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January 20, 2005
Economy Stronger, Fed Says
The pace of U.S. economic activity continued to pick up around most
of the country in late November through early January, the Federal
Reserve said yesterday, Reuters reported. “Eleven districts
characterized activity as expanding, with Atlanta, New York and Richmond
noting that the pace of activity had quickened since their last
reports,” the Fed’s beige book summary of economic
conditions said. The Fed said that consumer spending was generally
higher in the six weeks since it issued its previous beige book summary
on Dec. 1, and many districts reported stronger holiday sales than a
year ago, the newswire reported.
Specter to Introduce $140 Billion Compromise Bill on Asbestos
Senate Judiciary Chairman Arlen Specter (R–Pa.) said yesterday
he is putting the final touches on legislation that would create a $140
billion trust fund to compensate victims of asbestos-related diseases,
CongressDaily reported. During a Judiciary Committee
executive meeting yesterday, Specter said he plans to circulate his
proposal as soon as it is put in legislative language, and he plans to
introduce the bill formally as soon as bills are permitted to be
introduced in the chamber next week. Sen. Mike DeWine (R–Ohio) has
agreed to co-sponsor the measure, but Specter has not announced any
Democratic co-sponsors. Specter said he wants the bill to be ready by
early February to avoid conflicts with other pressing legislation. He
said the bill is crafted to “overcome the objections of all the
parties,” including insurers, labor unions and businesses facing
asbestos lawsuits.
Those groups had raised objections about previous drafts that Specter
circulated. Specter said this legislation would permit asbestos cases to
return to the regular court system if the trust fund runs dry, a feature
that insurers and businesses have objected to. But to satisfy them,
Specter said the bill would minimize “leakage” of cases out
of the trust fund and into the courts, the newswire reported.
Mirant Files Proposal with Bankruptcy Court
Energy company Mirant Corp. yesterday filed a reorganization plan in
bankruptcy court that starts a process intended to allow the company to
emerge from chapter 11 protection by mid-year, Reuters reported. Under
the plan, Mirant said its debt would be reduced by more than $5 billion
while all U.S. and international assets and operations would remain
intact. Mirant said the plan reflected a structure that had received
support from committees of its two groups of creditors and would serve
as a sound platform for final negotiations, the newswire reported.
Returns May Ease at Certain U.S. Hedge Funds—Study
U.S. hedge funds that trade in distressed debt may deliver lower
returns this year because they are finding fewer opportunities at home,
according to a new study released yesterday, Reuters reported. The
loosely regulated funds have become powerful players in less liquid
markets, accounting for 82 percent of all trading volume in the U.S.
distressed debt market in 2004. Last year they returned an average 15.62
percent, data from CSFB/Tremont show. This year’s returns may be
significantly lower, however, if fund managers stay exclusively in the
local market, according to hedge fund industry consultants Hennessee
Group LLC.
US Air in Deal to Cut Airbus Plane Deliveries
US Airways Group has reached a deal with Airbus to delay delivery of
new planes, the Associated Press reported. The Arlington,
Va.–based airline’s deal with the European plane
manufacturer would resolve various claims between the companies,
according to court papers filed on Monday. The deal would end US
Airways’ rights or obligations to acquire 35 Airbus planes, delay
delivery of other planes, and provide $6 million in cash to US Airways
from conversion of credits it has with Airbus. The U.S. Bankruptcy Court
in Alexandria, Va., will hold a hearing to consider approval of the deal
on Jan. 27, following any objections that are due by Jan. 25, the
newswire reported.
United Pilots Contract Calls for Pay Cut
United Airlines’ pilots would take an 11.8 percent pay cut and
the future of their defined-benefit pensions would be left temporarily
unresolved under a revised contract worked out by the two sides, the
Associated Press reported. The tentative contract agreement, released
yesterday by the pilots’ union, was sent to United’s 6,400
pilots for a ratification vote that lasts until Jan. 31. The pact calls
for hourly pay to be cut by nearly three percentage points less than the
14.7 percent reduction of the previous agreement, which a federal
bankruptcy judge dismissed Jan. 7. Pay would be raised 1.5 percent
annually from 2006 through the contract’s final year in 2009, the
newswire reported.
ABB Says Court Denies Plea to Review Asbestos Ruling
ABB Ltd., the Swiss company facing more than 135,000 asbestos
lawsuits, failed to persuade a U.S. court to reconsider part of its
dismissal of a $1.3 billion settlement, Bloomberg News reported. The
Third Circuit Court of Appeals in Philadelphia rejected the request to
review elements of the ruling that dealt with the Lummus Global and
Basic Ltd. subsidiaries of its main U.S. unit, ABB’s spokesman
said. The federal appeals court on Dec. 2 threw out a proposed
settlement at Combustion Engineering, Zurich-based ABB’s main U.S.
unit, saying it would have given too much protection from future suits
at the two units. ABB was threatened with collapse two years ago as the
costs of resolving asbestos suits drained cash, the newswire
reported.
Talk of Changing Pension Calculations Raises Concern on Benefit
Cuts
The seeming discrepancy in accounting, which has been an accepted
business practice for two decades, has begun to bother accounting rule
makers, who say the practice allows companies to understate to investors
the extent of their pension liabilities, the New York Times
reported. The panel that sets accounting standards is now preparing a
proposal that would require many big American companies to give a more
accurate financial picture of their pension plans. As a result, a number
of them will have to increase the pension liabilities on their books, in
essence telling investors that they owe their employees more than they
have disclosed in the past, the newspaper reported.
Restatements Are on the Rise
The number of restatements by publicly held companies surged to a
high in 2004, according to results of a study of regulatory filings by
the Huron Consulting Group, the New York Times reported.
The firm, which is expected to release its findings today, found that
253 companies restated their annual audited financial reports last year,
a 23 percent increase from 206 in 2003. Another 161 companies restated
quarterly financial statements, compared to 117 in 2003.
MCI
Jury Selection Starts for Ebbers Fraud Trial
Hundreds of New Yorkers were asked yesterday to complete a
questionnaire that will help determine who sits on the jury for the
trial of former WorldCom Inc. CEO Bernard Ebbers, Reuters reported. The
two-page questionnaire asks just five questions of the potential jurors,
including whether they ever owned securities of WorldCom. Other
questions sought to find out whether they have read about the case,
could serve until March, or currently own securities of MCI. U.S.
District Judge Barbara Jones has said she hopes to limit the pool of
potential jurors by Monday, when those who remain will be asked to
answer more questions in person, the newswire reported.
Directors Run Risk of Paying Penalties out of Their Pockets
Experts say the WorldCom settlement is part of an evolving trend in
which those who commit financial misdeeds, or fail in their duty to stop
them, pay significant penalties.
href='http://www.washingtonpost.com/wp-dyn/articles/A22701-2005Jan19.html'>Read
the full article.
MCI Offers States, Except Mississippi, $300 Million
MCI Inc. wants to settle all but three of its back tax claims from
states for $300 million, but the offer does not include Mississippi,
which wants as much as $1.5 billion, sources familiar with the matter
said yesterday, Reuters reported. The long distance carrier at first
attempted to settle all of the states’ tax claims for $160
million. It then more than doubled that offer to $330 million. The group
of 16 or so states rejected that offer. But they would take $375
million—if Mississippi were excluded, according to the sources,
the newswire reported.
Delta Posts Loss of $2.2 Billion
Delta Air Lines today reported a wider net loss for the fourth
quarter, hurt by $1.4 billion in charges as well as high fuel prices and
intense competition, the Wall Street Journal reported.
Delta reported a net loss of $2.2 billion, or $16.58 a share, for the
latest quarter, compared with a year-earlier net loss of $327 million,
or $2.69 a share.
Trico Marine to Exit Bankruptcy Next Month
Trico Marine Services Inc., a provider of marine support services to
the oil and gas industry, yesterday said it expects to emerge from
bankruptcy protection by early next month, Reuters reported. The
Houston, Texas-based company, plus two of its units, filed for chapter
11 bankruptcy on Dec. 21. Trico said a bankruptcy court has entered a
final order approving the company’s credit agreement with lenders
who would provide cash for its operations and restructuring under
chapter 11.