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December 5, 2002
Productivity Grows at a 5.1 Annual Rate in Third Quarter
Productivity, a crucial ingredient to the economy's long-term vitality,
grew at a brisk annual rate of 5.1 percent in the third quarter, a
faster pace than the government previously thought, the Labor Department
said yesterday, CongressDaily reported. Orders to U.S. factories
rose in October for the first time in the last three months. The latest
reading on productivity - the amount of output per hour of work - was
even better than the 4 percent growth rate estimated for the third
quarter a month ago and represented a considerable pickup from the 1.7
percent pace registered in the second quarter.
United Airlines U.S. Loan Guarantee Request Denied
United Airlines failed to win approval for a $1.8 billion U.S. loan
guarantee designed to keep the UAL Corp. carrier out of bankruptcy,
Bloomberg News reported. The federal Air Transportation Stabilization
Board said the initial request 'is not financially sound.'' The world's
second-biggest airline can submit a new business plan or seek a
guarantee as part of a chapter 11 reorganization, said Daniel
Montgomery, the board's executive director, the newswire reported. The
company has arranged to borrow as much as $2 billion from banks
including Citigroup Inc. and J.P. Morgan Chase & Co. should it seek
court protection, people familiar with the matter said. A United
Airlines bankruptcy would be the airline industry's biggest. UAL shares
fell 69 percent to 95 cents at 5:42 p.m. in New York. The stock was
worth $13.70 at the start of the year.
The Associated Press reported that United Airlines mechanics called
off a vote planned for Thursday on wage cuts after a government panel
rejected the financially troubled carrier's request for a $1.8 billion
federal loan guarantee. The nation's No. 2 airline had said the pay cuts
were necessary to keep it out of bankruptcy. But the panel's decision
rendered the vote moot, and made a chapter 11 filing highly likely, the
newswire reported. The Machinists' union canceled the vote just hours
before it was to begin at union halls nationwide and condemned the
decision by the Air Transportation Stabilization Board. 'We were ready
to partner with United, the union coalition and the government to return
United Airlines into the nation's premier carrier,' said union president
Tom Buffenbarger. 'Unfortunately, the United States government walked
out on that partnership,' reported the newswire.
Separately, Walt Disney Co. said on Wednesday that if UAL Corp.'s United
Airlines terminates aircraft leases because of a bankruptcy proceeding,
it could result in material charges to write off Walt Disney's
investment, Dow Jones reported.
Panel Gives Boston Archdiocese Consent to File for
Bankruptcy
A financial panel of the Boston Archdiocese gave Cardinal Bernard Law
permission on Wednesday to file for bankruptcy as the church tries to
settle potentially crippling lawsuits in the priest sex abuse scandal,
the Associated Press reported. No Roman Catholic archdiocese in the U.S.
has ever taken such a step, which would give a secular court control
over its finances and open it up to unprecedented scrutiny. Cardinal Law
would need approval from the Vatican before filing for bankruptcy, the
newswire reported. The Boston Archdiocese has been at the center of the
abuse scandal rocking the U.S. church since January. It is negotiating
with attorneys for some 400 alleged victims over possible settlements,
the newswire reported. 'We believe a mediated resolution would be
preferable to seeking chapter 11 protection and remain hopeful that this
process currently under way will be successful,' archdiocese spokeswoman
Donna Morrissey said. 'However, we feel it is also necessary to
carefully consider the alternative or complementary approach of a
chapter 11 reorganization,' reported Associated Press.
Burger King Operator AmeriKing Files for Bankruptcy
AmeriKing Inc., the second-largest U.S. operator of Burger King
restaurants, filed for bankruptcy protection after increased competition
from McDonald's Corp. and Wendy's International Inc. led to a shortage
of cash to pay off debt from an acquisition spree, Bloomberg News
reported. AmeriKing had a $22.9 million loss in the first half of this
year on $177 million in sales, according to its most recent quarterly
report to the Securities and Exchange Commission. The loss from
operations was $5.2 million, the company said, the newswire reported.
The closely held company is saddled with debt after borrowing more than
$115 million from banks and selling $119 million in bonds to double its
size since 1994. 'This is a critical moment in our company's history,''
and
restructuring will 'position us to accelerate our turnaround,'' said Joe
Langteau, AmeriKing's chief executive, in a statement, Bloomberg
reported.
Wal-Mart's Sales Increase at Start of Holiday Season
Wal-Mart Stores Inc., the world's No. 1 retailing chain, said sales at
stores open for at least a year climbed 2.6 percent in November, kicking
off the crucial holiday shopping season with a solid start, the Wall
Street Journal reported. The world's No. 1 retailing chain on
Thursday reported total sales for the four weeks that ended Nov. 29
surged 10.3 percent to $21 billion. Wal-Mart's performance was
significantly boosted by record sales on Black Friday, the day following
Thanksgiving that usually finds shoppers out hunting for bargains. Other
major U.S. retailers reported mixed results, but overall the stage was
set for consumers to come out and spend, reported the
Journal.
ING May Have to Buy Up to $510 Million of National Century
Bonds
ING Groep NV said it may have to purchase as much as $510 million of
bonds sold by a subsidiary of National Century Financial Enterprises
Inc., which filed for
bankruptcy last month, Bloomberg News reported. The obligation is part
of a liquidity facility ING's banking arm provided to Mont Blanc Capital
Corp., an investment program which sells short-term debt, or commercial
paper, backed by collateral including the National Century bonds, the
biggest Dutch financial services company said in a prospectus for
investors.
National Century, which buys medical bills from health-care providers
and bundles them into bonds to sell on, owes more than $4 billion to
investors including Pacific Investment Management Co. and Credit Suisse
First Boston. Chief Financial Officer Cees Maas confirmed last month
that ING has 'some risk exposure'' to the health-care financing company
through Mont Blanc, the newswire reported. Amsterdam-based ING said Nov.
21 it expects full-year earnings per share to match the 2.20 euros it
reported last year. The company had forecast as recently as August that
profit this year would top last year's.
Judge Grants Radiant Systems Injunction Against Tokheim
A bankruptcy judge on Wednesday ordered Tokheim Corp. to cease
manufacturing and selling products containing intellectual property
owned by Radiant Systems Inc., Dow Jones reported. Judge Jerry W.
Venters of the U.S. Bankruptcy Court in Wilmington, Del., granted
Radiant Systems the preliminary injunction and found that the harm being
done to Radiant Systems by allowing Tokheim to use the property trumped
the harm the injunction will cause Tokheim and its chapter 11 bankruptcy
case, the newswire reported. Tokheim had said the injunction could
jeopardize the sale of its assets. As reported, the debtor company
signed a $42 million deal to sell substantially all of its North
American assets to First Reserve Fund IX L.P. last week. Judge Venters
said it would be 'inherently unfair' to allow Tokheim to operate with
the patented products without the consent of Radiant Systems. A hearing
to consider final approval of the injunction is scheduled for Feb. 4,
2003.
Tokheim and five affiliates filed for chapter 11 protection in the
Wilmington court on Nov. 21. The Fort Wayne, Ind.-based company makes
and services electronic and mechanical petroleum dispensing systems. It
listed assets of $249.5 million and debts of $457.8 million in court
papers.
Nonprofit Hospital Exposure to National Century Limited
Fitch Ratings said on Wednesday that in response to investor inquiries
it has examined its not-for-profit hospital portfolio to determine if
there are any that utilized National Century Financial Enterprise's
(NCFE) financing programs, Dow Jones reported. In a statement, Fitch
said it believes the direct exposure of not-for-profits hospitals to
NCFE's financing program is extremely limited, and possibly nonexistent.
As a result, Fitch doesn't see any significant impact on the
not-for-profit hospital sector from National Century's bankruptcy
filing. Dublin, Ohio-based NCFE provided operating financing for about
100 medical facilities through purchases of their accounts receivable.
NCFE in turn packaged these receivables into securitized note offerings
that were sold to investors. The company filed for bankruptcy protection
on Nov. 18.
Collegiate Pacific Submits Proposal for Bike Athletics
Collegiate Pacific Inc. offered to buy bankrupt Bike Athletic Co. for
about $5 million in payments to unsecured creditors and the assumption
of $7 million in secured debt, Dow Jones reported. In a press release on
Wednesday, Collegiate Pacific said the acquisition, if successful, could
double its earnings growth for the next several years.
Knoxville,Tenn.-based Bike Athletic, a fabric manufacturer in with
annual revenue of $45 million, filed for bankruptcy in June after being
sold to a group that included the company's management. Collegiate
Pacific, which makes sports equipment for institutional markets, said it
has completed due diligence and approval by its lenders. The company
needs Bike Athletic's creditors committee to approve the proposal.
FirstEnergy Receives Bids for Four Ohio Power Plants
FirstEnergy Corp. has received several bids for four Ohio power plants
and expects to make a decision regarding those generators by the end of
this year, officials said on Wednesday, Dow Jones reported. The four
aging coal-fired plants, which generate a combined 2,535 megawatts, were
previously to be sold to merchant power generator NRG Energy. But the
$1.5 billion deal with the struggling Xcel Energy Inc. subsidiary fell
through in August, the newswire reported. FirstEnergy said in October
that it hoped to execute another sales agreement for the plants and that
a number of prospective buyers had shown interest. The bids received
this week, however, aren't binding.
If the plants aren't sold this year but remain on the block, FirstEnergy
will have to take a charge of $35 million, or 12 cents a share, in the
fourth quarter to reflect depreciation expense of the plants since the
NRG sales agreement was signed. FirstEnergy called off the sale to
debt-laden NRG Energy, which is now trying to arrange a prepackaged
bankruptcy deal with its creditors, when it became apparent NRG wouldn't
be able to complete the purchase. FirstEnergy also told NRG in August
that it reserves the right to pursue legal action for damages, which
could include suing to recover the difference in price between the
failed deal and any new deal, the newswire reported.
Shiloh Industries Comments on Valley City Chapter 11
Shiloh Industries Inc. doesn't expect that its ongoing operations will
be affected by the bankruptcy of Valley City Steel LLC, in which Shiloh
holds a 49 percent stake, Dow Jones reported. In a press release on
Wednesday, Shiloh said Valley City filed for bankruptcy on Nov. 27.
Shiloh is still evaluating the impact of the filing, the newswire
reported. Privately held Viking Steel LLC bought 51 percent of Valley
City from Shiloh for $12.4 million in July 2001 and held operational
control. Shiloh had a loss of $35.5 million, or $2.40 a share, before
items, on $662.5 million revenue in the fiscal year ended Oct. 31,
2001.
Park Pharmacy Files for Chapter 11 in Dallas
Park Pharmacy Corp. said it filed a voluntary chapter 11 petition in
U.S. Bankruptcy Court in Dallas, Texas, according to a Form 8-K filed on
Wednesday with the Securities and Exchange Commission, Dow Jones
reported. The company's bankruptcy petition, filed on Monday, listed
assets of $5.3 million and debts of $13.5 million as of Oct. 31. Park
Pharmacy had 2.6 million shares of preferred stock outstanding and 10.1
million shares of common stock outstanding as of Oct. 7, the bankruptcy
filing said. The company's largest unsecured creditor is Arter &
Hadden LLP of Dallas with a claim of $45,453, reported Dow Jones.
ElderTrust Issues Distribution Policy Guidance
ElderTrust plans to resume regular quarterly distributions to its
shareholders in mid-April for the first time since 2000, Dow Jones
reported. In a press release on Wednesday, the real estate investment
trust said that based on a current estimate of its operations and cash
requirements, it expects to declare a quarterly distribution of 16
cents, yielding an annual distribution of 64 cents. ElderTrust stopped
paying the distribution in August 2000 after its primary tenant, Genesis
Health Ventures Inc., filed for bankruptcy. The tenant has since emerged
from chapter 11 bankruptcy protection, a spokeswoman for ElderTrust
said, the newswire reported. Last month, ElderTrust said the maturity
dates on three loans totaling $30 million were extended.
Conseco Didn't Make $4.7 Million of Guarantee Payments
Conseco Inc. elected not to make $4.7 million of guarantee payments due
on Monday, the company said in a filing on Wednesday with the Securities
and Exchange Commission, Dow Jones reported. Conseco said it won't
resume the payments, related to manufactured housing securitization
trusts, until it completes the restructuring of its manufactured housing
business. Conseco, reiterating comments from its recent quarterly
report, said that without additional liquidity in the near future it
wouldn't be able to make those guarantee payments when they come due,
the newswire reported.
In its quarterly filing on Nov. 19 with the SEC, Conseco said it's
negotiating a debt restructuring plan that includes a chapter 11
bankruptcy filing and the 'conversion of a significant amount of
Conseco's debt into common equity,' Dow Jones reported.
American to Cut 5 Percent of Flight Attendants
Financially strapped American Airlines, a unit of AMR Corp., said on
Wednesday it will cut about five percent of its flight attendant jobs,
or some 1,100 positions, in the coming months as it tries to save money
by operating fewer flights, Reuters reported. From next Wednesday
through Jan. 7, American will offer voluntary options for its flight
attendants to share jobs or take leaves of absence, said American
spokesman Todd Burke. Further options to reduce personnel roles as
American cuts its flying capacity are under consideration, he added, the
newswire reported.
Last week, American, the world's largest airline, said it will cut its
domestic flight schedule in the first quarter of 2003 by 3.3 percent
because of depressed air travel demand. Dallas, Texas-based American is
seeking to cut costs wherever it can amid huge financial losses, with a
goal of $3 billion to $4 billion in permanent reductions. American said
it has already identified more than $2 billion in cuts, reported
Reuters.
Alabama Retirement Fund Renegotiating US Airways Deal
Alabama's pension fund is renegotiating its offer to buy a 38 percent
share of US Airways for $240 million, Dow Jones reported. Bankrupt US
Airways accepted the pension fund's offer in September. No other suitors
made higher offers, so the bankrupt airline recently started moving
forward with plans for RSA to acquire a 38 percent share.
David Bronner, CEO of the Retirement Systems of Alabama, told a state
pension panel on Wednesday that the original offer included RSA
controlling five of the 13 seats on the US Airways board of directors.
Now, he said, the fund wants seven. Also, Bronner said he either wants
to reduce the $240 million investment, receive preferred stock or find
another way to improve the deal. Bronner said the deal was 'in flux' and
that the RSA was awaiting more information from a revised reorganization
plan US Airways must file this month with the bankruptcy court. The
airline sought bankruptcy protection in August, the newswire
reported.
Pacific Gas Revenue Adjustment Bid Denied
The California Public Utilities Commission (CPUC) issued a draft
decision denying Pacific Gas & Electric Co.'s request for a 2002
revenue adjustment, according to a Form 8-K the utility filed with the
Securities and Exchange Commission on Wednesday, Dow Jones reported. A
CPUC administrative judge on Tuesday issued the draft decision rejecting
Pacific Gas' request for an annual increase of $76.7 million to its
electric distribution revenue requirement and an annual increase of
$19.5 million to its gas distribution revenue requirement. The company
made that request to allow for recovery of its capital investments and
escalating costs of providing electric and gas distribution services
during 2002. The draft decision said the utility's recorded numbers 'are
too stale' and the escalation rates 'too uncertain' to sustain a finding
for increasing the rates, according to the SEC filing, reported the
newswire. Any increase in rates, the draft order said, would require the
filing of a general rate case.
Pacific Gas filed for chapter 11 bankruptcy protection April 6, 2001,
after soaring utilities prices forced it to spend several billion
dollars more for power than it was allowed to collect from its customers
through rate increases, Dow Jones reported. The PG&E unit listed
assets of $24.2 billion and liabilities of $18.4 billion as of Sept. 30,
2000.
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