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Weak Reports on Jobs and Retail Sales Send Stocks Down
Stocks fell for a second day yesterday, eroding gains from a recent
rally, as weak jobs data and weak retail sales reports renewed doubts
about the strength of the economy, according to Reuters. A report
released yesterday showed that claims for first-time unemployment
benefits remained above 400,000. Also, retail chains, including Wal-Mart
Stores, Target, J. C. Penney and Sears, Roebuck all missed their sales
targets for the month, and several retailers forecast weak quarterly
earnings. 'The sales reports out of the retailers were on the light
side,' said Peter Dunay, chief market and options strategist at Wall
Street Access, a brokerage firm in New York. You have to be concerned
that the consumer, who's been the pillar of strength of the economy, may
be tiring,' he said. 'They're tiring because they're worried about
unemployment, so they're starting to trim their spending,' reported the
newswire.
Kleinert's, Clothing Maker, Files for Bankruptcy
Kleinert's Inc. filed for bankruptcy protection after sales dropped,
Bloomberg News reported. The closely held company listed assets and
debts of $50 million to $100 million each in its chapter 11 petition
filed in U.S. Bankruptcy Court in New York on Wednesday. Sales, which
began falling in 2001, were further eroded after the terrorist attacks,
the company said in court papers. The company's borrowing base also was
affected by overstated customer orders. The company said in a statement
that it has arranged financing to fund its operations during its
reorganization, reported the newswire.
Enron Bankruptcy Judge Approves $137.6 Million in Professional
Fees
U.S. Bankruptcy Court Judge Arthur Gonzalez has approved $137.6 million
in fees for lawyers, accountants and other professionals hired to help
reorganize Enron Corp., which filed for bankruptcy in December 2001,
Bloomberg News reported. Twenty-three professional firms led by Weil
Gotshal & Manges, Enron's main bankruptcy legal counsel, had billed
the former energy trader for $151.2 million in fees and expenses through
August of last year. Gonzalez reduced that amount by $13.6 million in a
May 2 order that did not cover later fees.
Enron is the most expensive bankruptcy in history in terms of legal
fees, surpassing the amounts billed in the 1999 bankruptcy of the Loewen
Group Inc. funeral-home chain. Lawyers charged $39 million in that
reorganization, court records show. More than $300 million in fees and
expenses have been requested by professional firms hired to sort out
Enron's finances since the Houston-based company sought court
protection, reported the newswire.
Boeing, Hawaiian Air to Fight for Control of Bankrupt
Carrier
Boeing Co. will ask a federal bankruptcy judge to replace Hawaiian
Airlines Inc.'s management in a move the 12th-largest U.S. carrier says
could force it to shut down, Bloomberg News reported. U.S. Bankruptcy
Judge Robert J. Faris in Honolulu began a two-day hearing yesterday on
Boeing's request for a trustee to supplant Hawaiian's top management.
Hawaiian Chairman John W. Adams, whose private investment partnership
holds a majority stake in the airline, and other executives have
enriched themselves at creditors' expense, Boeing said, Bloomberg
reported. The appointment of a chapter 11 trustee 'could have decidedly
adverse consequences for Hawaiian's viability,'' Adams said in court
papers. 'The flying public would likely perceive the appointment of a
trustee as the first step to liquidation,'' reported the newswire.
While trustees typically sell a bankrupt company's assets to pay
creditors, some lawyers familiar with the case said appointment of a
trustee for Hawaiian might help reorganize the airline under independent
management. 'A trustee becomes a kind of super CEO with power to
override decisions of the board and company officers,'' said Tom
Salerno, head of the corporate bankruptcy department at
Cleveland-based law firm Squire, Sanders & Dempsey, reported the
newswire.
Electronic Data Agrees to Reduced WorldCom Services
Contract
Electronic Data Systems Corp. agreed to a reduced contract with WorldCom
Inc., the telephone company that filed the biggest U.S. bankruptcy case,
Bloomberg News reported. The contract will be sent to a bankruptcy court
for approval shortly, Electronic Data spokesman Jeff Baum said. CFO
Robert Swan said last night the deal calls for fewer sales to Electronic
Data than the one in effect, which pays about $600 million a year,
Bloomberg reported.
Lehman Aided First Alliance Lending Fraud, Lawyer Tells
Jury
Lehman Brothers Holdings Inc. engaged in fraud by financing a mortgage
company accused of deceiving borrowers, a lawyer for the borrowers told
a jury, Bloomberg News reported. The borrowers claim they were
overcharged by First Alliance Corp. Lehman argues that First Alliance
had rectified its practices by the time Lehman agreed to provide a
credit line and bundle its mortgages for sale as bonds. The three-month
trial is believed to be the first courtroom test involving a securities
firm accused of helping an alleged predatory lender engage in fraud. If
Lehman is found liable for aiding First Alliance's fraud, asset-backed
securities lenders would be forced to investigate clients more
carefully, reported Bloomberg.
Morgan Stanley Asks for Ouster of Lauer; Regulator
Investigates
Morgan Stanley asked a U.S. bankruptcy court in Bridgeport, Conn. to
replace Michael Lauer as the manager of Lancer Partners, a hedge fund in
which Morgan Stanley is an investor, and appoint a trustee to replace
him, Bloomberg News reported. The filing, made on May 1, comes as Lauer,
47, faces client redemptions at his $1 billion Lancer Group amid
allegations he overstated the value of his investments. Lauer filed for
bankruptcy last month to keep investors in Lancer Partners from suing
him for not honoring their redemption requests, reported the
newswire.
Morgan Stanley's money management unit filed the petition to remove
Lauer, saying investors ``have utterly lost faith in the fidelity,
capability and trustworthiness'' of Lauer, the general partner. 'The
General Partner need not and should not be entrusted to continue as the
fiduciary.'' Morgan Stanley filed suit against Lauer earlier this year
for
failure to provide a 2001 audit for the fund and to disclose other
information. Early this year it found discrepancies in Lancer's
bookkeeping, it said in the filing, Bloomberg reported.
AMR's New CEO Says Cash, Conditions Point to Recovery
Though its future remains 'uncertain,' AMR Corp.'s American Airlines has
enough cash and perhaps even a good enough economic tailwind to fly its
way to recovery, new Chief Executive Gerard J. Arpey said, the Wall
Street Journal reported. Mr. Arpey, in his first meeting with
reporters since being named to the top job last month, said he believes
this year's first quarter will prove to be 'the low point.' The quarter
was a financial disaster for AMR, with a net loss topping $1 billion.
The company, which had only $1.3 billion in unrestricted cash at the end
of March, faces large debt payments in June. The company must have at
least $1 billion in cash on June 30 to avoid violating terms of its
credit line, reported the Journal.
FLEMING
Fleming to Close Five Grocery, General Distribution Sites
Fleming Cos. will close five wholesale distribution centers to reduce
costs as the company seeks to exit bankruptcy, Bloomberg News reported.
Grocery divisions in Salt Lake City, Utah; Warsaw, North Carolina;
Northeast, Maryland; and Phoenix, Arizona are being closed. A general
merchandise center in King of Prussia, Penn., is also being shuttered,
Fleming said in a statement sent on PRNewswire, reported the
newswire.
Fleming Directors, Officers Seek Defense Funds From Insurance
Firm
Some directors and officers of Fleming Cos. are asking a bankruptcy
court to allow an insurance company to advance defense expenses under a
management liability and company reimbursement policy. The defense costs
are related to securities and derivative lawsuits filed against Fleming,
or its directors and officers, according to court papers. The suits were
filed beginning last September, and some are in connection with a
Securities and Exchange Commission investigation of the firm's
accounting and trade practices, which the government agency ordered in
February. Some current and former directors and officers are asking the
court to authorize Greenwich Insurance Co. to initially advance up to
$7.5 million. The Greenwich Insurance policy has a $15 million liability
limit, the motion said.
Provided by Daily Bankruptcy Review (
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Rigases Seek To Force Adelphia Communications To Return
Papers
Adelphia Communications Corp. founder John Rigas and his sons are asking
a bankruptcy court to force the company to return original business
records they say were confiscated last June, according to a motion. In
the motion, filed with the court late Wednesday, the Rigases said
counsel for the company has refused to return the original documents,
even after repeated demands. Adelphia Communications spokesman Eric
Andrus told DBR Thursday that the company has provided the Rigases with
copies of all the documents, as requested. The Rigases want the
originals.
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
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