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October 12, 2004
Chapter 12 Extension Passes the House and Senate
H.R. 5167, to restore chapter 12 bankruptcy protections for farmers,
introduced by Reps. Tammy Baldwin (D-Wis.) and Nick Smith (R-Mich.),
passed the House on Friday. S. 2864, a companion bill in the Senate,
introduced by Senators Chuck Grassley (R-Iowa) and Patrick Leahy
(D-Vt.), passed the Senate on Wednesday. This legislation extends
chapter 12 until June 30, 2005, retroactive to Jan. 1, 2004. The
retroactive provision would allow some farmers who filed under a
different chapter to convert to a chapter 12 filing if their bankruptcy
is not yet final. The bill now can be sent to the President.
Pension Promise No Guarantee of Security
As the baby boom generation retires and people live longer, both
Social Security and privately funded pensions—the two basic legs
of American retirement income—are under increasing financial
pressure, the Washington Post reported. Bankruptcies can
mean sharply reduced payouts, according to the newspaper. Read the
href='http://www.washingtonpost.com/wp-dyn/articles/A25334-2004Oct11.html'>full
article.
US Airways Wins Loan Concessions
US Airways Group Inc. lenders agreed to extend terms of their
financing arrangement to mid-January, subject to approval of a
bankruptcy-court judge, the Wall Street Journal reported.
The funding agreement assumes that US Airways will get the emergency
labor savings it seeks, people familiar with the issue said. That puts
new pressure on US Airways to persuade the bankruptcy court to grant its
request to impose emergency pay and benefit cuts valued at about $38
million a month on unionized workers, the online newspaper reported.
NorthWestern Wins Court Approval of Bankruptcy Plan
A judge approved NorthWestern Corp.’s plan to hand ownership of
the company to creditors and allow the provider of electricity and
natural gas in Montana, Nebraska and South Dakota to exit bankruptcy,
Bloomberg News reported. U.S. Bankruptcy Judge Charles Case II in
Phoenix approved the plan on Friday after hearing arguments on
Wednesday. The plan will allow the Sioux Falls, South Dakota-based
company to exit protection with about $800 million in debt.
The recovery plan restructures more than $2.3 billion in debt and
gives senior bondholders and other unsecured creditors 92 percent of the
company’s new shares. Existing shareholders will get nothing. The
company was among several power producers that sought bankruptcy last
year after a glut of supply left them struggling to pay debts racked up
in the 1990s, the newswire reported.
McDermott’s Babcock & Wilcox Unit Wins Bankruptcy Plan
Approval
McDermott International Inc.’s Babcock & Wilcox Co. won
court approval of its plan to come out of bankruptcy by putting assets
worth about $1.75 billion into a trust to pay more than 222,000
asbestos-injury claims, Bloomberg News reported. Babcock & Wilcox,
one of the world’s largest makers of boilers for generating steam
power, used asbestos in its products until the mid-1970s. Its trust
follows a model established in the bankruptcy of Johns Manville, which
paid exposed workers more than $2.7 billion in a settlement that became
part of U.S. bankruptcy law. Under the proposal, all shares of Babcock
& Wilcox, with an estimated worth of $400 million to $500 million,
and insurance rights valued at up to $1.15 billion would be put into a
trust for asbestos-injury claimants. McDermott will contribute 4.75
million shares and a $92 million note as part of a related settlement,
the newswire reported.
Penn National Cancels Bid for President Casino
Penn National Gaming Inc. on Friday said it would not buy the
President Casino in St. Louis since a competing bid in bankruptcy court
topped its $28 million cash offer, Reuters reported. Penn said another
bidder had offered $57 million, and that under terms of the August
purchase agreement Penn would be reimbursed for some expenses.
Citigroup, Parmalat Brawl Over Billions
Citigroup launched a legal challenge against Parmalat’s
restructuring plan on Friday, hitting back after the insolvent food
group rejected its claims for credit repayment and sued the bank for
damages, Reuters reported. Citigroup said Italy’s government,
which oversees Parmalat’s administration, had “failed to
ensure a fair process for considering claims” relating to the 14
billion euro ($17.2 billion) insolvency.
Global Crossing Stock Down 25 Percent on Funding Worry
Shares of Global Crossing Ltd. fell as much as 25 percent on Monday
on concerns it could face a second bankruptcy after it said it is
cutting 600 jobs as it negotiates with lenders for much-needed
financing, Reuters reported. The company on Friday had said it needs up
to $40 million in funding through the end of 2004 and
“significant” additional funds beyond that period.
But Global Crossing’s CEO John Legere yesterday said he
believes the company is in a strong position to close its funding gap
after reaching an agreement on Friday with its majority shareholder,
Singapore Technologies Telemedia, that will allow it to seek additional
financing via its UK business, the newswire reported.
Interstate Bakeries Stockholders Form Committee
A group of shareholders in bankrupt Interstate Bakeries Corp. on
Monday said they have organized a committee to represent
shareholders’ interest in the maker of Twinkies and Wonder Bread,
Reuters reported. The “Ad Hoc Committee of Equity Holders”
said it plans to ask the U.S. bankruptcy court in Kansas City, Missouri,
to name it as the official stockholder representative in the case,
meaning the foodmaker would pay the legal and other costs. The company
filed for chapter 11 bankruptcy protection on Sept. 22, citing high
costs, declining sales and “liquidity issues,” the newswire
reported.
Judge vacates Sierra Pacific-Enron Judgment
A federal judge on Monday vacated an earlier ruling that called for
Sierra Pacific Resources to pay bankrupt Enron Corp. $336 million in a
dispute over power supply contracts, Reuters reported. District Judge
Barbara Jones remanded the case back to bankruptcy court to rehear
facts, issues and arguments in the case, Sierra Pacific said in a
statement. The new ruling by the U.S. District Court for the Southern
District of New York cancels a previous ruling by a bankruptcy court
concerning a power supply contract with Sierra Pacific subsidiaries
Nevada Power and Sierra Pacific Power Co. that was terminated by Enron
in 2002, Reuters reported.
Restructuring Gurus See Day of Reckoning
The next big wave of restructurings could start next year, experts
said, Reuters reported. For corporate restructuring experts at firms
like Blackstone Group, Lazard, Rothschild LLC and Miller Buckfire Lewis
Ying & Co., that would mean a new round of fees of $300,000 a month
or more, plus percentages of debt restructured. Creditor advisers like
Chanin Capital Partners and Houlihan Lokey Howard & Zukin are also
optimistic. Barry Ridings, Lazard’s co-head of restructurings,
sees 2005 as the dawning of “restructuring heaven” for a
small club of investment banks. “We’re going to see a lot
more restructurings in 2005,” said Ridings, the newswire
reported.
DirecTV Consolidates Latin American Satellite Operations
Rupert Murdoch’s News Corp. Ltd. yesterday said it will sell
its stake in Sky Latin America to its DirecTV Group for $579 million,
creating satellite broadcast monopolies in a region where profits have
been elusive, Reuters reported. For DirecTV Latin America, which emerged
from bankruptcy in February 2004, it eliminates competition in Latin
American regions where subscribers have decreased in the face of
economic recessions, political turmoil and currency fluctuations. For
News Corp., it simplifies a series of complex ownership stakes, while
allowing it to participate in the market via its controlling stake in
DirecTV, the newswire reported.