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October 4, 2002
Dismissed U.S. Trustee Sues to Keep Job
On June 18, Attorney General John Ashcroft informed the U.S. bankruptcy
trustee in San Francisco, Linda Stanley, that she was fired,
leading many bankruptcy lawyers in the Bay Area to believe that she was
fired because she is an outspoken Democrat, The American Lawyer
reported. Stanley's abrupt departure is said to signal the extent to
which the U.S. Trustee program has become politicized. Stanley had been
a vocal critic of the firewalls that law firms use to try to protect
themselves from conflicts, and was tough on fees, designing a
computerized system to help spot duplicative fee requests. Her role in
the high-profile Pacific Gas and Electric Co. bankruptcy, filed last
year and still pending in San Francisco, earned her nationwide
attention. 'When [Stanley] thought there was a question of propriety or
wrongdoing, she couldn't be stopped. She raised a fuss,' says
Elizabeth Warren, a bankruptcy professor at Harvard Law School.
'I think that is what got Stanley into trouble.' 'I became very visible
in going after big people in big cases,' Stanley says. 'I was removed
because I was effective.' The Justice Department and the Executive
Office for U.S. Trustees declined to comment on Stanley's firing,
instead citing a 'change in presidential administration' as the reason
she was dismissed. To read the full story, go to:
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CTC Communications Group, Unit File for Chapter 11
Protection
CTC Communications Group Inc. and its CTC Communications Corp. (CPTL)
unit filed chapter 11 petitions yesterday afternoon in the U.S.
Bankruptcy Court in Wilmington, Del., according to a Dow Jones newswire
report. The Waltham, Mass.-based company, which provides integrated
communications services via its CPTL unit, listed assets of $306.8
million and liabilities of $394 million as of July 31, with Cisco
Systems Capital Corp., a unit of Cisco Systems Inc. (CSCO), as its
largest unsecured with a $57.9 million claim. Judge Peter J.
Walsh will preside over the cases.
US AIRWAYS
Court Approves US Airways Plan to Abandon Some of Its
Planes
The U.S. Bankruptcy Court in Alexandria, Va., approved US Airways Group
Inc.'s request to abandon some planes that it deemed too costly to
maintain, according to a Dow Jones newswire report. US Airway's request
drew opposition from 18 financing parties, 16 of which were resolved
before a Sept. 26 hearing. Judge Stephen S. Mitchell overruled the
remaining two objections, brought by Sumitomo Mitsui Banking Corp. and
MetLife Capital L.P. US Airways filed for chapter 11 protection in
August.
DOT, DOJ Allow United, US Airways Alliance
The U.S. Department of Transportation yesterday ended an informal
investigation into the proposed codeshare and marketing alliance between
United Airlines and the bankrupt US Airways, according to Business
Travel News. The carriers, which must adhere to certain restrictions
imposed by the U.S. Department of Justice, can immediately begin certain
joint activities. For US Airways, the agreement supports its case for
finalizing a $900 million loan guarantee from the Air Transportation
Stabilization Board and strengthens its business plan as it reorganizes.
For United, which may also be teetering toward bankruptcy, the codeshare
pact should generate incremental revenue vital to its survival. 'The
competitive issues presented by the agreements do not presently require
further investigation,' DOT said in a statement. Both airlines agreed to
continue competing with each other and independently to set pricing and
service levels. DOT nevertheless said it will closely monitor
implementation of the agreement. United operates hubs at Chicago O'Hare,
Denver International, Los Angeles International and Washington Dulles
airports. US Airways' hubs are in Charlotte, N.C., Philadelphia and
Pittsburgh.
Owens Corning Wants Back Stock Dividends
Toledo, Ohio-based Owens Corning, a building-supply maker that filed for
bankruptcy two years ago, wants its biggest shareholders to give back
more than $700 million in stock dividends they received between 1996 and
2000, according to a newswire report. The company filed lawsuits
Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., asking for
the payouts to be returned by mutual-fund managers and investors who
received more than $100,000 in stock dividends during the four-year
period, and are seeking $709 million to help pay off creditors and
asbestos victims. The company filed for bankruptcy protection in October
2000 due to rising costs from asbestos lawsuits. Owens Corning said it
was pressured to file the lawsuit by its creditors and that it was
facing a statute of limitations deadline. The company is also seeking
money from stockholders of the former Fibreboard Corp.
WORLDCOM
Telecom Firms Concerned that WorldCom DIP Loan Terms Won't Be
Enough
Some major telecommunications firms have expressed concern over whether
WorldCom Inc.'s proposed final debtor-in-possession (DIP) financing
order would be enough funding to cover administrative expenses,
according to a Dow Jones newswire report. Verizon Communications Inc.,
subsidiaries of Qwest Communications International Inc. and BellSouth
Corp., and Southwestern Bell Telephone L.P. said they don't oppose a
final order approving DIP financing 'on appropriate terms,' but are
seeking to ensure the loan pact will preserve adequate assurances of
payment ordered by the bankruptcy court.
WorldCom received bankruptcy court approval of a $750 million interim
DIP loan in July from lenders led by Citigroup Inc., J.P. Morgan Chase
& Co. and GE Capital Corp. Under the DIP loan terms, the lenders can
terminate the financing on five days' notice if WorldCom defaults on the
pact. However, WorldCom could incur more than $1 billion in unpaid
obligations to utilities before the utilities could terminate service to
WorldCom. The U.S. Bankruptcy Court in Manhattan will consider final
approval of WorldCom's DIP financing at a hearing Oct. 15. According to
its lawyers, WorldCom has thus far secured $1.15 billion from its
lenders. The Clinton, Miss.-based company, which filed for chapter 11
protection July 21, said it needs financing of $1.25 billion to $1.5
billion to emerge from bankruptcy.
New York Comptroller Requests Copies of WorldCom
Documents
New York Comptroller H. Carl McCall, leading a shareholder lawsuit
against WorldCom Inc., has filed a motion in federal bankruptcy court
seeking copies of all documents that the telecommunications giant gave
government officials and private investigators, according to the
Associated Press. A hearing on the request, submitted Wednesday in U.S.
Bankruptcy Court in Manhattan, is set for Oct. 29. The motion requests
copies of all documents provided to federal agencies, such as the
Securities and Exchange Commission and Justice Department, produced by
the company's own investigators and transcribed from congressional
depositions, and 'would impose virtually no additional burden upon
(WorldCom), who has already gathered and produced the materials,' the
motion reads.
McCall filed papers July 2 to lead the shareholder lawsuit against
WorldCom, some of its officers and its accounting firm, Arthur Andersen
LLC. The action followed a $300 million loss for the $105 billion state
pension fund on WorldCom holdings, its largest loss ever. McCall is the
sole trustee of the state and local government pension fund, which
covers about 1 million current and future public employee retirees.
Directrix Sues Playboy Entertainment for $17 Million in
Damages
Directrix Inc. filed a lawsuit Sept. 26 in the U.S. Bankruptcy Court for
the Southern District of New York against Playboy Entertainment Group
Inc. for at least $17 million in damages, alleging that Playboy
improperly terminated agreements between the companies, according to a
Dow Jones newswire report. The complaint, filed yesterday, detailed
three separate counts for relief: Each of the first and second counts
seeks compensatory damages of at least $6 million from the alleged
breach of a master services agreement, and the third seeks compensatory
damages for at least $5 million due to Playboy Entertainment's alleged
breach of the explicit rights agreement.
Cold Metal Discusses Permanently Reopening Indiana Plant
Cold Metal Products Inc., which closed its steel plants in Indianapolis
and Youngstown, Ohio, Aug. 15 and filed for chapter 11 protection on
Aug. 16, is investigating the possibility of permanently reopening its
Indianapolis plant, according to a Dow Jones newswire report. In a press
release yesterday, the steel company said it had rehired 13 employees
and restarted manufacturing operations on a temporary basis under an
agreement with the United Steelworkers of America that will allow the
plant to operate for 60 days as the company and union negotiate a new
labor contract. The company had obtained bankruptcy court approval last
week and began operations earlier this week. Cold Metal received
bankruptcy court approval for $48 million debtor-in-possession financing
on Sept. 17 as well as court approval to continue wages and benefits for
its current employees.
Fansteel Seeks Reorganization Plan Extension
Specialty-metals manufacturer Fansteel Inc., which recently applied for
a renewal of its Nuclear Regulatory Commission license, is asking a
bankruptcy court for an extension of its exclusive chaper 11 plan-filing
period through Jan. 28, according to a Dow Jones newswire report. If the
company files a plan by that date, other entities would be prohibited
from filing competing plans through April 1, 2003. The U.S. Bankruptcy
Court in Wilmington, Del., will schedule a hearing on the proposed
exclusivity extension if any party files an objection by Oct. 21. Under
a previous extension, Fansteel's exclusive period was set to expire
Tuesday. However, because it filed the motion Monday, before the
expiration, the company maintained its exclusivity until the court rules
on the issue. Chicago-based Fansteel filed for chapter 11 protection
along with eight affiliates on Jan. 15, listing assets of $64.8 million
and debts of $91.6 million.
ENRON
New York Developer Bids More than $100M for Enron
Building
Intell Management and Investment, a New York investment group, has bid
more than $100 million for the 40-story Enron Center South in Houston,
securing the right to buy the building if the deal is approved by the
U.S. Bankruptcy Court in New York next week, the Houston
Chronicle reported yesterday, according to a newswire report. The
company was required to put down 5 percent of the purchase price in
nonrefundable earnest money, under the rules of the auction. If Intell
doesn't complete the purchase, the bankruptcy court can turn to the
second-place bidders, an investment group led by Lincoln Property Co.
and J.E. Robert Cos. The 1.2 million-square-foot office building was
intended to be Enron Corp.'s corporate headquarters and is connected to
the Enron Center North building, where the company has its headquarters.
Enron filed for chapter 11 in December.
San Francisco Giants Wins Court Approval to Remove 'E' from
Scoreboard
The San Francisco Giants received bankruptcy court permission to remove
a scoreboard sign featuring Enron Corp.'s tilted 'E' logo from the
baseball team's stadium, a federal bankruptcy judge ruled yesterday,
according to a Dow Jones newswire report. The ruling resulted from San
Francisco Baseball Associates, owner of the major league baseball team,
and its affiliate China Basin Ballpark Co., owner of the team's Pacific
Bell Park, reaching an agreement with Enron on how to deal with a
sponsorship arrangement made in 1998. Under the ruling, which formalizes
an agreement reached last week, Enron has until Dec. 2 to find another
company to sponsor the sign. The Giants can also look for a new sponsor
for the centerfield scoreboard sign for the next season. The team said
it was 'experiencing negative reactions from their fans and the media
due to the continued presence' of the 17-foot-by-33-foot 'E' sign, the
team said in a court filing in the New York bankruptcy court. Although
the financial terms of the sponsorship deal weren't disclosed, the
Giants said Enron hasn't made any payments due this year.
Malden Mills's Largest Creditor Criticizes Recovery Plan
The largest creditor of Malden Mills Industries Inc., which filed for
bankruptcy protection with the U.S. Bankruptcy Court in Worcester,
Mass., said the company's bankruptcy recovery plan is unrealistic, a
criticism that could lead to months of legal wrangling over the textile
firm's fate, according to a Dow Jones newswire report. Peter Stack,
spokesman for creditor GE Capital Corp., said Malden Mills' sales
projections were too optimistic; its reorganization plan projects sales
growing from $183 million in 2003 to $250 million in 2012, primarily
driven by sales of the company's Polartec fleece fabric, potentially
driving the company from a loss of $7.3 million to a profit of $29.9
million. 'We don't believe, with this level of disclosure, that the
performance numbers in their plan are feasible,' Stack told The
Boston Globe. Malden Mills owner Aaron Feuerstein gained national
attention when he kept all his employees on the payroll after a fire
destroyed the company's main plant in December 1995. The $400 million
cost of the rebuilding, which was not fully covered by insurance,
contributed to the company's bankruptcy filing in November. The filing
said that in all, current and former personnel have been loaned about
$700,000. However, Malden Mills's attorney Richard Langerman said the
loan of debts of current or former personnel, including Feuerstein's
family, was $500,000 and wouldn't be forgiven in the company's plans,
although the possibility has been discussed with creditors.
Teleglobe Gets Canadian Court Approval to Sell Core
Business
BCE Inc.'s Teleglobe Inc. unit, which filed for chapter 11 protection
with the U.S. Bankruptcy Court in Wilmington, Del., won a Canadian
court's approval to sell its core voice and data business to Cerberus
Capital Management L.P. and TenX Capital Partners LLC for US$155.3
million, according to a Dow Jones Newswire report. Judge J.M.
Farley of the Ontario Superior Court of Justice approved the sale at
a hearing late Wednesday. Cerberus (New York) and its affiliates manage
funds and accounts with capital in excess of $8 billion, while TenX
(Philadelphia) is a private equity firm with investments in
middle-market technology, communications and business services
companies. The bankruptcy court will consider approval of the U.S.-based
assets of Teleglobe's voice business Wednesday. Separately, the
company's Teleglobe Communications Corp. unit is seeking extension
through Jan. 25 of its exclusive period for filing a chapter 11 plan to
give it time to assess the claims against its estate and the assets
available to pay such claims. Teleglobe has asked the bankruptcy court
to set Dec. 2 as the deadline by which creditors must file proofs of
claim. The filing also sought to extend the company's exclusive period
for soliciting plan votes through March 26.
Warnaco Reorganization to Give Creditors More than
Expected
Due to recent operational changes and improvements with New York apparel
company Warnaco Group Inc., which manufactures products such as Olga
bras, Calvin Klein jeans and Speedo swimwear, the company will be able
to provide better-than-expected returns for its lenders and other
creditors when it emerges from chapter 11 early next year, according to
a Dow Jones newswire report. Yesterday, Warnaco said it will emerge from
bankruptcy with its debt reduced to roughly $265 million, down from
$2.45 billion, and with each of its core businesses intact. In its
reorganization plan filed Tuesday with the U.S. Bankruptcy Court for the
Southern District of New York, Warnaco also said it is seeking a
permanent president and chief executive and has hired executive
recruiting firm Heidrick & Struggles. Warnaco filed for chapter 11
on June 11, 2001. The company had received a $600 million
debtor-in-possession credit line from a consortium of banks led by
Citibank, J.P. Morgan Chase and The Bank of Nova Scotia.
PG&E Obtains Waiver Extension on Loan
PG&E Corp. yesterday said that its lenders have agreed to extend
until Oct. 18 a waiver of a requirement on a $420 million loan that the
company's troubled PG&E National Energy Group unit maintain an
investment grade credit rating, Reuters reported. San Francisco-based
PG&E said the waiver of the requirement for NEG, which is involved
in gas transmission, energy trading and power plant generation, had been
due to expire on today. PG&E said it plans to continue talking to
its lenders about eliminating the credit rating requirement from its
term loan agreement. In early August, Moody's Investor Services had cut
NEG's credit rating to 'junk' status following a similar move by
Standard and Poor's a few days earlier, and the move threatened to
result in a default on a $1.02 billion loan agreement between parent
PG&E Corp. and a group of lenders that required NEG to maintain an
investment grade rating with at least one of the two main rating
agencies.
PG&E announced in late August it had repaid around $600 million
of the loan, leaving a balance of about $420 million. NEG has reportedly
been hurt by weak wholesale power prices and closer scrutiny from rating
agencies following the collapse last year of leading energy trader Enron
Corp. PG&E's other major subsidiary, utility Pacific Gas &
Electric, filed for chapter 11 protection in April 2001 after it
incurred billions of dollars of debt buying power that could not be
recovered due to state regulations capping prices.
Kmart Says It Will Not Expand Grocery Business
Kmart, which offers a full line of groceries at its 117 SuperCenter
stores, said the company won't expand that strategy into other stores,
according to the Associated Press. Since its bankruptcy filing in
January, Kmart has reduced overhead costs by closing 283 stores and
cutting hundreds of jobs at its Troy headquarters. After the holidays,
Kmart said it will consider additional store closings. The company says
it expects to file its reorganization plan by the end of next
February.
AES Plans to Secure $1.6 Billion Credit Facility
Global power producer AES Corp. said yesterday it was attempting to
slash its debt and stave off talk of bankruptcy by obtaining a new $1.6
billion secured credit facility and exchanging up to $500 million in
notes, Reuters reported. 'It pretty much takes away any kind of
discussion on whether this company is going bankrupt or not for at least
two more years,' said Lasan Johong, an analyst at Blaylock &
Partners. 'It takes a lot of the near-term risk away.' The Arlington,
Va.-based company said the secured credit facility would replace an $850
million revolving facility maturing in March 2003, a $425 million term
loan maturing in Aug. 2003, a $262.5 million term loan to an AES
subsidiary maturing in July 2003 and a 52.3 million pound (US$82.1
million) letter of credit facility.
Asset Sale May End Bid to Reopen Gadsden Steel Mill
Bankruptcy Judge James Sledge approved a bid by a Pittsburgh group that
wants to sell assets of the defunct Gulf States Steel plant and
transform the site into an industrial park, the Associated Press
reported. The decision reportedly eliminated efforts to reopen the
Alabama mill, which closed two years ago, leaving about 1,700 workers
without jobs. Industrial Park LLC of Pittsburgh is set to buy the
property for $6.3 million. Another group that wanted to reopen the mill
bid $7 million for it, but a bankruptcy trustee rejected the plan. Don
Casey, whose family owns the Gadsden Industrial Park partnership, said
work to clean up the old steel mill will begin as soon as the sale is
final, which could be within 60 days. Casey said the plant's
steel-making equipment, such as the plate and hot-strip mills, would be
sold to firms in China and other countries. The industrial park could
produce at least 450 jobs, he said. Competition from foreign steel
producers was blamed for the mill's shutdown. Steel had been produced on
the site since 1904.
MTV to Secures Movie Rights to Napster Story
Cable Network MTV on Wednesday said it has reached a deal for the
exclusive rights to the life story of Shawn Fanning, who created the
bankrupt Napster, an Internet music- and file-sharing program, in 1999
while he was a 19-year-old student at Northeastern University in Boston,
Reuters reported. The movie, tentatively scheduled to air in 2003-2004,
may even star Fanning, now 21, as himself. Fanning dropped out of
college to launch the business around the program, which sparked
controversy by enabling millions of fans to swap songs on the Internet.
The service came under attack by the recording industry, which launched
a massive legal battle against the company for copyright infringement.
Napster ultimately folded and is currently being sold in bankruptcy
court. Earlier this week, restructuring expert Hobey Truesdell was named
the trustee in the Napster bankruptcy case. The song-swapping service
recently fetched an estimated $11 million bid from an undisclosed
bidder.
PA Fire and Rescue Company Officer Accused of Embezzling from
Carlisle EMS
A federal prosecutor says the investigation is not over in the case of a
former Carlisle, Pa., fire and rescue company officer who pleaded guilty
Tuesday to mail fraud, according to Carlisle's The Sentinel.
Clark Dunkle is awaiting sentencing in connection with what authorities
describe as the embezzlement of more than $456,000 from Carlisle's
Cumberland-Goodwill Fire Rescue EMS, and on Monday, Dunkle filed for
chapter 7 protection in federal court in Harrisburg, Pa. '[O]ther
aspects of the case are still under investigation, including what Mr.
Dunkle did with the money,' said Assistant U.S. Attorney Kim Daniel.
Under terms of a plea agreement, the government agreed not to press
further charges related to the embezzlement; however, Dunkle's
protection from further prosecution is limited to the
Cumberland-Goodwill case, Daniel said. Dunkle admitted to using his
companies, Patient Accounting Services, which was handling its ambulance
billing, and Dunkle Associates, in a scheme to divert fire and rescue
company funds to a secret 'ghost' account set up at an area bank and
have the monthly account statements mailed to his home. Dunkle's defense
attorney, Thomas Thornton, says he expects to meet with prosecutors in
the next couple of weeks to resolve his comment in court that Dunkle
repaid $370,000 he took from Cumberland-Goodwill. However, according to
Daniel, the accuracy of the $370,000 is in question.
Vanguard Receives New Offer
Scott Dickson, president and CEO of Vanguard Airlines Inc., said
Wednesday that the bankrupt carrier has received a new offer to buy the
bankrupt airline, according to the Pittsburgh Business Times.
Dickson also said the airline is close to having a second new offer,
which could come by today. Dickson would not disclose details on either
of the two new offers. On Sept. 25, Vanguard's board announced its
rejection of an offer to buy the airline from Robert Brooks, chairman of
Hooters of America Inc.—who wanted to acquire Vanguard through
Hooters Air LLC, an acquisition company—saying it was inadequate.
Vanguard began service to and from Pittsburgh International Airport in
1997, serving eight cities including Denver, San Francisco and Seattle.
The airline suspended service when it filed for bankruptcy protection in
July.
Judges Clear Way for $16 Million LTV Cleanup
Two federal judges have allowed a $16 million cleanup and redevelopment
of the former LTV Steel site in South Buffalo, N.Y., the largest and
most costly environmental cleanup in the city's history, according to
The Buffalo News. The approvals also will allow a $1 million
compensation package for residents of Hickory Woods, an adjoining
subdivision built on contaminated land. The cleanup and compensation
package was approved by federal bankruptcy court judges in Chicago and
Cleveland and is expected to be signed on Oct. 16, resulting in a local
partnership taking ownership of the 220-acre plant site. Funding for the
cleanup will come from insurers for LTV and Hanna Furnace Corp., which
operated manufacturing plants at the site and still own the
property.
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