August 142003

Submitted by webadmin on Thu, 2003-08-14 00:00

August 14, 2003

Retail Sales Rise in July

Consumers were in the mood to spend last month, suggesting a solid start
to the back-to-school shopping season and raising hopes that the
all-important holiday selling season ahead will be a strong one, the
Washington Post reported. July retail sales rose 0.8 percent from
the previous month, led by stores that sell clothing, electronics,
building materials and garden equipment as well as gasoline stations,
according to figures released by the U.S. Department of Commerce
yesterday. With automobile sales included, the retail industry
registered a 1.4 percent sales gain last month, the largest since March,
the federal data shows.

Sung Won Sohn, chief economic officer at Wells Fargo & Co., said the
increase suggests consumers are spending the tax cuts they received as
part of President Bush's $350 billion tax cut package. In the third
quarter alone, consumers should be receiving $30 billion in tax cuts,
which should help fuel spending during the back-to-school season, which
is second only to the Christmas holidays in importance for the retail
economy, Sohn said. 'But having said all these wonderful things about
consumers, the question is: how long can this spending last without
jobs?' Sohn said. 'If we continue to lose jobs, clearly consumer
spending could not be sustained,' reported the Post.

NextCard Bankruptcy Converted to Chapter 7

A Delaware judge converted the bankruptcy of NextCard Inc. into a
chapter 7 forced liquidation, court filings show, Reuters reported.
Judge Jerry Venters of the U.S. Bankruptcy Court in Wilmington, Del., on
Monday approved requests from the acting U.S. trustee and the U.S.
Federal Deposit Insurance Corp., NextCard's largest unsecured creditor,
to end NextCard's plan to wind up operations under chapter 11 of the
U.S. Bankruptcy Code. Alfred Giuliano was appointed NextCard's interim
trustee. In June, seven months after seeking to reorganize under chapter
11, NextCard filed a liquidation plan that it said anticipated payments
to creditors of between $2.9 million and $18.4 million, far below the
$464 million of claims outstanding, reported the newswire.

Globalstar Posts Second Quarter Loss

Globalstar LP said on Wednesday its second quarter loss widened from the
first quarter due to a charge, but the bankrupt satellite telephone
provider said services in Iraq had helped boost its numbers, Reuters
reported. Globalstar, which agreed during the quarter to an investment
from ICO Global Communications, said its net loss widened 11 percent to
$16.8 million compared to the first quarter this year, including a
second-quarter $2.5 million charge for the write-off of assets. The
company, which hopes to exit from bankruptcy by the end of this year,
said it ended the quarter with 93,000 subscribers compared to 75,000 in
the same quarter last year and 84,000 in the first quarter this year.
Globalstar said usage increased 28 percent to 14.5 million minutes in
the quarter due to the launch of services in Iraq, reported the
newswire.

WORLDCOM/MCI

WorldCom Tax Strategy May Have Saved Millions

WorldCom Inc. may have avoided hundreds of millions of dollars in state
taxes in the three years after its 1998 acquisition of MCI
Communications Corp. through an elaborate tax strategy created by
accounting firm KPMG LLP, the Wall Street Journal reported. In an
effort to minimize its state taxes, WorldCom moved as much as $19
billion in revenue between 1999 and 2001 through a Delaware-based
subsidiary of the company, according to an accounting analysis filed in
the U.S. Bankruptcy Court in New York. Because Delaware doesn't tax the
income of out-of-state corporations, the move substantially reduced
WorldCom's nonfederal income-tax obligations, according to filings in
the bankruptcy proceedings. However, the documents don't indicate how
much WorldCom's taxes were reduced by the arrangement.

The key to the tax shelter was KPMG's advice that WorldCom declare much
of its regular income as being returns on intellectual property --
rather than receipts from sales of phone services, according to a
confidential 128-page KPMG planning document reviewed by the Wall
Street Journal. According to that document and a court filing, KPMG
rationalized what it called a 'Total Tax Minimization' strategy partly
by contending that a large portion of WorldCom's post-merger income
stream was 'excess profits' partly attributable to the shrewdness of the
company's top corporate managers, reported the Journal.

MCI's Roscitt Mixes Sales, Technology

As reported yesterday, Rick Roscitt-who currently serves as chairman and
chief executive of communications equipment maker ADC Telecommunications
Inc., but spent most of his career at AT&T Corp. catering to
corporate customers-will become president and CEO of bankrupt MCI on
Sept. 1. Roscitt's deft touch with customers, along with his background
as both a supplier and operator of sophisticated networks, will be
crucial for MCI as it tries to emerge from bankruptcy and put its $11
billion accounting scandal to rest, analysts said, reported Reuters.

MCI now faces a federal probe on whether it improperly routed telephone
calls to avoid hefty access fees. It also has been banned from competing
for new government contracts. But the plain-talking executive has shown
he can handle a crisis and make tough choices. 'Rick solicits a lot of
input, but he is not necessarily looking for a consensus. He doesn't go
into paralysis waiting to make a difficult decision,' Bob Switz, then
ADC's chief financial officer, told Telephony magazine, according
to Reuters.

Canada Bankruptcies Rose 15.9 Percent in June From Year
Ago

The number of bankruptcies filed in Canada rose 15.9 percent in June to
8,019 from 6,916 the same month a year ago, according to the Office of
the Superintendent of Bankruptcy Canada, Bloomberg News reported. The
number of personal bankruptcies was 7,256, a 17.2 percent increase from
the June 2002 figure of 6,191. The report

showed that 763 businesses declared bankruptcy, a 5.2 percent rise
compared to 725 a year earlier.

DVI Inc. to Seek Chapter 11 Bankruptcy Protection

DVI Inc. plans to file for chapter 11 bankruptcy and has placed CFO
Steven Garfinkel on leave, Bloomberg News reported. The chapter 11
filing will take place in the next few days, said John Schoenfelder,
vice president of investor relations for the Jamison, Penn.-based
company. DVI, which extends loans and leases to help pay for the
purchase of medical equipment, discovered misrepresentations that have
been made to some lenders in past transactions, the statement said. That
has hindered DVI's efforts to recapitalize or sell the business, it
said, reported the newswire.

Junk-Bond Default Rate Dips in July to 5.8 Percent, May Fall
Further

The default rate for high-risk corporate borrowers fell to 5.8 percent
in July and may decline further in 2004, Moody's Investors Service said
in a report, Bloomberg News reported. The rate is down from a high of
10.9 percent in January 2002 for junk-rated borrowers, as relatively low
benchmark borrowing rates and demand for lower-rated debt allowed some
companies to refinance debt and avoid default, Moody's said. 'The
receptive high-yield market has enabled low-rated issuers with debt
coming due to find buyers and, in some cases, avoid a default,'' said
David Hamilton, New York-based Moody's director of default research.
'Credit conditions are such that it may be difficult for the default
rate to fall very significantly the last half of this year unless we see
really

spectacular economic growth,'' reported the newswire.

US Textile Industry Import Quotas To Expire At the End Of
'04

If 2003 has seemed terrible for the U.S. textile industry, just
wait--next year could be far worse. That's because quotas that suppress
the number of low-cost imports are scheduled to expire at the end of
2004, meaning even tougher competition for American textile companies,
according to the Associated Press. The American Textile Manufacturers
Institute says some 8,900 U.S. textile jobs were lost in July. That
doesn't include the effects of the July 30 bankruptcy declaration by
Pillowtex Corp., the 106-year-old textile maker that could eliminate
7,600 jobs as it liquidates.

Amerco Real Estate Unit Seeks Chapter 11

Amerco Inc., the parent of truck renter U-Haul International Inc., on
Thursday said its Amerco Real Estate Co. unit filed for chapter 11
bankruptcy protection, Reuters reported. The Reno, Nev.-based company
filed its own chapter 11 petition on June 20. It said the unit's filing
is part of Amerco's plan to obtain up to $300 million of financing from
Wells Fargo & Co.'s Foothill Capital Corp. to keep operating while
under court protection from creditors.

Edward 'Joe' Shoen, Amerco's chairman, said in a press statement the
Amerco Real Estate filing should not lead to layoffs. He repeated that
Amerco should be able to repay its creditors in full without diluting
shareholder interests. Amerco said the filing will not affect its
U-Haul, Oxford Life Insurance Co. or Republic Western Insurance Co.
units' operations, reported the newswire.

Japanese Bankruptcies Fell 19.8 Percent in July as Economy
Expanded

Fewer Japanese companies declared bankruptcy in July as the world's
second-largest economy extended a recovery from its third recession in
12 years, Bloomberg News reported. The number of corporate failures fell
19.8 percent from a year earlier to 1,377 cases, credit researcher Tokyo
Shoko Research Ltd. said in Tokyo. Bankrupt companies such as golf
course operator Kashimanomori Country Club K.K. owed 698 billion yen
($5.85 billion), a decline of 40 percent from a year earlier, reported
the newswire.

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