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September 3, 2002
New Index Helps to Explain Why Americans Keep Spending
A new consumer-spending index produced by Deloitte Research is helping
to explain why consumers keep spending despite wavering U.S. stock and
job markets, according to an article in The Wall Street Journal.
Carl Steidtmann, Deloitte's chief economist, says economists spend too
much time watching wiggles in monthly consumer-confidence
measures—which have recently slipped—to try to gauge the
outlook for spending, reported the newswire. The more important
indicator of the outlook for spending, he says, is long-term trends in
the actual cash going into and out of people's pocketbooks. His index of
cash flow is pointing up—thanks to factors such as tax cuts, wage
gains and increases in home prices—suggesting that spending could
strengthen, at least for the next few months.
The online newspaper reported that the University of Michigan on
Friday said its monthly index of consumer confidence fell in August to
87.6 from 88.1 in July. A separate measure of confidence produced by the
Conference Board was also down in August.
Bankruptcy Boom Leaves Many Retirees in Lurch
A recent article in The Wall Street Journal said the rash of
large publicly-traded companies seeking bankruptcy protection had left
tens of thousands of longtime employees without retirement benefits.
According to the article, in the past two years, the burden of bankrupt
companies unable to make good on pension benefits has swelled the rolls
of the Pension Benefit Guaranty Corp. (PBGC), a federal agency charged
with picking up underfunded pension plans. The PBGC isn't funded by tax
revenue, but by insurance premiums from employers that sponsor insured
pension plans. It earns money from investments and gets funds from
pension plans it takes over. The article stated that last year, the PBGC
took over the pension plans of Trans World Airlines LLC, representing
36,500 workers and retirees; Grand Union Co. with 17,000 workers and
retirees; and Outboard Marine Corp. with 10,000 workers and retirees. To
read the full article, point your browser to
href='http://www.wsj.com/' target='window2'>www.wsj.com
(subscription required).
Bankruptcy Law Would Broaden Lawyers' Role in Filings (Orlando
Sentinel)
An article in the Orlando Sentinel says the pending bankruptcy
legislation could make bankruptcy lawyers' jobs considerably more
involved. The news article says, if passed, the bill would broaden a
lawyer's role in individuals' bankruptcy filings; lawyers would be
required to conduct a thorough investigation into each client's finances
and verify the accuracy of the schedules that list such things as
assets, income, expenses and exempt property. If an audit of those
schedules later indicated something was amiss, the lawyer would be at
risk of civil penalty and could face sanctions, according to the
newspaper. To read the full story, point your browser to
href='http://www.orlandosentinel.com/business/nationworld/orl-cfblaw02090202s…'
target='window2'>http://www.orlandosentinel.com/business/nationworld/orl-cfblaw02090202s….
Critics Say Bankruptcy Reform Unfairly Targets Small Businesses
(Denver Business Journal)
A recent article in the Denver Business Journal says the
bankruptcy 'reform' bill now stalled in the U.S. Congress targets
consumers, but small businesses may be hurt by the bill as well. Critics
say the bill picks on small businesses as well as people with moderate
incomes—but not the Enrons and WorldComs of the world. To read the
full article, point your browser to
href='http://denver.bizjournals.com/denver/stories/2002/09/02/newscolumn2.html'
target='window2'>http://denver.bizjournals.com/denver/stories/2002/09/02/newscolumn2.html.
Judge Boosts PG&E Bankruptcy Plan
U.S. District Judge Vaughn Walker ruled on Friday that bankrupt utility
Pacific Gas & Electric can pre-empt California state law as it seeks
to reorganize, a setback for state regulators who want the utility
firmly under their control as it emerges from bankruptcy protection,
reported Reuters. Judge Walker said Pacific Gas & Electric could
move ahead with plans to spin off three new companies without obtaining
state approval or conducting environmental reviews, reported the
newswire. Walker's decision, which overruled an earlier ruling by the
bankruptcy judge overseeing the case, came as a blow to the California
Public Utilities Commission, which is backing its own rival
reorganization plan for the utility. Pacific Gas & Electric sought
bankruptcy protection in April 2001. U.S. Bankruptcy Judge Dennis
Montali has scheduled hearings in November on the rival plans.
Viasystems Reaches Agreement on Restructuring
St. Louis-based Viasystems Group Inc. reached a final agreement with its
bank lenders, major shareholder Hicks, Muse, Tate & Furst and
bondholders on a restructuring that calls for the exchange of about $740
million of debt into common and preferred stock and will result in a
prepackaged voluntary chapter 11 bankruptcy filing, reported Dow Jones.
In a press release Friday, the maker of printed circuit board and
backpanel assemblies said it has secured commitments from its senior
lenders for $37.5 million of working capital financing during the
reorganization proceeding. Upon completion of the recapitalization,
Viasystems will have about $80 million in cash and a new revolving
credit facility of up to $62 million. The company's debt will decline to
about $380 million from $1.1 billion, and interest will be reduced by
about $70 million annually. The company expects to begin the chapter 11
proceeding in late September, with the goal of completing the
restructuring in mid-November.
ENRON
Judge Approves $25 Million Enron-Dynegy Settlement
Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the
Southern District of New York on Thursday approved Enron Corp.'s $25
million settlement of a lawsuit it filed against hometown rival Dynegy
Inc. for backing out of a November merger, reported Dow Jones. Enron
sued Dynegy for $10 billion on Dec. 2, the same day it sought bankruptcy
protection, reported the newswire. It alleged that Dynegy withdrew from
the $23 billion proposed merger with Enron as part of a plan to wreck
the struggling company. Under the terms of the settlement, announced two
weeks ago, Dynegy agreed to pay Enron $25 million to resolve the
dispute. Also, Dynegy agreed not to pursue any claims related to its
acquisition earlier this year of the Northern Natural Gas Co. pipeline
from Enron. That will result in the release of about $62.9 million in
funds to Enron that had been escrowed in connection with the sale of the
pipeline.
Enron Creditors Move to Recover $10 Million from Arthur
Andersen
Dow Jones reported that creditors of Enron Corp. are seeking to recover
$10 million the company paid to former auditor Arthur Andersen LLP days
before the energy trader's bankruptcy filing. The official creditors'
committee in Enron's bankruptcy case asked Judge Arthur Gonzalez
for the authority to sue Andersen on behalf of Enron. Judge Gonzalez
will hear the motion on Sept. 19.
Icahn Revises XO Communications Debt Tender Final Results
Billionaire financier Carl Icahn, citing shareholder duplication,
revised downward the final results of his tender offer for XO
Communications Inc.'s senior secured loans, reported Dow Jones. Icahn
said in a press release Friday that $676.6 million principal amount of
the bank debt was tendered or confirmed, and his entities now own $847.5
million of the outstanding $1 billion of such debt. Icahn had previously
reported that he had agreements to acquire $947 million of the $1
billion face value in bank debt for a total of $500 million. The
revision stems from duplication caused by certain holders both
confirming sales to Icahn and then tendering debt already confirmed as
sold, Icahn said.
On Monday, XO Communications won bankruptcy-court approval for a
restructuring plan that requires Telefonos de Mexico SA and XO's largest
investor, Forstmann Little & Co., to invest a total of $800 million
for an 80 percent stake in the firm.
Adelphia Communications Seeks OK to Wind Down 14 of Its 17
CLECs
Bankrupt Adelphia Communications Corp. is asking a bankruptcy court for
approval to wind down 14 of its 17 competitive local exchange carrier
(CLEC) markets and to sell nearly all the related assets, according to
court papers filed late Thursday, reported Dow Jones. The cable company
is also seeking approval to implement a severance plan for employees who
would be laid off because of the wind-down of the CLEC markets,
according to the newswire. CLECs were created as a result of the
deregulated competitive telecommunications environment under the
Telecommunications Act of 1996. CLECs compete on a selective basis for
local exchange service, as well as long-distance, Internet access and
data services.
Adelphia said it loses roughly $2 million to $3 million in cash each
month while operating the 14 CLECs. The motion said Adelphia
Communications and Adelphia Business are negotiating the manner in which
Adelphia Business will be compensated for its continued management
services during the wind-down process. The U.S. Bankruptcy Court in
Manhattan will consider the matter at a Sept. 19 hearing.
Bankruptcy Judge Approves Sale of Lightyear Unit
U.S. Bankruptcy Court Judge David Stosberg has approved the sale
of Louisville-based Lightyear Communications Inc.'s local telephone
business, according to Business First. Lightyear and its parent
company, Lightyear Holding Inc., entered a purchase agreement on June 14
with Delaware-based Lightyear Acquisition Inc., reported the online
newspaper. Lightyear Holding has been operating under chapter 11 of the
U.S. Bankruptcy Code since April 29. Lightyear's business included in
the sale operates in Massachusetts, New Hampshire, Rhode Island, Maine,
New York, Vermont, New Jersey, Maryland, Pennsylvania, Virginia,
Delaware and Washington, D.C. The bankruptcy court approved the sale
late last week, after requiring the firm to hold a sealed-bid auction of
the business unit, reported Business First. Judge Stosberg also
signed an order last week giving Lightyear an extension to file its
reorganization plan with the court. The plan is due March 31.
Napster CEO: Sale or Shutdown
Napster Inc.'s chief financial officer said Friday that if a bankruptcy
court didn't approve the proposed sale of substantially all of the
company's assets to Bertelsmann AG by Tuesday, it would terminate its
employees and cease operations, reported Dow Jones. The newswire
reported that under the terms of Napster's debtor-in-possession loan
with Bertelsmann, the debtor must win approval of a sale by Tuesday.
Bertelsmann has agreed to purchase the assets in a deal valued at $92
million but said it would not extend the deadline. If the court doesn't
approve the sale by Tuesday, Napster will lose the loan and have almost
no funds to cover operating costs, reported Dow Jones.
Consolidated Freightways Files for Bankruptcy Protection
Consolidated Freightways Corp. said Monday it was filing for chapter 11
bankruptcy protection and laying off as many as 15,500 people around the
country, reported Dow Jones. In letters being mailed to workers today,
the company said it simply didn't have enough money to continue
operations. About 15,500 workers would be affected, the company said,
with more than 80 percent receiving termination notices immediately. The
remaining supervisory and management positions were to be phased out
quickly. Operations of the company's CF AirFreight and Canadian
Freightways Ltd. subsidiaries would continue normally without layoffs.
The company has 350 terminals and 30,000 trucks in the United States,
Canada and Mexico.
UAL Names Glenn Tilton Chairman, President, CEO of United
Air
United Airlines named veteran oil executive Glenn Tilton as its new
chairman and CEO on Monday, reaching outside the airline industry in its
effort to keep the ailing carrier out of bankruptcy, reported Dow Jones.
Tilton, 54, vice chairman of ChevronTexaco Corp. and acting chairman of
energy marketer Dynegy Inc., was selected by unanimous vote of the board
of United parent UAL Corp. during a special Labor Day conference call,
the company said. He replaces interim CEO Jack Creighton, who turned 70
Sunday and had signaled his wish last May to retire. UAL has posted
losses of nearly $3 billion in the past 18 months and has threatened to
file for chapter 11 bankruptcy protection this fall if it can't cut
costs dramatically and win a government loan guarantee.
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