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Fed Cuts Rates Quarter-point
The Federal Reserve cut a key short-term interest rate yesterday by a
one-quarter percentage point to its lowest level in 45 years. Federal
Reserve Chairman Alan Greenspan and his Federal Open Market Committee
(FOMC) colleagues reduced the federal funds rate from 1.25 percent to 1
percent, the lowest level since 1958.
'The committee continues to believe that an accommodative stance of
monetary policy, coupled with still-robust underlying growth in
productivity, is providing important ongoing support to economic
activity. Recent signs point to a firming in spending, markedly improved
financial conditions, and labor and product markets that are
stabilizing. The economy, nonetheless, has yet to exhibit sustainable
growth. With inflationary expectations subdued, the committee judged
that a slightly more expansive monetary policy would add further support
for an economy, which it expects to improve over time,' the FOMC said in
a statement.
New Agreements Sought On Asbestos Litigation
Republicans and Democrats on the Senate Judiciary Committee worked on
Wednesday evening in the hopes of brokering an agreement on several
outstanding issues ahead of a markup today of asbestos reform
legislation, sources said, CongressDaily reported. The panel will
take a third stab at marking up the bill after the last two sessions
yielded progress on medical criteria for asbestos-related illnesses, but
left two critical issues unresolved: how much compensation asbestos
victims will get and a mechanism to ensure that the victims'
compensation fund does not run dry.
Judiciary Chairman Orrin Hatch (R-Utah) said he hopes to finish work
on the bill today, but dozens of proposed amendments remain. The bill so
far has not garnered broad support among Democrats, with Judiciary
ranking member Patrick Leahy (D-Vt.) still concerned that the bill does
not provide enough compensation to those sickened by asbestos exposure
and that it places the risk of insolvency on the victims rather than the
defendant companies, reported the newswire.
ENRON
Regulators Bar Enron's Sale Of Electricity at Market
Rates
Federal energy regulators on Wednesday barred Enron Corp. from selling
electricity and natural gas at market rates anywhere in the United
States, in response to findings that it manipulated Western power
markets two years ago, the Associated Press reported. The Federal Energy
Regulatory Commission (FERC) said Enron would be able to sell power, but
at much less competitive prices, virtually shutting down the company's
ability to compete, the newswire reported. It can resume regular
business once it emerges from bankruptcy proceedings and gets FERC
approval. FERC Chairman Pat Wood said it was the first time that the
commission had imposed its so-called 'death penalty' on power sellers.
'We send a clear signal that competitive markets must work in the
interest of customers and the public interest,' Wood said, AP
reported.
Houston-based Enron filed for bankruptcy-court protection after a series
of revelations of hidden debt, inflated profits and accounting tricks.
Thousands of workers lost their jobs and investors were left with
virtually worthless stock. The company, which has continued doing
business, must file its chapter 11 reorganization plan by June 30, AP
reported.
Enron Files Pipeline Reorganization Plan With Bankruptcy
Court
Enron Corp. sought bankruptcy court approval to transfer all of its
interests in North American natural-gas pipelines to a new company
called CrossCountry Energy Corp., which will be owned by creditors,
Bloomberg News reported. CrossCountry would hold interests in 9,900
miles of gas pipelines, Houston-based Enron said in a statement. Enron
announced the transfer plan in March under the working name PipeCo. A
hearing on Enron's plan for the pipeline transfer is scheduled for Aug.
7 in New York, according to a court document. The company's pipeline
units had 782 full-time employees on June 15, it said, reported the
newswire.
Labor Department To Sue Enron Over Pensions
The Labor Department is suing bankrupt Enron Corp. and its former
officers, claiming they broke the law by allowing employees to
accumulate overpriced company stock in retirement plans that ended up
going broke along with the company, the Associated Press reported. 'The
department's action puts corporate executives and pension plan
administrators on notice: Take your fiduciary duty to act in the best
interests of your workers seriously or the Labor Department will hold
you accountable,' said Rep. John A. Boehner (R-Ohio), chairman of the
House Education and Workforce Committee.
More than 20,700 participants in Enron's 401(k) plan had nearly
two-thirds of their assets invested in company stock. Accounting
problems caused the stock to plummet in value, ultimately bankrupting
the company in December 2001 and siphoning the retirement savings of
thousands of workers, reported the newswire.
FERC Orders NRG to Honor Connecticut Light Contract
The Federal Energy Regulatory Commission (FERC) on Wednesday ordered
NRG, the bankrupt unit of Xcel Energy Inc., to honor a money-losing
contract with Connecticut Light & Power, after a court allowed NRG
to drop the deals, Reuters reported. FERC's move sets up a possible
jurisdictional battle with a bankruptcy court over who takes precedence
in the case. Earlier this month, a district court judge ruled that NRG
could temporarily stop supplying about 45 percent of the electricity
used by the 1.1 million customers of the Northeast Utilities unit in
Connecticut. NRG wants to drop a three-year agreement originally set to
expire at the end of the year, claiming that it is losing about $500,000
a day, reported the newswire.
GLOBAL CROSSING
Level 3 Was Interested in Buying Global Crossing, Banker
Says
Level 3 Communications Inc. expressed interest in buying bankrupt rival
Global Crossing Ltd., a banker for Global Crossing said in a court
hearing, Bloomberg News reported. Broomfield, Colo.-based Level 3
approached Arthur Newman, senior managing director at the Blackstone
Group LP, about six weeks ago, Newman told the bankruptcy court.
Level 3 competes against Global Crossing in transmitting telephone calls
and data for business customers over high-speed optical lines. Level 3
has been taking advantage of the slump in valuations of distressed
rivals, using money supplied in part by Buffett to buy assets of Genuity
Inc. earlier this year, Bloomberg reported. Hamilton, Bermuda-based
Global Crossing filed for bankruptcy last year after piling on $12.4
billion of debt to expand its network only to collapse amid a glut of
telecommunications capacity, reported the newswire.
Judge Allows Secret Testimony on Global Crossing
A U.S. bankruptcy judge on Wednesday ruled that key testimony about
Global Crossing Ltd.'s plan to sell a stake to Singapore Technologies
Telemedia could be heard in closed court because of national security
concerns over the evidence, Reuters reported.
In rejecting arguments by the media and rival telephone companies, Judge
Robert Gerber said the testimony could not be made in public because it
would 'telegraph' security issues the U.S. government may have about
Singapore Technologies' plan to acquire a majority stake in Global
Crossing, reported the newswire.
Conseco Finalizes $850 Million Sale of Finance Arm
Bankrupt insurance and lending firm Conseco Inc. sold its finance arm to
a group of private investors for $850 million, the investors said on
Wednesday, Reuters reported. The sale of Conseco Finance Corp. is the
latest step in Conseco's push to exit chapter 11 bankruptcy protection
as an insurance-only company and cut its debt and preferred securities
obligations by more than $5 billion to about $1 billion. The transaction
closed on Monday and follows an Illinois bankruptcy court's conditional
approval last week of Conseco Finance's newest reorganization plan, the
investors said. Affiliates of private investment firms Cerberus Capital
Management, Fortress Investment Group LLC and JC Flowers & Co.
bought the unit by setting up a joint venture called Green Tree
Investment Holdings, Reuters reported.
Carmel, Ind.-based Conseco bought mobile home lender Green Tree
Financial in 1998 as part of an aggressive expansion drive. The move
turned out to be a disaster, leaving Conseco with too much debt and too
many bad loans, reported the newswire.
Great Plains Finalizes Telecom Units' Bankruptcy
Great Plains Energy Inc., parent company of the Kansas City Power &
Light utility, said on Wednesday it has finalized a bankruptcy plan for
its Digital Teleport telecom units, Reuters reported. In a statement,
the company also said it expects second-quarter net income of about $25
million to $27 million, or 36 cents to 38 cents a share, pending final
resolution of certain items related to the bankruptcy plan. Kansas City,
Mo.-based Great Plains said the previously approved bankruptcy plan for
its DTI Holdings Inc., Digital Teleport Inc. and Digital Teleport of
Virginia Inc. subsidiaries follows the $38 million cash sale earlier
this month of DTI's operating assets to a unit of rural telephone
company CenturyTel Inc., reported the newswire.
Princeton Video Gets Bankruptcy Financing
Princeton Video Image Inc. on Wednesday said it received bankruptcy
court approval for financing it needs to keep operating, and procedures
to sell its assets and eventually liquidate, Reuters reported. The
Lawrenceville, N.J.-based company, which also provides virtual
advertising for sports and entertainment events, filed in May for
chapter 11 protection from its creditors with the U.S. Bankruptcy Court
in New Jersey.
Princeton Video's debtor-in-possession financing is being provided by
PVI Virtual Media Services LLC, which is owned by the company's two
secured creditors and biggest stockholders, Cablevision Systems Corp.'s
PVI Holdings LLC unit and Mexico's Presencia en Media SA. The company
also said the bankruptcy court has approved a competitive bidding and
sale process for the sale of the company's assets, reported the
newswire.
Farmland Industries Gets Extension
Farmland Industries has another month to disclose how much of its $800
million-plus debt it expects to be able to repay to unsecured creditors,
the Associated Press reported. The disclosure plan was to have been
filed by next Monday in bankruptcy court. There were no objections to
the agricultural cooperative's fifth request for more time, and the
delay until July 31 was granted by U.S. Bankruptcy Judge Jerry Venters
during a hearing on Tuesday.
Farmland filed for chapter 11 bankruptcy protection in May 2002. In its
motion asking for the delay, the nation's largest farm cooperative said
it was in sensitive negotiations over the direction of its remaining
pork business. The company previously said that it was negotiating with
possible buyers of its pork business but that if it didn't get a
sufficient offer, it would propose that it continue operating the
business and pay creditors back over time. Lawyers for the two
committees that represent Farmland's unsecured creditors supported the
delay, reported the newswire.
Two UAL Board Members Resign
The replacement of two veteran members of the board at United Airlines'
parent company this week was just the latest reshuffling in a quiet,
ongoing changing of the guard at the bankrupt carrier, Reuters reported.
UAL Corp. announced on Tuesday that board members John Van de Kamp and
Richard McCormick were leaving after 10 years. The changes at the board
level follow a replacement of about 60 percent of the corporate officers
since the arrival of Chief Executive Glenn Tilton, according to the
company, reported the newswire.
Safety-Kleen Seeks Court OK To Pay Potential Lenders' Fees
Safety-Kleen Corp. is asking a court for permission to pay prospective
lenders $750,000 of due diligence fees to smooth the company's emergence
from chapter 11 bankruptcy protection. Safety-Kleen, a hazardous and
industrial waste services company, said it expects to enter into exit
financing of $275 million to make payments under its reorganization plan
and to fund its operations as a reorganized company, according to a
court motion obtained on Tuesday. As of June 17, the date the company
filed the motion, it had received five formal but non-binding financing
proposals from potential lenders, including banks from which it had
borrowed before filing for bankruptcy protection.
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Midwest Air Says Bankruptcy Possible by Mid-July
Midwest Express Holdings Inc., parent of Midwest Airlines, said on
Wednesday it has told employees it may have to file for bankruptcy as
soon as mid-July if it cannot restructure deals with workers, lenders
and other creditors, Reuters reported.
Midwest Express was hit hard by the travel downturn following the Sept.
11, 2001, hijack attacks and the drop in business travelers because of a
weak economy. In a July 19 memo to employees that was obtained by
Reuters, Midwest Express said it has cut costs by about $7 million per
month since fall 2002, but it needs to find more savings to restore
profitability. 'While we continue to work for an out-of-court
restructuring, we need to be prepared to seek the assistance of the
bankruptcy court to complete our work,' the memo said, reported the
newswire.
The 'Always-On' System
The end of Kmart's bankruptcy signaled renewed activity for Kmart's
lawyers who defend the retailing giant in tort liability lawsuits -- and
for its litigation extranet, the secure, Web-based system the company
uses to manage and monitor public liability cases throughout the United
States, law.com reported. While Kmart's reorganization plan has
its critics, the company's extranet has won praise as a model
case-management tool, the website reported. At its busiest, it handled
more than 3,500 open cases, in a manner, lawyers agree, that streamlined
and simplified their work. To read the full article, point your browser
to
href='http://www.law.com/jsp/article.jsp?id=1056139878823'>http://www.law.com/jsp/article.jsp?id=1056139878823.
Weirton Steel To Seek $175 Million Through Emergency Steel Loan
Guarantee Program
As a component of its reorganization plan, Weirton Steel Corp. announced
in a press release distributed by PR Newswire that it will seek a $175
million loan by applying for participation in the Emergency Steel Loan
Guarantee Program.
Company Treasurer David Bordo will submit an application on Monday to
the loan board in Washington, D.C. 'If the application is approved, we
will work with a financial institution to secure the loan. Since the
onset of our bankruptcy filing, our goal has been to reorganize and
emerge quickly from the court process. The loan would help us through
our daily expenditures as we work through the reorganization process as
well as help us build for our future,' said John H. Walker, Weirton
Steel president and CEO, according to the press release. Last month, the
company filed a voluntary petition to reorganize under chapter 11
bankruptcy protection.
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