February 13, 2004
Senate Names Conferees for Pension Rate Payment Bill
Senate Majority Leader Bill Frist (R-Tenn.) yesterday sent pension
legislation to conference with the House, naming five Senate conferees
in the process, CongressDaily reported. Senate Finance Chairman
Charles Grassley (R-Iowa), ranking member Max Baucus (D-Mont.), Majority
Whip Mitch McConnell (R-Ky.), Health, Education, Labor and Pensions
Chairman Judd Gregg (R-N.H.) and ranking member Edward Kennedy (D-Mass.)
will negotiate the bill for the Senate. House conferees will be named
later.
Democrats had held up the motion to go to conference over concerns
that they might be excluded from the final negotiations as they were on
last year's Medicare bill.
The Senate bill included House-passed provisions changing the rates that
companies use to calculate their pension payments, replacing the 30-year
Treasury interest rate with a higher rate based on a corporate bond
rate. However, the Senate bill also includes special waivers of
accelerated payments for airlines, steelmakers and other companies with
particularly underfunded pension plans.
Grassley Introduces New Class Action Legislation
Senate Finance Chairman Charles Grassley (R-Iowa) has introduced a new
version of the controversial class-action bill that fell one vote short
last October of the 60 needed to break a Democratic filibuster,
CongressDaily reported. The new bill includes compromise language
based on a deal bill sponsors struck last November with Democratic Sens.
Charles Schumer (D-N.Y.), Christopher Dodd (D-Conn.) and Mary Landrieu
(D-La.). The three democrats had voted against proceeding with floor
consideration of the previous bill. They have signed on as cosponsors of
the compromise, which addresses concerns they had raised about the
formula for removing class action cases to federal court and other
issues. On Wednesday Majority Leader Bill Frist (R-Tenn.) placed the
revised legislation on the Senate calendar.
Revlon Announces Deal to Cut Its Debt Load
Ronald O. Perelman, the financier and majority owner of Revlon Inc., has
struck a deal with Fidelity Management and Research, to help cut the
cosmetic giant's $1.9 billion debt load almost in half by swapping bonds
for company shares, the New York Times reported. Revlon disclosed
yesterday the terms of the refinancing, which it said will reduce debt
by $930 million, as the company announced its financial results for
2003. Revlon's revenues were $1.3 billion for the year, an increase of
16 percent over 2002 and the company's net loss narrowed to $154 million
from $287 million in 2002.
Under the debt reduction plan, Perelman has committed $775 million to
buy Revlon shares while Fidelity agreed to exchange $155 million in debt
that it holds for Revlon stock. The company said that $780 million of
the total debt reduction will occur before the end of March, reported
the Times.
Halliburton Units Chapter 11 Filings Can Proceed
Halliburton Co. said a court has ruled that insurers challenging the oil
services company in asbestos litigation could not seek dismissal of
bankruptcy filings by several of its units, Reuters reported.
Halliburton units DII Industries, Kellogg Brown & Root and other
affected subsidiaries were required to file for chapter 11 bankruptcy
protection as part of a $4.3 billion asbestos settlement. Some of
Halliburton's insurers, which are expected to give $2 billion to help
pay for the settlement, had tried to dismiss the bankruptcies, but Judge
Judith Fitzgerald on Wednesday ruled that they lacked the standing to do
so. Workers had filed more than 300,000 claims, saying they were harmed
by breathing asbestos fibers used in industrial furnaces at a
Halliburton subsidiary built before a finding in the 1970s that asbestos
is a carcinogen, reported the newswire. The bankruptcy court has
scheduled hearings for May 10-12 to consider the reorganization plan
proposed by the Halliburton subsidiaries.
Hawaiian Airlines Takeover Proposed
A Wyoming-based turnaround company today proposed taking over Hawaiian
Airlines, with the support of Boeing Capital Corp. and former Hawaiian
Airlines CEO Bruce Nobles, and lead it out of bankruptcy protection by
June, the Honolulu Advertiser reported. The first of several
expected reorganization plans for Hawaiian Airlines was unveiled
yesterday by Corporate Recovery Group LLC, Boeing Capital Corp. and BCC
Equipment Leasing Corp. Corporate Recovery Group of Wilson, Wyo. would
invest $30 million, pay back $115 million to $150 million in claims
against Hawaiian and issue new warrants giving creditors the right for
up to 10 percent of stock in the new company, Nobles said today. In
exchange, Corporate Recovery Group would end up owning 90 percent of
Hawaiian Airlines, Nobles said. Boeing Capital Corp., the financial
subsidiary of the Boeing Co., is among Hawaiian's largest creditors and
is negotiating with Hawaiian's bankruptcy trustee over new aircraft
leases, reported the newspaper.
SEC Drops Case Against Former Kmart Execs
The Securities and Exchange Commission (SEC) has dropped its accounting
fraud case against two former Kmart executives, a lawyer for one of the
men said on Thursday, the Associated Press reported. The SEC had filed
its civil action against Enio A. 'Tony' Montini Jr. and Joseph
Hofmeister in addition to criminal charges, which a judge dismissed at
trial in November after federal prosecutors in Detroit decided they did
not have enough evidence. Montini's lawyer Jonathan Graham said U.S.
District Judge Paul Borman dismissed the case at the SEC's request on
Tuesday. Graham said he received notification on Thursday. The charges
stemmed from a federal probe into Kmart's decline into bankruptcy and
were part of a government crackdown on accounting fraud. The government
claimed that Montini and Hofmeister conspired to inflate Kmart's
earnings in the second quarter of 2001 by improperly recording a
payment. The criminal case was dismissed after just two government
witnesses testified.
Km Logistics CEO Sentenced For Fraud Scheme
The CEO of a Randolph, Mass.-based company was sentenced today in
federal court for mail fraud, wire fraud, and bankruptcy fraud. U.S.
Attorney Michael J. Sullivan and Kenneth W. Kaiser, special agent in
charge of the Federal Bureau of Investigation in New England, announced
yesterday in a press release that William J. Findley of Rochester,
Mass., was sentenced by Senior U.S. District Judge Morris E. Lasker to
57 months' imprisonment, restitution in the amount of $1,932,021, a
$10,000 fine, and a $1,400 special assessment. In addition, Judge Lasker
ordered the immediate liquidation of Findley's truck and Harley-Davidson
motorcycle as partial payment of the restitution obligation. Findley
pleaded guilty on Sept. 3, 2003, to charges that he stole money from the
escrow account of KM Logistics that held customer funds. Findley's theft
from the KM Logistics customer escrow account drove the business into
bankruptcy. For additional information, visit
href='http://www.usdoj.gov/usao/ma/presspage/Feb2004/Findley-William-sentenci…'>http://www.usdoj.gov/usao/ma/presspage/Feb2004/Findley-William-sentenci….
Bankruptcy Judge Approves Cone Mills Deal
A federal bankruptcy judge in Delaware approved Wilbur Ross's $90
million bid to buy denim maker Cone Mills, the Associated Press
reported. The New York financier bought Cone rival Burlington Industries
out of bankruptcy in November for $614 million, and plans to merge the
denim operations of the two Greensboro companies. 'This now positions
Cone and Burlington together as by far the leading player in the denim
[business],' Ross said. 'I think this is the first real step toward
consolidation that the industry has seen.' Approval of the sale, which
has been controversial from the beginning, came after two days of
hearings before Judge Mary F. Walrath. 'It may not be the best result,'
Walrath said in making her ruling. 'But the debtor has met its
burden.'
Committees representing Cone bondholders and shareholders had opposed
the sale, calling Ross's offer too low. The financier offered to buy
Cone for $46 million through his investment firm, WL Ross & Co. The
final price came to at least $90 million when adding to the sale price
the assumption of certain Cone debts. An attorney representing the
bondholders, Richard Engman, said the group would appeal the judge's
decision, reported the newswire.
Judge Orders Takeover of Parmalat's Brazil Unit
A local judge ordered a court-supervised takeover of the Brazilian
subsidiary of Italian dairy giant Parmalat Finanziaria SpA, forcing the
company president to resign, a Parmalat spokesman said yesterday, the
Associated Press reported. Judge Carlos Henrique Abrao appointed three
administrators to manage the company, replacing President Ricardo
Goncalves, in an order on Wednesday. The judge also subpoenaed
executives' tax and bank records, and prohibited the executives from
leaving the country. Former directors who were involved with Parmalat's
dairy and holding company, Parmalat Participacoes, over the past five
years also will be investigated and have their bank and tax records
subpoenaed by the court, reported the newswire.
Enron's Skilling May Face Charges Soon
Prosecutors are preparing an indictment against former Enron Corp. CEO
Jeff Skilling that could be brought to a federal grand jury as early as
next week, the Houston Chronicle reported. Citing unnamed
sources, the newspaper said it was unclear what charges Skilling could
face, but that legal experts expected he would fight them and plead not
guilty. Enron former CFO Andrew Fastow, who was indicted on nearly 100
charges, last month pleaded guilty to two fraud counts and agreed to
cooperate with prosecutors in exchange for a 10-year sentence. His plea
was followed quickly by the indictment of former Enron CAO Rick Causey,
who pleaded not guilty to six felony conspiracy and fraud charges.
Judge OKs Conversion of Bankruptcy to Chapter 7
A U.S. Bankruptcy Court judge this week approved the conversion of the
Castaways bankruptcy case to a chapter 7 liquidation from a chapter 11
reorganization, the Las Vegas Sun reported. The conversion
occurred after the Castaways' primary creditor, Vestin Mortgage,
foreclosed on the property and creditors filed claims stating that they
had a secured interest in certain assets, Vestin bankruptcy attorney
Candace Carlyon said.
Several creditors have since lined up to file claims senior to Vestin's
on the property, including slot makers who have rented games to the
casino for use on a revenue participation basis, Carlyon said. The
liquidation will have no bearing on the timing of Vestin's proposed sale
of the property to an interested operator, she said.
Union to Challenge Granting of Stelco's Bankruptcy Protection
Order
The United Steelworkers will file a motion in court today asking a judge
to rescind a decision to grant Stelco Inc. bankruptcy protection from
creditors in a dispute over how the steelmaker defines itself as
insolvent, the Associated Press reported. The union, representing 6,300
Stelco workers, had been mulling this week whether to contest the order,
after accusing the company of being misleading in its calculation of
pension costs and other figures filed by Stelco in a court affidavit.
Among several questions, the union wants to know how the company
calculated its estimated $1.25-billion deficit to its pension plan and
some $918 million in post-retirement pension benefits in documents filed
to back its application for protection under the federal Companies'
Creditors Arrangement Act, reported the newswire.
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