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December 19, 2002
Bankruptcy: The Good, the Bad
When Conseco Inc. announced the third-largest bankruptcy filing in U.S.
history Wednesday, it sent a shudder through the U.S. stock market --
perhaps because bankruptcy is often seen as a bad thing, an admission of
ultimate failure, CNNMoney.com reported. But that might be an
overly simplistic view of reorganization. It's often the case that
bankruptcy is not only good for the businesses that file, but for the
U.S. economy as a whole, since it allows companies to take some risks in
figuring out the most efficient way to operate. 'Bankruptcy is perfect
for some business problems -- for financial problems, it works well,'
said G. Ray Warner, resident scholar at the American
Bankruptcy Institute and a professor of law at the University of
Missouri-Kansas City. 'Harder are the operation bankruptcies like Kmart,
where the problem is not just debt.' To read the full article, point
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Halliburton Reaches $4.1 Billion Asbestos Settlement
Halliburton Co. agreed to pay as much as $4.1 billion in cash and stock
in one of the
largest settlements of asbestos lawsuits in history, Bloomberg News
reported.
The world's No. 2 oil-services company reached an agreement with lawyers
representing more than 75 percent of about 200,000 people suing the
company over exposure to cancer-causing asbestos. The settlement
includes as much as $2.775 billion in cash, about $100 million in notes
and as many as 59.5 million shares, worth $1.21 billion based on
yesterday's close of $20.35.
The company and plaintiffs' lawyers presented the accord yesterday to
U.S. Bankruptcy Judge Judith Fitzgerald in Pittsburgh, who is
overseeing the reorganization of former unit Harbison-Walker
Refractories Inc. Two units, Dresser Industries and Kellogg Brown &
Root, will file for bankruptcy by March, the company said, reported
Bloomberg. Judge Fitzgerald scheduled a Jan. 17 hearing on the accord
and continued a freeze on asbestos lawsuits against Halliburton. Under
the settlement, Halliburton will create a trust fund to pay potential
future claims.
CONSECO
Conseco Aims to Emerge from Bankruptcy in Second Quarter of
2003
Conseco Inc. expects to emerge from federal bankruptcy protection in the
second quarter next year, if not earlier, the company's lead attorney
said during a hearing Wednesday morning, Dow Jones reported. James
H.M. Sprayregen told Judge Carol A. Doyle that Conseco has been in
'intense' negotiations in recent weeks with bondholders and banks
regarding its debt levels. The company reached an agreement in principle
on a financial restructuring that was best facilitated by the bankruptcy
filing, he said.
Conseco's decision to file for bankruptcy was widely expected.
Sprayregen said Conseco's large insurance company units remain 'sound
and profitable entities' that won't be directly affected by the
bankruptcy filing. Judge Doyle approved a number of first-day procedural
motions during an hour-long hearing, reported the newswire.
Conseco To Sell Former Green Tree Unit To Investor
Group
As part of a complicated bankruptcy filing, Conseco Inc. announced on
Wednesday an agreement to sell the assets and operations of Conseco
Finance Corp. (CFC), the nation's largest mobile-home lender, to an
investor group, Dow Jones reported. The proposed purchase price would be
equal to the outstanding amount of CFC's secured debt as of the deal's
close, reported the newswire. That would be a small fraction of the more
than $6 billion Conseco paid to acquire the St. Paul, Minn.-based
business, formerly known as Green Tree Financial Group., in 1998.
Industry observers speculated that CFC's secured debt, the bulk of which
is owed to Lehman Brothers, may amount to as little as $800 million to
$1.8 billion, Dow Jones reported.
UNITED AIRLINES
Airbus Named Chair Of UAL Creditors' Committee
The unsecured creditors' committee for the chapter 11 reorganization of
UAL Corp., parent of United Airlines, has chosen Airbus North American
Holdings Inc. as permanent committee chair, Dow Jones reported. The Air
Line Pilots Association and Bank of New York were picked as vice chairs
of the committee. KPMG International has been named financial adviser to
the creditors' committee. Two attorneys from the Chicago law firm
Sonnenschein Nath and Rosenthal, Fruman Jacobson and Carole Neville,
will represent the committee on legal matters, reported the newswire.
Airbus is chairman of the unsecured creditors' committee in the US
Airways chapter 11 case, as well as the UAL case.
UAL DIP Syndication Begins for Institutional
Investors
Bankers who arranged UAL Corp.'s $1.5 billion debtor-in-possession
financing began on Wednesday marketing $300 million of the loan to
institutional investors, say people familiar with the situation, Dow
Jones reported. The banks held a meeting with investors, who have until
Jan. 9 to commit to a piece of the loan, sources said.
The so-called carve-out would be taken from the $1.2 billion facility
arranged last week by J.P. Morgan, Citigroup Inc. and Bank One Corp.
before the parent of No. 2 carrier United Airlines filed for bankruptcy.
Bank One also agreed to a separate $300 million term loan with the
company.
Airline Loans, Aircraft Leases Add to Bank Problem
Loans
The nation's largest banks haven't seen the last of losses tied to
airline loans and leases on aircraft, Dow Jones reported. Bank of New
York Co. is the latest to announce an airline-related hit: The company
said late on Tuesday it would set aside $390 million in provisions
during the fourth quarter to cover its exposure to United Airlines,
whose parent company, UAL Corp., recently filed for bankruptcy, reported
the newswire. The provision will also cover losses tied to the rest of
the sector. Bank of New York will post a related charge of $240
million.
Last week, Bank One Corp. said it would post a $45 million charge in the
fourth quarter to cover its losses tied to United. Meanwhile, Bank One
said it would also provide $600 million in debtor-in-possession
financing, a chunk of which is part of a $1.2 billion package with
lenders J.P. Morgan Chase & Co., Citigroup Inc. and CIT Group Inc.,
reported the newswire.
UAL Asks Bankruptcy Judge to Collect $100 Million Tax
Refund
UAL Corp. asked a bankruptcy court judge in Chicago for permission to
collect a $100 million tax refund that was blocked by its chapter 11
filing, Bloomberg News reported. The U.S. Tax Court had found Dec. 9
that the Internal Revenue Service owes UAL tax overpayments plus
interest totaling about $100 million. The Tax Court later said the
decision violated a portion of bankruptcy law that prohibits debt
collection actions after a filing, even when the decision is in favor of
the company seeking protection from creditors, reported the
newswire.
United Airlines Cuts Some 2003 Fares to Lure Travelers
United Airlines said yesterday that it would be offering lower fares in
almost all of its markets to attract travelers during the slow period
after the holidays, the New York Times reported. It was United's
first announcement of fare reductions since it filed for protection from
creditors under chapter 11 of the Bankruptcy Code last week, but experts
said the cuts were not deep enough to indicate that the airline was
willing to go to any length to keep passengers, reported the
Times.
Boston Archdiocese Interim Leader Backs Settling Lawsuits
The interim leader of the Boston Archdiocese said on Wednesday that he
backs efforts to settle hundreds of lawsuits accusing church leaders of
turning a blind eye to claims that priests molested children, the
Associated Press reported. Roman Catholic Bishop Richard Lennon said he
told the church's lawyers to set aside all day-to-day activities-except
those mandated by the courts-so they can 'actively pursue' settlement of
the cases. 'I will support efforts to arrive at a settlement of claims
which will be fair and equitable for all the victims of sexual abuse,'
Lennon said at his first news conference since being named apostolic
administrator last week after Cardinal Bernard Law resigned as
archbishop, reported the newswire. More than 400 lawsuits are pending
against the archdiocese, and the prospect of paying the claims has
prompted the archdiocese to consider filing for bankruptcy.
Banks Ask Xcel Energy to Pay More for NRG Restructuring
Banks want Xcel Energy to make 'substantial' payments beyond the $300
million it has already offered under a plan to restructure the debt of
its struggling power generation and trading unit, NRG Energy Inc., Xcel
said in a filing with the Securities and Exchange Commission on Tuesday,
Dow Jones reported. In a plan sent to NRG creditors in November, Xcel
offered to pay NRG $300 million and surrender its equity ownership in
the financially troubled unit in return for a release from any and all
claims against the parent. A recently submitted bank counterproposal,
however, would require 'substantial additional payments' by Xcel, the
company said in the filing, according to the newswire.
NRG, among the hardest-hit in the troubled merchant energy sector, is
now trying to arrange a prepackaged bankruptcy deal with its creditors,
which include bondholders and 105 banks, Dow Jones reported. The unit
has about $7 billion in debt and is expected to end up in bankruptcy
whether or not the restructuring plan is approved, Xcel has said.
Bondholders are expected to submit their own counterproposal, reported
the newswire.
Companies in Bankruptcy Grapple with 'Critical Vendor' Question
With some of the largest U.S. bankruptcy filings to date occurring this
year-including the continued flight to chapter 11 of telecommunications
and retail companies, which both rely heavily on vendors-critical vendor
motions are now more scrutinized than ever, Dow Jones reported. In many
cases, judges are demanding very detailed information to support a
debtor company's request to pay a vendor. The judges are also granting
immediate relief on an interim basis in order to give other parties
involved, such as a creditors' committee, time to review the request. To
read the full article, point your browser to
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3E%28article%2Ddoc%2Dtype%3CCONTAINS%3Ebankruptcy%29%29.
Oakwood Homes Expects to Reach $215 Million Loan Deal
Oakwood Homes Corp. expects to reach an agreement on a $215 million
debtor-in-possession loan with Greenwich Capital Financial Products Inc.
and Warren Buffett's Berkshire Hathaway Inc., Dow Jones reported. The
debtor company has been negotiating the loan since it filed for chapter
11 bankruptcy protection on Nov. 22. The sides have agreed to the basic
terms and the lenders are expected to sign the loan documents on
Wednesday, said Robert J. Dehney, an attorney with Morris Nichols
Arsht & Tunnell, the firm representing Oakwood Homes, reported the
newswire. A hearing to consider approval of the loan that had been
scheduled for Wednesday evening was rescheduled after Oakwood Homes'
committee of unsecured creditors requested more time to review the loan
documents and pursue an alternative deal, Dehney said, reported Dow
Jones. The hearing is now scheduled on Dec. 30.
Panaco Cites Chapter 11 Proceedings for AMEX Notification
Panaco Inc. received notice from the American Stock Exchange that its
shares aren't in compliance with continued listing requirements and may
be subject to delisting, Dow Jones reported. In a press release on
Wednesday, the oil and gas company said that it doesn't plan to submit a
proposal for regaining compliance because it is still working on
developing a plan of reorganization related to its chapter 11 bankruptcy
filing. On Dec. 11, Panaco asked a bankruptcy court for an extension
through the end of January to use the cash collateral of a secured
creditor to pay operating expenses while the company works to complete
its chapter 11 plan, reported the newswire.
NRG Disputes Payments Claimed By Former Executives
NRG Energy Inc. went on the offensive this week, saying five former
executives who filed a petition to drag the struggling power generator
and trader into bankruptcy court don't deserve the payments they are
seeking, Dow Jones reported. The executives, including former Chief
Executive David Peterson, say the company owes them more than $23
million in payments for deferred compensation, pensions and severance.
In a bankruptcy-court motion filed on Monday, the Xcel Energy Inc.
subsidiary acknowledged that it stopped paying the 'rogue group of
disgruntled former executives,' but said it had a reason, reported the
newswire.
The company, among the most troubled in the merchant energy sector, said
the executives were among those that 'formulated and implemented the
strategy that led to NRG's current difficulties,' reported Dow Jones.
The five former NRG executives filed a petition on Nov. 22 to force NRG
into bankruptcy. The executives left the company between May and August
this year. As reported, NRG filed a response with the U.S. Bankruptcy
Court for the District of Minnesota late Monday that contested the
executives' claims, as well as a motion to have the petition
dismissed.
FAO Falls on Concern Retailer May File for Bankruptcy
FAO Inc. shares tumbled 38 percent after the owner of the FAO
Schwarz
toy stores said on Tuesday it will seek bankruptcy protection unless its
lender eases some borrowing restrictions, Bloomberg News reported. FAO
is asking Wells Fargo Retail Finance LLC to relax some of the
limitations the bank recently imposed on the retailer, the newswire
reported. Other lenders have tightened financing amid slumping sales
that forced FAO to cancel orders for the remainder of the holiday
season. The company, formerly known as Right Start, had about $1 million
available for borrowing as of Dec. 13, according to a filing with the
Securities and Exchange Commission. Without the bank's restrictions, FAO
would have been able to borrow $23.1 million, reported the newswire.
Sunbeam Emerges From Bankruptcy Protection as Private
Company
Sunbeam Corp., the No. 1 U.S. small-appliance maker, said it will
operate as a
private company after emerging from bankruptcy protection, Bloomberg
News reported. The maker of Mr. Coffee, Oster blenders and Coleman
camping equipment said in a statement that it has been renamed as
American Household Inc, reported the newswire. Sunbeam sought chapter 11
protection in February 2001, citing $3.2 billion in debt, reported the
newswire. Most of the debt was accumulated when Sunbeam acquired Coleman
Co., First Alert Inc. and Signature Brands USA Inc. in 1998 under former
Chief Executive Officer Al Dunlap. The Justice Department is
investigating Sunbeam's finances under Dunlap's tenure.
Qwest Bondholders Now Must Decide Whether To Swap Debt
A federal judge on Wednesday gave Qwest Communications International
Inc. the green light to proceed with its proposed $13 billion debt
exchange offer and left bondholders with the difficult decision of
whether to participate in the controversial swap, Dow Jones reported.
With the deadline on the exchange looming on Friday, investors and
analysts say the best recourse would be for bondholders to collectively
refrain from tendering their notes. The offer has no minimum acceptance
level, but if the swap draws very little interest, it could bring the
company to the bargaining table, some said, reported the newswire. But
it's a risky decision since, under the terms of the offer, bondholders
who don't tender wind up with bonds subordinated to those who do,
reported Dow Jones.
U.S. Department of State Awards WorldCom 10-Year Pact
Bankrupt telecommunications firm WorldCom Inc. received a 10-year
contract valued at up to $360 million from the U.S. State Department to
provide advanced communications services, Dow Jones reported. In a press
release today, WorldCom said it will provide the services to State
Department facilities as part of the Spectrum program, which will
deliver international private lines, satellite, Internet Protocols and
ATM protocols to State Department agencies worldwide. The company will
serve as a preferred provider for State Department communications
programs.
US Airways Flight Dispatchers, Simulator Engineers OK Pact
US Airways Group Inc. reached tentative agreements with its flight
dispatchers and simulator engineers on additional cost-cutting measures
aimed at helping the airline emerge from bankruptcy, Dow Jones reported.
US Airways, which filed for chapter 11 in August, plans on filing its
reorganization plan with the bankruptcy court on Friday. The company is
trying to negotiate $200 million in labor cuts to receive a federal loan
guarantee. In a press release on Wednesday, the airline said it
continues to have productive discussions with its other unions on
further savings.
Novo Files Chapter 11 Petition
A Novo Broadband Inc. on Wednesday filed a voluntary chapter 11 petition
in the U.S. Bankruptcy Court in Wilmington, Del. The company listed
total assets of $12.3 million and total debts of $10.5 million as of
Oct. 31, Dow Jones reported. Based in New Castle, Del., the company
repairs and services broadband equipment for equipment manufacturers and
operators of cable and other broadband systems in North America. A Novo
Broadband has 8.7 million shares of common stock outstanding, and its
largest unsecured creditor is Worldwide Digital of St. Louis, which
holds a trade claim in the amount of $473,858, according to the court
filing, reported the newswire.
Shares of Bankrupt Kmart Delisted
Bankrupt retailer Kmart Corp.'s shares will begin trading on the Pink
Sheets electronic quotation system today under the symbol 'KMRTQ.PK,'
ending an 84-year run on the New York Stock Exchange, Reuters reported.
The shares, which were first listed under the old S.S. Kresge name on
the NYSE on May 23, 1918, were delisted because they did not meet the
NYSE's requirements. The exchange notified Kmart in July that it was not
in compliance after its shares fell below $1. The company's name was
changed to Kmart in 1977, and it began trading under that name on May
17, 1977, a NYSE spokeswoman said, reported the newswire. The company
filed for bankruptcy protection in January after struggling to boost
sales in a discount sector dominated by Wal-Mart Stores Inc. and Target
Corp.
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