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February 22, 2005
Economic Growth Expected to Dip in 2005
Economic growth will slow this year but will still be sufficient to
reduce the nation’s unemployment rate, business economists say,
the Associated Press reported. In its latest economic outlook, the
National Association for Business Economics predicts the economy will
expand by 3.6 percent this year and next. That would mark slowing from
the 4.4 percent growth in 2004, the strongest showing in five years.
“Economic growth in 2005 will moderate but still be solid,”
said Carl Tannenbaum, chief economist at LaSalle Bank and head of the
committee overseeing the economic forecast.
One reason economists give for the expected moderation this year is
the belief that the housing market will cool and mortgage rates will
rise. Consumer spending and business investment this year are expected
to be solid and to help support economic growth, according to the
outlook, the newswire reported.
Winn-Dixie Files for Bankruptcy Protection
Winn-Dixie Stores Inc. said today it filed for bankruptcy protection,
citing financial challenges that have worsened since the grocer reported
a much-wider fiscal second-quarter loss earlier this month, the
Wall Street Journal reported. Winn-Dixie and 23 of its U.S.
subsidiaries filed for chapter 11 protection on Monday in the U.S.
Bankruptcy Court for the Southern District of New York, the
Jacksonville, Fla.–based company said. Winn-Dixie said it has
secured an $800 million credit facility from Wachovia Bank N.A. to help
pay for its reorganization. The credit facility replaces the
company’s previous $600 million credit line, the online newspaper
reported.
Spiegel Plans to Exit Bankruptcy as Operator of Eddie Bauer
Chain
Spiegel Inc. said it will emerge from bankruptcy-court protection as
a stand-alone operator of the Eddie Bauer chain, as it filed its plan of
reorganization with the court overseeing its case, the Wall Street
Journal reported. The new retailer will be called Eddie Bauer
Holdings Inc. and will have its headquarters in Redmond, Wash. According
to the terms of the reorganization plan, creditors will receive 100
percent of the equity in the new company. Unsecured creditors will
recover about 90 percent of their claims, made up of approximately 52
percent cash and 48 percent new equity, the online newspaper
reported.
United Airlines
Judge OKs Suit by United Air Workers
A federal court judge ruled that employees of United Airlines may
proceed with a class-action lawsuit against the airline’s employee
stock ownership plan and its trustees, the workers’ attorneys said
today, Reuters reported. U.S. District Court Judge Samuel Der-Yeghiayan
gave the lawsuit class action status on Thursday. No trial date has been
set. The suit, originally filed in 2003, alleges that the employee stock
ownership plan committee for UAL Corp. and the plan trustee, State
Street Bank, were aware that UAL’s stock was unstable, said
attorneys from Hagens Berman Sobol Shapiro, the law firm representing an
estimated 70,000 UAL employees, the newswire reported.
United Airlines CEO Expects Consolidation in the Airline
Industry
United Airlines’ CEO Glenn Tilton said last week that he
expects the airline industry to consolidate in order to survive the
competitive environment and lower airfares, the Associated Press
reported. According to Tilton the airline industry is a competitive and
oversupplied marketplace and there is not room for all of the large
airlines that remain from the times of government regulation. Tilton did
not say whether United plans to acquire or merge with other airlines if
it exits bankruptcy. Low revenue and increasing jet fuel costs have
contributed to big losses at nearly all of the 10 largest U.S. carriers,
which together lost nearly USD 9 billion last year, reported the
newswire.
MCI
Qwest Weighs Bids for MCI
Qwest Communications International is weighing proposals to make
another $8 billion bid for MCI, executives close to the company said
yesterday, the New York Times reported. The deliberations
come as MCI is under increasing pressure from some shareholders to
reconsider its decision to accept Verizon’s $6.75 billion cash and
stock bid over Qwest’s $8 billion offer. Several shareholders have
sued MCI, contending that it failed to fulfill its fiduciary duty by not
fully considering Qwest’s offer and “by depriving
MCI’s public stockholders of maximum value to which they are
entitled,” the newspaper reported.
WorldCom Civil Trial Is Delayed; Judge Will Set Time
Restrictions
A federal judge in Manhattan delayed the beginning of a civil trial
over fraud claims at WorldCom Inc. until March and said she will limit
opening arguments and testimony in the case to about three months, the
online Wall Street Journal reported. At a pretrial hearing,
U.S. District Judge Denise Cote said jury selection would begin in the
case on March 17 and opening statements could begin as early as a week
later. The trial was originally scheduled to begin Monday, the online
newspaper
reported.
Shareholders to Vote on Sears–Kmart Deal
Kmart Holding Corp. and Sears, Roebuck and Co. will hold special
meetings of their shareholders on March 24 to vote on the
companies’ proposed merger, the Associated Press reported. The
meetings will be held at the Sears headquarters in the Chicago suburb of
Hoffman Estates, Ill., which will serve as the headquarters of the
combined company following the merger. The registration statement filed
with the Securities and Exchange Commission in connection with the
proposed merger has been declared effective, and joint proxy statements
will be mailed to shareholders starting Tuesday. Under the merger
agreement, Sears Holdings will have a 10-member board of directors,
which will include seven members from the current Kmart board and three
members from the current Sears board.
Hedge Funds Bet on Growth for Bankrupt Parmalat
Hedge funds see long-term value in Italy’s Parmalat, the
insolvent company they and other creditors will control after a
€12 billion deal the company is set to approve, Reuters reported.
Hedge fund managers say they are betting on future growth at the company
and on the prospect of dividends, if Parmalat is successful in its $10
billion litigation claims. The food group, which filed for bankruptcy 14
months ago, is set over the next 10 days to back the terms of a plan to
exchange €12 billion ($15.67 billion) of debt for shares, handing
ownership of the new company to its creditors, the newswire
reported.