August 30, 2004
Total Bankruptcy Filings Down
The total number of bankruptcies filed in federal courts declined
slightly in the 12-month period ending June 30, 2004, according to data
released on Friday by the Administrative Office of the U.S. Courts. It
is the first annual decline since 2000. The total number of bankruptcy
cases filed in this 12-month period totaled 1,635,725, down .9 percent
from 1,650,279 for the same period in 2003. While the total number of
new filings during the quarter is the second-highest three-month total
in history, it represented a 4.3 percent decline from the 440,257 new
cases filed during the April-June period of 2003. This is the second
consecutive quarter where total bankruptcy filings dropped from highs
reached in 2003. Filings in the first quarter of 2004 also fell from a
record high set in 2003.
Non-business filings totaled 1,599,986, down .8 percent from the
1,613,097 cases filed during the 12-month period ending June 30, 2003.
“Consumer bankruptcy filings appear to have turned a
corner,” said Samuel J. Gerdano, ABI Executive Director.
“While bankruptcies are still high compared to four years ago,
improving economic conditions and low interest rates are permitting more
families to clean up their household balance sheets.”
For more information on the most recent quarterly bankruptcy
statistics, visit
href='/Content/NavigationMenu/NewsRoom/BankruptcyStatistics/Bankruptcy_Filings_1.htm'>ABI’s
statistics page.
href='/am/Template.cfm?Section=Press_Releases1&ContentID=36017&TEMPLATE=/CM/ContentDisplay.cfm'>press
release is also available online.
Corporate Profits Fell in Quarter On Oil Costs, Slowing Demand
U.S. corporate profit growth halted abruptly in the second quarter,
as a result of higher energy costs and slowing consumer demand,
according to the Commerce Department, the Wall Street
Journal reported. The government said after-tax corporate
earnings declined 1.2 percent from the first quarter after four quarters
of profit growth. After-tax profits were up 3.7 percent in the first
quarter and rose at better than 7 percent in each of the two previous
quarters, according to government estimates. Pretax profits edged up 0.1
percent in the second quarter. The profit figures aren’t adjusted
for inflation. The Commerce Department also revised downward its
estimate of second-quarter economic growth to an inflation-adjusted
annual rate of 2.8 percent from the previous 3 percent, because of a
larger trade deficit than previously estimated, the newspaper reported.
The economy expanded at a 4.5 percent rate in the first quarter, the
Journal reported.
The University of Michigan consumer-sentiment index was revised
upward for August to 95.9 from the previous 94. However, that still was
lower than July’s 96.7. The GDP report also showed that consumers
and businesses both were spending somewhat more aggressively in the
second quarter than previously estimated. Business spending rose at a
12.1 percent pace, after a 4.2 percent advance in the first quarter.
Enron’s Koenig in Plea Deal
A former top official at Enron, the energy firm that collapsed after
an accounting scandal, faces up to 10 years in prison and a $1 million
fine after pleading guilty to securities fraud, the Financial
Times reported. The conviction of Mark Koenig, a former Enron
vice president responsible for investor relations, was secured as part
of a plea agreement, according to U.S. justice officials. Koenig has
agreed to cooperate fully with the government's ongoing criminal
investigation of the collapse of Enron, the Times reported.
Koenig pleaded guilty to participating with Enron senior management in a
scheme to misrepresent Enron’s financial situation.
Pachulski Knocked off Brobeck Case (The Deal)
The already contentious bankruptcy of defunct San Francisco law firm
Brobeck, Phleger & Harrison LLP grew more so Wednesday, Aug. 25,
when the law firm advising one faction of partners was disqualified,
according to The Deal. The ruling will delay a decision on
a pending $3.75 million settlement offer between Brobeck and Clifford
Chance LLP, which raided more than a score of Brobeck lawyers two years
ago. After more than two weeks of deliberation, U.S. Bankruptcy Judge
Dennis Montali disqualified Los Angeles-based Pachulski, Stang, Ziehl,
Young, Jones & Weintraub PC because it had advised Brobeck’s
liquidation committee while it was winding down the firm. Brobeck was
later forced into involuntary bankruptcy. Read the
href='http://news.yahoo.com/news?tmpl=story&u=/thedeal/20040827/bs_deal_thedeal/pachulskiknockedoffbrobeckcase'>full
story.
Court Approves Sale of Vision-Ease Lens Assets
BMC Industries Inc. announced on Friday in a press release that the
company has concluded a bankruptcy court-supervised process to sell its
Vision-Ease Lens business. BMC has received court approval to move
forward with the sale of substantially all of the assets of Vision-Ease
Lens, and all of the outstanding capital stock of its Vision-Ease
foreign subsidiaries, to Insight Equity A.P. X LP, a Texas-based limited
partnership. The transaction, subject to satisfaction of certain closing
conditions, is expected to close in September. Vision-Ease Lens, a
leading manufacturer of eyewear lenses, is headquartered in Ramsey,
Minn. The company currently employs 1,200 people worldwide with
manufacturing facilities in Ramsey and Jakarta, Indonesia.
W.R. Grace Lifted by Settlement Hopes
W.R. Grace shares vaulted more than 12 percent Friday on speculation
that the specialty chemicals maker is close to announcing that it has
settled some asbestos-related claims against it, CBS MarketWatch
reported. Shares of Columbia, Md.-based W.R. Grace GRA were last up 91
cents, or 12.57 percent, at $8.15. On Thursday, the stock rallied $1.09,
or 15 percent, to $7.24.
The New York Stock Exchange, in a statement on its web site, said
that it was aware of the “unusual market activity” in the
stock and requested that the company issue a public statement indicating
whether there are any “corporate developments that may explain the
unusual activity,” it said. Oppenheimer & Co. Chief Investment
Strategist Michael Metz said the stock is benefiting from speculation
that there is an asbestos settlement and it is favorable to the company.
Asbestos-related liability was one of the key factors that forced W.R.
Grace to file for bankruptcy protection in April 2001.
E-Debt Files for Bankruptcy
Akron, Ohio-based E-Debt Financial Services Inc., a company that
enabled its clients to buy and sell portfolios of distressed debt over
the Internet, has filed for bankruptcy, according to Crains Cleveland.
The company, doing business as EDFS Inc., filed for chapter 7, a total
liquidation of all its assets, in the U.S. Bankruptcy Court for the
Northern District of Ohio on Aug. 6.
E-Debt Financial Services has no assets, according to court
documents. However, the company listed its liabilities as $1.27 million.
The liabilities stem from judgments against the company—one levied
in 2003 for $1 million in favor of Levin M&A Consulting Inc. of
Cleveland, and a second for $270,994 in favor of eCredit.com Inc., a
Dedham, Md.-based provider of credit risk management and collections
software and services, in 2002.
Hawaiian Airlines Plan Could Pay Creditors In Full
Hawaiian Airlines could be a step closer to getting out of
bankruptcy, according to HawaiiChannel.com. Hawaiian Holdings, the
parent company of the airline, along with trustee Joshua Gotbaum, say
they have a plan that will pay all creditors “in full.”
Hawaiian would see a $160 million investment from RC Aviation, which
would pay off the company’s debt and provide capital to
expand.
We need to reach an agreement on our aircraft with our labor
contracts. We need to get approval of our creditors. This plan is the
best plan because it offers the best chance to do that,& Gotbaum
said. He added that the plan would make Mark Dunklerly the
company's CEO, but calls for no other major management changes. A
bankruptcy judge must weigh the proposal against other reorganization
plans filed with the court.
UK Federal-Mogul Pension Plan Rejects Bid
The pension plan at a U.K. unit of bankrupt auto parts maker
Federal-Mogul Corp. on Friday rejected a $130 million offer by financier
Carl Icahn to keep it afloat, prompting a warning from bondholders that
the plan may be liquidated, Reuters reported. The plan's trustees
called the offer, which was part of a $700 million bid for the assets of
the U.K. car parts maker, Turner & Newall, inadequate. They said
they now plan to ask a U.K. court for advice on how to proceed in the
matter.
The issue pits U.S. bondholders led by billionaire Icahn, who largely
controls the fate of Federal-Mogul, against its U.K. creditors,
including the pension fund, the newswire reported. The fund covers
40,000 current and former Turner & Newall workers. Michigan-based
Federal-Mogul sought bankruptcy protection in 2001, burdened with some
$11 billion in asbestos litigation claims stemming largely from its U.K.
operations. The company has nearly worked out a consensual
reorganization plan with creditors, but faces a stumbling block over the
U.K. pension fund issue, which could thwart the bankruptcy
court-mandated creditor approval process. Under the current plan, Icahn
would control nearly 49 percent of the company’s equity when it
emerges from bankruptcy. A 51 percent stake would be held by a trust to
benefit asbestos claimants.
US Airways Pilots, Management Make New Offers
US Airways Group Inc.’s pilot union leaders on Monday said they
proposed new contract terms to management, which in turn made a
counteroffer, after the union last week refused to endorse a company
plan for $295 million of concessions, Reuters reported. According to the
union's web site, the union made a new offer to management on
Saturday, which prompted management to make a counteroffer on Sunday.
Terms of the offers were not immediately available. The union's
12-member negotiating committee plans to reconvene at 8 a.m. EDT to
consider a response to management's new offer, according to the
newswire. The No. 7 U.S. airline, based in Arlington, Va., has said it
has just weeks to reach giveback agreements with all of its unions
before deciding whether to enter bankruptcy for the second time in two
years.
Former ECW Investor Expected to File for Bankruptcy This Week
Video game publisher Acclaim, which invested in Extreme Championship
Wrestling in 1999 and currently produces the Legends of Wrestling
videogame series, is expected to file for bankruptcy next week,
according to GamesIndustry.biz. Offices in Austin, Texas and the United
Kingdom were shut down, with differing reports as to why, including
layoffs and failure to pay rent on the facilities, according to the web
site. The article also cites that the company has yet to pay their
British staff for the month of August.
Acclaim, which currently produces the Legends of Wrestling video
games, held the WWF license until the 1990s. In July, Acclaim reported
a net loss of $56.4 million for its 2004 fiscal year, the news site
reported. Net revenues were down $67.4 million from the previous year
($142.7 million versus $210.1 million). At the time, the company was
seeking a loan to help their finances and warned that failure to do so
would mean they would have to shut down operations or seek bankruptcy
protection.
Ribbon Maker Files for Bankruptcy
Philadelphia-based Delaware Ribbon Manufacturers Inc. has filed for
chapter 11 bankruptcy protection, the Philadelphia Business
Journal reported. The filing was made Aug. 25 in the U.S.
Bankruptcy Court in Philadelphia. The company listed assets between $1
million and $10 million and similar debts. The filing said the company
was “unable to pay its debts as they mature.”
Core-Mark Makes Exit from Bankruptcy
Core-Mark, which quietly became a $4 billion packaged goods giant
based in South San Francisco, has emerged from its bankrupt parent
company and expects to debut on the stock market as soon as October,
MSNBC News reported. The developments set the stage for new growth at
the company, its CEO said last week. They also mark the return of local
control for the 116-year-old firm, which in June 2002 sold itself to
Fleming Companies Inc., a wholesale grocery supplier based near Dallas,
the news site reported.