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November 27, 2002
Stocks Slide as Consumer Data Disappoints
Stocks tumbled in late afternoon trading on Tuesday after disappointing
consumer confidence data had investors pulling back after a seven-week
rally in the blue-chip Dow, Reuters reported. A closely watched consumer
confidence index rebounded in November from the month before, snapping
five straight months of declines. But the index missed forecasts,
disappointing investors hungry for hints of a solid economic rebound to
justify the Dow's 20 percent surge from five-year lows hit in early
October, the newswire reported. Still, some investors said the data was
not enough to derail the rally entirely.
The Conference Board, a private business group, said its consumer
confidence index rebounded to 84.1 in November from 79.6 in October. But
the data missed forecasts of 85.2. Analysts track consumer confidence
for clues on consumer spending, which drives about two-thirds of the
nation's economy. 'People were looking for an up side to expectations,
especially at this time of the year,' said Art Hogan, chief market
analyst at Jefferies & Co. 'We've baked a lot of good news into this
market in the past seven weeks, so we might see some people taking some
of those profits off the top today and this week,' he added, the
newswire reported. Data expected in coming days includes weekly jobless
claims and the U.S. Federal Reserve's so-called Beige Book, which
assesses the nation's regional economies.
Third Quarter Bank Profits Up 34.8 Percent
Credit card loans written off by the nation's commercial banks jumped
35.6 percent to $3.9 billion in the three months ending in September as
credit quality problems continued to grow, the Associated Press
reported. The surge in writeoffs, compared with the third quarter of
2001, came as banks earned $23.4 billion, only $11 million short of the
record set in the second quarter of this year, the Federal Deposit
Insurance Corp. (FDIC) reported Tuesday, according to the newswire. The
third-quarter profits were up 34.8 percent from the July-September
period last year. Still, they were held back by sharply lower income
from banks' international operations and higher expenses for loan
losses, the FDIC said. To view the entire article, go to
href='http://www.washingtonpost.com/wp-dyn/articles/A42773-2002Nov26.html'>
color='#000080'>http://www.washingtonpost.com/wp-dyn/articles/A42773-2002Nov26.html.
Economy Shows Strength in 3rd Quarter
The U.S. economy grew more briskly than first thought in the third
quarter with robust car sales helping to more than triple the weak
second-quarter pace while after-tax corporate profits also improved, the
government said on Tuesday, Reuters reported. U.S. gross domestic
product, a measure of all output within the country's borders, rose at a
revised 4.0 percent annual rate in the July-September period after an
anemic 1.3 percent gain in the preceding quarter, the Commerce
Department said. To read the full article, point your browser to
href='http://www.reuters.com/financeNewsArticle.jhtml;jsessionid=%3Cbr%3E'>
color='#000080'>http://www.reuters.com/financeNewsArticle.jhtml;jsessionid=
BGGQYY0BYNLPECRBAEOCFFA?type=businessNews&storyID=1810733.
NATIONAL CENTURY
CSFB Says It Will Write Down National Century Bonds'
Value
Credit Suisse First Boston (CSFB) said it will write down more than $200
million of its $258 million holding of bonds related to National Century
Financial Enterprises Inc. (NCFE), the health-care-industry financier,
the Wall Street Journal reported. CSFB, a unit of Credit Suisse
Group, said that following National Century's filing for
bankruptcy-court protection last week, it would write down the value of
its bond holdings to $44 million, or 17 percent of their principal
amount.
CSFB is one of several large financial firms that have been caught up
in the demise of closely held Dublin, Ohio-based National Century,
reported the Journal. National Century finances about 100
health-care providers, many of which have their own financial problems.
National Century buys health-care claims from the providers at a
discount -- giving them operating funds -- and takes the reimbursements
when paid by insurers, Medicare and Medicaid.
'It is increasingly apparent that NCFE and its officers deliberately
misled CSFB and other investors,' CSFB alleged in a statement. 'CSFB
intends to assess the situation as information develops related to NCFE,
its officers and directors, and others, and will vigorously pursue those
responsible for these losses.' The Washington Post
reported that Federal authorities have expanded their probe of collapsed
health care lender National Century Financial Enterprises Inc. examining
whether executives intentionally deceived government health plans and
committed wire and securities fraud in dealings with struggling
hospitals and other providers, according to people close to the
investigation.
A New York Times article reports how, as F.B.I. agents and
forensic accountants sift through the books of National Century
Financial Enterprises, an entrepreneur named Lance K. Poulsen managed to
use $3.35 billion in highly rated bonds to finance a series of
money-losing health care companies most banks would not touch. To read
the full article, point your browser to
href='http://www.nytimes.com/2002/11/26/business/26CARE.html?todaysheadlines'>
color='#000080'>http://www.nytimes.com/2002/11/26/business/26CARE.html?todaysheadlines.
National Century-Financed Hospital to Get $3 Million
Washington's Greater Southeast Community Hospital, struggling to stay
open after the failure of health-care financier National Century
Financial Enterprises Inc., will receive a $3 million check for
outstanding Medicare payments owed to the medical center, Bloomberg News
reported. The Health and Human Services Department will deliver the
check today to help keep the 450-bed hospital open. The agency also will
allow the hospital to suspend monthly government loan payments of
$82,000 for a year and promised to process Medicare claims faster.
Doctors Community Healthcare Corp., the hospital's parent, filed for
chapter 11 bankruptcy on Wednesday. The company received its cash for
operations from National Century.
Genuity to File Bankruptcy, Sell Assets to Level 3
Genuity Inc., the data-network operator that defaulted on $3 billion in
loans, plans to seek bankruptcy protection and is near an agreement to
sell most of its assets to rival Level 3 Communications Inc. for $240
million, Bloomberg News reported. Genuity will file for chapter 11
protection from creditors, people familiar with the matter said, after
Verizon Communications Inc. opted not to buy back a stake in August,
leaving the money-losing seller of Internet access unable to pay
interest on $3.15 billion in loans. An announcement is expected this
week, the people said, according to the newswire.With the asset
purchase, Level 3 would gain an Internet-connection contract with AOL
Time Warner Inc. valued by analysts at $360 million a year. The company,
a fiber-optic network operator part owned by billionaire Warren Buffett,
has been seeking acquisitions to widen the customer base amid a plunge
in prices for network use.
WORLDCOM
WorldCom Will Accept Fraud Suit Settlement, SEC Says
The Securities and Exchange Commission will ask a U.S. judge to approve
a partial settlement of the agency's fraud suit against WorldCom Inc.,
and the second biggest U.S. long-distance phone company is expected to
accept it, a top SEC official said, Bloomberg News reported. Lawrence A.
West, an assistant director of the SEC's Enforcement Division, said he
and Peter Bresnan, the commission's lead lawyer on the WorldCom case,
will attend a hearing before U.S. District Judge Jed Rakoff in
Manhattan. A settlement may allow the Clinton, Miss.-based company,
which has admitted misstating more than $9 billion in expenses and
reserves, to avoid fines and criminal charges as regulators seek to help
it emerge from bankruptcy, people familiar with the matter said.
Earlier yesterday, a federal bankruptcy judge approved an agreement
between WorldCom and UAL Corp. to end a program allowing WorldCom
customers to earn air miles for long-distance phone services, Dow Jones
reported. The agreement will allow United to pursue a relationship with
Sprint Corp. WorldCom's MCI unit owed United roughly $6 million for
Mileage Plus miles purchased under the partnership agreement. The pact
also stipulated that MCI was the exclusive telecommunications provider
for the Mileage Plus program. UAL sought to end the partnership on July
19, two days before WorldCom filed for bankruptcy protection amid its
disclosure of massive accounting irregularities. WorldCom initially
objected to UAL's request. The two then reached the settlement in
October, according to court papers, the newswire reported.
Separately, WorldCom's insurance settlement with a unit of American
International Group Inc. also received approval from a federal judge,
days before a deadline that could deprive WorldCom's current directors
and officers of additional liability coverage by the same issuer,
according to Dow Jones. Under the settlement, which was reached earlier
in November, AIG subsidiary National Union Fire Insurance Co. will
provide liability coverage to WorldCom directors, officers and employees
individually, but not as a group. National Union had sought to rescind
the liability policies shortly before WorldCom's bankruptcy filing,
claiming WorldCom had misrepresented its finances, the newswire
reported.
WorldCom Execs to Meet Regularly with Customer
Committee
WorldCom Inc. senior executives and some of the company's largest
corporate customers have agreed to have regular meetings to discuss
issues related to WorldCom's chapter 11 case, Dow Jones reported. The
agreement stemmed from a motion by the ad hoc committee of customers to
form an official committee to represent customers' interests in the
bankruptcy proceedings. Hank Levine, co-counsel to the ad hoc group,
said WorldCom will recognize the group's standing as an ad hoc
committee. After the company filed for bankruptcy protection on July 21,
some of its largest corporate customers organized themselves into a
17-member ad hoc committee. Court papers said members of the ad hoc
committee purchase more than $300 million in services annually from
WorldCom.
US Airways to Furlough about 2,500 Employees
US Airways Group will furlough about 2,500 employees over the next three
months and seek work-rule and benefit changes to complete its
cost-cutting initiatives and emerge from chapter 11 protection in the
first quarter, reported Dow Jones. The airline said on Tuesday all work
groups will be affected as a result of this action. US Airways also
plans to close a heavy maintenance hangar in Tampa, Fla., and a
reservations call center in Orlando, Fla. Employees who hold
seniority-based priority at those two facilities will be offered
positions at other US Airways facilities in Pennsylvania and North
Carolina, where these functions will be consolidated. The company said
its restructuring plan is still on track, the newswire reported.
Judge Extends Order to Freeze Assets Held by Rigases
The judge in Adelphia Communications Corp.'s bankruptcy case on Tuesday
extended an order to freeze the founding Rigas family's assets except
for those needed to pay for their living expenses and legal costs, Dow
Jones reported. The decision comes after an emergency request from
Adelphia late on Monday, seeking a temporary restraining order on all of
the assets held by the Rigases. The nation's sixth-largest cable
operator filed for chapter 11 protection in June and secured a freeze
from the court two months later on sale and transfer of real estate by
founder John Rigas and his family. By extending the freeze while leaving
room for certain expenses, Judge Robert Gerber said 'the Rigases
are allowed to maintain relatively normal lives and pay their legal
bills.'
Kaiser Aluminum Wins Approval to Sell Facility for $7.4
Million
Kaiser Aluminum Corp. on Tuesday won approval to sell an aluminum
forging facility in a deal valued at $7.4 million, Dow Jones reported.
The debtor company said the sale will bring more money into the estate
than would the continued operation of the Oxnard, Calif., facility.
Proceeds of the sale will be used to fund the administration of Kaiser
Aluminum's chapter 11 estate. 'The debtor believes that the best course
of action is to sell the Oxnard assets and use the proceeds for the
benefit of its estate,' Kaiser Aluminum said in its motion. 'The sale
will result in higher return to the estate than the continued operation
of the facility or a closure and piecemeal liquidation of the
facility.'
Dairy Mart Files Plan to Liquidate Remaining Assets
Dairy Mart Convenience Stores Inc. on Friday filed a joint chapter 11
plan under which the company and its subsidiaries will distribute
remaining assets to creditors, Dow Jones reported. The disclosure
statement, filed along with the plan, said the company worked with the
unsecured creditors' committee to form the liquidation plan. On the date
the plan might take effect, Dairy Mart would establish a liquidating
trust that would be used for all distributions under the plan. Creditors
of Dairy Mart and its Conna Corp. and Lawson Co. units, as well as
holders of priority nontax claims and secured claims, would receive cash
payments under the plan.
The U.S. Bankruptcy Court in Manhattan will consider approval of the
disclosure statement at a hearing on Jan. 8, 2003. In court papers, the
company said it and the committee intended to seek court confirmation of
a plan before Dec. 31. The company recently received bankruptcy court
approval of settlements with some of its equipment lessors whose leases
weren't assumed or rejected as part of Dairy Mart's $79.5 million asset
sale. Hudson, Ohio-based Dairy Mart Convenience Stores filed for chapter
11 protection on Sept. 24, 2001, listing assets of $190.7 million and
debts of $220.7 million as of May 5, 2001.
Collegiate Pacific Pursues Bike Athletic Acquisition
Collegiate Pacific Inc. is considering the acquisition of Bike Athletic
Co., a company with annual revenue of $45 million that is currently
operating in chapter 11 bankruptcy, Dow Jones reported. Knoxville,
Tenn.-based Bike Athletic filed for bankruptcy in June after being sold
to a group of investors. The acquisition is subject to review of
requested operating data, completion of due diligence, financing and the
acceptance of any proposal by the unsecured creditors' committee, other
appropriate parties and the court, Collegiate said in a press release on
Tuesday.
Asbestos Concerns Hit Car Parts Retailers
Asbestos liability concerns pressured shares of auto parts retailers on
Tuesday after the largest U.S. chain, AutoZone Inc., said it was named
as a defendant in lawsuits involving the sale of brake parts, Reuters
reported. Hundreds of U.S. companies, from the Big Three U.S. automakers
to Halliburton Co. and Honeywell International Inc., are facing lawsuits
from claimants exposed to asbestos, a fire-resistant material than can
cause a form of lung cancer and other fatal diseases. Memphis,
Tenn.-based AutoZone said it has never manufactured or installed brake
products and does not believe it has material liability in the
cases.
FTI Consulting Postpones Share Offering
FTI Consulting Inc. said on Tuesday it would postpone its plan to sell
2.1 million shares due to volatility in the stock market and the
company's own share price, Reuters reported. The firm, which sells
bankruptcy, financial restructuring and litigation-related consulting
services, said it would monitor the situation, but forecast that the
offering would not occur until the first quarter of 2003.
Bankruptcy Court Approves Triarc Purchase
Triarc Cos. Inc, which operates the Arby's fast-food restaurants, on
Tuesday said a bankruptcy court had approved its plan to buy the
second-largest operator of its franchises for $8 million and $14.5
million in investment, Reuters reported. Triarc said it will buy Sybra
Inc., a subsidiary of I.C.H. Corp. that owns and operates 239 Arby's
restaurants. ICH and its subsidiaries filed for chapter 11 bankruptcy
protection in February.
Triarc said it will pay $8 million to ICH's creditors for all of Sybra's
equity, and will make an additional $14.5 million investment in Sybra,
reported the newswire. Sybra will remain liable for its long-term debt
and capital lease obligations, which totaled about $104 million at the
end of last year, Triarc said. Triarc will also obtain $5 million per
year of additional financing for Sybra for three years in order to cover
any operating shortfalls, Reuters reported. The acquisition is expected
to close in the fourth quarter, Triarc said. New York-based Triarc
operates about 3,400 Arby's restaurants.
Enron Employee Pleads Guilty to Filing False Income Tax Return
A former Enron Corp. finance executive, Lawrence Lawyer, pleaded guilty
to failing to report as income almost $80,000 he accepted in kickbacks
for taking part in a scheme that led to the bankrupt energy trader's
collapse, Bloomberg News reported. Lawyer, who is cooperating with
Justice Department investigators, faces up to three years in prison for
filing a false income tax return. He agreed to repay the $79,468 that
federal officials said he took as disguised gifts while helping manage
one of the partnerships used to hide Enron's debt. The money will go to
a fund created to help Enron employees who lost their jobs.
Oakwood Cuts 1,700 jobs, Gets Court Approval to Tap $25 Million
Loan
Oakwood Homes, the nation's No. 2 retailer of manufactured homes, says
it will file for chapter 11 bankruptcy protection and cut 1,700 jobs --
about a fifth of its workforce, the Associated Press reported. The
company, which also builds mobile homes, is facing $570 million in debt
and has been losing money for the past three years. Oakwood has been
hurt by a surge in home repossessions. 'This was inevitable,' said Myles
Standish, chief executive of the company. 'We've been losing money for
years. ... At some point in time, you've got to rectify, and you've got
to do it as soon as you can.' Seventy-five retail locations also will be
shuttered, most of them in Tennessee and Texas. Oakwood makes loans to
the consumers who buy its manufactured houses.
Bloomberg News reported that Oakwood Homes won court permission to
tap a $25 million loan from Foothill Capital Corp. while awaiting
approval of $215 million in financing from Berkshire Hathaway Inc. and
other creditors on Dec. 18. Berkshire Hathaway, Greenwich Capital
Financial Products Inc.and Ranch Capital LLC have agreed to lend Oakwood
$215 million to finance operations during its bankruptcy reorganization.
At a hearing in Delaware, U.S. Bankruptcy Judge Peter Walsh
approved a $2.15 million breakup fee payable to the creditors if Oakwood
finds other financing.
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