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March 21, 2006
name='1'>Employee Benefit in Bankruptcy Case Before High Court
Today
The Supreme Court today
will hear oral argument in Howard Delivery
Service Inc. v.
face='Times New Roman' size='3'>Zurich
American Insurance (05-128), a
case that tests the tension between the bankruptcy law and workers
compensation insurance, and whether such insurance is an employee
benefit under the Code, according to today’s
Cornell’s Legal
Information Institute Bulletin. Section
507(a)(4) of the Bankruptcy Code states that 'the following expenses and
claims have priority in the following order: . . . Fourth, allowed
unsecured claims for contributions to an employee benefit plan arising
from services rendered within 180 days of the [filing of the petition].'
Howard Delivery Service argues that it should not have to pay unpaid
insurance premiums to Zurich American Insurance because workers
compensation does not qualify as a 'contribution to an employee benefit
plan.' The Fourth and Ninth Circuits have held that workers compensation
does fall within this language, while the Sixth, Eighth and Tenth
Circuits have argued that it does not. The Supreme Court must now decide
whether or not to interpret the language of § 507(a)(4) to include
workers' compensation policies as 'contributions to an employee benefit
plan,' which benefit from priority under the Bankruptcy
Code.
href='http://www.law.cornell.edu/supct/cert/05-128.html'>Read
more.
w:st='on'>
name='2'>Oneida
face='Times


New
Roman' size='3'> Files for Chapter 11
Protection
Oneida Ltd., which was
once the world's largest maker of stainless steel flatware, has filed a
pre-negotiated plan to reorganize under chapter 11 bankruptcy protection
that calls for the company to shed about $100 million in debt, the
Associated Press reported yesterday.
face='Times New Roman' size='3'>Oneida
size='3'>filed its plan Sunday in the U.S. Bankruptcy Court for the
Southern District of New York in
w:st='on'>
size='3'>Manhattan
Richard Mahony, speaking on behalf of the 126-year-old company. It had
announced earlier this month it would file for bankruptcy protection
after agreeing to a debt-for-equity deal with its lenders. According to
court papers, the company listed assets of $305 million and debts of
$332 million.
face='Times New Roman' size='3'>Oneida
said it lost more than $157 million between January 2003
and October 2005. The company expects to be out of chapter 11 in 90
days, Mahony said, adding that the filing will not affect employment.
Oneida Ltd. has 936 employees, including about 430 in central
size='3'>New York
href='http://www.nytimes.com/aponline/business/AP-Oneida-Bankruptcy.html?page…'>Read
more.
CFTC
Objects to Refco Unit’s Move out of Chapter 7
Refco Inc’s
proposal to shift its former unit out of chapter 7 bankruptcy
proceedings would set a bad precedent for commodity brokers, the
Commodity Futures Trading Commission said in a filing,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. The
w:st='on'>
size='3'>U.S.
size='3'>regulatory agency sought to stymie Refco’s attempts to
convert the bankruptcy case of its Refco LLC unit into a chapter 11
reorganization. The Refco unit has been bogged down in chapter 7
proceedings since last November. According to court papers filed in the
U.S. Bankruptcy Court in Manhattan, the agency argued that Refco’s
bid would let commodity brokers manipulate liquidation proceedings by
filing—possibly transferring accounts—and then neglecting to
fulfill all the remaining requirements of the process. A court hearing
on the matter is scheduled for Thursday. The news comes as a bankruptcy
court recently permitted a U.S. Trustee to appoint an examiner to
investigate the recent claims of fraud and misconduct by Refco prior to
its chapter 11 filing. Ignoring opposition from the company’s
lenders, led by Bank of America and Refco’s creditors' committee,
Judge Robert Drain allowed U.S. Trustee Deirdre
Martini to select an examiner of the
allegations.
name='4'>Riverstone Faces Off Against Dissident
Shareholder
Bankrupt
telecommunications company Riverstone Networks Inc. is defending itself
against a bid by one of its largest shareholders, Charles L. Grimes, to
toss the company’s chapter 11 filing, Portfolio Media reported
yesterday. Grimes moved to dismiss Riverstone’s case in February,
arguing that the company is actually solvent and that it had failed to
prove that it was suffering from financial distress at the time it filed
its petition for bankruptcy. Riverstone’s stock registration was
revoked by the SEC after the California-based company filed for chapter
11 protection last month in the U.S. Bankruptcy Court for the District
of Delaware, listing assets of $98.3 million and liabilities of $130
million. Grimes has asserted that Riverstone’s bankruptcy filing
was an unnecessary ploy to facilitate the company’s asset sale to
Lucent Technologies Inc. or a higher bidder. If the sale proceeds,
shareholders could receive more than double the 40
face='Times New Roman' size='3'>cents a share
the stock traded at prior to the company filing for bankruptcy,
according to Riverstone. But Grimes objected to the hurried pace of the
sale process, arguing that potential buyers could be excluded in the
company’s rush to close the deal.
name='5'>Judge Approves
w:st='on'>
size='3'>Sale
PlusFunds
After overruling three
final objections, a bankruptcy court gave the green light Thursday for
the offer on the $5-million sale of hedge fund PlusFunds Group
Inc., Portfolio
Media reported yesterday. Judge James Peck of
the U.S. Bankruptcy Court for the Southern District of New York granted
San Francisco-based private equity firm FTVentures’
bid of $2
million in cash and $3 million in stock. Bankrupt creditor Refco Capital
LLC and the creditors' committee of bankrupt Refco Inc. withdrew their
objections after reaching agreements with PlusFunds. The judge also
threw out objections by potential bidders Bear Stearns Asset Management
Inc., HFR Asset Management LLC and National Bank of
w:st='on'>
size='3'>Canada
During negotiations, New York-based PlusFunds cut its overbid price
from $1 million to
$500,000 and slashed its bidding increments from $500,000 to $250,000.
It also decided to decrease the time that a qualified bidder must
contract to allow its funds to be available from 60 days to 30 days. The
judge also granted a hotly debated $150,000 breakup fee with up to
$400,000 in expenses if another party outbids FTV during the auction.
Refco Capital had challenged the possibility of a breakup and expenses
as well as the “no shop” clause that kept the hedge fund
from giving enough information to potential buyers, according to its
objection.
w:st='on'>
name='6'>Louisville
face='Times New Roman' size='3'> Orchestra Reaches Deal to Save it
from Bankruptcy
A last-minute deal reached
Monday saved the Louisville Orchestra from a final curtain call as a
contract agreement between the orchestra board and its musicians' union
looks to extend performances for at least five more years, WKYT27 News
(Kentucky) reported yesterday. The agreement, which goes into effect in
September, includes concessions by the musicians on base salary,
overtime pay, vacation and benefits. However, it keeps all 71 musicians;
orchestra officials had wanted to reduce the number to 53. The
orchestra's schedule will also become more flexible under the new deal,
doing away with requiring all shows to be performed in contiguous
weeks. The changes in the contract will save the orchestra $1.9 million
over five years, said Joe Pusateri, an orchestra board member who is
also one of the organization's largest donors.
href='http://www.wkyt.com/Global/story.asp?S=4656743'>Read
more.
name='7'>Loan Program in
face='Times New Roman' size='3'>New England
size='3'>Sold as Alternative to Bankruptcy
w:st='on'>
size='3'>Cranston
w:st='on'>
size='3'>R.I.
Concepts launched WhyFile.net, which is now offering loans to
debtors who would fail to pass the means test implemented by the new
bankruptcy law for chapter 7,
size='3'>Providence Business News reported on
Saturday. Wesley Wright, the company’s director of alternative
lending, said that the program only offers home equity and debt
consolidation loans and that it is marketed directly to attorneys.
Through WhyFile, Wright said, the mortgage company has forged a referral
network of 50 attorneys in
more in
face='Times New Roman'
size='3'>Massachusetts
Despite causing bankruptcy filings to plummet after taking effect, the
new laws have had little impact on debtors’ abilities to file
under chapter 7, according to Christopher M. Lefebvre,
a bankruptcy attorney with offices in
w:st='on'>
size='3'>Pawtucket
“Simply because, at first blush, you may appear to fail the means
test, does not mean that bankruptcy may not have some beneficial value
to you,” said Lefebvre. “I am very troubled, and a matter of
fact I’m almost offended, with the notion of companies providing
[credit] for people who are already inundated in debt.”
href='http://www.pbn.com/contentmgr/showdetails.php/id/120021'>Read
more.
name='8'>Appeal Against PG&E Chapter 11 Plan
Dismissed
A federal appeals court has
dismissed as moot an appeal against a bankruptcy court's confirmation of
Pacific Gas and Electric Co.'s chapter 11 reorganization plan, the
utility said, according to Reuters on Monday. In a filing with the
Securities and Exchange Commission, it said the U.S. Court of Appeals
for the Ninth Circuit made the ruling on March 16, dismissing the appeal
by two former commissioners of the California Public Utilities
Commission (CPUC). PG&E's reorganization plan under
chapter 11 was confirmed by the U.S. Bankruptcy Court for the Northern
District of California, and became effective on April 12, 2004, the
filing said.
href='http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&s…'>Read
more.
UPS
Uses Political Clout to Press for Cuts in Pension
Benefits
The top legislative
priority for the United Parcel Service Inc. (UPS) is currently seeking
Congress to allow employers to cut pension benefits already promised to
some workers in plans funded by multiple companies, Bloomberg News
reported yesterday. Atlanta-based UPS says the plans can no longer
afford to pay full benefits because so many companies that used to pay
into the pool have gone out of business. As the number of contributors
shrinks, remaining companies are obligated to fund the retirement
plans. Multi-employer
plans cover 9.8 million
w:st='on'>
size='3'>U.S.
size='3'>workers, or about 22 percent of those in defined-benefit plans.
They were $177 billion in the red in 2003, the last year for which
figures are available, according to the Pension Benefit Guaranty Corp.,
a quasi-governmental agency that insures pensions. The more common
single-employer plans were underfunded by $450 billion in 2005, the
Labor Department says. UPS is part of a coalition supporting the House
pension provision composed of trade groups, unions and companies such as
Cleveland-based Eaton Corp., the world's second-biggest maker of
hydraulic equipment, and Carteret, New Jersey-based Pathmark Stores
Inc., owner of more than 140 supermarkets.
href='http://www.bloomberg.com/apps/news?pid=10000103&sid=aZ4baobjLWaQ&refer=…'>Read
more.
Autos
face='Times New Roman' size='3'>
name='10'>Delphi
size='3'> Bankruptcy Put Dominoes in
Motion
Delphi's bankruptcy was
the beginning of a wave that has engulfed General Motors and the United
Auto Workers as well as the other auto parts suppliers that
followed Delphi into chapter 11, the
size='3'>New York Times reported today.
Before
size='3'>Delphi
protection, GM said it could not estimate the financial impact of such a
move. Immediately afterwards, it said the impact could be as little as
zero; last week, it estimated the minimum effect would be $5.5 billion
to $12 billion. To be sure, the
face='Times New Roman' size='3'>Delphi
size='3'>bankruptcy is not the biggest problem for GM, which had already
embarked on an overhaul restructuring that includes plans to shut all or
part of 12 plants and eliminate 30,000 jobs by 2008. Yet the
bankruptcy's fallout has wiped away an embryonic sense of optimism that
GM could eventually reverse its losses on the strength of the new sport
utilities and pickups arriving in showrooms this year. Some analysts say
that
size='3'>Delphi
helpful to G.M. in at least one way: getting the UAW to the bargaining
table. “No matter its impact on GM, Delphi's bankruptcy has been
useful for 'softening up the UAW,' said Gerald C. Meyers, a professor at
the Ross School of Business at the
w:st='on'>
size='3'>University
size='3'>Michigan
size='3'>.
href='http://www.nytimes.com/2006/03/21/business/21place.html?_r=1&oref=slogi…'>Read
more.
In related news, the lead
negotiator for the second-largest union at auto supplier Delphi Corp.
says he is optimistic that an early-retirement and job-cut agreement
could be reached this month, perhaps coming soon after Delphi and its
former parent General Motors Corp. complete a similar deal with their
largest union, the United Auto Workers, the Wall Street Journal
reported today. Senior officials at GM, Delphi and the UAW continued to
negotiate yesterday evening on a voluntary early-retirement package for
tens of thousands of GM and
face='Times New 

Roman'
size='3'>Delphi
of averting a strike. A deal has been close since Thursday evening, say
people familiar with the matter. UAW workers are expected to be offered
as much as $35,000 each to retire from GM or
w:st='on'>
size='3'>Delphi
one person briefed on the talks. GM and
w:st='on'>
size='3'>Delphi
workers between them. GM and Delphi have also made 'significant
progress' on an early-retirement package for the 8,500 hourly Delphi
workers represented by IUE-CWA at eight
w:st='on'>
size='3'>Delphi
represents 4,000
size='3'>Delphi
href='http://online.wsj.com/article/SB114290632346603674-email.html'>Read
more.
Airlines
name='11'>Delta Seeks to Cut Employee Stock
Options
Delta Air Lines Inc.,
which is operating under bankruptcy protection, asked a judge Monday to
allow the nation's third-largest carrier to void roughly 93 million
stock options held by 70,000 current and former employees and directors,
the Associated Press reported yesterday. The Atlanta-based company said
the options, if exercised, would provide little to no real value, making
the $305,000 a year it costs the airline to maintain, account for and
administer the benefit an unnecessary burden on Delta. The company's
motion says the request has the support of the creditors' committee in
its bankruptcy case and the Air Line Pilots Association, the union that
represents holders of roughly one-third of the options Delta is seeking
to reject. A hearing on the request is scheduled April 3 in U.S.
Bankruptcy Court in
w:st='on'>New
York
chief financial officer, Edward Bastian, said it's possible flight
bookings in April and May are being affected by a strike threat by
Delta's pilots. But while he wouldn't provide numbers, he stressed that
bookings are not down in any 'material' way, and there's no way to tell
for sure why bookings may be different from a year ago.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/03/20/AR20060…'>Read
more.
name='12'>Hawaiian Air Accused of Antitrust
Violations
Hawaiian Airlines Inc.
has been accused of violating antitrust laws by using its bankruptcy
proceedings to prevent a low-cost competitor from entering the
carrier’s regional stronghold—the Hawaiian state’s
popular inter-island market, Portfolio Media reported yesterday.
The allegations were leveled by Arizona-based Mesa Air Group Inc. in a
counterclaim filed in the U.S. Bankruptcy Court for the District of
Hawaii. The rival said that Hawaiian Airlines' actions violate the
Sherman Act. Hawaiian Airlines sued Mesa Air in February for allegedly
using restricted bankruptcy documents to study and copy Hawaiian’s
financial projections for business in the region. The Hawaiian suit
asked the court to enjoin Mesa Air from entering the market for two
years. However, Mesa Air said the suit was “motivated not by any
intent to achieve success on the merits, but rather to misuse the
litigation process as an anti-competitive weapon,” the document
said. Mesa Air asserts that Hawaiian’s allegations are nothing
more than a thinly-veiled attempt to monopolize the market by pinching
off competitor’s efforts in the region—something it has been
accused of in the past. The ultimate goal of the lawsuit, according to
Mesa Air, is to prevent
w:st='on'>
size='3'>Mesa
a low-cost carrier, since that would supposedly threaten
Hawaiian’s ability to offer “supra-competitive prices to
consumers.” Mesa Air also accused Hawaiian of coercing freight
carriers to boycott shipping the parts and equipment Mesa Air needed to
open its Hawaiian operations, thus physically hampering Mesa Air’s
logistics for entering the market.
International
name='13'>Bank says UK Staff Support Pension
Changes
National Australia Bank
Ltd. (NAB) said its British staff had voted to support changes to their
pension schemes and the bank will make a one-off payment of 100 million
pounds ($176 million) to reduce its pension deficit.
size='3'>The bank owns Clydesdale Bank in
w:st='on'>
size='3'>Scotland
Yorkshire Bank in
w:st='on'>
size='3'>England
NAB's
face='Times New Roman'
size='3'>UK
size='3'>operations contributed about 16 percent of cash earnings before
one-off items for the year ended Sept. 30. 'Rather than receiving a
pension based solely on a final salary at retirement, the proposed
structure builds pension benefits year-on-year based on a member's
annual salary,' said NAB, which sold its two Irish banks last
year.
href='http://today.reuters.com/business/newsArticle.aspx?type=bankingFinancia…'>Read
more.