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April 6, 2007
Investors Appeal to Supreme Court
Enron investors appealed
Thursday to the Supreme Court, seeking review of their class-action
lawsuit against investment banks that had put together financing
transactions for the company, which collapsed in 2001, Reuters reported
yesterday. The investors are seeking to overturn last month’s
ruling by a federal appeals court that their lawsuit cannot proceed. The
ruling was a big victory for Merrill Lynch, Credit Suisse and Barclays.
The Supreme Court agreed last month to hear a case raising a similar
issue on whether shareholders of companies accused of securities fraud
can sue other companies on charges that they had also taken part.
Lawyers for the plaintiffs said that the Enron case would be a
“suitable companion.”
Airlines
id='2'>Examiner Named in Northwest Bankruptcy
An investment banker was
appointed on Thursday to examine the details of the Northwest Airlines
bankruptcy case, in response to a request from the shareholders’
committee who claim the airline has a higher value than previously
reported, the Associated Press reported yesterday. The U.S. Trustee's
office recommended investment banker Harvey Tepner, a partner in charge
of restructuring at New York-based Compass Advisers LLP. Tepner's task
is to determine whether Eagan, Minn.-based Northwest Airlines Corp.
properly evaluated the worth of its assets. He is not charged with
producing his own valuation of the business. In approving the
nomination, Judge Allan
Gropper said that the examiner process should
not slow down Northwest's bankruptcy exit. Tepner has until May 14 --
two days before the company will seek court approval of its
reorganization plan -- to submit a written report. Creditors have until
May 7 to vote on the plan.
href='http://biz.yahoo.com/ap/070405/northwest_bankruptcy.html?.v=1'>Read
more.
In related news,
Judge Allan
Gropper has given three labor unions approval
to sell an additional 20 percent of the unsecured claims they received
from the airline in exchange for concessions,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Judge Gropper approved modifications to the
letters of agreement on Wednesday that allow the unions to cash in on an
additional 20 percent of their claims before Northwest’s chapter
11 plan becomes effective. His order covers Northwest’s agreements
with the Transport Workers Union of America, the Aircraft Technical
Support Association and Northwest Airlines Meteorologists
Association.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=22118'>Read
more. (Registration required.)
id='3'>Pilot’s Union Wants to Reopen Airline
Contracts
The nation's largest
pilot union said on Thursday it would seek to reopen contracts to roll
back bankruptcy concessions at UAL Corp.'s United Airlines and
other
face='Times New Roman'
size='3'>U.S.
size='3'>carriers, Reuters reported yesterday. John Prater, president of
the Air Line Pilots Association, said pilots gave back an enormous
amount to help airlines restructure and want their share now that
industry profits are returning. The International Air Transport
Association this week projected 2007 profits for
w:st='on'>
size='3'>U.S.
size='3'>airlines of $4.4 billion after factoring for restructuring
expenses. 'Frustrations are building when we see management taking their
$10-to-$25 million payday,' Prater said of executive compensation
packages. The move would also affect terms for pilots at the old US
Airways Group Inc., which faced liquidation before it merged with
America West Airlines in 2005. Prater said the union would likely
approach Northwest Airlines Corp. and Delta Air Lines Inc. after they
emerge from bankruptcy this spring.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/04/05/AR2007040500837_pf.html'>Read
more.
New
Century Granted $150 Million Bankruptcy Financing
New Century Financial
Corp., the largest U.S. subprime lender now under bankruptcy protection,
was authorized on Thursday to obtain up to $150 million of financing to
keep operating under chapter 11, Reuters reported yesterday. The order
by U.S. Bankruptcy Judge
size='3'>Kevin Carey allows New Century to
draw on funds it lined up from CIT Group Inc. and Royal Bank of Scotland
Group Plc's Greenwich Capital Financial Products Inc. unit prior to its
April 2 bankruptcy filing. Carey set an April 19 deadline for parties to
object to the so-called debtor-in-possession financing. A final hearing
to authorize the financing is set for April 24.
href='http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-04-05T184550Z_01_N05206458_RTRIDST_0_USA-SUBPRIME-NEWCENTURY-UPDATE-1.XML'>Read
more.
In related news, New
Century Financial Corp. has been hit with a class action suit alleging
that the company and its executives made false statements in
registration and proxy statements, Bankruptcy
Law360 reported yesterday.
w:st='on'>
Orleans
Gauthier Swick LLC has filed a suit on behalf of investors who purchased
Series A preferred shares or Series B preferred shares in two of New
Century’s public offerings. Although
several shareholder lawsuits have been filed alleging that the company
made false statements in order to increase the sale of its stock at two
public offerings, this is the first suit brought on behalf of the
holders of preferred shares.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=22109'>Read
more. (Registration required.)
id='5'>Calpine Objects to Hire of Financial Advisor
Calpine Corp. is looking
to rebuke a bid by its equity committee to retain Perella Weinberg
Partners LP as its financial advisor, arguing that the move could cost
as much as $40 million in fees,
size='3'>Bankruptcy Law360 reported yesterday.
The equity committee, which filed its motion to hire the New York-based
Perella Weinberg on March 1, has proposed that Calpine’s estate
compensate the firm $150,000 per month plus a success fee to current
equity security holders. However, Calpine said the firm’s fees
could collectively reach as high as $40 million, according to its
objection. Calpine said that the proposed success fee is inappropriate
given the circumstances of the bankruptcy case, because the fee is
essentially based on Calpine’s equity value prior to its emergence
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=22091'>Read
more. (Registration required.)
Autos
id='6'>Ford Leaders' Pay Packages May Heighten Labor
Tension
Ford Motor Co.'s $62
million pay package for its top executives could add to
already-simmering tensions between
w:st='on'>
size='3'>Detroit's auto
makers and unionized workers ahead of a summer showdown over cost cuts,
the Wall Street
Journal reported today. The
w:st='on'>
size='3'>Dearborn
w:st='on'>
size='3'>Mich.
which last year lost $12.6 billion, disclosed the pay packages in a
filing with the Securities and Exchange Commission yesterday. They
include $28.2 million in compensation for Chief Executive Alan Mulally,
who joined Ford in October after a long career at aerospace giant Boeing
Co. Mulally received a $666,667 salary, an $18.5 million bonus, $8.68
million in option awards and other compensation such as use of a
corporate aircraft and relocation costs. Ford had previously disclosed
it would pay him an $18.5 million bonus. Ford said the compensation is
consistent with other large corporations and said that a large portion
of the executive compensation is tied to the company's future
performance.
href='http://online.wsj.com/article/SB117578165739060945.html?mod=us_business_whats_news'>Read
more. (Registration required.)
id='7'>Again, Kerkorian Makes a Move for Chrysler
Kirk Kerkorian’s
investment arm, the Tracinda Corporation, made a $4.5 billion cash offer
yesterday for the struggling Chrysler Group that hinges on winning the
exclusive right to negotiate with DaimlerChrysler and a deal with the
United Automobile Workers union that could mean worker concessions,
the New York
Times reported yesterday. “Tracinda
believes by taking a long-term approach to solving Chrysler’s
problems, it can become a robust and lasting stand-alone entity,”
the company said. Kerkorian’s bid for Chrysler comes less than a
year after he bought 10 percent of General Motors and then tried to
broker an alliance between the automaker and Renault of France and
Nissan of Japan, both run by Carlos Ghosn. Now, both Chrysler and the
union must decide how to respond to the unexpected offer from
Kerkorian.
href='http://www.nytimes.com/2007/04/06/business/06auto.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
id='8'>Consumer Confidence at 6-Month Low
Consumer confidence sank to a
six-month low as higher gasoline prices, a housing slump and stock
market turbulence made people fret more about the economy, the
Associated Press reported today. The RBC Cash index showed confidence
dropping to 85.4 in April. That was down from 92.3 in March. The new
reading was the lowest since 83.1 in October. The index is based on the
results of the international polling firm Ipsos. It marked the second
straight month that consumer confidence has declined. The Department of
Energy said that gasoline prices climbed to $2.71 a gallon nationwide in
early April, from $2.61 a gallon near the end of March. 'Consumers
appear to be anxious about the economic climate in the face of the rise
in gasoline prices as well as the volatility of the stock market and the
ongoing woes of the housing market and the subprime mortgage market,'
said Lynn Reaser, chief economist at Bank of America's Investment
Strategies Group.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/04/06/AR2007040600277_pf.html'>Read
more.
International
id='9'>New British Credit Law Targets Unscrupulous
Lenders
Millions of British borrowers
will receive greater protection from rogue lenders from Friday as
changes to consumer credit and mortgage regulations come into force,
Reuters reported today. The implementation of the Consumer Credit Act of
2006 will allow British consumers the ability to go to court if they
think credit has been offered to them under unfair terms. They will also
be able to take any grievance they may have to the Financial Ombudsman
Service (FOS). The new law extends the work of the FOS to cover all
licensed lenders, instead of the 70 percent that previously fell under
its remit. If the ombudsman rules that a firm has acted irresponsibly in
giving credit or advice, it can order the lender to pay compensation,
repay charges or interest, and even write off debt.
href='http://investing.reuters.co.uk/news/articleinvesting.aspx?type=personalFinanceNews&storyID=2007-04-06T062505Z_01_NOA845398_RTRUKOC_0_BRITAIN-CREDIT-PROTECTION.xml'>Read
more.
id='10'>Bank of
w:st='on'>
size='3'>England
size='3'>Holds Interest Rate at 5.25 Percent
The Bank of England left its
key interest rate at 5.25 percent, leaving the cost of borrowing
unchanged for the third month in a row, MarketWatch.com reported
yesterday. The bank surprised the market with a rate hike in January --
its third since the summer of 2006 -- as it struggled to keep a lid on
inflation. At its last meeting in March, however, the Monetary Policy
Committee voted 8 to 1 to hold rates with the lone dissenter actually
calling for a rate cut amid volatile stock-market conditions. The latest
figures showed inflation rose to 2.8 percent in February from 2.7
percent in January. The level is still well above the government's
target rate of 2 percent, but the bank has previously said it sees
inflation steadily coming back to the target level as utility bills
retreat from the high levels of 2006.
href='http://www.marketwatch.com/news/story/story.aspx?guid=%7BA51F173C%2DEB83%2D487D%2D8963%2DBE43DB93338F%7D&dist=rss'>Read
more.
TROUBLED
COMPANIES IN THE NEWS
1000’s of companies lose money or
experience some form of difficulty each quarter.
The business news articles below are
taken from the Daily Summary of Troubled & Fast Growing U.S.
Companies and Other Business News published by Bastien Financial
Publications.
To begin receiving the COMPLETE Daily
e-Summary, that emails you information on over 70 such companies each
morning, email
face='Times New Roman'
color='#0000ff'>steve@creditnews.comyour name, company
name, address, phone and fax. We’ll set you up within 24
hours.
Tax Time Special! Now through April 15,
you can receive an annual subscription to the U.S. Business
Journal¹s weekly summary of troubled
w:st='on'>
w:st='on'>U.S.
Indicate “ABI CODE 27” in your email.
size='3'>Chicago Athletic Association, an
athletic club in
face='Times New Roman' size='3'>Chicago
size='3'>,
size='3'>Il
back to 1890, is closing its doors and laying off its eighty-eight
employees.
size='3'>Circuit City Stores Inc., the
size='3'>Richmond
w:st='on'>Va.
consumer electronics retailer, said that it will continue
closing underperforming stores as it also considers selling off its
chain of more than 500 locations in
w:st='on'>
size='3'>Canada
This follows an announcement a week ago that
w:st='on'>
size='3'>Circuit
face='Times New Roman' size='3'>City
would slash its payroll by 3,400 jobs (8% of its
workforce). In its fourth quarter,
face='Times New Roman' size='3'>Circuit
size='3'>City
about 650
w:st='on'>
size='3'>U.S.
size='3'>stores, reported a net loss of $12 million, compared to a
profit of $141 million a year ago. Sales edged up 1%–to $3.9
billion. The recent results included $145 million in charges
related to store closings and other restructuring moves. For the
year,
face='Times New Roman' size='3'>Circuit
size='3'>City
a net loss of $11.7 million on an 8% sales increase–$12.4
billion.
size='3'>Daimler Chrysler AG, the German-based
automaker, made it official and said that it is now negotiating with a
number of potential suitors to sell off its troubled
face='Times New Roman' size='3'>Chrysler Group
size='3'>unit in the
w:st='on'>
size='3'>U.S.
size='3'> One such suitor, Tracinda Corp., an investment
firm owned by investor Kirk Kerkorian, offered to pay $4.5 billion in
cash for Chrysler Group while also promising to post a $100 million good
faith deposit. DaimlerChrysler’s CEO, Dieter Zetsche, however says
that a deal with any suitor won’t be an easy one. The
size='3'>U.S.
size='3'>automaker, which lost $1.5 billion last year, faces some $20
billion in healthcare obligations for its retired workers. According to
some estimates, Chrysler Group might sell for perhaps up to $5 billion
to $7 billion, compared to the $36 billion that DaimlerChrysler forked
over for the unit nine years ago in what was described at the time as a
“marriage made in heaven”. Mr. Zetsche added that he
hoped a sale of Chrysler Group could be made with a strategy of making
the
face='Times New Roman'
size='3'>U.S.
size='3'>unit profitable on a sustainable basis. This led some to
further speculate that Canadian auto-parts maker Magna International
Inc. could be an ideal merger candidate.
size='3'>Ford Motor Co.’s CEO Alan
Mulally, speaking at a the New York International Auto Show, said that
his company will not have to resort to any deeper restructuring moves
than those that have already been announced. Mr. Mulally expressed hope
that the
face='Times New Roman'
size='3'>Dearborn
carmaker’s Way Forward restructuring plan will head the firm
toward recovery by 2009. The earlier announced retrenchment called for
the company to shutter fourteen factories and cut 44,000 jobs, or about
a third of its workforce, by next year. While Mr. Mulally had earlier
said that Ford would lose sales and marketshare over the next few years,
he conceded that sales declines in January and February fell more
sharply than had been anticipated. The firm recently announced that its
first quarter sales in the
w:st='on'>
size='3'>U.S.
size='3'>sank 13% from the year-earlier period, while its marketshare
slipped another 2%, leaving it with a 16.4% share of the
market.
size='3'>Foundation Coal Holdings Inc. is
closing its
face='Times New Roman' size='3'>Keensburg
size='3'>,
size='3'>Il
making the announcement shortly after the plant’s unionized
workers said they would go on strike.
size='3'>Greenbrier Cos.’s stock price
plunged 17% after the
w:st='on'>Lake
Oswego
railcars announced a loss for its second quarter and altered its outlook
for the year. The company reported a net loss in the recent
quarter of $6.1 million, including extra charges of $16.5 million.
Revenue edged up less than 2%–to $240 million. Greenbrier also
retracted its fiscal financial projections due to weakening demand for
railcars.
size='3'>Oxford Industries Inc., an
size='3'>Atlanta
w:st='on'>
size='3'>Ga.
maker, reported its third quarter net income declined 33%–to $9.7
million. Revenue slipped 3%–to $267 million.
size='3'>Retail Ventures Inc., a Columbus,
Oh.-based retailer, reported a fourth quarter net loss of $35.9 million.
Sales rose 6.5%–to $874 million.. For the year, it lost $151
million on a 5% sales increase–to nearly $3.1
billion.