September 2, 2004
Economy Continues Sluggish Expansion
U.S. manufacturing grew more slowly in August, a research group
reported yesterday, adding to other signs that the economic expansion
continued to lose steam in recent weeks, the Washington
Post reported. The Institute for Supply Management’s index
of manufacturing activity fell to 59 last month, its weakest reading of
the year, from 62 in July. The figures are based on a survey of
purchasing managers, with a reading above 50 indicating growth and a
number below that level reflecting a decline. The report followed other
recent reports that have showed stalling job creation, weak income
growth, slowing home sales, falling exports and slipping consumer
confidence, the newspaper reported.
Acclaim Files for Chapter 7 Bankruptcy
Video game publisher Acclaim Entertainment Inc. today said it filed
for bankruptcy after failing to line up new financing for a credit line
that expired last week, Reuters reported. The Glen Cove, N.Y.-based
company, which publishes such games as “Combat Elite” and
“Alias,” said it filed to liquidate its assets under chapter
7 of the U.S. Bankruptcy Code. It filed in New York. Acclaim has
struggledin the highly competitive video-game market, lacking breakout
hit titles that are needed to compete.
US Airways Pilots Hint Deal Is Near on Cuts
The pilots’ union at US Airways said yesterday that it might be
close to reaching an agreement on wage and benefit cuts that the
struggling airline contends are necessary to avoid another bankruptcy
filing, the New York Times reported. But US Airways and the
machinists’ union traded angry words after the company dismissed a
proposal that the union said would save the airline $115 million a year.
US Airways is pushing its unions for $800 million in concessions, on top
of two rounds they granted while the airline was in bankruptcy. US
Airways wants the cuts by Sept. 15, in advance of a crucial series of
financial deadlines at the end of the month.
Enron
Judge Delays Criminal Trial for Former Enron Executives
A federal judge in Houston yesterday agreed to postpone for five
months the criminal trial of several former executives in Enron
Corp.’s Internet division, one day after a leader of the unit
pleaded guilty and agreed to cooperate with prosecutors, the
Washington Post reported. U.S. District Judge Vanessa D.
Gilmore said the trial, which had been scheduled to begin Oct. 4, should
instead be reset for March 2005. The judge rescheduled the case late
yesterday after defense lawyers said they needed more time to prepare
because the lead defendants in the case—COO Kevin P. Hannon and
CEO Kenneth D. Rice—had both pleaded guilty to securities fraud
charges in recent weeks.
Ex-Enron Chief Lay Says Case “Reeks Of Politics”
Former Enron Corp. Chairman Ken Lay said the legal case against him
was “a flimsy, hollow shell and reeks of politics” in an
article he wrote for Wednesday’s edition of theWashington
Post. Lay was indicted in July on 11 criminal counts linked to
the 2001 collapse of former energy trader Enron. Since then, he has been
trying to get his trial held quickly and separately from the trials of
former Enron Chief Executive Jeffrey Skilling and former Chief
Accounting Officer Richard Causey. Skilling also wants a separate trial.
A federal judge in Houston, Texas, has said he would not decide before
October whether to separate Lay’s trial.
Delta Renews Request to Change Lending Agreements
Delta Air Lines Inc., which is struggling to avoid bankruptcy, on
Wednesday renewed its request for bondholders to agree to change the
carrier’s lending agreements, Reuters reported. A group of
bondholders said last week it would not agree to any changes until they
better understood the company’s reorganization plans. The airline,
plagued by rising fuel prices, high labor costs and high borrowing
costs, is aiming to revamp its business, including renegotiating at
least some portion of its $20 billion of debt obligations. On Aug. 18 it
asked investors in some $1.5 billion of its secured bonds, known as
equipment trust certificates and pass-through certificates, for
permission to buy back and hold those bonds, the newswire reported.
Major Airlines Try to Fly Above Financial Failure
Three of the nation’s largest airlines could be operating under
bankruptcy protection in coming weeks, analysts say, the latest sign of
the industry’s upheaval as it lurches through a historic
transformation, the Washington Post reported. United
Airlines already is in bankruptcy. US Airways has warned for months that
its second bankruptcy filing in two years could come as soon as this
month. And Delta Air Lines, which is struggling to lower costs, looks
increasingly like a candidate for chapter 11. Read the article at
href='http://www.washingtonpost.com/wp-dyn/articles/A54510-2004Sep1.html'>http://www.washingtonpost.com/wp-dyn/articles/A54510-2004Sep1.html
Europe Follows U.S.to Cut Bankruptcy’s Stigma
Two centuries after the United States introduced tolerant treatment
for bankrupt companies to keep its railroads rolling, is copying that
lenience, with adopting a new bankruptcy law on Wednesday and more to
follow, Reuters reported. The United States invented corporate
reorganization in the nineteenth century as a way of keeping bankrupt
railroads on track, and in 1978 it formalized a more lenient approach
with the chapter 11 bankruptcy procedure. Faced with a spate of recent
crises at big employers such as Parmalat and Cirio in Italy and Alstom
in France as well as a tougher European Commission stance on state aid,
Europe is now borrowing from chapter 11. Spain adopted a new bankruptcy
law on Wednesday, and reforms are underway in France and Italy, the
newswire reported.
Bankruptcy Court OKs Steel Mogul Court
Ross’s Coal Mine Buy
A bankruptcy court has approved the $786 million sale of bankrupt
coal miner Horizon Natural Resources to an investor group led by
financier Wilbur Ross, Horizon said on Wednesday, Reuters reported. The
approval, from U.S. Bankruptcy Judge William Howard, will allow the deal
to close in about one month, according to a statement. Horizon filed
plans of reorganization with the U.S. Bankruptcy Court for the Eastern
District of Kentucky in April and expects to emerge from chapter 11
bankruptcy protection in the third quarter. The $786 million bid is
comprised of $304 million in cash, $482 million in second-lien notes and
the assumption of liabilities. The deal with WL Ross & Co., the
buyout fund led by Wilbur Ross, divides Horizon into two new entities,
International Coal Group and Old Ben Coal Co., and creates the No. 5
U.S. coal company, the newswire reported.
United Airlines Sees Payroll Cuts As Way to Survive
UAL Corp.’s United Airlines likely will have to reduce its
workforce, as the airline, which is currently in bankruptcy-law
proceedings, must cut deeper to survive, the Wall Street
Journal reported. Executives and board members are discussing
ways to cut costs further as the airline attempts to exit bankruptcy,
and executives are warning the airline’s 62,000 employees they
will have to tighten their belts even more. “It’s clear that
the cost structure that we need will mean workforce reductions over
time,” said UAL spokeswoman Jean Medina, the newspaper
reported.
Planet Hollywood Group Takes Over Aladdin Casino
Planet Hollywood investors on Wednesday said they officially had
taken over the Aladdin casino that they won a year ago in a bankruptcy
sale for $635 million, Reuters reported. Investors including Planet
Hollywood International CEO Robert Earl, Bay Harbour Management and
Starwood Hotels & Resorts Worldwide, which will rebrand the hotel
operations as a Sheraton, aim to keep the property open during
renovations that will last until early 2006. At that point the Middle
Eastern fairy tale-themed casino, which originally cost $1 billion to
build, will reopen as a movie-themed Planet Hollywood Resort and Casino,
including a Sheraton hotel.