August 3, 2004
Consumer Spending Dives
Sharply in June
Consumer spending took a much
deeper dive than expected in June as shoppers cut back on purchases of
expensive items like autos amid slowing income growth, a government
report showed today, Reuters reported. Personal spending dropped 0.7
percent in June after climbing 1 percent in May, the Commerce Department
said. Adjusted for inflation, spending plunged 0.9 percent. Incomes rose
a tepid 0.2 percent, a slowdown from May's 0.6 percent gain. Wall Street
economists had forecast a 0.1 percent drop in spending with income up
0.2 percent, and many have expressed confidence the soft spot for
spending has already been left behind, the newswire reported.
Index Shows Growth in
Manufacturing
Manufacturing saw the highest
growth in 30 years in July, with the Institute for Supply Management
purchasing managers' index rising 0.9 points from 62. The growth marks
the 14th consecutive reading above 50 points and indicates expanding
activity in the sector. New orders rose 4.7 points to 64.7, and
production accelerated 2.9 points to 66.1. Meanwhile, employment grew at
a slower rate, increasing 2.4 points to 57.3. 'Overall growth in the
second half of 2004 will be fueled by strong business equipment
investment, purchases of high technology durable goods and robust
exports,' said Manufacturers Alliance/MAPI President Thomas
Duesterberg.
DirecTV to Buy Pegasus Satellite Assets
DirecTV Group plans to buy the
satellite television assets of Pegasus Communications Corp. for $938
million, the companies said on Monday, Reuters reported. The deal sent
shares of both companies higher and brings a resolution to years of
disputes. It also lets DirecTV quickly apply triage to Pegasus's
under-performing rural markets. Pegasus was a reseller of DirecTV
services. The agreement comes two months after Pegasus Satellite
Television, a unit of Pegasus Communications, sued DirecTV and the
National Rural Telecommunications Cooperative, alleging the two entities
had sought 'to destroy' Pegasus. Pegasus Satellite filed for bankruptcy
protection on June 2 after DirecTV and the NRTC agreed to dissolve an
agreement giving it the exclusive right to distribute DirecTV, which
will pay $875 million cash in the deal, the newswire
reported.
American Air Rescinds Fare
Increase for Fuel
American Airlines has rescinded
a $5, one-way increase in its domestic fares meant to offset record high
fuel prices, after other carriers did not follow suit, the airline said
on Monday, Reuters reported. American, a part of AMR Corp., raised
prices last Thursday for most domestic and some international flights,
but rolled back almost all of those increases over the weekend after the
move was not followed industry-wide. The rising price of fuel is leading
airlines to intensify their cost-cutting plans. But several major
have cut costs so deeply to avoid or emerge from bankruptcy that they
have almost no room to maneuver, the newswire reported.
United May Try to
Renegotiate Plane Rates
United Airlines on Monday said
it may seek to renegotiate aircraft financing deals made since entering
bankruptcy to lower payments, Reuters reported. If the financing
arrangements cannot be renegotiated, United said lessors or other
financiers may choose to repossess the planes. United, a unit of UAL
Corp., said because the government recently rejected its application for
backing of a reduced $1.1 billion loan, the additional cost-cutting
needed to attract private financing will include reworking the aircraft
financing agreements. Other parts of United's business are also under
review, including heavily underfunded pension plans. United must now
arrange nongovernmental guaranteed exit financing to get out of chapter
11 protection, which it sought in December 2002. In a regulatory filing,
it said if a significant number of aircraft were repossessed, financial
and operational performance could be hurt, the newswire
reported.
3-HSBC's Hang Seng H1 Up On
Lower Bad Debt Reserves
Hang Seng Bank, the Hong
Kong affiliate of HSBC Holdings PLC, said on Monday that first-half
profit increased a better-than-expected 24 percent as it cut reserves
for bad debts, Reuters reported. The territory's fourth-largest lender
benefited from a resurgent economy with fewer personal bankruptcies and
rising property prices, and recouped HK$763 million (US$98 million) it
had previously written off for problem loans. Net interest income fell
9.8 percent, however, as low interest rates continue to crimp gains from
lending. Client loans grew 7.5 percent, bucking a trend of stalled loan
growth in
sector, trade finance and consumer lending were strong, the bank said,
the newswire reported.
Bankruptcy Rates Turn the
Corner
Bankruptcy filings have risen
in nine of the last 13 years, and accelerated their increase in the last
three years, rising 32.5 percent from 2000 to 2003. However, new
research from RegionalOneSource shows that this trend has finally
reversed itself, the group announced in a press release
yesterday.
Bankruptcy filings dropped in
the first quarter of 2004 as compared with the same quarter of the
previous year. Both business and consumer filings were down,
reflecting the effect of nearly two years of GDP growth and robust
financial markets, as well as the long-awaited renewal of growth in job
markets. However, the turnaround in consumer filings, which has
greatly lagged business filings, was very modest (1.8 percent) and
varied significantly by region of the country, with important
implications for regional economic performance and for the presidential
race.
Bankruptcy Seen As
Dioceses' Shelter
On the same day Portland's
archdiocese announced its bankruptcy, Tucson Bishop Gerald Kicanas sent
a weekly memo to his congregation that strongly hinted at a filing for
chapter 11 bankruptcy protection, the Portland
Oregonian reported. By taking the step of declaring bankruptcy
July 6, Vlazny forever changed how dioceses conduct the business of
religion. As dioceses pay settlements for decades of child abuse by
priests, bankruptcy is now an option. Read the full article at
href='http://www.oregonlive.com/news/oregonian/index.ssf?/base/front_page/109…'>
face='Times New Roman'
size='3'>http://www.oregonlive.com/news/oregonian/index.ssf?/base/front_page/109…
Choice One to File
Bankruptcy
Choice One Communications Inc.
officials announced a plan to reorganize finances and lower debts
through a voluntary prepackaged bankruptcy, the Democrat and
Chronicle reported. The company will file chapter 11 papers
sometime in the next month, they said.
The process would eliminate the
value of common stock in the Rochester-based telecommunications company
through a deal that was reached with financial backers and bankers,
officials said. The restructuring would reduce Choice One's total debt
from $650 million to $200 million and add $25 million in new cash to
company coffers. Yawman said the company expects to stay in bankruptcy
less than 60 days, with the entire process to be completed by the end of
this year.
United Appears Boxed In as Trouble Percolates
Labor unions, a federal pension
board, members of Congress and its regional partners all are unhappy
with United over decisions it is making while it is in bankruptcy
proceedings, the New York Times reported. The company's
decision to stop funding its pension plans until it emerges from
bankruptcy raises the possibility that it might terminate them
altogether. Because pilots may fear that their pensions might be
threatened, analysts said the airline might see a wave of retirements
like those at Delta Air Lines. If tensions grow deep enough, experts
said, disgruntled employees may even re-enact their slowdown in the
summer of 2000, which caused numerous delays and canceled flights. Read
the full article at www.nytimes.com.