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May 18, 2007
Autos
name='1'>Survey: Auto Suppliers Face Cash Crisis
Worsening troubles in the
auto supply industry could derail the supply chain and even halt vehicle
production, suggests the latest study to underscore the gloomy future
facing auto-parts makers, the
size='3'>Detroit News reported today. The
survey of 80 of the top auto suppliers finds that more than 20 percent
of them could encounter significant financial hurdles in the next 12
months. And one-third of North American suppliers are financially
distressed, said the report released Thursday by Southfield, Mich.-based
BBK, a business consulting firm. High costs for raw materials, labor and
health care, combined with the ever-increasing legacy costs for
retirees, are burdening suppliers, pushing more to the brink of
bankruptcy. Already, at least eight Detroit-area suppliers are in
chapter 11 bankruptcy reorganization. Continued turbulent times for
parts makers could create major ripples for domestic auto
manufacturers.
href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20070518/AUTO01/705180348'>Read
more.
name='2'>Collins & Aikman Sues Former CEO
Collins & Aikman
Corp. has sued its former chief executive, David Stockman, and the
private-equity firm that helped him take control of the auto-parts
company in 2001, saying they enriched themselves by inflating earnings
and sending the company on a disastrous 'acquisition spree,' the
Wall Street Journal
reported today. The lawsuit, filed Wednesday in U.S.
District Court in
face='Times New Roman' size='3'>Wilmington
size='3'>,
size='3'>Del.
criminal complaints filed against Stockman and some other executives. It
accuses him and several other former executives and directors of fraud
and mismanagement. It also alleges malpractice by Collins & Aikman's
auditors, saying they turned a 'blind eye' to signs of accounting
improprieties at the company. It seeks to force Heartland Industrial
Partners, the $1 billion private-equity firm Stockman founded, to return
an unspecified amount in fees and other benefits it collected as a
result of the acquisition binge.
href='http://online.wsj.com/article/SB117944379741506874.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='3'>GM CEO Says Deal between GM,
w:st='on'>
size='3'>Delphi
Imminent'
GM CEO Rick Wagoner said
yesterday that a deal between Delphi Corp., General Motors Corp. and the
United Auto Workers union to help the auto parts supplier exit
bankruptcy is 'not imminent,' Reuters reported.
w:st='on'>
size='3'>Delphi
discussions with the UAW and its former parent GM on wages and benefits
and wants to file a reorganization plan by the end of July. Wagoner's
comments came a day after the
size='3'>Detroit News reported that the UAW
countered
size='3'>Delphi
newspaper said that the union submitted a proposal on Monday that
included some possible concessions, and that potential investors, other
stakeholders and
size='3'>Delphi met on Tuesday to
discuss it.
size='3'>Delphi
$3.4 billion equity investment deal with a group led by Cerberus Capital
Management and Appaloosa Management LP to support Delphi's exit from
bankruptcy remains contingent on the supplier reaching agreements with
GM and its unions.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/05/17/AR2007051701433.html'>Read
more.
name='4'>Catholics Asked to Contribute to
w:st='on'>
size='3'>Spokane
Settlement
Roman Catholic parishioners who
saw the Spokane Diocese fall into bankruptcy because of sex abuse cases
against their clergymen now are being asked to help the diocese pay
molestation victims that had landed it in bankruptcy, the Associated
Press reported yesterday. The diocese chapter 11 reorganization plan
approved last month commits the diocese to pay $48 million, including
$10 million from 82 parishes, to settle as many as 177 old claims of
sexual abuse. That $10 million is roughly what the diocese's 95,000
parishioners normally put in the collection plate in a year. Home to
Bishop William Skylstad, president of the U.S. Conference of Catholic
Bishops, the diocese is the smallest and poorest of five nationwide that
have sought bankruptcy protection against clergy sex abuse lawsuits.
Skylstad is himself raising an additional $6 million toward the
bankruptcy settlement, and Catholic agencies, such as cemeteries,
children's homes and charities, are being asked to contribute another
$6.5 million. Insurance settlements will pay the rest.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/05/17/AR2007051701370.html'>Read
more.
Continues Work on GSE Bill, Votes to Limit Regulator's
Scope
The House continued work
on legislation to create stronger oversight at government-sponsored
enterprises such as Fannie Mae and Freddie Mac and siphon money from
their portfolios to create an affordable housing fund of more than $2.2
billion over the next five years,
size='3'>CongressDaily reported today. While
the House continued to debate the bill and passage is expected, House
leaders yesterday postponed final votes on the bill and amendments until
Tuesday. In the most significant vote, members adopted an amendment,
sponsored by Reps. Melissa Bean (D-Ill.) and Randy Neugebauer (R-Texas)
that would specify the regulator could take action to restrict or cap
Fannie's and Freddie's combined $1.4 trillion mortgage portfolio if it
poses a safety and soundness risk to the companies themselves, but not
in regards to the overall economy. Financial Services Chairman Barney
Frank (D-Mass.), who sponsored the underlying bill, opposed the
amendment because it would alter the agreement he struck with Treasury
Secretary Paulson to provide the new regulator the ability to restrict
Fannie's and Freddie's portfolios based on safety and soundness. Rep.
Richard Baker (R-La.) a longtime GSE critic, also opposed the amendment,
noting that the two engage in complicated derivatives and that they
participate in hedging strategies involving billions of dollars with
large banks such as Deutsche Bank, Barclays and BNP
Paribas.
All
American Semiconductor Creditors Make Pitch for Trustee
The official unsecured
creditors’ committee of All American Semiconductor Inc. has asked
for a trustee to be appointed or for the case to be converted to chapter
7, alleging that current management is acting for the benefit of the
company's lenders,
size='3'>Bankruptcy Law360 reported yesterday.
A trustee, the motion argues, would be able to reassess the strategy of
the case, decide how to proceed with any sale and determine whether it
is appropriate to convert the case to chapter 7. The unsecured creditors
say the continued decline in business and the proposed sale process pose
a substantial threat to them.
size='3'>The committee argues that the case should be transferred to
chapter 7 because there is no rehabilitation, and any sale will
effectively be an asset liquidation.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=24963'>Read
more. (Registration required.)
name='7'>Werner Co. Asks for More Time to File Plan
Werner Co. has asked the
bankruptcy court for more time to retain control over its chapter 11
case, arguing that the company has been too focused on selling off its
assets to put together a feasible reorganization plan,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday.
size='3'>The bankrupt ladder maker asked on Wednesday for the court to
give the company until June 30 to submit a reorganization proposal and
Aug. 1 to solicit votes from creditors, respectively. If Bankruptcy
Judge Kevin J.
Carey signs off on Werner’s request, it
would mark the fourth time that the court has granted Werner an
extension of its exclusive rights since the company filed for bankruptcy
in June 2006. The latest deadline for Werner’s exclusive right to
file a plan was set to pass on May 17, and its exclusive lobbying rights
were set to expire on July 16.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=24952'>Read
more. (Registration required.)
New
Century Asks Court to Help Prevent Litigation
Subprime lender New
Century Financial Corp. filed a motion Wednesday asking the court
overseeing its bankruptcy to allow it to provide “adequate
protection” to various counterparties of its master repurchase
agreements in order to avoid possible adversary proceedings,
Bankruptcy Law360
reported yesterday. New Century funded its pre-petition
operations mostly through these master repurchase loan agreements with
various financial services companies, and now the bankrupt lender fears
those parties will come after it through post-petition litigation. New
Century said that shortly before it filed for bankruptcy on April 2, the
parties with which it had entered into master agreements took action to
part ways with the beleaguered lender. The financial services companies
made margin calls of more than $150 million that New Century was not
able to repay at the time, the motion said. The companies then started
to restrict the loans and ultimately stopped providing funding for the
loans, declaring New Century in default.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=24945'>Read
more. (Registration required.)
Grants Bid to Dismiss BioSafe's Chapter 11 Case
BioSafe Medical Technologies
Inc. has found its way out of bankruptcy after a judge on
face='Times New Roman'>Tuesday granted a joint motion to
dismiss an involuntary chapter 11 petition filed on behalf of the home
medical testing company’s creditors, Bankruptcy Law360 reported
yesterday. Bankruptcy Judge Susan Pierson Sonderby on Tuesday approved a
joint motion to dismiss the case on behalf of BioSafe and all the
petitioners after the parties reached a compromise that will enable the
company to “emerge sufficiently capitalized and well-positioned to
reap the sizable enterprise valuations that BioSafe’s investment
bankers believe are inherent within the company’s patents and
existing and prospective business relationships,” according to the
motion. Under the terms of the settlement, reached on April 23, Hilco
will extend a $5.5 million senior secured-term loan and a contingent $1
million revolving credit facility to BioSafe and BioSafe Laboratories,
Inc., a 99.9 percent owned non-debtor subsidiary of BioSafe.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=24930'>Read
more. (Registration required.)
name='10'>Company Trustee Has O.J. Book Rights
Bankruptcy Judge
A. Jay Cristol
size='3'>ruled that an independent trustee will maintain control over a
bankrupt company, owned by O.J. Simpson's children, which holds the
rights to the canceled Simpson book ''If I Did It,'' the Associated
Press reported yesterday. The decision by Judge Cristol paves the way
for the family of slaying victim Ron Goldman to negotiate a deal to
acquire the rights to the manuscript. In the book, Simpson explains how
he would have committed the killings of ex-wife Nicole Brown Simpson and
Goldman. The book has been the subject of a legal fight between the
former NFL star and Goldman's family. HarperCollins planned to publish
it but canceled the deal following public outrage. Lorraine Brooke
Associates, which names Simpson's oldest daughter, Arnelle, as its head,
retains the rights to it. Arnelle Simpson had sought to reorganize
Lorraine Brook, which would have allowed her to maintain temporary
control over it -- and possibly ensure that the book would not be sold
to the Goldman family. Judge Cristol ruled that the company was in no
position to be reorganized and should simply be liquidated.
href='http://www.nytimes.com/aponline/us/AP-Simpson-Lawsuit.html?pagewanted=print'>Read
more.
name='11'>Energy Company Files for Bankruptcy
Rumford Energy, the Concord,
N.H.-based heating fuel company that suddenly closed last month, has
filed for bankruptcy, the Associated Press reported yesterday. The
company says it believes it owes money to 1,000-1,500 creditors and
listed assets of up to $1 million with liabilities of up to $100
million. Since the company closed abruptly last month, more than 400
customers have filed complaints saying they paid in advance for heating
fuel, then didn't receive the fuel, or their money back.
name='12'>Regulators Turn Attention to Risk in Banks' LBO
Lending
The Federal Reserve and
other regulators are taking a closer look at the risks banks may be
taking on in financing the boom in leveraged buyouts (LBO), the
Wall Street Journal
reported today. Banks have been major players in the
surge of takeovers, both as lenders to and investors in buyout targets.
As yet, there is little sign that this activity poses a threat to the
banks' health as they have strong capital bases thanks to years of
strong profits. However, a buoyant financing environment has led
investors and lenders to accept declining returns on all sorts of risky
assets. Regulators see signs of that in LBO lending, particularly in
what is known as 'bridge' financing, or the temporary credit that serves
as a stopgap between the buyout and longer-term financing. LBO loan
volume hit $121 billion last year, compared with $31 billion in 1998,
the peak of the previous cycle, according to Standard & Poor's
Leveraged Commentary & Data. Volume this year has reached $88
billion, more than double the year-earlier period. Meanwhile,
interest-rate spreads have fallen to their lowest levels ever, and loan
restrictions have been loosened.
href='http://online.wsj.com/article/SB117945234844107123.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='13'>Auditing Rule Is Put at Risk by
w:st='on'>
size='3'>Texas
size='3'>Bill
w:st='on'>
size='3'>Texas
are on the verge of rejecting a requirement that state and local
governments disclose the cost of the health care they have promised to
retired employees, the
size='3'>New York Times reported today. The
accounting rule that has run into criticism in the state capital,
size='3'>Austin
intended to encourage politicians to deal ahead of time with the huge
obligations they have imposed on future taxpayers. Until now, most
governments have been using pay-as-you-go accounting, which does not
show the benefits’ total cost. This method shows only how much a
government spends each year to buy health care for its retirees —
not the value of the benefits coming due in the future. Officials
in
size='3'>argue that having to disclose the state’s total
obligation — roughly estimated around $50 billion — could
bring pressure to cut benefits. Some places, like
w:st='on'>
York City
disclosed their retiree health obligations and have started setting
aside money to pay for them.
href='http://www.nytimes.com/2007/05/18/business/18pension.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='14'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
Daily e-Summary, that emails you information on over 70 such companies
each morning, email
face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.com
size='3'>your name, company name, address, phone and fax.
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size='3'>BabyUniverse Inc., a
size='3'>Fort Lauderdale
Fl. online retailer of baby products, reported a first quarter net loss
of $1.7 million. Sales fell almost 10%–to $8.5
million.
size='3'>Core Molding Technologies Inc.
size='3'>,
face='Times New Roman'
size='3'>Columbus
maker of sheet-molding composites, reported its first quarter net income
tumbled 47%–to $1.2 million, while revenue fell 14%–to $31.2
million. Core’s products are used by manufacturers of cars and
watercraft.
size='3'>Daimler Chrysler AG, the German-based
automaker, and Cerberus Capital Management have agreed to invest $1.2
billion in Chrysler
Group’s pension fund, according to terms
of the recently announced deal for the German company to sell its
Chrysler Group unit to Cerberus. Cerberus also plans on investing $5
billion in the Michigan-based automaker over the next five years and
will reportedly handle Chrysler Group’s whopping $18 billion
healthcare and pension obligations. In fact, these so-called legacy
costs for healthcare and retirees are thought to be part of the reason
that the Daimler-Benz merger with Chrysler went sour. There were
also differences in corporate culture between the German and
size='3'>U.S.
size='3'>companies, although some analysts point out that that
shouldn’t be an indication that trans-Atlantic mergers will go
away. In fact, DaimlerChrysler is doing just fine with its
Freightliner unit in
w:st='on'>
size='3'>Oregon
made DaimlerChrysler the biggest truck manufacturer in the world.
But, still, there probably are important lessons to be learned in the
Chrysler story. The $7.4 billion that DaimlerChrysler is getting
for Chrysler Group is a pittance, considering the $36 billion that
Daimler-Benz spent to buy it a decade ago and the tens of billions of
dollars that it subsequently pumped into the
w:st='on'>
size='3'>U.S.
size='3'>unit.
size='3'>Dave & Busters Inc., a
privately-held Dallas, Tx.-based operator of restaurants, reported a
fourth quarter loss of $943,000, compared to net income of $4.2 million
in the year-earlier period. The company blamed the loss on
expenses related to its being purchased by an affiliate of Wellspring
Capital Management LLC last year. Sales were up nearly 10%–to $144
million, including a 1.3% increase in same-store
sales.
size='3'>Ford Motor Co., Dearborn, Mi., said
that it will stop production at its Wixom, Mi. assembly facility on
5/31. The move is part of the carmaker’s strategy to shutter
nine plants by next year and a total of sixteen facilities by
2012.
size='3'>ILX Resorts Inc., a
w:st='on'>
size='3'>Phoenix
operator of timeshare resorts, reported a first quarter net loss of
$650,000. Revenue declined 8%–to $11.2 million.