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Economists Forecast A Second-half Rebound; Jobless Rate
Increases
Tax cuts and improving business profits should lead to a long-awaited
economic rebound in the second half of the year, according to 54
economists surveyed by the Wall Street Journal. Warning signs
continue, as the Federal Reserve raises concerns about possible
deflation, and the job market remains stagnant, according to the
newspaper. Nevertheless, economists argue that improvement is
expected.
The nation's gross domestic product is projected to grow at a 3.5
percent annualized rate in the third quarter and at a 3.8 percent rate
in the fourth quarter, according to the Journal's monthly forecasting
survey. The economy is projected to grow at a rate of 3.8 percent during
the first half of 2004, reported the online newspaper.
Separately, Reuters reported that the U.S. unemployment rate
increased in June to a 9-year high while the economy lost 30,000 jobs,
the government said on Thursday.
Aurora Foods to File for Bankruptcy, Has New Investor
Aurora Foods Inc., maker of Duncan Hines cakes, Aunt Jemima syrup and
Lender's bagels, said it will file for bankruptcy and replace its chief
executive officer under a $200 million agreement with investor J.W.
Childs Associates LP, Bloomberg News reported. Aurora said it plans to
convert about $400 million in subordinated debt into stock and cash
through a pre-negotiated chapter 11 filing, according to the newswire.
The investment by J.W. Childs would give the investment firm a 66
percent stake in the reorganized company. As part of the deal, Lawrence
K. Hathaway will replace Dale F. Morrison as CEO of St. Louis-based
Aurora. The company said it's in talks with bank lenders and bondholders
about its bankruptcy plan. The company said it missed an $8.8 million
bond payment yesterday, Bloomberg reported.
Under a tentative proposal, Aurora's bank lenders will be fully paid,
receiving about $458 million in cash and $197 million in notes. Holders
of Aurora's 12 percent unsecured notes due in 2006 would get $29 million
in notes, and holders of two series of senior subordinated notes will
get $110 million cash and 29.5 percent of the reorganized company's
shares, the newswire reported. Aurora's existing shares will be canceled
and holders would get 4.9 percent of the new shares, the company
said.
Crown Pacific Partners Wins Approval of Bankruptcy
Financing
Crown Pacific Partners LP, a timberland owner that filed for bankruptcy
after 10 straight quarterly losses, won a judge's approval of $40
million in financing designed to allow the company to pay suppliers as
it restructures, Bloomberg News reported. A bankruptcy judge in Phoenix
approved the interim debtor-in-possession loan provided by The CIT
Group/Business Credit Inc., a unit of CIT Group Inc., to provide
immediate financing to keep the lumber business going, Crown Pacific
officials said in a release, the newswire reported.
The Portland, Ore.-based company listed assets of $53.6 million and
debts of $1.07 million in its chapter 11 petition filed in the U.S.
Bankruptcy Court in Phoenix on Monday. The company sought protection
after revenue slumped because of a drop in lumber prices. The company
owns and manages 524,000 acres of timberland in Oregon and Washington.
Crown Pacific said in May that its net loss widened to $16.5 million for
the quarter ended March 31. It reported a net loss of $6.9 million in
the year-earlier period. The company has been negotiating with lenders
and selling assets to reduce its debt.
Polyphalt to File for Bankruptcy
Toronto-based Polyphalt Inc. is filing for bankruptcy and is considering
selling off its assets after failing to repay a secured loan to its
major shareholder, according to the Toronto Star. The Toronto
company, which makes pavement and roofing material from recycled plastic
and rubber, said today it will file a plan under the federal Bankruptcy
and Insolvency Act. Polyphalt has hired Deloitte & Touche Inc. to
provide advice, identify restructuring opportunities and act as
bankruptcy trustee overseeing the sale of the company's assets. The move
comes after Polyphalt defaulted on a loan from majority shareholder
Grandwin Holdings Ltd and Grandwin sought to petition Polyphalt into
bankruptcy and wind down its operations, the online newspaper reported.
In a release yesterday, Polyphalt said it intends fo find investors or
strategic purchasers for some or all of its assets and is reviewing 'a
number of non-binding expressions of interest' on some of its
operations.
Airline Mechanics Lose New Contract Bid
A group of American Airline's mechanics lost a bid in U.S. federal court
on Wednesday to shelve their latest labor agreement, a step opponents
said would have compounded the airline's financial troubles, Reuters
reported. The contract, approved earlier this year by the airline's
flight attendants, pilots, mechanics and other ground workers, calls for
$1.8 billion in cost savings a year and was aimed at keeping the
embattled carrier out of bankruptcy, the newswire reported. U.S.
District Judge Loretta Preska upheld the contract at a hearing on
Wednesday, ruling against a group of New York-based mechanics who sought
an order to have the terms of the agreement put to a new union vote. The
New York unions claimed some of their members either did not have an
opportunity to vote or did not have time to study the contract before
voting and that some changes to the contract were not submitted for a
ratification vote, according to Reuters.
Spalding Wins Approval to Use Funds to Finance Bankruptcy
Case
Spalding Holdings Corp. received court approval to use cash and other
collateral secured by assets to fund its bankruptcy case, Bloomberg News
reported. The company's use of the money will be based on budgets
submitted to the court and will be allowed until a final hearing is
scheduled. U.S. Bankruptcy Judge Kevin Carey granted approval
yesterday during a hearing in Philadelphia.
Spalding filed for chapter 11 on Monday to ease the sale of Top-Flite
to Callaway for
$125 million. The company agreed to sell its sporting goods business to
Russell Corp. for $65 million in April to focus on its golf line.
Without the funds, the company's ``efforts to sell their assets and
maximize creditor recoveries will be brought to a screeching halt and
the intent and purpose of chapter 11 will be frustrated,'' the Chicopee,
Mass.-based company said in court papers, reported the newswire.
Five AT&T Executives Resign From Latin America Unit's
Board
Five AT&T Corp. executives resigned from the board of AT&T Latin
America Corp., a data-transmission unit of AT&T that filed for
bankruptcy earlier this year, according to a U.S. regulatory filing,
Bloomberg News reported. AT&T cut off financing to the unit in
October, which created a $40 million funding gap. The next month, the
unit warned that it might seek bankruptcy protection or sell its assets
after third-quarter losses widened and talks with creditors broke
down.
Bedminster, N.J.-based AT&T has a 69 percent financial stake and
a 95 percent voting stake in the Latin American company, which is based
in Washington D.C. AT&T agreed in January to sell its stake to
Southern Cross Group LLC for $1,000, so it could walk away from an
investment that cost it more than $1.1 billion. AT&T officials
created the unit in 1999 as analysts were predicting demand for services
such as high-speed data transmission would grow 20 percent a year in
Latin America. Instead, demand fell as economic growth stagnated in
Argentina, Brazil and other countries, reported Bloomberg.
WORLDCOM
WorldCom Proposes Paying Shareholders $750 Million In SEC
Case
WorldCom Inc. has proposed paying shareholders $750 million as part of a
revised settlement agreement with the Securities and Exchange
Commission, the agency
said, Bloomberg News reported. The company had agreed in May to pay $500
million to settle the SEC's accounting fraud charges. Yesterday's
agreement adds $250 million of common stock in the reorganized company,
which will be called MCI Corp. when it emerges from bankruptcy. U.S.
District Judge Jed Rakoff of New York had questioned the size of the
earlier proposed settlement. Rakoff must approve the agreement, reported
the newswire.
WorldCom Seeks Court OK To Consolidate Some Non-U.S.
Units
WorldCom Inc. is seeking bankruptcy court approval to realign and
consolidate its European, Middle Eastern and African subsidiaries,
according to court papers.
In a motion filed with the bankruptcy court late Tuesday, the company
said ownership of those units would be consolidated under a newly
organized holding company. The proposal is designed to foster more
efficient management, reduce costs and enhance cash management of the
subsidiaries. WorldCom said it's seeking to 'rationalize the ownership
and operation' of its subsidiaries in the three geographical
regions.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Peregrine Systems Committee Says Company Needs To Revise Chapter
11 Plan
Peregrine Systems Inc.'s committee of unsecured creditors objected to
confirmation of the software company's reorganization plan, saying the
company should revise the way it would allocate new common stock under
the plan. In an objection filed with the bankruptcy court on Friday, the
committee said Peregrine Systems is seeking to distribute new stock to
existing noteholders 'based on questionable assumptions.' Those
assumptions include the company's projected excess cash and debt that
remains when the plan takes effect. The committee said that Peregrine
Systems made some determinations on matters that couldn't be known as of
the plan's effective date, such as the total claims of unsecured
creditors and tax liabilities from after the company's bankruptcy filing
last September.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
HealthSouth Seeks Capital To Avert Bankruptcy Filing
HealthSouth Corp. is seeking to raise additional capital to help avert a
bankruptcy filing, according to people familiar with the situation, the
Wall Street Journal reported. By cutting costs, including 330
jobs and expensive private jets and a helicopter, the company has at
least identified an option besides bankruptcy. On Monday, HealthSouth
and Alvarez & Marsal Inc., a turnaround firm hired in the scandal's
wake, plan to provide to creditors and investors a financial snapshot of
the company for the first time since the fraud was disclosed in
March.
To avoid a bankruptcy filing, HealthSouth would have to raise more than
$500 million to pay off a $345 million convertible-bond issue that has
already matured, according to people familiar with the situation. The
remaining amount would be used for working capital. Other debt issues
that don't mature for a couple more years, but which are technically in
default, likely would have to be restructured, reported the
newspaper.
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