January 29, 2004
Fed Keeps Rates Steady
The U.S. Federal Reserve opted on Wednesday to hold interest rates at
1958 lows, but edged toward an eventual rate hike by altering a pledge
it made in August to keep rates low for a 'considerable period,' Reuters
reported. In a statement at the close of a two-day meeting,
policy-makers moved away from the time-frame reference and said only
that they 'can be patient' before implementing what would be the first
rate increase since May 2000. The unanimous decision by the Federal Open
Market Committee (FOMC) keeps the federal funds rate for overnight loans
between banks at 1 percent. 'With inflation quite low and resource use
slack, the committee believes that it can be patient in removing its
policy accommodation,' the FOMC statement said.
House Passes Bankruptcy Bill, But Senate Democrats Object
The House voted yesterday to combine a noncontroversial, Senate-passed
bill providing relief to family farmers with a House-passed bankruptcy
bill that stalled in the Senate last year amid controversy over
Democrat-favored abortion language, CongressDaily reported. In
approving the combined legislation on a 265-99 vote with 67 members
absent, the House put GOP leaders one step closer to their goal of
moving the 'Bankruptcy Abuse Prevention and Consumer Protection Act,'
which passed the House as a stand-alone bill last March, to conference
with the Senate, even though the Senate has not voted on the
measure.
But Senate Democrats are likely to object to House leaders' efforts
to move the combined legislation to conference without a Senate vote on
the whole package. Senate sources said that if the House-passed measure
were to move to the Senate floor, many Democrats would support
amendments such as controversial language by Sen. Charles Schumer
(D-N.Y.) to prevent abortion protesters from filing for bankruptcy to
avoid paying fines for disruptive activity at clinics. 'We still believe
Sen. [Bill] Frist should bring the bill to the floor, so that we can
have an up-or-down vote on it, including provisions such as Sen.
Schumer's,' a spokeswoman for Minority Leader Tom Daschle (D-S.D.) said
on Wednesday, reported the newswire.
Senate Democrats Put Pension Reform Conference On Hold
An anticipated House-Senate conference on pension-reform legislation is
on hold, as Senate Democrats seek assurances that Republican legislators
will not add unrelated provisions to the bill during negotiations,
CongressDaily reported. Although the Senate passed the measure on
Wednesday by an 86-9 margin, Democrats are using procedural tactics to
prevent it from moving directly to conference, hoping to force leaders
to take another tack to pass the legislation. The Senate could send the
bill back to the House, or the chambers could reach a pre-conference
agreement to keep unrelated provisions out of the pension bill, a
spokeswoman for Senate Minority Leader Tom Daschle (R-S.D.) said.
Majority Leader Bill Frist (R-Tenn.) said he plans to consult with
Daschle to move the bill. 'I hope we can work this out,' Frist said. 'I
will continue to talk to the Democratic leader in an effort to proceed
with regular order on appointing conferees,' he added, reported the
newswire.
The Senate yesterday passed pension legislation that gives special
breaks to airlines, steelmakers and other companies, over the wishes of
the Bush administration, which warned senators that reducing pension
payments could endanger the nation's pension insurer,
CongressDaily reported.
Panel Gives Mixed Reviews To New OCC Consumer Rules
The new rules of the Office of the Comptroller of the Currency (OCC)
exempting national banks from many state consumer protection laws drew
mixed reactions today during a House Financial Services subcommittee
hearing, with some members calling the regulations fair and necessary,
and others denouncing them as a departure from congressional intent,
CongressDaily reported. 'In my view, the OCC regulations represent a
thoughtful attempt to codify and harmonize past legal precedents, and
there are many, and regulatory guidance into a coherent framework for
resolving conflicts between federal and state laws as they apply to
national banks,' Financial Services Chairman Michael Oxley (R-Ohio)
said.
But several lawmakers said the new rules would undermine the nation's
dual system of federally and state-chartered banks. 'This is a very
far-reaching change to the way in which the banking system has been
run,' said Financial Services ranking member Barney Frank (D-Mass.).
'What we have here is a fundamental policy question about how banking
authority ought to be divided.' Oversight and Investigations
Subcommittee Chairwoman Sue Kelly (R-N.Y.) questioned whether the OCC,
in completing the new rules, had 'strayed from its obligations' to
protect consumers from predatory lending practices. 'When they take
effect on Feb. 12, these regulations will effectively prevent a state
from determining and enforcing its own banking laws,' Kelly said,
reported the newswire.
FTI Consulting Hit by Departures; Shares Slide
FTI Consulting Inc. suffered a severe blow on Wednesday after some
senior executives in its bankruptcy operation walked out to set up their
own practice, Reuters reported. The departure tore into FTI's shares,
which were hammered right from the start and were down nearly 31 percent
at $15.93 in early afternoon trading on the New York Stock Exchange - a
price last seen two years ago. The company did not give many details on
the departures, but Mayank Tandon, an analyst with Janney Montgomery
Scott, who spoke to the company's senior management after the
announcement, said the crisis surrounds a core group of 11 senior
executives, some of whom have already left.
FTI said the executives who left were part of the practice it inherited
from Policano & Manzo, a bankruptcy firm it bought in 2000. Michael
Policano and Bob Manzo, both senior managing directors at FTI will
remain with FTI. The operations handled by the departing executives were
expected to contribute up to 21 percent of its 2004 revenues. But the
departures could have a broader negative impact. 'This could have a
snowball effect, the stock stays weak, options go under water and then
more people will leave,' said Tandon, reported the newswire.
Bankruptcy Lawyers Bill United Parent $59.7 Million
Kirkland & Ellis, the Chicago law firm representing United Airlines'
parent company in its bankruptcy proceedings, has requested $59.7
million in fees and expenses for the first year of the case, court
documents show, the Miami Herald reported. Nearly $56 million of
that amount is compensation for Kirkland's attorneys and $3.8 million is
for expenses such as copy making, airfare and court filing costs, the
newspaper reported. The documents were made available electronically
Wednesday. At least one lawyer charged more than $700 an hour.
UAL Corp. filed for federal bankruptcy protection on Dec. 9, 2002.
The Elk Grove Village-based airline, which is undergoing a massive
overhaul of its business operations and cost structure, this week said
it remains on track to emerge from bankruptcy during the first half of
the year. Kirkland & Ellis so far has received fees and expenses of
$44.8 million and $3.3 million, respectively. Fee applications filed to
the court on Nov. 14 and Jan. 26 are pending, and no payments have been
made on the requests. Fees and expenses for the November filing totaled
$7.4 million, while the December period's figure totaled $1.4 million,
the Herald reported.
KB Toys to Close 375 Stores, Cut 3,500 Jobs
Bankrupt toy retailer KB Toys Inc. said on Wednesday it is closing at
least 375 of its stores and cutting 3,500 jobs as it works to
restructure, Reuters reported. KB Toys, which is controlled by private
equity firm Bain Capital, said it received bankruptcy court approval to
hire The Ozer Group LLC, The Nassi Group LLC and SB Capital Group LLC to
conduct the store-closing inventory sales in at least 356 stores
beginning Jan. 29. By Feb. 11, KB will choose 19 to 115 more stores for
closing. It expects to sell up to $122.5 million of inventory through
the store-closing process.
Archibald Candy Files for Bankruptcy Protection
Archibald Candy Corp., the parent of Fannie May and Fanny Farmer Candy,
said on Wednesday it filed for chapter 11 bankruptcy protection, Reuters
reported. Archibald had previously announced the closing of its Chicago
manufacturing plant and the phased closing of its 238 Fannie May and
Fanny Farmer retail stores. Archibald said the filing made at the U.S.
Bankruptcy Court in Chicago, reflects assets of between $50 million and
$100 million and debts of more than $100 million. The company set up a
new credit facility of $13.5 million, it said.
Parmalat Brasil Files for Bankruptcy Protection
The Brazilian unit of Italian food group Parmalat on Wednesday filed for
bankruptcy protection, a company spokeswoman said, Reuters reported.
Parmalat Brasil Industria de Alimentos, home to one sixth of Parmalat's
global workforce, has been struggling to pay suppliers and has been
flooded with lawsuits filed by creditors since an accounting scandal at
its parent company in Italy erupted in December. The Parmalat Brasil
spokeswoman said the company would issue a statement detailing its
request for bankruptcy protection later on Wednesday.
Cruise Group Royal Olympia Seeks Court Protection
Royal Olympia Cruises Lines Inc. said on Wednesday its ship-owning
subsidiaries have requested protection from creditors in a Greek court,
in a move similar to chapter 11 of the U.S. Bankruptcy Code, Reuters
reported. The small cruise-ship operator based in Piraeus, Greece said
in a press statement that if 'no other alternative is found,' the
subsidiaries may be forced to cease operations.
The company, whose shares trading the United States were off 27 percent
to 50 cents, said it was in talks with banks of its ship-owning
subsidiaries and creditors about a possible reorganization. The company
gave no details of the talks. Royal Olympic filed in mid-December for
chapter 11 bankruptcy protection for two of its units, which own the
cruisers Olympia Voyager and Olympia Explorer. The company said then it
was in talks with lenders to restructure $250 million in loans, reported
the newswire.
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