January 11, 2002
Verizon Wireless Pulls Out of Effort to Revive NextWave Spectrum
Deal
An official involved in discussions to resurrect the troubled NextWave
Telecom Inc. wireless spectrum settlement said the keystone player in
the deal, Verizon Wireless Inc., has withdrawn from talks, Dow Jones
reported. Verizon, a partnership between Verizon Communications
Inc. and Vodafone Group PLC, told the 12 other companies in a coalition
struggling to salvage a settlement that it was dropping out, said Daniel
O. Pegg, senior vice president of public affairs for Leap Wireless
International Inc.
The other partners pressed Verizon for its position during a
conference call on Wednesday that was held to discuss efforts by the
providers to retrieve $3.1 billion they deposited with the Federal
Communications Commission (FCC) in connection with the NextWave
spectrum. While the settlement appeared to have failed after Congress
refused to meet a Dec. 31, 2001, deadline to pass legislation needed for
the deal, many of the wireless companies were still optimistic that it
could be salvaged. But Verizon told the coalition “they were
going [in] a separate direction,” Pegg said. As the largest
potential holder of the spectrum, Verizon’s withdrawal dooms
discussions of reviving the settlement.
Burlington Industries to Close Or Sell Five Plants
Burlington Industries Inc. yesterday announced it will close or sell
manufacturing facilities at five locations in the United States and
Mexico, resulting in the loss of 4,000 jobs or about 29 percent of its
workforce, as part of its bankruptcy reorganization, Dow Jones
reported. The Greensboro, N.C.-based textile company filed for
chapter 11 bankruptcy protection in December, listing total assets of
$1.18 billion and liabilities of $1.11 billion. The plants to be
sold or closed are in Mount Holly, N.C., Stonewall, Miss., Halifax, Va.,
Clarksville, Va. and Aguascalientes, Mexico.
Motient Announces Chapter 11 Filing
Motient Corp. filed for chapter 11 bankruptcy protection yesterday in
the U.S. Bankruptcy Court for the Eastern District of Virginia in order
to eliminate $335 million in debt, Dow Jones reported. The Reston,
Va.-based company said it expects to continue uninterrupted service on
its nationwide wireless data network and to conduct day-to-day
operations. Motient and the holders of a majority of its senior
notes have reached an agreement in principle that will convert
Motient’s senior notes to equity.
If the restructuring is completed as proposed, Motient will eliminate
more than $40 million in annual interest payments, which the company
expects will let it reach break-even earnings before interest, taxes,
depreciation and amortization in 2002. The restructuring also will
let Motient have sufficient cash to operate beyond its expected cash
positive date. The restructuring plan is subject to court
approval.
Home Health Corp. of America Emerges From Bankruptcy
Home Health Corp. of America Inc. yesterday announced that it has
emerged from spending almost three years in chapter 11 bankruptcy and
received an asset-based revolving credit facility from Healthcare
Business Credit Corp. of up to $4 million, Dow Jones reported.
King of Prussia, Penn.-based Home Health said its secured lenders will
receive one million new common shares under the reorganization plan,
representing 100 percent of the company’s issued equity
interest. Unsecured creditors will receive $600,000 plus possible
recoveries of other claims, and holders of common shares and other
equity interests will receive nothing. The plan’s disclosure
statement was approved in December.
ENRON UPDATE
Andersen Admits Some Enron Documents Were Destroyed
Arthur Andersen LLP, already under fire for its audits of Enron
Corp., has destroyed documents sought by federal law enforcement
officials investigating the Enron debacle, Dow Jones reported. In
a statement issued on Thursday, Andersen said it notified the U.S.
Justice Department and the Securities and Exchange Commission that
individuals at the firm “disposed of a significant but
undetermined amount” of documents relating to its work for
Enron. The Houston energy company declared bankruptcy last month
after announcing it had overstated four-and-a-half years worth of
earnings. The document destruction includes paper documents and
e-mail correspondence. Andersen said it has instructed employees
to retain all existing documents “until further
notice.” Andersen said destruction of Enron documents
occurred in recent months by individual employees involved in auditing
the energy company.
Bush Worried About Lost Pensions In Bankruptcies; Urges
Nonpartisan Investigation
President George W. Bush said yesterday that he wants to see a
thorough investigation into the sudden collapse of Enron and has ordered
a review of the U.S. laws governing pensions, Dow Jones reported.
He also warned lawmakers to steer clear of partisan activities targeting
Republicans and urged them to focus instead on the circumstances
surrounding the company’s failure. Speaking in a hastily arranged
event in the Oval Office, the president made his comments as the
political heat mounted over Enron's collapse. The president said
that he had never discussed Enron’s finances with the
company’s president, Kenneth Lay, adding that he had last seen Lay
last spring.
Bush said, “One of the things that we are deeply concerned
about is that there has been a wave of bankruptcies that have caused
workers to lose their pensions and that is deeply troubling to me.
So I have asked the secretary of treasury, secretary of labor [and]
secretary of commerce to convene a working group to analyze pension
rules and regulations to look into the effects of the current law on
hard-working Americans,” Bush said. Specifically, Bush said
the group would look at ways to prevent workers from losing their life
savings if their companies go bankrupt.
Ashcroft Removes Himself From Enron Investigation
Attorney General John Ashcroft and his Chief of Staff, David Ayres, have
removed themselves from the investigation of Enron Corp., according to
Dow Jones. The Justice Department said Ashcroft’s decision
was “due to the totality of the circumstances of the relationship
between Enron and the Attorney General.” Ashcroft
hasn’t been involved in any aspect of the investigation to date,
the Justice Department said. The statement didn’t explain
why Ashcroft and Ayres were removing themselves. However,
according to the Center for Responsive Politics, Enron gave $25,000 in
so-called soft money to the Ashcroft Victory Committee in the 2000
election cycle.
Enron Chairman Kenneth Lay also gave the Ashcroft Victory Committee
$25,000. The committee provided funds to the National Republican
Senatorial Committee and Ashcroft’s failed campaign for
re-election to the Senate. Enron’s political action
committee also gave Ashcroft’s Senate campaign $4,999 in the 2000
cycle, while employees of the company gave $2,500, according to the
Center for Responsive Politics.
Enron Justice Probe Not Seen Reaching Into Bankruptcy
Court
Despite its apparent sweeping nature, the Justice Department’s
creation of a task force to investigate Enron Corp. isn’t expected
to have much of an impact on ongoing bankruptcy proceedings, Dow Jones
reported. Nor does the Bankruptcy Code offer a safe haven to
senior executives who managed the company before its December chapter 11
filing. Yesterday, Enron confirmed that it’s the target of a
criminal investigation. The probe, which is expected to focus on
possible accounting fraud, will be run by the Justice Department in
coordination with U.S. attorneys from across the country.
“The criminal investigation as well as the Department of Labor
and the SEC’s investigation may develop facts that would support
asserting certain causes of action against officers or other entities
that dealt with Enron,” said Jack Williams, the outgoing
scholar-in-residence at the American Bankruptcy Institute.
“It can change the tone of a bankruptcy case,” he
continued. “The fact that you have a coordinated criminal
investigation involving prosecutors from several different cities
suggests a very serious investigation.”
Justice Confirms Probe Into Enron; Creditors Seek to Delay Sale
of Unit
The Justice Department said a task force has been formed to pursue a
criminal investigation of Enron Corp., confirming a probe that is
expected to center on possible accounting fraud, The Wall Street
Journal reported. The investigation will be run by the
department’s criminal division, coordinating among U.S. attorneys
in New York City, San Francisco, Houston and elsewhere. The
Securities and Exchange Commission, which has been investigating Enron
since October, and the Justice Department could both file cases alleging
violations of securities laws if Enron is found to have intentionally
misled investors about its financial condition. Several congressional
committees also have begun inquiries into various aspects of
Enron’s collapse.
Confirmation of the probe came even as nearly two-dozen firms asked a
U.S. bankruptcy-court judge to temporarily block Enron's intended sale
of its energy-trading business, until recently the earnings juggernaut
for the entire company. The court approved an auction process on
Dec. 19 that was to have resulted in the announcement of the winning
bidder today. But a host of creditors have asked the court to
delay the sale indefinitely. The list includes financial institutions
such as Royal Bank of Scotland Group PLC and GE Capital Corp., as well
as power-trading rivals such as Mirant Corp., El Paso Merchant Energy LP
and Aquila Inc., a unit of Utilicorp United Inc.
Judge Approves Indesco Plan
Judge Robert Gerber of the U.S. Bankruptcy Court for the
Southern District of New York yesterday approved a plan that could
enable bankrupt Indesco International Inc. to emerge from chapter 11
bankruptcy protection next month, The Daily Deal reported.
Judge Gerber said he approved a plan that could clear the way for the
embattled New York-based spray-bottle pump-maker to emerge by Feb.
15. Under the plan, bondholders will get all of the equity in the
new Indesco entity. Trade creditors will be made whole on their
claims.
Three unsecured bondholders filed an involuntary chapter 11 petition
against Indesco on Nov. 14, 2000, after it defaulted on $145 million in
notes. Indesco responded with a voluntary filing on Jan. 4,
2001.
California State Sues PG&E Parent
The state of California sued the parent company of its largest
utility yesterday, alleging that the corporation drained off its
subsidiary’s assets and drove it into bankruptcy during the
state’s energy crisis last year, according to the Associated
Press. Pacific Gas & Electric Corp. pushed PG&E Co. into
chapter 11 bankruptcy through fraudulent and deceptive business
practices, Attorney General Bill Lockyer said. The lawsuit seeks
between $600 million and $4 billion in penalties. PG&E Co.,
which owes billions of dollars to creditors, filed for chapter 11
bankruptcy on April 6, 2001. PG&E Co. has blamed its woes on a
deregulation law that left it unable to collect the full price of
electricity from its customers for months.
Kmart Sees Shortfall, Talking to Lenders
Kmart Corp. yesterday announced that its earnings for the fiscal year
ending this month would fall short of Wall Street estimates and the
struggling discount giant disclosed it was in talks with lenders on
supplemental financing, reported Reuters. The company, the No. 2
U.S. discount chain behind Wal-Mart Stores Inc., said it was discussing
existing as well as supplemental financing as part of a review of its
liquidity position. Shares of Kmart, which has been battered by a
spate of bad news recently, including a series of credit downgrades,
tumbled 13.75 percent in New York. Its stock fell to a 30-year low
last week after a Wall Street analyst said he would not be surprised to
see the company file for bankruptcy.
Loews Cineplex to Seek Court Approval For Chapter 11
Statement
Loews Cineplex Entertainment Corp., the third-largest theater chain in
North America, will ask the bankruptcy court handling its chapter 11
case to approve its disclosure statement, reported Dow Jones. A
hearing on the matter is scheduled before Judge Allan L. Gropper
of the U.S. Bankruptcy Court in Manhattan on Monday. Although
Loews’ reorganization plan has the support of some of its major
creditors, several parties have charged that the disclosure statement
doesn’t provide enough information to allow them to evaluate how
they would be affected.
Specifically, they want to know the projected recovery for unsecured
creditors and how they would be affected if the assets and debt of
Loews’ bankrupt units were pooled, which the plan proposes to
do. Loews and its bankrupt affiliates are proposing to form a
reorganized company that would be owned by Onex Corp., a buyout firm
based in Toronto, and Los Angeles-based investment firm Oaktree Capital
Management. New York-based Loews filed for chapter 11 bankruptcy
protection in February.
Wheeling-Pittsburgh Steel Gets Financial Support Package
Wheeling-Pittsburgh Steel Corp. has put together a $27.2 million package
of financial support that, if approved, will help the company to survive
its cash crisis, Dow Jones reported. Yesterday the company said
the package, which includes loans of $5 million from the state of West
Virginia and $7.2 million from Ohio, would save jobs for 4,100
employees. Wheeling-Pittsburgh expects all contributions to its
plan to be committed and finalized by the middle of next week. The
Wheeling, W.V.-based company filed for chapter 11 bankruptcy protection
on Nov. 16, 2000, in the U.S. Bankruptcy Court in Youngstown, Ohio.
HMG Worldwide Won’t Proceed With Delisting Hearing
HMG Worldwide Corp.’s stock was delisted from the Nasdaq SmallCap
Market yesterday after the company decided not to follow through on a
hearing request to contest the delisting, Dow Jones reported. In
mid-September, Nasdaq informed HMG, which creates in-store merchandising
programs, that its stock didn’t meet the market’s minimum $1
bid price requirement. Initially, the New York-based company,
which filed for chapter 11 bankruptcy protection in late October,
requested an oral hearing with the listing qualifications board.
HMG said it told Nasdaq on Monday that it wasn’t pursuing the
hearing.
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