January 21, 2004
Pension Bill Consideration May Wait For FY04
Appropriations
Legislation heading for the Senate floor to change the rate companies
must use to calculate pension contributions will include a provision the
White House opposes, giving companies with particularly underfunded
pensions a two-year break from increased contributions,
CongressDaily reported. However, Senate leadership is waiting to
know the outcome of the FY04 omnibus spending bill before bringing the
pension legislation to the floor.
Senate Finance Chairman Charles Grassley (R-Iowa) said on Tuesday he
would propose a temporary waiver of 'deficit reduction contribution'
rules that require accelerated payments from companies, including major
airlines, whose plans are underfunded. The proposal would allow
companies to defer 80 percent of their obligations in the first year and
60 percent in the second. The underlying bill mirrors a House-passed
bill that changes the rate companies use to calculate pension
contributions, from the 30-year Treasury rate to a higher corporate bond
rate, a change expected to save companies millions. The new rate will
stay in place for two years while Congress considers comprehensive
pension reform, reported the newswire.
Presidential Candidate Dean Addresses Bankruptcy, Credit Card
Debt
In Manchester yesterday, Governor Howard Dean spoke to a large hall of
New Hampshire voters, answering questions and talking about why he was
running for president, his background as a governor and the need of the
country to assess the State of the Union. One of the issues he raised
was that bankruptcies are at a record high and that more women this year
will declare bankruptcy than will graduate from college. Another point
was that Americans owe 15 times more on their credit cards than they did
25 years ago. Read the
href='http://blog.deanforamerica.com/archives/003294.html'>article.
MCI Appoints Two More Directors to Board
Bankrupt telecommunications provider MCI said on Tuesday it appointed
Glenn Hutchins and Mark Neporent as company directors, increasing its
board to 11 members, Reuters reported. Hutchins, founder and managing
member of investment firm Silver Lake Partners, and Neporent, chief
operating officer of Cerberus Capital Management LP, will join the board
on the date of MCI's emergence from bankruptcy, MCI said, reported the
newswire. MCI filed for chapter 11 bankruptcy protection in 2002 amid an
$11 billion fraud scandal. It expects to emerge from bankruptcy
protection with its new board in February.
Supreme Court Considering Loan Deal Case
The Supreme Court is considering a car loan case, Koons Buick Pontiac
GMC Inc. v. Nigh, case 03-377, that Nigh and his lawyer say could
cast light on allegedly misleading or high-pressure sales tactics for
car loans, the Associated Press reported. The court will examine whether
a 1968 consumer protection law allows people like Nigh to collect
sizable damage awards if they win their case in court.
In the Koons case, Nigh sued, alleging violations of the Truth
in Lending Act among other claims. The dealer countersued, alleging Nigh
broke a contract. Ultimately, a jury awarded Nigh about $24,000 under
the Truth in Lending Act, plus money to pay his lawyer and an additional
$4,000 award under a Virginia consumer law. Koons, backed by banking
industry groups, argued that the consumer protection law caps damages at
$1,000. Two lower courts have agreed with Nigh that 1995 amendments to
the law allow a wronged consumer to collect much more -- twice what the
consumer would have paid in finance charges. The high court said Tuesday
it will hear Koons' appeal in the case. Arguments probably will be in
October. Read the
href='http://www.lasvegassun.com/sunbin/stories/bw-scotus/2004/jan/20/0120041…'>full
article.
Ivaco Says Shareholders Likely to Receive No Value
Steelmaker Ivaco Inc. said on Tuesday that its shareholders are unlikely
to receive any value for their shares after it completes a
restructuring, Reuters reported. Montreal-based Ivaco, which entered
bankruptcy protection in September because of difficult market
conditions for the North American steel industry, has since trimmed its
workforce and filed to liquidate its U.S. assets. 'On the basis of the
information we developed, we are of the current view that shareholders
are not likely to receive anything in the restructuring,' Guy-Paul
Massicotte, Ivaco vice president, told Reuters. Ivaco pointed to the
strong Canadian dollar and higher energy prices for putting pressure on
its operations. The company's shares have dropped 30 percent since
entering bankruptcy protection on Sept. 16, and are 85 percent off a
52-week high of C$2.59 reached last January, reported the newswire.
Cable & Wireless Receives 'Multiple' Offers for Assets
U.K. phone carrier Cable & Wireless PLC (C&W) on Tuesday said it
received 'multiple qualified bids' for its U.S. assets and said it would
therefore conduct an auction for them this week, Reuters reported.
C&W in October agreed to sell its U.S. Web-hosting and Internet
technology assets to Los Angeles private equity firm Gores Technology
Group for $125 million, subject to better offers from 'qualified
bidders.' Other bidders had until last Friday to submit counter-offers
in an auction overseen by the U.S. Bankruptcy Court in Delaware. Cable
& Wireless on Tuesday did not disclose the bidders, but said they
were all from 'well established and financially stable organizations.'
The auction is to be held in New York today, Reuters reported. At least
one company, XO Communications Inc., disclosed on Friday that it planned
to submit an offer for the company.
US Airways Pilots Union Agrees to Talks
US Airways Group Inc.'s pilots union agreed to talks to cut costs
further and boost productivity as the struggling airline seeks to sell
assets, the Wall Street Journal reported today. According to the
paper, the Air Line Pilots Association said its ruling council decided
to engage in talks, which could lead to formal negotiations, on the
plight of US Airways.
Earlier in January, the airline, still struggling financially less than
a year after emerging from bankruptcy, was reported to be looking to
sell a variety of assets, including its East Coast shuttle. Sources said
the decision was prompted mostly by the company's failure to win pilot
union support for a revised business plan proposed by management and its
need to meet terms of debt obligations.
HealthSouth Fraud Larger Than Estimates
HealthSouth Corp. said on Tuesday its massive accounting fraud was much
larger than earlier estimates and may have exceeded $4 billion, Reuters
reported. Officials for Alvarez & Marsal, restructuring specialists
hired to turn around the operator of rehabilitation and surgical
centers, said at a financial update meeting in New York that the total
amount of fraudulent entries in HealthSouth's accounting ledgers totaled
between $3.8 billion and $4.6 billion. That compares with an estimate
last July that the company would have to adjust its balance sheet
downward by $2.5 billion and prosecutor allegations that the fraud was
$2.7 billion. But restructuring officials said on Tuesday the company
expects to generate revenue of nearly $4 billion in 2004, signaling a
rebound from the scandal, which led to criminal charges against 16
former executives, reported the newswire.
California City Asks Rehearing of PG&E Bankruptcy Vote
A California city on Tuesday asked the state utilities regulator to
reconsider its narrow approval of an agreement that clears the way for
utility Pacific Gas & Electric Co. to emerge from bankruptcy in the
first quarter this year, Reuters reported. The City of Palo Alto said in
a petition for rehearing that the California Public Utilities
Commission's (CPUC) narrow 3-to-2 approval of the agreement on Dec. 18
violated state laws because the settlement would bind future commissions
to terms of the accord, strip the CPUC of its role to set 'just and
reasonable' electricity rates, and hand regulatory authority to the U.S.
Bankruptcy Court, reported the newswire.
Mirant Bankruptcy Legal Fees Topping $120 Million
Mirant Corp. is likely to spend $120 million to $140 million on legal
and consulting fees during its first 12 months in bankruptcy, according
to a bankruptcy court filing from the case's Fee Review Committee,
Reuters reported. That is about 50 percent more than the $80 million to
$90 million originally anticipated, according to the filing by Nancy
Rapoport, head of the court-appointed committee in the Mirant
bankruptcy filing.
Atlanta-based Mirant filed for chapter 11 protection in July 2003 in
Fort Worth, Texas, in the largest bankruptcy case in the country last
year. It has hired law firms Haynes and Boone and White & Case to
help with its case, reported the newswire.
