January 14, 2002
Greenspan Says Economy Still Faces Risks
Federal Reserve Chairman Alan Greenspan said on Friday that there
were scattered hopeful signs that the recession could be ending, but he
warned that the American economy still faces “significant
risks,” The Washington Post reported. Greenspan,
making his first public comments on the economy since the Fed cut
interest rates on Dec. 11, said there are tentative indications that the
economic slump could be drawing to a close, but he said those signals at
present are far from conclusive. Greenspan identified some of
those threats as weak profits and business investment and restrained
household spending caused by rising unemployment. He said,
however, there were tentative signs that a recovery could soon
begin. Greenspan’s comments appeared to leave the door open
to a further rate cut, possibly at the Fed’s next meeting Jan.
29-30.
ENRON UPDATE
Houston-based Enron's Bankruptcy Case To Remain In New
York
Enron’s bankruptcy proceedings will remain in New York and not be
moved to Houston, according to the Associated Press. The
Houston-based energy giant filed for chapter 11 bankruptcy protection on
Dec. 2 in New York. Some Enron creditors sought to transfer the
company’s bankruptcy case to Houston, where several thousand
employees lost their jobs, but Judge Arthur Gonzalez sided with Enron
and declined the request. Judge Gonzalez called New York the
“most efficient forum” for handling the matter.
Houston-based Dynegy and El Paso Corp. had argued it would be more
convenient and economical to hear the case near the location of many
Enron creditors and assets.
Senate Enron Probe to Delve Into Document Destruction
A key Senate oversight panel is on track to issue a rash of subpoenas on
Friday as part of its sweeping probe of the historic financial collapse
of Enron Corp., congressional aides said, Dow Jones reported. Sen.
Carl Levin (D-Mich.), chairman of the Senate Governmental Affairs
Committee’s Permanent Subcommittee on Investigations, intends to
issue 51 subpoenas requesting documents and records from current and
former corporate officials at Enron and Arthur Andersen, Enron’s
outside auditor. The subcommittee is seeking extensive records and
documents dating back to January 1999.
Subcommittee aides confirmed on Friday that last-minute changes in
the subpoenas were made in light of Andersen’s revelation on
Thursday that it destroyed key documents sought by congressional
investigators in both the Senate and House. The subcommittee
doesn’t intend to identify the recipients of the subpoenas, the
aide said, noting that replies are due next month. Of the
subpoenas, 49 will go to individual current and former members of
Enron’s board and other corporate officials, as well as to
Andersen’s auditors and consultants, the aides said. The
remaining two subpoenas will be issued to Enron and Andersen as
corporate entities.
Top Bush Aides Admit Enron Asked for Help, But There Are No Signs
of Assistance
New details continue to emerge about extensive efforts by Enron Corp. to
win help from the Bush administration as the company slid into
bankruptcy court, but there has been no indication that the White House
offered help in response, The Wall Street Journal reported.
Yesterday, Commerce Secretary Donald Evans said he had several
conversations with President Bush late last year about how sad
Enron’s collapse was, but didn’t tell the president about
Enron Chairman Kenneth Lay’s appeals for government help until
last Thursday. Evans said on NBC’s “Meet the
Press” that as Enron’s condition worsened, he informed White
House Chief of Staff Andrew Card about a phone call he received from
Lay. But Card, speaking through White House spokesman Ari
Fleischer, said he too chose not tell the president that Enron was
looking for the administration’s help.
Treasury Secretary Paul O’Neill also said he didn’t
inform the president of calls he and Treasury Undersecretary Peter
Fisher received from Enron. O’Neill said that at the time of
the calls — in late October — he was deeply involved in
pushing the president’s stimulus package in Congress, pursuing the
financial trail of terrorists, and dealing with other issues of greater
concern. The White House also said during the weekend that Energy
Secretary Spencer Abraham declined to meet with Enron in mid-September,
but then, on Nov. 2, the secretary called Lay to inquire about the
company’s status. Robert Bennett, Enron’s attorney,
said Lay believes the September calls related to an energy conference
being organized by the company. In each case, White House officials say
that the administration did nothing to try to prevent Enron’s Dec.
2 bankruptcy court filing.
2 More Enron Units Seek Chapter 11 Protection; 35 Now
Bankrupt
Two more Enron Corp. units have filed for chapter 11 bankruptcy
protection in the U.S. Bankruptcy Court of the Southern District of New
York, bringing the total of bankrupt units to 35, Dow Jones
reported. Enron Natural Gas Marketing Corp. listed assets of
$79,042 and total debts of $1.36 billion — not including
off-balance sheet transactions and contingent obligations — in
papers filed on Friday. The unit, which markets natural gas and
oil, has 1,000 shares of common stock and is owned by Enron North
America. Enron Natural Gas’s largest unsecured claims relate to
gas contracts with American Public Energy for $419.3 million and with
Mahonia Ltd., an offshore company, for $847 million.
Calypso Pipeline LLC, in a filing last week, listed total assets of
negative $4.2 million and total debts of negative $1.3 million,
excluding off-balance sheet and contingent obligations. The unit
operates a proposed natural gas pipeline from the Bahamas into South
Florida. Enron Global LNG LLC owns Calypso.
UBS Is Chosen as Winning Bidder For Enron’s
Energy-trading Unit
Investment bank UBS AG was selected as the winning bidder for Enron
Corp.’s once-powerful wholesale trading unit, following an auction
in bankruptcy court, an Enron lawyer said Friday, reported Dow
Jones. Terms of the UBS bid weren’t disclosed. Enron
lawyer Martin Bienenstock said details would be made public today.
The successful bid beat out another bank, Citigroup Inc., as well as an
offer by BP PLC, the London-based oil company, for a portion of the
trading business. Details of the bids submitted by UBS and
Citigroup haven’t been disclosed.
Ha-Lo Industries Seeks Approval of Third Amendment to DIP Pact
Ha-Lo Industries Inc. is asking a bankruptcy court to approve a third
amendment to the company’s debtor-in-possession (DIP) financing
agreement through LaSalle Bank N.A. and Comerica Bank, according to Dow
Jones. The Niles, Ill.-based firm has requested an extension of
the loan agreement through April 30 or the date on which the company
reaches a maximum revolving credit amount, whichever is earlier,
according to a court motion. The ability of Ha-Lo and its Lee
Wayne Corp. unit to borrow under the DIP pact was set to expire on Dec.
31, 2001, but a court order extended the company’s borrowing
through Jan. 16. The U.S. Bankruptcy Court in Wilmington, Del.,
has scheduled a hearing on the proposed extension and amendment for
Wednesday. The third amendment would allow Ha-Lo to borrow up to
$3 million during March, and $1.5 million in April, more than the
borrowing bases without taking into account the temporary borrowing base
increase.
Ha-Lo filed for chapter 11 bankruptcy protection on July 30 and
listed assets of about $100 million and liabilities of about $80
million. The company’s Lee Wayne and Starbelly.com Inc.
units also filed for bankruptcy.
Museum Company Seeks Chapter 11 Protection
Museum Company Inc. filed for chapter 11 bankruptcy protection on
Thursday with the U.S. Bankruptcy Court in Manhattan, according to Dow
Jones Newswires. The company cited total assets of about $73.5
million and total liabilities of $54.6 million as of Dec. 1, 2001.
The retailer of museum-related items said that it has more than 1,000
creditors. Museum Company estimated that funds would be available for
distribution to unsecured creditors. Wells Fargo Retail Finance
LLC, the company’s pre-petition lender, holds secured claims of
about $8.3 million. Wells Fargo is the largest unsecured creditor.
Fairfield, N.J.-based Museum Company manufactures and sells
museum-inspired merchandise including jewelry, sculptures, toys, stained
glass, books and music.
Jore Receives 60 More Days of Financing
U.S. Bankruptcy Judge Ralph B. Kirschner on Thursday agreed to grant
bankrupt Jore Corp. 60 more days of financing, giving the company more
time to find a buyer or salvage the business, the Associated Press
reported. The company received a buyout offer on Thursday but has
not accepted it, said Clyde Hamstreet, Jore’s chief restructuring
officer. Pentair Corp., a New York Stock Exchange corporation
valued at some $2.7 billion that owns Porter-Cable and Delta tool
brands, made an offer earlier Thursday to buy Missoula, Mont.-based
Jore. Details were not disclosed.
Under Kirschner’s order, banks will supply Jore
with $900,000 for next week’s operations, with the rest to be
determined. If Jore cannot find a buyer or right the business by Feb. 5,
the company will be liquidated at auction in March.
Polaroid Withdraws Plan to Award Big Retention Bonuses to Top
Aides
Polaroid Corp., under fire from employees and retirees, withdrew a
controversial plan that would have paid at least $5 million in retention
bonuses to top executives while the company is in bankruptcy
proceedings, reported Dow Jones. The instant photography concern,
which filed for bankruptcy court protection in October, had said it
needed to make the payments to the 45 executives to keep the management
team focused on running the company while it seeks a buyer for all or
part of the company. Along with the $5 million, the company said
the executives would be eligible for various other bonuses, for which it
declined to specify amounts. At a time when the company has been
laying off thousands, the plan infuriated employees and retirees, whose
medical and life insurance payments were cut off shortly before the
bankruptcy filing.
Last month, Polaroid made a court-approved deal with creditors, under
which executives would receive $1.55 million out of the $5 million in
retention bonuses in January and February. Company spokesman Skip
Colcord said the other bonuses—including the remainder of the $5
million—would now be shelved, while the company tries to come up
with another arrangement.
Kmart Seen Closing Large Number of Stores
Kmart Corp., battling intense competition from discount rivals Wal-Mart
Stores Inc. and Target Corp. as well as talk of bankruptcy, is expected
to close a large number of its 2,100 stores in a bid to revive its
ailing retail business, analysts said on Friday, reported Reuters.
The Troy, Mich.-based retailer on Thursday disclosed it was in talks
with lenders about existing and supplemental financing after reporting
weak holiday sales. Kmart, the No. 2 discount chain behind Wal-Mart,
also said it was reviewing its liquidity position and business plan for
2002 and 2003. The company is already in the midst of a massive
restructuring aimed at making it more competitive with Wal-Mart.
Some analysts have identified about 250 to 300 unprofitable stores
that would be likely targets for closure. Kmart shares had already
been hammered by comments made last week by Prudential Securities
analyst Wayne Hood that the chain might file for bankruptcy. The
company reported on Thursday that sales at stores open at least a year
fell 1.0 percent in December.
Webvan’s Liquidation Confirmed in Bankruptcy Court
The defunct Internet grocery store Webvan Group on Friday said that a
bankruptcy judge in San Francisco confirmed its liquidation plan, in
which all the company’s assets have been sold and proceeds will be
distributed to creditors, Reuters reported. Webvan filed for
bankruptcy protection in July after being unable to grow its online
business fast enough to overcome steep operating losses. The
Foster City, Calif.-based e-tailer said that its stock would be canceled
and that it did not expect to have any funds available to distribute to
equity holders.
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