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Fed Raises Interest Rates to Rein in
Inflation
The Washington Post reported today that the Federal Reserve
raised its target for overnight interest rates by half a percentage
point yesterday to slow down the U.S. economic growth and prevent
inflation from rising. In addition, the Fed reported that additional
rate hikes are likely in the coming months. The Fed's move to raise
rates was widely expected by investors and analysts and will raise the
Americans' borrowing costs. Rates on 30-year fixed mortgages recently
rose to 8.52 percent, the highest level in five years, and analysts say
it could go higher over the next several weeks. Since the rate hike was
generally anticipated, the increase had a negligible impact on stock and
bond markets yesterday. Fed officials, including Chairman Alan
Greenspan, explained the increase by expressing concern that the current
demand for goods and services is outpacing the economy's ability to
produce them, and that employers' demands for more employees will cause
them to grant inflationary wage increases to attract and keep employees.
However, economist Jerry Jasinowski, president of the National
Association of Manufacturers, said the increase 'was excessive and
unwarranted by current economic conditions,' and added that 'the Federal
Reserve is resorting to unnecessary shock treatment because recent
interest rate increases are already beginning to slow the economy.'
McDonald's Boston Market Purchase Cleared
The Wall Street Journal reported today that the bankruptcy court
has approved the purchase of the 851 existing Boston Markets by
McDonalds's, the world's largest restaurant chain. The Oak Brook,
Ill.-based company agreed in December to purchase Boston Chicken,
Golden, Colo., for $173.5 million. The deal will close sometime this
month, and McDonald's will begin switching Boston Markets into its other
brands, including Donato's Pizza and Chipotle Mexican Grill. A
'significant majority of existing Boston Market sites' will continue
operating under that name, said Jeffrey Kindler, McDonald's executive
vice president.
Schlumberger Aquires Assets of CellNet Data Systems
Schlumberger Ltd. announced yesterday that its Resource Management
Services (RMS) business segment has acquired substantially all of the
assets of CellNet Data Systems Inc., according to a newswire report.
Schlumberger RMS bought the CellNet assets for $235 million (which
includes the assumption of certain liabilities), undertaken through a
prearranged CellNet chapter 11 filing in February, and closed yesterday
upon the final approval by the U.S. Bankruptcy Court for the District of
Delaware on Friday. CellNet is a provider of low-cost telemetry services
that support the ability to transmit and receive data for the remote
monitoring and control of utility metering devices. Schlumberger RMS
provides business services for utilities, energy service providers and
industry worldwide.
Silver Cinemas Files Chapter 11, Receives $50 Million in DIP
Financing
Dallas-based Silver Cinemas International Inc. announced yesterday that
it and its wholly owned subsidiaries, Silver Cinemas Inc., Landmark
Theatre Corp. and Landmark Theatre USA Inc., have filed voluntary
chapter 11 petitions in the District of Delaware, according to a
newswire report. In addition, the company announced that it had received
a commitment from Foothill Capital Corp. to provide $50 million in
debtor-in-possession (DIP) financing. 'We do not expect the chapter 11
proceedings to negatively impact our ability to continue to provide a
high level of customer service to our customers,' said President and
Chief Executive Officer Larry D. Hohl. 'At the time of the bankruptcy
filing, the company was on current terms with its most important trade
vendors. Our goal is to emerge from bankruptcy as a financially strong
film exhibition company focused on growing the art film segment and
maximizing the potential of our discount film segment.' Silver Cinemas
operates 84 theaters in 17 states, including 52 theaters run by Landmark
Theatres, a wholly owned subsidiary of Silver and the nation's largest
art film exhibitor.
Hughes Electronics May Get $1 Billion in Extra Revenue
According to a Dow Jones newswire report, billionaire investor Craig
McCaw, El Segundo, Calif., has decided to merge his planned Teledesic
LLC 'Internet in the sky' with ICO Global Communications Ltd.'s
satellite-phone project, and Hughes Electronics Corp. is likely to come
out on top, The Wall Street Journal reported. London-based ICO
was expected to emerge from bankruptcy as early as yesterday, and McCaw
was trying to increase his control over that company, which could
translate to more than $1 billion in extra revenue for Hughes. Hughes'
satellite-making unit is set to direct all engineering,
systems-integration and testing efforts for ICO, and may supply as many
as eight additional satellites beyond the 12 already announced by the
venture.
Gottschalks to Acquire Lamonts Apparel
According to a newswire report, a U.S. bankruptcy court approved the
sale of 37 of the 38 stores leased by Lamonts Apparel Inc., Kirkland,
Wash., to Gottschalks Inc., a regional department store chain that
operates 42 departments stores and 20 specialty stores in the West and
Northwest. The sale does not include the liquidation of Lamonts's store
inventories, which are now being sold. Lamonts expects to transfer
ownership of the store leases on or about July 24 to Gottschalks, which
expects to operate stores by Sept. 1. Proceeds from the sale of the
stores and the inventories will become part of the Lamonts estate to
satisfy creditor claims (currently estimated at a range of 40-50
percent), and the company hopes to complete the chapter 11 proceedings
some time this year. 'We are very pleased that the proposed real estate
asset sale will go through to Gottschalks and are especially pleased
that the bidding process resulted in a higher valuation for the benefit
of Lamonts' creditors,' said Lamonts Chairman of the Board Alan R.
Schlesinger. Lamonts Apparel Inc., which operates 38 stores in Alaska,
Idaho, Oregon, Utah and Washington, filed chapter 11 three months ago.
Rite Aid Corp. Hopes to Complete Debt Plan
The Wall Street Journal reported today that the nation's third
largest drugstore chain, Rite Aid Corp., is moving closer to completing
its previously announced restructuring plan. The lenders in the
syndicated credit facilities, led by J.P. Morgan, have agreed to extend
the maturity of the credit facilities until August 2002. A Rite Aid
spokesperson says that Salomon Smith Barney Inc. and Citibank have also
completed syndication of a third senior secured credit facility. Rite
Aid found itself in need of reorganization after a costly acquisition
spree. The drugstore chain also had trouble managing all its new stores
and making payments on a $1.5 billion debt acquired after purchasing PCS
Health Systems, a pharmacy-benefits manager.
Kmart Leader to Step Down
Kmart Corp. Chairman Floyd Hall, who has been credited with saving the
retailer from the brink of bankruptcy five years ago, said Tuesday he
will step down as chief executive officer when his contract ends next
April 1, the Detroit Free Press reported. Hall, who made the
Troy, Mich.-based retailer profitable, improved sales and revamped
stores. The search for a replacement began last month.
Paracelsus Healthcare Consummates New Credit Facility
Houston-based Paracelsus Healthcare Corp. announced yesterday that it
has consummated a new $62 million subsidiary level financing facility
that has replaced and expanded its capacity and will be used to fund the
normal working capital and capital expenditure requirements of the
company's hospitals, according to a newswire report. The new credit
facility is an obligation of certain of the company's subsidiaries and
will be secured by all patient accounts receivable of the company's
hospitals as well as a first lien on two of its hospitals and certain
other miscellaneous assets of the company's subsidiaries. Paracelsus
Healthcare Corp. was founded in 1981 and presently owns the stock of
hospital corporations that own or operate 10 hospitals in seven states
with a total of 1,287 beds.
Hedstrom Holdings $50M DIP Loan Gets Final Court OK
Hedstrom Holdings Inc. (X.HIX) has obtained bankruptcy court
authorization
to borrow under a $50 million debtor-in-possession credit facility
provided
by a group of banks led by Credit Suisse First Boston. Judge Peter J.
Walsh's May 8 order also allows borrowing by two non-bankrupt Canadian
subsidiaries, MAV industries Ltd. and Backyard Products Ltd. The DIP
lenders
are a subset of Hedstrom's pre-petition lenders, to whom the DIP order
grants adequate protection.
Roman''>
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href='http://www.fedfil.com/bankruptcy/developments.htm'>The Daily
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Review Copyright © May 17, 2000.
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