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October 16, 2003
GOP Leaders, Biz Groups Agree on Asbestos Claim System
Negotiators working to salvage asbestos litigation legislation have
struck a deal on paying for a trust fund system to compensate victims of
asbestos-related illnesses, brightening the once-dim prospects for floor
action this year, CongressDaily reported. The agreement would
require insurers to contribute $46 billion and defendant companies in
asbestos lawsuits to pay just over $57.5 billion, which—combined
with existing, privately run asbestos trust funds—would bring the
total fund size to about $114 billion, the newswire reported. The
Judiciary Committee's version, which served as the basis for
negotiations, would have cost at least $108 billion.
Majority Leader Bill Frist (R-Tenn.) and backers of the bill plan to
spend the next few days trying to drum up support among Democrats and
labor groups that opposed the committee bill. 'While many details still
remain to be worked out, clearly this is a significant and meaningful
step forward between the two major parties to the larger asbestos
negotiations,' Frist said, CongressDaily reported. 'We've got an
agreement that is a worthwhile way of resolving the issue,' said
Judiciary Chairman Orrin Hatch (R-Utah). Hatch admitted that the deal,
crafted during a series of meetings and conference calls with Frist over
the past few weeks, faces obstacles, the newswire reported. Hatch said
he hopes unions will support a bill, since it provides more money to
victims than does the current system.
The bill would replace asbestos lawsuits and jury awards with a trust
fund to compensate victims. It includes medical criteria for determining
who is eligible for awards and prescribes award amounts for specific
categories of illness. But Jon Hiatt, general counsel of the AFL-CIO,
said although he has not seen the details of the agreement, the funding
level is inadequate to compensate victims, the newswire reported. The
agreed-upon $114 billion is higher than the $108 billion in the original
Judiciary bill, but amendments added in committee could have driven the
cost as high as $153 billion. 'And even that, we thought was too low,'
Hiatt said, according to CongressDaily.
Insurers and defendant companies have agreed to the $114 billion
trust fund, with defendant companies agreeing to pay an additional $10
billion in contingency payments if the fund runs dry. Defendant
companies agreed to shoulder more than the 50-50 split originally
envisioned with insurers to salvage a deal. 'In response to Sen. Frist's
insistence and persistence, we're going to support what are clearly
tough terms,' said a spokesman for the Asbestos Study Group, which
includes a number of defendant companies, the newswire reported.
Retail Sales Slipped in September
U.S. retail sales fell for the first time in five months in September,
but the drop appeared to be a temporary bump in a recovering economy,
the Wall Street Journal reported. Separately, the Federal Reserve found
that economic growth continued to broaden in September and early
October, according to its latest study on regional economies, known as
the 'beige book' report, the Journal reported. Retail sales fell 0.2
percent in September from August, mostly due to a 1.6 percent drop in
sales at auto dealers, the Commerce Department said, the online
newspaper reported. Economists said auto sales declined mostly because
they had reached unsustainable levels the prior month, according to the
newspaper.
Donaldson: Despite Rebound, Investors Wary of Stock
Markets
SEC Chairman William Donaldson told senators Wednesday that U.S. stock
exchanges remain fundamentally sound and reliable, but persisting
instances of malfeasance by some public corporations continue to
undermine investor confidence in the stock market, CongressDaily
reported. In testimony to the Senate Banking Securities and Investments
Subcommittee, Donaldson also said his agency is working to come up with
a new framework of rules or regulations to address structural issues
such as market data fees, fragmentation of the markets themselves and
the basic regulation of the various exchanges. He refused to be pinned
down, however, on a timetable for issuing the new rules, although he
told reporters later that some action on a new code of behavior for the
governance of the stock exchanges is imminent, according to the
newswire.
Banking Securities and Investments Subcommittee Chairman Michael Enzi
(R-Wyo.) noted the technological advances that had been made, mostly to
the good, in opening markets to ordinary investors. But he said the same
advances had made it harder to achieve 'level playing fields' for
different types of investors. 'It has become even harder for market
participants to act in the best interests of their investors,' Enzi
said. Even as subcommittee members and Donaldson bemoaned the recent
ethical lapses of corporate and exchange leaders, the SEC chief
expressed confidence in the basic workings of investment markets. 'Our
system of multiple, competing markets has worked remarkably well,' said
Donaldson, the newswire reported. 'We have the world's most competitive
and efficient markets.' But, he said, advanced electronics-assisted
trading, along with the recent decimalization of price quotes, had
introduced problems the SEC is now addressing. Those issues, Donaldson
said, have to do with ensuring fair access by all investors to the
various exchanges and a clearer understanding of the fees charged to
investors by all elements of the market structure. The SEC will lay down
new rules for collection and reporting of trading information and the
influence of resulting revenues on market structure, Donaldson said,
CongressDaily reported.
PG&E Cuts Cash-flow Forecast after State Rulings
PG&E Corp., the owner of California's biggest utility, said annual
cash flow after 2005 will be as much as $50 million less than forecast
after a bankruptcy plan for Pacific Gas & Electric was revised by
regulatory decisions, Bloomberg News reported. The rulings included a
California Public Utilities Commission order last month to refund $444
million to customers, San Francisco-based PG&E said in a regulatory
filing. The compromise plan to bring the utility out of bankruptcy early
next year won the support of 97 percent of creditors, PG&E announced
a week ago. The agreement struck in June with the commission calls for
using bond sales, customer payments and reserves to pay creditors owed
$13 billion and resume dividend payments by late 2005. Shares of
PG&E fell 15 cents to $24.26 at 10:08 a.m. in New York Stock
Exchange composite trading, the newswire reported. They have more than
doubled in the past year.
WorldCom Bankruptcy Examiner's Final Report Due by End of
Year
WorldCom Inc. bankruptcy examiner Richard Thornburgh said a final report
on the $11 billion accounting scandal that led to the company's
bankruptcy will be completed by the end of the year, reported Bloomberg
News. 'We're putting the finishing touches on our third and final
report,' he said in a televised interview with Bloomberg News.
Thornburgh said the report will focus on WorldCom's relationships with
its investment bankers and auditors and offer guidance on changes that
are still needed at the company. He said new Chief Executive Officer
Michael Capellas has the company on the right track.
'My sense is that Michael Capellas is making a good-faith effort to
reshape the culture at WorldCom,' Thornburgh said in a radio interview
with Bloomberg News. Thornburgh also said that many of the recent
scandals involving corporate governance, including the one at WorldCom,
were because boards of directors lacked independence. 'Boards of
directors have to be independent of the management of those companies,'
Thornburgh said in the televised interview. 'In WorldCom, you had a
board that was completely beholden to a chief executive officer.'
Sprint, Others Drop Objections to MCI Plan
Sprint Corp., 13 U.S. states and others on Wednesday dropped their
objection to MCI's reorganization plan, easing the telephone company's
efforts to emerge from bankruptcy later this year, Reuters reported. The
bankruptcy judge overseeing the MCI case also ordered the telephone
company's former finance chief Scott Sullivan, and former auditor KPMG
LLC, to produce documents requested by the Commonwealth of
Massachusetts, according to the newswire. Many of the objections by
Sprint and others, such as the Comptroller of the State of New
York—the trustee of the state retirement funds—centered on
the priority status given to various classes of creditors. Many of the
opponents withdrew their objections after MCI, which filed for
bankruptcy last year, offered a sweeter payout to win support from
dissenting creditors, Reuters reported.
Asbestos Factions Struggle to Settle Their 30-Year War (Wall
Street Journal)
An article in the Wall Street Journal analyzes the battle over
asbestos liability legislation. The online newspaper provides an
overview of the 30-year battle involving manufacturers, trial lawyers,
insurers and labor unions. According to the Journal, all of the
warring camps are as close as they've ever been to agreeing on a
congressional truce for one of the most expensive battles in industrial
history. To read the full article, point your browser to
href='http://online.wsj.com/article/0,,SB106616724588279300-search,00.html?co…)'>http://online.wsj.com/article/0,,SB106616724588279300-search,00.html?
collection=wsjie/30day&vql_string=bankruptcy<in>(article-body).
Court OKs James Cable Reorganization Plan
The U.S. Bankruptcy Court for the Middle District of Georgia approved a
reorganization plan for James Cable LLC, a move that could see the
once-troubled small-market MSO emerge from bankruptcy before the end of
the year, according to Reed Business Information. The court
approved the plan on Oct. 6. According to court documents, James Cable
will swap the majority of its debt for equity, giving its largest
bondholders 93 percent of the equity in the new company, the online news
source reported. The remaining 7 percent would go to James Cable's
current equity-holders.
Bloomfield Hills, Mich.-based James Cable filed for chapter 11
protection in June. It has about 63,000 basic subscribers in mostly
rural communities in Oklahoma, Texas, Georgia, Louisiana, Colorado,
Wyoming, Tennessee, Alabama and Florida. James Cable started to run into
trouble back in February, defaulting on a $5.4 million interest payment
on 10.75 percent bonds, which triggered another default on a $30 million
credit facility, the online news source reported. According to
securities documents, the bankruptcy court set a Nov. 13 deadline for
objections to the reorganization plan. A confirmation hearing for the
reorganization plan is set for Nov. 25.
Premier Concepts Files for Bankruptcy Protection
Premier Concepts Inc. announced in a press release yesterday that it has
filed a voluntary petition for reorganization under chapter 11 in the
U.S. Bankruptcy Court for the Central District of California. The
company specializes in the marketing and retailing of high-end
reproduction jewelry. Premier Concepts's national chain of 25 retail
stores, which operate under the names Imposters, Elegant Pretenders and
Joli-Joli, sell jewelry that emulates classic fine jewelry, as well as
pieces designed by famous jewelers. The product line also includes
replicas of jewelry owned by celebrities. Premier's stores are located
in California, Colorado, Nevada, Florida, Pennsylvania, New Jersey and
Arizona.
United Seeks to Sell Part of Orbitz Stake
United Airlines is seeking federal bankruptcy-court approval to sell
some of its 26 percent stake in online travel agency Orbitz Inc.,
according to the Associated Press. The sale of stock would help the
airline reorganize more quickly and efficiently, spokesman Jeff Green
said Wednesday, the newswire reported. Proceeds would be put toward
paying off bankruptcy loans. United, the nation's No. 2 airline, said in
a bankruptcy-court filing this week that the sale would raise from $26
million to $52 million. The sale is part of Orbitz's planned initial
public offering. United is working to emerge from bankruptcy court
protection in mid-2004.
UAL, Lenders Seek Court OK of Some Waivers Under DIP Loans
UAL Corp., the parent of United Airlines, is asking the bankruptcy court
overseeing its case to approve some waivers and amendments under the
carrier's debtor-in-possession financing facilities and to pay amendment
fees to the lenders. In a motion filed with the court Wednesday, UAL
said that it and its DIP lenders have recently amended the credit
facilities to document waivers of some alleged technical defaults. The
modifications are subject to bankruptcy court approval. The U.S.
Bankruptcy Court in Chicago has scheduled a hearing on the matter for
Oct. 24. Interested parties may file objections through Friday.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2'>www.djnewsletters.com/trial-form.html?promo=TDBRABI2).
Copyright (c) 2003 Dow Jones & Co. Inc. All Rights Reserved.
Bankruptcy Judge Eyes $500 Million Loan for Mirant
Mirant Corp. could learn on Friday whether it will be approved for a
$500 million loan, despite claims by its creditors that the company does
not need the money, Reuters reported. The company has asked the
bankruptcy court to approve a $500 million debtor-in-possession facility
financed by General Electric Capital Corp., a unit of General Electric
Co., to supplement about $855 million in unencumbered cash. Mirant said
it needed the loan and related letters of credit to maintain the
liquidity necessary to operate in the volatile commodities markets, the
newswire reported.
Mirant, one of the few energy merchants to continue speculative
trading in the power and gas markets, must post collateral against its
trading contracts with counterparties, as well as against long-term
supply contracts. The company has curtailed its speculative trading
business since its bankruptcy filing in July, according to a spokesman,
although it continues to be active in the markets. Mirant has about $8.9
billion in debts that it rang up during its aggressive expansion in the
deregulated energy markets. But many of the company's creditors,
including Citibank and Credit Suisse First Boston, have urged the court
to reject the DIP financing, arguing the company does not need the money
and that a $15 million closing fee for the loan to be paid to GE Capital
was excessive.
Pittsburgh's Credit Rating Cut Five Levels to Junk
The city of Pittsburgh's credit rating was slashed five levels to the
lowest of any major U.S. city following Mayor Tom Murphy's threats to
file for bankruptcy over the state's failure to allow a tax increase,
Bloomberg News reported. Pittsburgh, home to Alcoa Inc. and Mellon
Financial Corp., was downgraded to BB from A- by Standard & Poor's,
affecting $879 million of general obligation bonds. The second-largest
city in Pennsylvania is the only municipality with more than 100,000
people rated below investment grade, or BBB, by S&P. Murphy has said
the city has a deficit of $60 million this year, one-sixth of its annual
budget. An auditor's report said last month the city may run out of
money by Christmas if the legislature won't agree to a $40 million
increase in payroll and commuter taxes, the newswire reported.
Enron Wins Court OK of Bid Rules for $205 Million Sale of 2
Units
Enron Corp. won court approval of bidding rules to auction off its
Papiers Stadacona Ltee and St. Aurelie Timberlands Co. units on Nov. 10,
if a $205 million offer made by lead, or stalking-horse bidder Peter M.
Brant is topped by at least $7.65 million. Following an Oct. 9 hearing,
Judge Arthur J. Gonzales of the U.S. Bankruptcy Court in
Manhattan approved the auction rules, a $5.125 million breakup fee and a
$1.5 million expense reimbursement for Brant if he's outbid at the
auction. Judge Gonzales's order sets a Nov. 3 deadline for submitting
competing bids, which must equal or exceed $212.65 million and be
accompanied by a $6.15 million deposit and evidence of adequate
financing. Subsequent bids at the auction must be in increments of at
least $2 million.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2'>www.djnewsletters.com/trial-form.html?promo=TDBRABI2).
Copyright (c) 2003 Dow Jones & Co. Inc. All Rights Reserved.
10-fold Increase in Young Adults Filing for Bankruptcy
New York Gov. George Pataki signed a bill last week to include credit
union branches in elementary schools, exclusively for students, reported
CNN. The news portal reported that the banking facilities will provide
children credit to learn how to avoid being adult debtors. Savings
accounts have been in schools for decades. But credit unions that offer
savings and checking accounts, debit cards, ATM cards, even credit cards
and loans have cropped up in recent years. Credit cards are usually
restricted to fifth graders and above and only with a co-signing parent.
Loans also are co-signed and balances for credit cards and loans are
kept low, usually to no more than $200 or $300. The New York law allows
branches in schools and prohibits teachers, administrators, parents and
relatives of the students from joining or using the credit union,
according to the law sponsored by state Sen. Stephen Saland, chairman of
the Senate Education Committee.
'There has been a 10-fold increase in young adults filing for
bankruptcy over the past five years,' said Saland, an attorney from
Poughkeepsie, New York. 'At times, poor judgment in early life cannot
only follow you, but have devastating effects for years to come. My hope
was that this legislation would provide rather practical education to
avoid financial crisis.' To read the full article, point your browser to
href='http://www.cnn.com/2003/EDUCATION/10/14/kid.credit.unions.ap/index.html'>www.cnn.com/2003/EDUCATION/10/14/kid.credit.unions.ap/index.html.
PGS Junior Subordinated Creditors Approve Restructuring
Plan
Petroleum Geo-Services ASA announced yesterday in a press release that
its junior subordinated debentures voted to accept the company's
proposed restructuring plan. The company file for chapter 11 bankruptcy
protection in the U.S. Bankruptcy Court for the Southern District of New
York on Sept. 10. At the confirmation hearing for the plan, scheduled
for Oct. 21, the company will present to the bankruptcy court a final
certification of the voting results as part of the plan confirmation
process. Following confirmation, the company expects to consummate the
plan and emerge from chapter 11 in November.
Weirton Steel Seeks to Start Job Cuts
Bankrupt Weirton Steel Corp. said Wednesday it needs to start
eliminating 950 jobs immediately and will ask a court for permission to
expedite the cuts, the Associated Press reported. Last week, the company
filed a reorganization plan acknowledging it has been pursuing two
strategies for emerging from chapter 11. One involves a sale to a larger
company; the other would keep the steelmaker a small independent
producer. In a document filed Wednesday with the bankruptcy court in
Wheeling, W.Va., Weirton Steel said it will have to cut those jobs under
either plan and needs to begin immediately. The nation's fifth-largest
integrated steelmaker sought bankruptcy protection in May after losing
more than $700 million in five years. It plans to emerge by year's
end.
Ivaco Gets Bankruptcy Court Extension; Sells Virginia
Property
Ivaco Inc. has been granted an Ontario Superior Court extension of its
protection from creditors to Nov. 24, the insolvent steelmaker said
today, the Toronto Star reported. Ivaco, which last month entered the
shelter of the Companies' Creditors Arrangement Act to restructure its
debt, said it is still preparing a plan 'for the purpose of returning
its core businesses to profitability.' Ivaco also said it has signed an
agreement to sell a property in Virginia for $4 million (U.S.), and it
is continuing to search for a chief restructuring officer, the Star
reported. Ivaco, which is operating under Michigan court protection for
its U.S. assets and has shut down manufacturing plants in Vermont and
Georgia, has not said how many jobs it will cut from its workforce of
2,800. Ivaco, which lost $12.9 million in its second quarter, has blamed
its problems on the higher Canadian dollar, U.S. anti-dumping tariffs
against Canadian wire rod, and higher costs for scrap metal, according
to the online newspaper.
More Bankruptcy Headlines
For more bankruptcy stories, point your browser to ABI's 'Bankruptcy
Thursday' at
href='/bankruptcythursday/index.html'>http://www.abiworld.org/bankruptcythursday/index.html.
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