Deal

Lernout & Hauspie Speech Products NV (L&H) has signed a new
claims settlement deal with Janet and James Baker, whose speech and
language technology business, Dragon Systems Inc., was merged into an
L&H unit in 2000 in exchange for now-deflated L&H common stock,
Dow Jones reported.  The Bakers will get $1 million in cash from
L&H unit L&H Holdings USA Inc., payable within 90 days, in
settlement of all merger-related and other claims against L&H and
L&H Holdings.  U.S. Bankruptcy Judge Judith H. Wizmur heard the
new settlement on Jan. 10.  The settlement is subject to court
approval.  The Bakers will also get $750,000 worth of shares in
ScanSoft Inc., which in December bought most of the speech and language
technologies business of L&H and L&H Holdings.

Globix Delists Self From Nasdaq, Will File Chapter 11 Next Month

Web hosting firm Globix Corp. yesterday disclosed that it would
voluntarily delist itself from the Nasdaq stock exchange, after
announcing plans to file for chapter 11 bankruptcy protection next
month, Reuters reported.  As of today, Globix shares will trade on
the over-the-counter bulletin board.  Globix said it would file for
bankruptcy next month after more than half of its bondholders agreed to
reduce the debt burden by about $480 million.    

Under terms of the prepackaged bankruptcy deal, Globix bondholders
(who own more than 51 percent of the company’s outstanding $600
million of 12-1/2 percent senior notes) will exchange those senior notes
for $120 million and a substantial equity position.  Globix said
there would be no cash interest payable on the new senior secured notes
for up to four years.   Globix, which plans to exclude its U.K
and European operations from the bankruptcy petition, said customers,
employees and trade creditors would not be affected by the
restructuring.

Ames Gets Financing Proposal From GE Capital

Retailer Ames Department Stores Inc. said it has received a financing
proposal from GE Capital that would help it emerge from chapter 11
bankruptcy reorganization this year, Reuters reported.  The Rocky
Hill, Conn.-based retailer also announced that it had good holiday
results.  Ames Chairman and Chief Executive Joseph Ettore said the
company has been able to boost profits by closing 151 stores and one
distribution center as a result of the chapter 11 bankruptcy filing five
months ago.

Judge Prevents Enviro-Recovery Bankruptcy

Ashland County, Wisc., Circuit Court Judge Robert Eaton ruled on Friday
in favor of a shareholder’s meeting for Enviro-Recovery, and
against a bankruptcy filing sought by two of the company’s three
directors, The Daily Press reported.  Enviro-Recovery is the
parent company of Superior Water-Logged Timber, the Ashland-based firm
that specializes in converting sunken logs into high-end lumber for fine
furniture, musical instruments and other products.



The ruling is the latest action in a continuing battle for control of
the company, which has been in turmoil since Chief Financial Officer
Jeffrey Schwartz sent a letter to the Enviro board last year saying the
company was running deeply in the red and should file for bankruptcy
protection “at the first opportunity.”  Water-Logged
Chief Executive Officer David “Caz” Nietzke and member of
the Enviro board filed the suit to prevent the filing. 

PG&E Bankruptcy Judge Questions Company Plans

Pacific Gas & Electric Co. has not provided enough information about
the environmental impact of transferring its hydroelectric system assets
to a new unit of its parent PG&E Corp., the judge in the
utility’s bankruptcy case said yesterday, Reuters reported. 
U.S. Bankruptcy Court Judge Dennis Montali, opening a hearing on
PG&E's disclosure statement, also questioned the timing and effects
of plans to pay large creditors with a combination of cash and long-term
notes.   Montali did not make any rulings on these points, but his
questions suggested that attorneys for PG&E and groups of creditors
have work to do in order to achieve agreements.  Hearings will
continue tomorrow.

Montali must approve the statement before PG&E can ask creditors
to approve its plan to transfer its power generation and energy
transmission assets to new PG&E companies. The California Public
Utilities Commission and other state officials oppose the transfers
because the new owners would be beyond the reach of state
regulations.  PG&E got 73 objections to information in its
disclosure statement and 23 were resolved or withdrawn, said Ron Low, a
company spokesman.  He said the company hopes to seeks creditor
approval of its plan by the second quarter this year.



States, Workers Bail Out Wheeling

After indications that the bankrupt Wheeling-Pittsburgh Steel
Corp. would close its doors, the Wheeling, W. Va.-based steelmaker
received a reprieve in the form of a $27.2 million infusion over the
weekend to keep it going, The Daily Deal reported.  The
funds didn’t come from financiers or bankers, but rather two
states.  West Virginia kicked in $5 million and Ohio chipped in
$7.2 million as part of a package to keep Wheeling-Pitt afloat. 
The rest of financing came from Wheeling’s New York-based parent,
WHX Corp., ($5 million) along with iron ore processor Cleveland-Cliffs
Co. ($5 million). Wheeling-Pitt workers offered $5 million in the form
of temporary wage cuts.



The money should last Wheeling-Pitt until the spring, when President
Bush is expected to make a decision on the U.S. International Trade
Commission’s October ruling that imports have seriously harmed
domestic steel producers.  But despite the temporary financing,
some observers believe Wheeling-Pitt may still close one of its two
blast furnaces.  On Nov. 16, Wheeling-Pitt filed for chapter 11
bankruptcy protection for the second time after failing to make a bond
payment.  It also went bankrupt in 1991.

FedEx Unit Sees $825 Million Savings From Contract Cancellation

FedEx Corp.’s FedEx Express unit said its total financial
commitments for 2003 and thereafter have been reduced by about $825
million due to the cancellation of certain contractual obligations to
acquire 19 MD11 airplanes from Ayres Group, an affiliate of SAirGroup
that filed for bankruptcy protection from creditors under Swiss law, Dow
Jones reported.  According to its Form 10-Q filed with the
Securities and Exchange Commission on Monday, FedEx Express is committed
to purchase two DC10s, four MD11s, seven A300s, seven A310s and 75 Ayres
ALM 200s to be delivered through 2007.  Deposits and progress
payments of $8 million have been made toward these purchases and other
planned aircraft transactions.

But because Ayres Corp. filed for chapter 11 bankruptcy protection in
November 2000 and its assets were subsequently foreclosed on by its
senior lender, FedEx believes it is unlikely any of the ALM 200 aircraft
will be delivered. All deposits and other capitalized costs related to
the Ayres commitment were expensed in 2001.

Kmart Board Convenes Meeting to Mull Options Amid Downgrades

Amid a severe credit-ratings downgrade and rising speculation that a
bankruptcy-protection filing might lie ahead for Kmart Corp., its board
convened yesterday to discuss the retailer’s financial options,
The Wall Street Journal reported.  A Kmart spokesman said he
couldn’t comment on whether board members were exploring the
possibility of a chapter 11 bankruptcy filing.  Kmart spokesman
Jack Ferry noted that the meeting is scheduled to continue through today
and said, “Let’s let the board meet tomorrow and see what
comes out of it.”

“I think filing for chapter 11 is a high possibility,”
said Bob Buchanan, an analyst at A.G. Edwards, adding that a filing
would give Troy, Mich.-based Kmart access to more financing and
liquidity.  But bankruptcy doesn’t appear to be the only
option facing Kmart.  Ferry said that he knew of no debt-covenant
violations, and that Kmart Chief Executive Charles C. Conaway recently
has said Kmart had a minimum of $300 million in cash on hand. 
“We’ve said that we’re up to date in payments with our
vendors,” Ferry said.