December 16, 2003
PG&E Bankruptcy Plan Seen Passing Regulatory Panel
California utility regulators are expected to adopt a plan on Thursday,
Dec. 18, to allow Pacific Gas & Electric Co. to get out of
bankruptcy early in 2004, analysts said yesterday, Reuters reported. The
five-member California Public Utilities Commission (CPUC) will decide
among six separate proposals, with three votes needed for adoption.
Federal Bankruptcy Court Judge Dennis Montali approved the PG&E
Corp.-owned utility's reorganization plan on Friday, but did not make it
final pending a decision at the CPUC meeting. Montali scheduled a
hearing for Dec. 22 to consider what action the regulatory commission
takes. 'We believe it is too optimistic to assume the final approved
plan will look exactly like the original settlement. However, it does
appear likely that the final plan will maintain most of its key economic
elements and will be a reasonable compromise for PG&E,' analyst
James Dobson at Deutsche Bank Securities wrote in a research note
yesterday, reported the newswire.
Appeals Court Panel Considers Removing Judge From Asbestos Cases
A federal appeals court is weighing whether to remove a judge
overseeing some of the nation's largest bankruptcy cases involving
companies sued by people exposed to asbestos, the Associated Press
reported. Nearly 100 attorneys listened as the 3rd U.S. Circuit Court of
Appeals in Philadelphia heard arguments Friday over whether to remove
U.S. District Judge Alfred Wolin, who sits in Newark. The three-judge
panel didn't announce a decision Friday. Senior Circuit Judge Leonard
Garth said he doubts 'there is any bias in Judge Wolin's soul,' but
acknowledged that wasn't at issue.
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Congress to Weigh Easing U.P.S. Role on Pension Funds
Congress is expected to consider a proposal early next year that would
shift responsibility for billions of dollars in future pension promises
to the federal government from United Parcel Service (U.P.S.), the
New York Times reported. U.P.S. is chafing at its legal
requirement to cover retirees of other companies through its
participation in multiemployer plans, in which many employers pool the
cost of providing pensions for union members. While the prospects for
the proposal are unclear, U.P.S. has gained support from several
lawmakers, including some in Georgia, Kentucky and Ohio.
These plans allow workers to take their benefits with them when they
switch jobs. When one company in such a plan goes out of business, the
surviving companies have to make good on its pension promises.
U.P.S. is the largest company in the pension plans of the International
Brotherhood of Teamsters, with potential responsibility for billions of
dollars of obligations to its retirees. 'We have serious concerns over
the financial condition of these plans,' said David Bolger, a spokesman
for U.P.S. The company says it remains willing to pay for its own
employees' pensions and even for the obligations it has already assumed
from other companies. But it wants to make each company solely
responsible for its own workers' benefits in the future. If a company
defaults, those obligations would then go to the federal government,
reported the Times.
FAO's Chance of Finding a Buyer Are Slim
The deadline for bankrupt toy retailer FAO Inc. to find a buyer has
arrived and the possibility of a last minute rescue is becoming less
likely, industry watchers said yesterday, Reuters reported. FAO, which
last week filed for chapter 11 bankruptcy protection for the second time
this year, had until Dec. 15 to find a buyer for both its upscale FAO
Schwarz toy stores and its Right Start stores, which sell baby toys and
equipment such as playpens and strollers. Pending the outcome of its
efforts to find buyers for FAO Schwarz and Right Start, FAO hired
liquidators to sell inventory of all three of its brands. Its Zany
Brainy educational toy chain went straight to liquidation.
Possible scenarios for the stores -- particularly the famed, but
loss-making FAO Schwarz -- are an acquisition by a private equity firm
or high-end retailer or liquidation, according to Reuters. Some say that
buyers are waiting in the wings for the company to go belly up so they
can pick up the best pieces. 'If anything is going to happen it will be
that,' said Kurt Barnard, head of consulting firm Retail Forecasting
Group, reported the newswire. 'They'll pick up the pieces at bargain
basement prices. FAO has one great negative force to contend with: it is
in the toy business.'
Judge Allows Del Monte To Buy Agway Country Products Unit
A bankruptcy judge yesterday approved the sale of Agway Inc.'s Country
Products Group to Del Monte Fresh Produce Co. for $12.15 million, the
Associated Press reported. The Coral Gables, Fla.-based food company
outbid AMPCO Distribution Services LLC of Long Island, N.Y., said Agway
spokesman Stephen Hoefer. AMPCO had reached a previous tentative
agreement with Agway to purchase its food division for $8.3 million.
Country Best Produce and Country Best Adams make up Agway's Country
Products Group, which repackages, ships and sells potatoes, onions and
other produce to large chain-store customers in the eastern United
States. Agway will realize net proceeds from the sale of about $11.2
million, Hoefer said, reported the newswire.
Cone Mills Lands Bankruptcy Financing
Bankrupt textile maker Cone Mills Corp. said that it had entered into a
$45 million credit agreement with Bank of America and General Electric
Capital Corp., the Business Journal reported. This
debtor-in-possession financing agreement was authorized by the U.S.
Bankruptcy Court for the District of Delaware by an order issued Nov.
25. The financing will be used by the company to fund its working
capital needs until it can exit from the bankruptcy proceedings.
Greensboro-based Cone Mills has agreed to be bought for about $90
million by financier Wilbur Ross upon emergence from chapter 11
bankruptcy, which it entered into in September. Ross also owns
Greensboro's Burlington Industries and has said he intends to combine
the two textile firms.
Atlas Air Delays Filing for Bankruptcy
Atlas Air Worldwide Holdings, the largest U.S. freight carrier for
airlines, said it delayed a planned bankruptcy filing until Feb. 1 to
continue to seek agreements with creditors, Bloomberg reported. The
parent of Atlas Air and Polar Air Cargo also said it expects its loss to
widen to US$71.6 million as world cargo shipments decline. The Purchase,
N.Y.-based company said in a U.S. regulatory filing that it had planned
to seek chapter 11 protection today, using a recovery plan backed by
creditors.
Atlas in September announced plans for a bankruptcy filing this month.
Efforts to reach agreements with creditors have been hampered because
financial results have not met its projections, Atlas said. The company
expects to be profitable again by 2005, spokeswoman Rachel Berry said.
The company's losses widened this year after a Securities and Exchange
Commission investigation that followed Atlas's announcement that it
would restate results for 2000, 2001 and the first half of last year to
change accounting for inventory, maintenance and other costs, reported
the newswire.
MCI October Net Loss Widens from September
MCI on Monday posted a wider monthly net loss due to higher expenses,
Reuters reported. MCI said its net loss in October was $194 million,
compared with a loss of $35 million in September, due to an increase in
miscellaneous expense primarily from prior period transactions and a
decline in operating income. The company said revenue was $1.98 billion
in October, compared with September revenue of $1.95 billion.
October's cash balance increased to $5.4 billion from $5.3 billion in
September.
Bankruptcy Judge Upheld in Claim by Late Beatle
A bankruptcy judge tossed out a claim from the late former Beatle George
Harrison in a case involving the musician's nearly $12 million
California judgment against his one-time business manager and partner, a
federal appeals court ruled on Friday, the Associated Press reported. In
overturning a federal judge, an 8th U.S. Circuit Court of Appeals panel
ruled that a bankruptcy court in 2001 had discretion to spike Harrison's
challenge to Denis O'Brien's bankruptcy case after the musician twice
failed to give court-ordered depositions.
Harrison, the 8th Circuit panel unanimously found, was warned by U.S.
Bankruptcy Judge Barry Schermer to give the sworn answers, but declined
for health and security reasons he sought to keep sealed, even from
O'Brien's attorneys. 'All of this can be viewed as unfortunate,' Judge
Richard Arnold wrote for the 8th Circuit. Harrison had evidence about
his health status 'from which a court could well conclude that the
deposition should be postponed, but he never properly presented this
evidence to the bankruptcy court. This was a personal choice, which he
had the power to make.'
'This case raises an unusually sharp conflict between deep personal
concerns and the demands of the law,' Arnold wrote. But 'the conduct of
Mr. Harrison rose to the level of willful disobedience, and once this
had been determined, the bankruptcy court's selection of a proper
sanction, including dismissal, was within its discretion,' he wrote,
reported the newswire.
New Owners Say CART Series Will Continue in 2004
Although the parent company of Championship Auto Racing Teams (CART) is
heading for bankruptcy, the series will continue in 2004 under new
management, according to a statement issued by Open Wheel Racing Series
(OWRS) yesterday, Reuters reported. The embattled CART series, which
began in 1979, has suffered a loss of teams and sponsors to the rival
Indy Racing League since 1996, and became a public company in 1998. OWRS
made an offer to buy the stock of CART for approximately $5 million, but
that was withdrawn earlier this month. Instead of shareholder approval,
OWRS now needs only the consent of the bankruptcy court to purchase CART
assets. 'Effective immediately, we're ready to begin work to implement
our vision for CART in 2004 and for many seasons beyond,' said Paul
Gentilozzi, one of the OWRS partners, reported the newswire.
Worldwide Wireless Files Motion to Amend Plan of
Reorganization
Worldwide Wireless Networks Inc. (WWWN) filed for chapter 11 bankruptcy
on Sept. 11, 2002, the company announced in a press release. On Nov. 20,
2003, WWWN in conjunction with the creditors' committee filed a
reorganization plan with the U.S. Bankruptcy Court. The plan
contemplates the merger of ECHEX International Inc. into WWWN, with
WWWN's creditors receiving approximately 4.74 percent of the shares in
the combined company at the time of the merger. WWWN shareholders of
record at the time of the merger will receive no distribution under the
plan, and will retain less than one-tenth of one percent of the stock of
the company on a fully diluted basis following the merger and the
reverse stock split described below. A hearing will be held on Dec. 24,
2003, to obtain court confirmation of the plan, the company said.
Mirant Expects Flood of Claims as Deadline Nears
Mirant Corp. said on Monday it expected a flood of last minute court
filings as companies raced to beat Tuesday's deadline for submitting
claims against the bankrupt energy merchant, Reuters reported. 'We're
expecting hundreds if not thousands of claims,' Mirant spokesman David
Payne said.
Mirant, the largest U.S. bankruptcy of 2003 and the eleventh largest
ever, filed for chapter 11 protection in Fort Worth on July 15 after
failing to hammer out a debt restructuring agreement with banks and
bondholders. Mirant had listed a total of $11.4 billion in debt in its
July filing against $20.6 billion in assets.
