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House Subcommittee to Hold Third FCRA Hearing
The House Financial Services Financial Institutions and Consumer Credit
Subcommittee will hold the third in a series of hearings on Thursday on
reauthorization of provisions of the Fair Credit Reporting Act (FCRA),
CongressDaily reported. Financial institutions are seeking
congressional action to continue the law's provisions on information
sharing among credit providers, which pre-empt state laws over credit
information sharing. The federal pre-emption provisions expire at the
end of this year.
Asbestos Litigation Negotiations Continue This Week
Senate Judiciary Chairman Orrin Hatch (R-Utah) had not indicated late
last week whether he would schedule a markup this week for his
still-controversial legislation to reform the litigation system for
asbestos-injury cases, CongressDaily reported. Hatch had asked
colleagues to provide him with suggestions for changing the bill by this
Friday and is expected to incorporate some of the ideas of his
Democratic colleagues into the bill. Hatch is working with Sen. Max
Baucus (D-Mont.) to address Baucus's concern that hundreds of asbestos
victims in the mining town of Libby, Mont., would not be eligible for
compensation under the new system. As written, the bill only provides
compensation to victims exposed at their workplace, reported the
newswire. Hatch's plan calls for a separate court system to hear
asbestos cases and a $108 billion trust fund to compensate victims. Most
Democrats have yet to embrace the plan, but both sides want to overhaul
the asbestos litigation system -- which they say has caused several
companies to go bankrupt and prevented the sickest victims from getting
adequate compensation.
Almost three quarters of Americans Support Tougher Bankruptcy
Laws
Almost three quarters of Americans are in favor of bankruptcy
legislation that would make it much more difficult for debtors to
discharge their debts and get a fresh start, according to the Cambridge
Consumer Credit Index. Of those polled, 79 percent said that if the
legislation was enacted, it would deter them from filing for bankruptcy
while 21 percent would be more likely to file for bankruptcy, the group
announced in a press release on Friday.
'Despite the weak economy and rising unemployment, the Index survey
demonstrates a vast majority of Americans favor toughening bankruptcy
laws, perhaps because they feel that too many people are filing for
bankruptcy who have the ability to repay their debts and have been
getting off the hook too easily, ' said Jordan Goodman, spokesperson for
the Index.
The overall Cambridge Consumer Credit Index increased by five points
from May to 61. The Index rose in two of the three component questions.
The 'Reality Gap,' which is the difference between the amount of debt
consumers say they will pay off in the next month compared to the amount
of debt they actually pay off a month later, widened to eleven points,
reversing its three-month narrowing trend. A month ago, 79 percent of
Americans planned to pay off debt, while a month later 68 percent
actually did so. The Cambridge Consumer Credit Index is a
forward-looking economic indicator gauging consumer spending and debt.
It is released on the fifth business day of every month to coincide with
the Federal Reserve Board's G19 release of consumer credit outstanding
data.
More in U.S. Late on Credit Card Payments
More Americans fell behind on their credit card payments in April than a
year ago, suggesting that consumers are straining to support their
spending, Moody's Investors Services said on Friday, Reuter's reported.
Consumers, although debt heavy, do not owe so much that it will force
them to sharply pull back their spending, which will be troublesome for
an economy struggling to gain traction. A stabilization in the jobs
market and steady income growth will stave off borrowers from falling
into a deep hole, according to economists. Moreover, many cardholders
who are also homeowners have paid down their credit card bills with
money freed up from mortgage refinancings, Moody's Senior Credit Officer
William Black, told Reuters. 'Cardholders have paid down their credit
card debt with lower-cost, tax-deductible mortgage debt,' Black said.
Moody's delinquency index on credit card payments 30 days past due rose
to 5.25 percent in April, up from 5.04 percent a year earlier but down
from March's 5.44 percent.
High-payment delinquencies among cardholders have spilled into more
losses for banks and retailers with subsidiaries that issue credit
cards. April's rate of charge-offs, the annualized rate that issuers
write off card accounts as uncollectible, rose to its highest level in
more than a year. Moody's blamed the charge-off increase to high
bankruptcy filings, which is at a record in the first quarter at 404,154
cases. Many issuers reported that April tends to have seasonally high
bankruptcy filings, Moody's said, Reuters reported.
Halliburton Delays Units' Chapter 11 Filing
Houston-based Halliburton Co. on Friday said that as part of a $4
billion settlement of 200,000 asbestos lawsuits, it expects to push back
the bankruptcies of two units until the third quarter, Reuters reported.
The most important step in the cash-and-stock settlement, agreed upon
last December, is the filing of the prepackaged bankruptcies of the
company's Dresser Industries and Kellogg Brown & Root subsidiaries.
The bankruptcy filings will shield Halliburton from having to file for
bankruptcy itself. Once completed, the deal will settle all of the
company's pending asbestos litigation and remove a major investor worry,
reported Reuters.
Halliburton said the completion of the trust distribution procedures and
the plan of reorganization is taking more time than originally
anticipated. Currently, the company anticipates it will complete its
ongoing review of asbestos claims in July. Halliburton already delayed
the bankruptcies earlier this year, from March until sometime in the
second quarter, reported the newswire. The company said the delay in
filing has occurred because it is taking longer than expected to
complete the trust distribution procedures and the plan of
reorganization. Jim Wicklund, an analyst at Banc of America Securities,
said the delay in the bankruptcy filings could benefit Halliburton by
reducing the amount of money it needs to pay out to asbestos victims, to
$450 million from $4 billion.
The company also underscored its continuous tracking of legislative
proposals for asbestos reform in Congress. In deciding whether to
approve its asbestos settlement, the company said it will take into
account the status of legislative initiatives, which include a proposed
$108 billion trust fund to pay asbestos injury claims, Reuters
reported.
Klingeberger Appointed New Bankruptcy Judge
Assistant U.S. Attorney Philip Klingeberger has been appointed as U.S.
Bankruptcy Judge for the Northern District of Indiana, the
Post-Tribune reported. Klingeberger will begin his term on June
16, working alongside Chief Bankruptcy Judge Kent Lindquist - who will
take senior status and hear fewer cases, reported the online newspaper.
Chief Judge Joel M. Flaum of the U.S. Court of Appeals for the Seventh
Circuit announced Klingeberger's appointment last week.
Klingeberger has been Assistant U.S. Attorney for the Northern
District of Indiana since 1986 - serving as chief of the civil division
for part of that time. Prior to that, he was in private practice in
Highland and Merrillville. Klingeberger has specialized in bankruptcy
law. He has been a member of the American Bar Association, Indiana State
Bar Association and Lake County Bar Association. He attended the
University of Michigan and received his undergraduate degree from
Grinnell College in 1972. Klingeberger received his law degree in 1975
from Indiana University Bloomington, where he was on the Law Review,
reported the Post-Tribune.
NRG Energy Says FERC CL&P Order Threatens Access To $250
Million Loan
An order from the U.S. Federal Energy Regulatory Commission that
requires a unit of NRG Energy Inc. to continue upholding a money-losing
power supply agreement with Connecticut Light & Power Co. (CL&P)
threatens the struggling power generator's ability to access a $250
million loan package approved last month by a bankruptcy court judge, an
NRG attorney said Wednesday. The debtor-in-possession financing for NRG
Energy was tied to a number of conditions, including one that it shed
its contract with Northeast Utilities' CL&P. NRG's Power Marketing
Inc. supplies CL&P with 45 percent of the electricity it needs to
serve its almost 1.1 million customers. 'Power Marketing Inc.'s
continued performance under the CL&P agreement puts at risk NRG's
ability to obtain working capital to fund 11 electric generating
facilities in New York, Connecticut and Massachusetts, its Northeast
generating facilities under its DIP Loan, which also specifically
requires rejection of the CL&P agreement,' NRG attorney Neil Levy
wrote in a letter to FERC. 'Given NRG's current financial situation,
these Northeast generating facilities need access to the DIP Loan
funds.'
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Group Petitions to Force Seitel Into Chapter 11
A group of unsecured debt holders is seeking to force Seitel Inc. into a
chapter 11 bankruptcy-court proceeding, the Wall Street Journal
reported. The group filed a petition on Friday in the U.S. Bankruptcy
Court in Wilmington, Del., saying the Houston seismic-data provider has
failed to pay them the more than $79 million that they are owed. MONY
Life Insurance, Seitel's largest creditor, with $17 million owed, was
among those filing the petition.
Seitel, roiled by a scandal a year ago, said it is considering various
options, but is likely to ask the court to convert the filing to a
voluntary chapter 11. Under chapter 11, a company continues to operate
while it tries to work out a plan to pay its debts. 'Most likely, we
will consent to it,' said Larry E. Lenig Jr., Seitel's president and
chief executive officer. The company has 20 calendar days to respond,
reported the online newspaper.
American Airlines and Northwest Match United's Free-ticket Offer
American Airlines and Northwest Airlines on Friday matched a
frequent-flier promotion announced two days earlier by United Airlines,
the Wall Street Journal reported. The programs, which experts expect
other carriers to copy, essentially give mileage-club members a free
domestic round-trip ticket in return for taking three round-trip
business trips between now and the end of September, or Oct. 7 in
Northwest's case.
In this unprecedented industry downturn, demand by business fliers who
pay the most for their tickets has been hurt far more than demand by
leisure travelers. In response to the overall decline in demand --
recently exacerbated by the war in Iraq and the outbreak of severe acute
respiratory syndrome -- airlines have slashed capacity and cut fares,
but continue to lose eye-popping sums of money, reported the
Journal.
FPL Executive Leaves to Become Allegheny Energy CEO
Allegheny Energy Inc., which clinched financing earlier this year to
avert a bankruptcy, on Monday said it named Paul Evanson, an FPL Group
Inc. executive, as chairman, president and chief executive, Reuters
reported. The Hagerstown, Md.-based U.S. utility said Evanson will
replace Jay Pifer who took over as president and CEO on an interim basis
from Alan Noia. Noia, who presided over the company as it struggled to
avoid a credit crunch once the energy trading market fell apart,
announced his retirement in March, a little more than a week after
Allegheny secured a long-awaited $2.4 billion financing agreement with
its lenders.
Allegheny, like many of its rivals, is now in the midst of refocusing on
its utility business. Over the past few months, it has canceled some
power plant projects, cut employees and suspended its common stock
dividend as part of an ongoing effort to shore up its finances, reported
the newswire.
Washington Group Has Bright Prospects After Bankruptcy
Washington Group International Inc., a Boise, Idaho-based engineering
and construction company, has bright prospects according to an article
in the June 9 edition of Barron's that discusses the outlook for
companies that have recently emerged from the bankruptcy process,
reported Reuters. Washington Group has a great balance sheet with about
$170 million in cash, no debt, and $2.5 billion of annualized revenues,
Alan Fournier, head of Pennant Capital, said in the Barron's
story.
WorldCom Must Still Fix 'Material Weaknesses'
Auditors for WorldCom Inc. identified several lingering problems with
accounting procedures that the telephone and data services company must
still resolve, the Securities and Exchange Commission said on Friday,
Reuters reported.
WorldCom, which filed for bankruptcy amid an $11 billion accounting
scandal, received a report from its external auditors KPMG on June 3
that outlined 'material weaknesses and other deficiencies in the
company's internal accounting control structure and policies and
procedures.' Although WorldCom has made several changes to eliminate its
past financial malfeasance, KPMG found additional problems, the SEC said
in a filing with the U.S. District Court for the Southern District of
New York. Ashburn, Va.-based WorldCom said it expects to adopt the
latest recommendations before it emerges from bankruptcy in the fall,
reported the newswire.
Two reports examining WorldCom's accounting scandal will be released
today. The disclosure of the reports had been delayed by several months
at the request of prosecutors who are investigating former WorldCom
employees, including former Chief Executive Bernie Ebbers, Reuters
reported.
Sheffield Pharmaceuticals Files for Chapter 7 Bankruptcy
Sheffield Pharmaceuticals Inc., a developer of inhaled drug products, on
Friday said its board authorized the company to immediately file for
protection under chapter 7 of the U.S. Bankruptcy Code, Reuters
reported. The Rochester, N.Y.-based company said its board decided to
proceed with a chapter 7 liquidation when efforts to obtain
debtor-in-possession financing from major creditors and shareholders
were unsuccessful. The American Stock Exchange suspended trading in the
company's common stock on June 2.
Crown Pacific Enters Forbearance With Lenders
Forest products company Crown Pacific Partners LP said on Friday it
entered into forbearance agreements with its bank lenders and
bondholders through June 15, while it continues recapitalization talks
with them, Reuters reported. The company said that if it does not reach
a deal to recapitalize the debt, it will likely seek chapter 11
bankruptcy protection. Portland, Ore.-based Crown Pacific said it did
not make interest payments due on debt in late May and early June,
reported the newswire.
Fleming Gets Court Approval to Sell 40 Stores
Fleming Cos. said on Friday that a bankruptcy court has approved its
plan to sell 40 stores for a total of about $118.4 million as it
reorganizes operations, Reuters reported. The company, which filed for
bankruptcy in April, said it will sell 31 Minnesota-based Rainbow Food
Stores to Roundy's Inc. for about $84 million in cash. The Dallas-based
company will sell six Calif.-based Food4Less stores for about $27
million in cash to Save Mart Supermarkets and three other Food4Less
stores to Kroger Co. for about $7.4 million. The three deals should
close by the end of June. Fleming, which said last month it would close
several facilities, was forced into bankruptcy when it lost its largest
account from discount retailer Kmart Corp., reported the newswire.
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