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U.S. Consumer Borrowing Falls $2.2 Billion in November
U.S. consumer borrowing in November had the biggest decline in 11
years, evidence that Americans are becoming more wary of taking on debt,
Bloomberg News reported. Borrowing through credit cards and other types
of loans decreased at a 1.5 percent, or $2.2 billion, annual rate, the
first drop since January 1998 and the biggest since October 1991, when
the total dropped at a $2.4 billion rate, the Federal Reserve said. That
follows an increase of $1.5 billion in October, reported the
newswire.
Unemployment at an eight-year high in November has shaken consumer
confidence, prompting households to use restraint in spending and taking
on less debt. Holiday sales at Target Corp. and Wal-Mart Stores Inc.
were lower than forecasted, suggesting consumers may not lead the
economy to firmer footing. 'Households continue to use debt with great
caution because of worries about sluggish job markets and an already
high debt burden,'' said Steven Wood, principal economist at Insight
Economics LLC in Walnut Creek, Calif. 'Although consumers can be tempted
to borrow when interest rates are very low, they are growing their
non-mortgage debt more slowly,'' Bloomberg News reported. Economists
expected consumer credit to rise at a $3.8 billion annual rate in
November, based on the median of 33 forecasts in a Bloomberg News
survey, following a previously reported $1.4 billion October
increase.
Commentary: Will a Chance for Asbestos Reform Be Missed?
(Business Week)
Asbestos litigation has touched nearly every sector, and
multimillion-dollar settlements are becoming almost routine, noted a
recent Business Week article. In recent weeks, Honeywell
International Inc. and Halliburton Co. said they would shell out
billions of dollars to make their asbestos problems go away, reported
the magazine. And Republicans, who long have sought to curb what they
see as litigation run amok, now control Congress. 'With President Bush
on board as well, will beleaguered companies with ties to asbestos soon
get a break?' asks the magazine. To read the full article, point your
browser to
href='http://www.businessweek.com/magazine/content/03_02/b3815036.htm'>http://www.businessweek.com/magazine/content/03_02/b3815036.htm.
DirecTV Latin America Retains Restructuring Consultant
DirecTV Latin America LLC has retained AlixPartners LLC to assist with
a
restructuring, Bloomberg News reported. The company's financial
condition is 'unacceptable,'' and a solution 'must be executed
urgently,'' Kevin N. McGrath, chairman of DirectTV Latin America, said
in a statement distributed by PR Newswire. If the company isn't
successful in its restructuring, DirecTV Latin America would consider a
chapter 11 bankruptcy filing, McGrath said in the statement, reported
the newswire.
PANACO Inc. Discusses American Stock Exchange Notification
Panaco Inc. won't appeal the American Stock Exchange's efforts to delist
the company's shares, Dow Jones reported. In a press release on
Wednesday, Panaco said its decision reflects its chapter 11
reorganization plan and financial situation. The exchange initially
informed the oil and gas explorer in late November that its shares
weren't in compliance with listing requirements. At the time, Panaco
didn't plan to file a proposal to regain compliance. Shares of Panaco,
which filed for bankruptcy protection on July 16, last traded that day
at 15 cents, reported Dow Jones.
360Networks, Creditor Panel File Lawsuit Against Nortel
Former chapter 11 debtor 360networks Inc. and its committee of unsecured
creditors on Wednesday filed a lawsuit against Nortel Networks Inc.,
seeking about $101.1 million in damages, Dow Jones reported. The company
and its creditor panel are seeking to recover funds that were
transferred to Nortel within 90 days of 360networks' bankruptcy filing.
The company filed for bankruptcy protection in June 2001 after failing
to meet scheduled debt payments. 360networks emerged from bankruptcy
protection in November 2002. Unsecured creditors could receive roughly
$81.5 million if the plaintiffs are successful in recovering the $101.1
million, reported the newswire.
The creditor panel is calling the lawsuit and the $101.1 million in
damages one of the largest preference actions ever filed, reported Dow
Jones. The committee comprises many of 360networks's largest trade
creditors and represents creditors holding an estimated $250 million to
$300 million in total claims against the company, the newswire reported.
360networks Corp.-the parent of 360networks, a Vancouver-based provider
of fiber-optic services, and numerous operating subsidiaries-filed for
protection from creditors in both the United States and Canadian courts
in June 2001 after failing to meet scheduled debt payments.
NRG Cash Position Better as Restructuring Talks Continue
Progress on asset sales and improved wholesale electricity prices in the
eastern United States have given troubled power producer NRG Energy Inc.
some breathing room as it continues its debt restructuring talks with
creditors, a top official said on Wednesday, Dow Jones reported. The
Xcel Energy Inc. subsidiary still hopes to restructure its operations,
among the worst hit in the suffering energy sector, through a
prepackaged bankruptcy deal with its creditors. The unit's improved cash
position should give it the time, and possibly the evidence, it needs to
close a deal, said Richard Kelly, NRG Energy's president and chief
operating officer, in an interview, reported the newswire.
Kelly had aimed to complete a prepackaged bankruptcy deal with creditors
before the end of 2002. Though the talks have run longer than expected,
Kelly said he still expects to arrange a deal. Failure to secure
agreement on a restructuring plan would likely force NRG to seek
bankruptcy protection, the company said, Dow Jones reported. A
bankruptcy court status hearing on the case is planned for Jan. 23.
US AIRWAYS
US Airways Wins Judge's Approval to Investigate EDS
Agreement
US Airways Group Inc. may investigate its $5 billion computer services
agreement with Electronic Data Systems Corp. (EDS), as the bankrupt
airline decides whether to keep or abandon the deal, a federal
bankruptcy judge ruled, Bloomberg News reported. U.S. Bankruptcy
Judge Stephen S. Mitchell last month granted a US Airways request
to examine documents related to the 25-year contract with EDS.
Yesterday, the judge denied EDS's request for reconsideration of the
ruling and ordered that the documents be turned over, reported the
newswire.
US Airways has accused EDS of failing to honor a contract provision
making the carrier a 'most favored customer.'' The seventh-largest U.S.
airline, which filed for chapter 11 protection in August, has said it
suspects EDS is providing better terms to larger rivals, such as
Continental Airlines Inc. and AMR Corp.'s American Airlines. The
deadline for US Airways to decide whether to keep the contract is Feb.
25, court papers show. Under Judge Mitchell's ruling, the EDS documents
must be turned over to a 'neutral expert'' who will complete a report in
early February, Bloomberg News reported.
US Senator Wants to Let US Air String Out Pension
Payments
Sen. Rick Santorum (R-Pa.), seeking to bring US Airways out of
bankruptcy, wants to let the strapped airline string out $3.1 billion in
payments to its employee pension plan over 30 years, Dow Jones reported.
The bill will help the airline fulfill its 'financial obligation to the
hardworking employees by providing them the ability to restructure their
pension plan,' Santorum, said in a statement released on Wednesday
night, reported the newswire. US Airways declared bankruptcy in August,
the first to do so in the travel slump following the Sept. 11 terrorist
attacks. The company carrying a $61 billion debt said it needs to cut
costs by $1.6 billion to remain viable.
UNITED AIRLINES
United Air Flight Attendants Ratify Temporary Cuts
United Airlines flight attendants on Wednesday approved temporary wage
cuts of 9 percent that the air carrier says it needs to satisfy lenders
who are providing key financing for its bankruptcy restructuring,
Reuters reported. All but one of United's five unions have now agreed to
the temporary pay cuts, which United says will meet requirements lenders
imposed for the debtor-in-possession financing and gives it more time to
negotiate permanent contract changes.
The International Association of Machinists has opposed a proposed
interim 13-percent pay cut, and U.S. Bankruptcy Judge Eugene
Wedoff is expected to decide by the end of the week whether United
can impose those temporary cuts on machinists. The flight attendants'
union said 62 percent of eligible flight attendants voted, with 93
percent supporting the pay cut. Pilots, meteorologists and flight
controllers already ratified temporary wage cuts with the airline,
reported the newswire.
UAL: Machinists 'Must Be Ordered' to Accept Pay Cuts
UAL Corp., parent of United Airlines, said in bankruptcy court documents
late on Wednesday that its machinists union 'must be ordered' to join
fellow unions in accepting the airline's proposed pay cuts, Dow Jones
reported. UAL said that without court-ordered wage relief from the
International Association of Machinists (IAM) and Aerospace Workers, the
airline may violate the terms of its debtor-in-possession loan and could
be forced to liquidate. 'United requires interim relief from the IAM to
ensure the company's short-term and long-term survival,' the company
wrote in a filing obtained by Dow Jones Newswires. UAL said it had
informed its unions, including IAM, of the rules governing its
debtor-in-possession loan and actively negotiated, or was available to
negotiate, with them to achieve the necessary changes, Dow Jones
reported.
Crash Creates More Worry for Airlines in Bankruptcy
The fatal crash on Wednesday of a US Airways commuter plane in North
Carolina could heighten fears about the safety of airlines in bankruptcy
proceedings, the Wall Street Journal reported. That would be
problematic for US Airways Group Inc. and UAL Corp., both of which
entered chapter 11 bankruptcy-court protection last year. US Airways and
UAL's United Airlines have promised travelers no interruption in service
or decline in safety standards. To read the full article, point your
browser to www.wsj.com (subscription
required).
Dynegy Expects to Beat 2003 Predictions
Dynegy Inc. officials are optimistic that 2003 will bring profits larger
than Wall Street had expected and a smaller debt load as the energy
company continues revamping its business, the Associated Press reported.
Dynegy also plans to jettison its money-losing trading and
communications businesses this year, officials said on Tuesday. The
company expects to earn 8 cents to 15 cents per share, or $31 million to
$54 million this year, exceeding analysts' consensus estimate of 3 cents
per share. Dynegy was among the energy companies battered by fleeing
investors and squeezed credit ratings in the fallout of former rival
Enron Corp.'s December 2001 failure. Dynegy's forecast assumes the
company will successfully renegotiate $1.3 billion in bank agreements
due in April and May, despite its low credit ratings, which are below
investment grade, reported the newswire.
Alltel, Level 3 May Bid on WorldCom Units, Study Says
Level 3 Communications Inc. and Alltel Corp. are among the companies
that
may seek to buy assets of WorldCom Inc., which is trying to emerge from
the biggest bankruptcy case in U.S. history, a study says, Bloomberg
News reported. Leveraged-buyout firms Carlyle Group Inc., Blackstone
Group LP and Welsh, Carson, Anderson & Stowe also may seek bids, the
study from consulting firm Eastern Management Group Inc. said, reported
the newswire. WorldCom Chief Executive Michael Capellas has vowed to
steer the second-biggest U.S. long-distance provider out of bankruptcy
intact. Some analysts expect the company, with $41 billion in
liabilities and $107 billion in assets, to back off that promise,
Bloomberg reported.
Frederick's of Hollywood Emerges from Chapter 11
Protection
Frederick's of Hollywood Inc., which sells lingerie in 167 U.S. stores
and on the Internet, said it emerged from chapter 11 bankruptcy
protection, Bloomberg News reported. The private company filed for
bankruptcy protection in July 2000 to ease a debt load from a 1997
leveraged buyout. Filing for bankruptcy permits companies to reorganize
and continue operating by paying creditors a portion of what they are
owed. Los Angeles-based Frederick's said it has remodeled or opened more
than 20 stores, introduced new products and secured a new revolving
credit line as part of its recovery. A federal bankruptcy judge approved
the plan last month, reported the newswire.
Retro Fashion Boosts IPO-bound Converse
After costly manufacturing operations and high debt plunged Converse
Rubber Co. into chapter 11 bankruptcy reorganization two years ago, the
manufacturer of the famous Converse All Star is mounting a
fourth-quarter comeback, including a public offering of new Converse
shares, Dow Jones reported. In a December securities filing, Converse
announced its intention to raise $86 million in a public offering this
spring led by underwriter Morgan Stanley, reported the newswire.
Converse has shed about 1,000 employees, closed its U.S. manufacturing
plants and shaved off more than $100 million in debt, reported the
newswire. The company now makes all of its products in Asia.
Shareholders Seek to Add Enron as Defendant in Lawsuit
Shareholders of Enron Corp., having recently won a go-ahead for their
class-action lawsuit against some of the company's lenders, are taking
aim at the company itself, Dow Jones reported. To name the bankrupt
Houston company as a defendant in the class action, the shareholders
have filed motions to ask the bankruptcy judge to lift the stay imposed
on Enron upon its landing in bankruptcy court in December 2001. Such a
freeze, designed to prevent chaotic scrambles for a debtor's assets,
could shield a company from civil suits after filing for bankruptcy.
Judge Arthur Gonzalez, who oversees Enron's bankruptcy
proceedings, will hear the shareholders' motion on Thursday in U.S.
Bankruptcy Court in the New York, reported the newswire.
Tentative Ruling Scraps PG&E Company Claim Against California on
Rates
A California Superior Court has issued a tentative ruling to dismiss a
breach-of-contract claim filed by PG&E Corp. unit Pacific Gas &
Electric Co. against the state, according to court documents on the
Sacramento Superior Court web site on Wednesday, Dow Jones reported. The
bankrupt utility is seeking $4.1 billion in damages from California for
not allowing the company to sell power from its generation plants into
the wholesale market, reported the newswire.
Pacific Gas & Electric's original breach-of-contract claim with the
State Victim Compensation and Government Claims Board was rejected last
March. The utility filed with Sacramento Superior Court in early
September. Pacific Gas filed for chapter 11 bankruptcy protection in
April 2001, after racking up billions of dollars in undercollections
because it couldn't pass high wholesale power prices to customers with
frozen rates. Hearings on the utility's reorganization plan will resume
next week, Dow Jones reported.
Geoworks/Holder Meeting: Shares Last Traded At 2 Cents
Geoworks Corp. said it will consider alternatives including bankruptcy
after a shareholder meeting was canceled due to a lack of a quorum, Dow
Jones reported. The meeting, adjourned from Dec. 11 to Wednesday, was to
include a vote on proposals to sell the U.K. professional services
business and to liquidate. The software design and engineering services
company said in a press release that the votes cast were overwhelmingly
in favor of the company's proposals. Geoworks, delisted from Nasdaq in
November, now trades on the over-the-counter Bulletin Board. The stock
closed at 2 cents on Wednesday, Dow Jones reported.
Lumenon May Seek U.S. Filing If It Can't Restructure Notes
Lumenon Innovative Lightwave Technology Inc.'s Canadian unit received
court approval granting it protection from its creditors, Dow Jones
reported. Lumenon's LILT Canada Inc. unit had filed a petition under the
Canadian Companies' Creditors Arrangement Act with the Superior Court of
Quebec. All of Lumenon's operations and activities are performed through
LILT.
In a press release on Wednesday, Lumenon said the deterioration and the
continuing uncertainty in the telecommunications sector made it
'extremely' difficult to obtain adequate financing to allow it to
continue its operations. If Lumenon fails to restructure its obligations
under the notes or if the noteholders exercise the default remedies that
they are entitled to exercise upon a default under the notes, Lumenon
will be required to seek protection under chapter 11 of the U.S.
Bankruptcy Code, Dow Jones reported.
Wheeling-Pittsburgh Plan Gives Stock to Creditors, Workers
Wheeling-Pittsburgh Corp.'s proposed chapter 11 reorganization plan
would leave the company's equity in the hands of its unsecured creditors
and workers, according to recently filed court documents, Dow Jones
reported. Under the plan, which is subject to creditor and court
approval, 70 percent of the new common stock that the company would
issue would be exchanged for unsecured claims against the company and
its main operating unit. The remaining 30 percent of the shares would
benefit union-represented and salaried workers, according to a
disclosure statement that summarizes the plan for creditors, reported
the newswire.
Allegheny Energy Seeks Preemptive Rights Removal
Allegheny Energy Inc. is asking shareholders to approve the removal of a
preemptive rights plan, according to a proxy filed on Wednesday with the
Securities and Exchange Commission, Dow Jones reported. The rights plan
gives shareholders the right to pre-empt any issue of stock to another
person by purchasing the stock on the same terms and conditions as
offered to any nonshareholder. This applies to both common stock and
convertibles the company issued to nonshareholders. Allegheny Energy
said it wants to remove this provision because it impedes any private
sale of equity securities for cash to institutional or strategic
investors, reported the newswire.
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