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December 9, 2002
UAL Files for Bankruptcy Protection But Vows to Keep Flying
United Airlines' parent UAL Corp. filed for protection from its
creditors today, becoming the largest U.S. airline to do so, the Wall
Street Journal reported. UAL directors, after meeting throughout the
weekend, voted unanimously late on Sunday to file the petition today, in
the U.S. Bankruptcy Court in Chicago, said people familiar with the
situation. The move could potentially put UAL on the path to become a
leaner, more efficient airline while it sheds debt. Shareholder value is
likely to be wiped out. The filing could represent a final chapter to
the flawed 1994 buyout of 55 percent of UAL by its employees, reported
the Journal.
UAL--which faces a $300 million loan repayment due Monday and has an
additional $690 million of debt due this week--ran out of options last
week after the federal government refused to bail the carrier out of its
liquidity squeeze with a $1.8 billion loan guarantee. United, which has
posted losses of $3.8 billion in the past seven quarters, applied for
the aid in late June and intended to use the guarantee to line up a $2
billion loan package, reported the Journal. To read the full
article, point your browser to
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Unemployment Jumps to 6 Percent as Manufacturers Slash
Jobs
The jobless rate jumped to 6 percent in November as employers
unexpectedly trimmed their payrolls, the Wall Street Journal
reported. The job cuts were steepest among manufacturers and retailers,
and dashed hopes that the ailing labor market had stabilized.
Separately, consumer credit rose in October by the smallest amount in 16
months, reported the online newspaper. Friday's report from the Labor
Department was a bleak snapshot of the labor market at a time when many
economists believed that the worst was over for job seekers. Economists
were expecting a rate of 5.8 percent, only a slight increase from the
5.7 percent recorded in October, according to a survey by Dow Jones
Newswires and CNBC. The disappointing employment report came amid news
of a shakeup in President Bush's economic team. Treasury Secretary Paul
O'Neill and senior White House economic adviser Larry Lindsey both
submitted their resignations on Friday.
Opposition to Qwest Debt Swap Becomes Court Room Row
Bondholders' opposition to Qwest Communications International Inc.'s
$12.9 billion debt exchange offer has grown into a full-fledged row that
will be decided in the courts, Dow Jones reported. On Friday, U.S.
District Judge Denny Chin set a hearing for Dec. 18 on a request by an
unofficial committee of Qwest bondholders to block the exchange offer,
which Qwest launched last month in a bid to reorganize some of its debt
outside of bankruptcy, the newswire reported.
The committee, whose members hold in excess of $4 billion of the bonds
subject to the exchange, allege in a complaint filed with the court that
the debt swap offer and its documents violate securities law and breach
the company's fiduciary duties to bondholders. They retained law firm
Fried, Frank, Harris, Shriver & Jacobson last week. Qwest early on
Friday said it intends to file a motion to dismiss the committee's
complaint, Dow Jones reported. Qwest, which is the local phone company
for 14 states in the Midwest and West and the nation's fourth-largest
long-distance company, has suffered in the face of an economic slowdown,
capacity glut and the investigations into its accounting practices.
Boston's Cardinal Law Heads to Rome Amid Protests at Home
Cardinal Bernard Law, facing rekindled calls for his resignation and a
rebellion of Boston-area clergy, was in Rome for a previously
unannounced visit to the Vatican, an archdiocese spokeswoman said, the
Associated Press reported. An archdiocese financial panel has authorized
Law to file for bankruptcy on behalf of the archdiocese, but he would
need permission from the Vatican before doing so.
Meanwhile, following new revelations of priest misconduct in the Boston
Archdiocese, an estimated 400 people protested outside the Cathedral of
the Holy Cross, the cathedral where Law typically celebrates Mass, the
newswire reported. Sunday's larger-than-usual protest was fueled by last
week's release of new internal church documents containing some of the
most spectacular allegations yet, suggesting church officials tolerated
a wide range of clergy misconduct, and not just sexual abuse of boys,
reported the newswire.
Med Diversified Seeks OK to Sell Accounts Receivable
Med Diversified Inc. is asking a bankruptcy court for interim approval
of a deal that would allow it to fund business operations and its
chapter 11 case through the sale of accounts receivable, Dow Jones
reported. The debtor company, which filed for bankruptcy protection in
the U.S. Bankruptcy Court in Central Islip, N.Y., on Nov. 27, is using
cash collateral to fund its operations. An interim court order
authorizing the cash collateral use expires Monday. Med Diversified has
reached an agreement to sell the accounts receivable to Sun Capital
Healthcare Inc. Judge Stan Bernstein of the Central Islip court will
consider the motion today along with a motion for final authority to use
the cash collateral, the newswire reported. The agreement is critical to
Med Diversified because the former purchaser of its accounts receivable
- National Century Financial Enterprises Inc. and its affiliates - filed
for chapter 11 bankruptcy protection on Nov. 18 and can no longer afford
to purchase the assets.
WORLDCOM
WorldCom Seeks to Pay $9 Million Owed Under Employee
Programs
WorldCom Inc. is seeking bankruptcy court approval to pay about $9
million of additional outstanding amounts due to employees under some
supplemental pre-petition incentive and compensation programs, according
to court documents, Dow Jones reported. In the motion filed on
Wednesday, WorldCom said the supplemental programs 'represent a central
component of the compensation structure for sales force representatives,
mid-level management, customer service representatives, and other
employees and organization units.' Those programs include nonexecutive
management incentive programs, sales compensation programs, sales
contests, credit and collections programs, and customer service and
support programs,reported the newswire.
The U.S. Bankruptcy Court in Manhattan on July 22 granted a WorldCom
request to pay nearly all pre-petition wages and to continue
pre-petition employee compensation and benefits programs. 'Given the
limited notice of the first-day motions,' however, the company had only
sought authority to pay pre-petition amounts due under general
compensation programs, and only up to $4,650 per dismissed employee,
according to the motion. The bankruptcy court will consider WorldCom's
motion at a hearing on Dec. 17.
Separately, the Associated Press reported that WorldCom Inc. had laid
off 3,000 more employees across the country, mainly from the firm's
information technology and operations staff.
WorldCom Allowed to Keep Licenses Over Objections of
Church
The Federal Communications Commission has turned down a request by a
church group seeking to prevent bankrupt telecommunications provider
WorldCom Inc. from keeping some of its licenses, Bloomberg News
reported. The United Church of Christ Inc. filed an objection in October
to WorldCom maintaining some of its wireless and Internet licenses
during bankruptcy proceedings. The church group said WorldCom was
'scandal-plagued'' and unfit to offer phone service in the United States
and other countries.
Sealed Air Board Approves Settlement of W.R. Grace Fraud
Claims
Sealed Air Corp., the maker of Bubble Wrap, said its board approved an
agreement to settle asbestos and bankruptcy-fraud claims related to the
company's 1998 purchase of W.R. Grace & Co.'s food-packaging unit,
Bloomberg News reported. Committees representing the claimants also
approved the agreement, Sealed Air said in a press release distributed
by Business Wire. Sealed Air's board authorized management to complete a
definitive agreement, the newswire reported. Sealed Air last week said
it had reached an agreement in principle to pay $512.5 million in cash
and 9 million of its shares to Grace creditors. Grace creditors and
asbestos-injury claimants sought to prove the chemical maker
fraudulently transferred assets before filing for chapter 11 protection
in 2001.
Kmart Expects to Complete Internal Investigation by Year-end
Kmart Corp. plans to complete an investigation of its former management
by the end of the year, an attorney for the bankrupt retailer said,
Bloomberg News reported. The investigation is 'on track'' to conclude on
schedule, said Charles Smith, an attorney with the New York-based law
firm of Skadden, Arps, Slate, Meagher & Flom, after a hearing in the
Chicago bankruptcy court. U.S. Bankruptcy Judge Susan Pierson
Sonderby granted Kmart's request to keep confidential material that
the Troy, Mich.-based company collects during its probe. The judge
expanded an earlier order sealing records to include video recordings,
transcripts of depositions and other subpoenaed documents.
US Airways Faces Heat from Financial Backer
US Airways Group Inc. is facing pressure from its financial backer for
better terms as the carrier tries to finalize a reorganization plan and
emerge out of chapter 11 bankruptcy proceedings, the Wall Street
Journal reported. According to people familiar with the situation,
the lender, Retirement Systems of Alabama, is seeking more board seats
as well as changes in some financial terms of its pact with the carrier.
That pressure comes even as US Airways, the nation's seventh-largest
airline, tries to persuade its unions to agree to more cost savings.
Those savings are necessary if US Airways is to land a $900 million
federal loan guarantee that would back a $1 billion loan that would
enable it to emerge from chapter 11. Without the savings, the Air
Transportation Stabilization Board won't extend the conditionally
approved loan backing, upon which the last portion of the RSA interim
financing hinges, reported the Journal. RSA, a pension fund that
has extended debtor-in-possession financing to the carrier, hopes to
control a 37.5 percent stake in the Arlington, Va.-based airline after
it emerges from chapter 11, which US Airways expects to occur in the
spring, the Journal reported.
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