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July 20, 2007
Bernanke Breaks with Greenspan, Stresses Forecasts, Consumers
Federal Reserve Chairman Ben S. Bernanke's appearance before Congress marked his clearest break yet with predecessor Alan Greenspan, Bloomberg News reported today. In two days of testimony this week, Bernanke emphasized the Fed's predictions for growth and inflation and devoted about half his time to discussing consumer protection. In doing so, he shunned the practice of Greenspan, who distrusted forecasts and was suspicious of regulation. Bernanke made the outlook of the entire Federal Open Market Committee the centerpiece of his remarks, and then discussed the risks. He said the economy will continue to expand, framed by the opposing risks of faster inflation and the housing slump. When he was done, bond prices had barely moved, a sign that he has aligned investors' outlook with that of the Fed. Read more.
name='2'>Southeast's Bankruptcies High as U.S. Rate Declines
Almost two years after lawmakers amended the U.S. Bankruptcy Code to reduce filing rates, the Southeast continues to see elevated numbers of consumer bankruptcies, a phenomenon some experts attribute in part to local culture, Dow Jones newswire reported today. Bankruptcy numbers over the past few months appear to be slowing or leveling off in many regions. More than 73 percent of the nation's federal court districts saw bankruptcy filings drop between May and June, according to Jupiter eSources, a company that tracks bankruptcy data. Bankruptcies continue to climb or remain elevated, though, in the three highest-filing states in the countryÑTennessee, Georgia and Alabama. Some experts say that BAPCPA may have little effect on filing rates in states with chronically high bankruptcy rates. Economic and social factors such as low-paying jobs and high divorce rates often lead to financial hardship, but local bankruptcy experts say the sheer frequency of filings may also be whittling down the social stigma of filing. Read more.
name='3'>Verizon Wireless Asks Court to Disconnect Amp'd
Verizon Wireless has asked for bankruptcy court permission to disconnect Amp'd Mobile LLC from its wireless network, just over a month after its attempts to remove Amp'd from its network pushed the start-up cellular carrier into chapter 11, Bankruptcydata.com reported yesterday. In a motion filed with the U.S. Bankruptcy Court for the District of Delaware on Tuesday, Verizon Wireless said that Amp'd Mobile has been racking up $370,000 in network usage charges per day but cannot pay its post-petition bills because it has failed to receive a DIP loan. The bankrupt carrier has been operating post-petition with the use of cash collateral, provided by its lender Kings Road Investments Ltd. Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone Group PLC, has asked the bankruptcy court to allow it to immediately disconnect Amp'd Mobile's service and terminate the pre-petition wholesale agreement between the two companies. Verizon Wireless has also asked the court to either offer assurances that it would be paid in full for the services rendered or reject the wholesale agreement entirely. A hearing on the matter has been scheduled for July 23. Read more (subscription required).
Autos
name='4'>UAW in Talks with Lazard to Restructure Retiree Obligations
Detroit's unionized auto workers, under pressure from the Big Three auto makers, are signaling a willingness to consider proposals that would lift billions of dollars of retiree health-care obligations off the companies' books, the Wall Street Journal reported today. The nitty-gritty details, however, pose significant and potentially costly hurdles. The United Auto Workers union has reportedly begun working with investment bank Lazard Ltd. to study scenarios for restructuring retiree health-care obligations at General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, though Lazard has yet to be officially hired. Blue-collar retiree health-care obligations will be a central issue as the union sits down today with Chrysler to formally begin bargaining toward a new master labor agreement. GM and Ford will begin talks on Monday. The current contracts based on the last agreement expire on Sept. 14. Read more.
name='5'>Bankruptcy Judge Approves Delphi-UAW Pact
Bankruptcy Judge Robert Drain approved a new labor deal between Delphi Corp. and the United Auto Workers that offers senior workers cash payments in exchange for accepting lower wages, the Detroit News reported yesterday. Judge Drain's approval of the labor agreement is a key milestone, averting Delphi's other option, which was to petition the court to invalidate its union contracts and allow the company to impose lower wages. The UAW said that move would provoke a strike -- an event that could have doomed the company. Delphi is in talks with and must still reach agreements with its five other smaller unions. Delphi also disclosed yesterday that it had rejected a $3.3 billion financing proposal from Highland Capital Partners. Read more.
Appaloosa Ready to Fund Dana's Bankruptcy Exit, Calls Centerbridge Deal 'Unfair'
Dana Corp.'s largest shareholder, hedge fund Appaloosa Management, said yesterday that it told Dana that it is prepared to fund the auto parts maker's exit from chapter 11 bankruptcy proceedings, Reuters reported yesterday. The Chatham, N.J.-based hedge fund has complained about Dana's planned investment deal with private equity group Centerbridge Capital Partners and said yesterday that its proposal is 'materially superior' to the private equity group's plan. Appaloosa, which owns 15 percent of Dana's common stock, said the structure of the Centerbridge deal is 'fundamentally unfair to existing stakeholders.' The hedge fund said that while its plan would honor the company's proposed settlement with its unions, it would also be ready to pursue a proposal that does not require incorporation of the union settlement. Read more.
name='7'>Pennsylvania Hospital Misses Filing Deadline
Financially troubled Tyrone Hospital in State College, Pa., was ordered earlier this year to file a financial disclosure and reorganization plan in federal bankruptcy court by July 15, StateCollege.com reported today. However, the hospital failed to meet the court's deadline, and a judge is now threatening to impose involuntary chapter 7. The attorney handling the hospital's bankruptcy proceedings said that the appropriate paperwork will be filed within a few days, well in advance of the new deadline of August 9. In January, Tyrone Hospital's CEO stated that the facility's best option for long-term success was to affiliate itself with a larger medical organization. Hospital officials have been in discussions with representatives of the Altoona Regional Health System regarding a potential merger, which would provide the funds needed to upgrade the Tyrone facility.
name='8'>Ex-trustees to Repay $300K to Pension Plan
Former trustees of two pension plans at Buffalo Color Corp. have been ordered to pay $300,000 to the Pension Benefit Guaranty Corp., Msn.com reported today. A consent judgment requiring the payment was granted to the U.S. Department of Labor, which sued the former trustees for violating the Employee Retirement income Security Act. The governmental agency said the seven trustees used pension assets to buy notes from Buffalo Color's parent company, Lanesborough Corp., which were later deemed worthless. Also, the labor department said two votes were taken on the matter in December 2000 although Lanesborough filed for chapter 11 protection that September. The defendants were identified as Kenneth Funsten, Armen Dekmejian, Lawrence Kaminski, Michael Lindaman, Frank Giumpa, Lawrence Zollinger and Frank Miller. The Pension Benefit Guaranty Corp. has been trustee of the pension plan since October 2004.
name='9'>Miami Condo Glut Pushes Florida's Economy to Brink of Recession
In the middle of the biggest glut of condominiums in more than 30 years, Miami developers keep on building, Bloomberg News reported today. The oversupply will force prices down as much as 30 percent, the worst decline since the 1970s, and help push Florida's economy into recession as early as October, said Mark Zandi, chief economist at West Chester, Pa.-based Moody's Economy.com, who owns a home in Vero Beach, Fla. Thirty-seven new high-rise condos and 20,000 new units are being built in Miami's 1,040-acre downtown, where sales fell almost 50 percent in May, according to the Florida Association of Realtors. The new units will join the 22,924 existing condos in Miami-Dade County that were for sale in April. Puig Development Group, a closely held company that converted rental apartments to condos, filed for chapter 11 protection on May 29. The Hialeah, Fla.-based Puig and its subsidiaries controlled 2,900 units in Florida, including 980 condos, worth about $210 million, said Ronald Glass of Atlanta-based GlassRatner Advisory & Capital Group LLC, CRO for the Puig properties. Read more.
TROUBLED COMPANIES IN THE NEWS
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CalAmp Corp., an Oxnard, Ca. maker of microwave amplification components and other devices, reported a first quarter net loss of $11.4 million, including a $310,000 extra charge. Revenue increased 2%Ðto $47.4 million.
Datalink Corp., a Chanhassen, Mn. supplier of large data-storage systems, reported a second quarter net loss of $350,000. Revenue edged up 1%Ðto $40.3 million.
Electronic Data Systems Corp., the Plano, Tx. provider of technology services, is cutting 147 positions at its offices in Federal Way, Wa.
Ford Motor Co., Dearborn, Mi., is expected to begin receiving bids for its Jaguar and Land Rover luxury brands from private-equity firms and possibly other auto manufacturers. Ford, which earlier sold its Aston Martin brand for nearly $850 million, could fetch up to $8 billion for Jaguar and Land Rover.
General Motors Corp. reported its June sales in the U.S. declined 21%. In the second quarter, GM saw its worldwide sales actually increase slightly, by 0.4%Ðto 2.4 million cars.
Intersil Corp., a Milpitas, Ca. maker of silicon chips, reported its second quarter net income declined 27%Ðto $31.2 million. Revenue declined 5%Ðto $178 million.
Motorola Inc., the Schaumburg, Il. cell phone maker, reported a second quarter net loss of $28 million, on a 19% sales declineÐto $8.7 billion. The loss compares with income of nearly $1.4 billion for the same period one year earlier. The company's loss from continuing operations stood at $38 million for the period.
Pfizer Inc. warned that it will have to undertake further restructuring to strengthen its results as it faces increased generic competition amid the expiration of its drug patents on Lipitor and other products. That would be on top of plans to trim its payroll and shutter plants announced in January. The announcement of further downsizing comes as the big Manhattan, N.Y. drug company reported its second quarter results. Net income sank 48% in the periodÐto $1.3 billion, including restructuring and other charges of about $1.1 billion. Sales fell more than 5%Ðto $11.1 billion.
Quovadx Inc., a Greenwood Village, Co. software company, entered into an agreement to be acquired by Rogue Wave for $139 million. The purchase by Rogue Wave, a unit of private-equity concern Battery Ventures, follows six rough years for Quovadx as a public company. Recently, the Securities and Exchange Commission sued two former Quovadx executives related to accounting problems three years ago. Quovadx earlier settled a number of investor lawsuits related to the accounting matter for more than $18 million.
Southwest Airlines Co.'s second quarter net income fell 17%Ðto $278 million, while revenue increased 5.5%Ðto $2.6 billion. The Dallas, Tx. carrier, facing increased fuel costs, has been trying to rein in expenses, recently saying it will offer buyouts to a quarter of its workforce.
Tully's Coffee Corp., Seattle, Wa., reported a fiscal loss of more than $9.7 million, although sales increased to $62 million, up from $58 million a year ago. In the previous year Tully's had net income of $15.4 million.