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March 24, 2006
name='1'>Long-Term Forecast Hazy for Katrina-Hit
Businesses
Lawmakers say they are
doing their best to help small businesses and taxpayers affected by
Hurricanes Katrina and Rita stave off bankruptcy, but with funds drying
up the financial outlook for companies doing business in the area
seems even murkier,
size='3'>Portfolio Media reported yesterday.
Last November, a study by Experian that examined the effects of Katrina
on 635,000 businesses found that the hurricane's impact on cash flow and
outstanding debt had significant implications on the local economy and
suppliers depending on that revenue, with commercial properties in
the
size='3'>Gulf States
size='3'>listing as much as $40 billion in payables outstanding.
According to the study, professional and business services firms were
the hardest hit by the disaster and owed the most ($8.8 billion).
Otherindustry groups
significantly affected were retail trade ($8 billion), wholesale trade
($5.9 billion) and construction ($5.7 billion) businesses, according to
the study. “Bankruptcies will spike, but not for some time,”
stated the report, “Historically, bankruptcies peak much later
after any natural disaster or economic shock – sometimes as long
as two yearsfollowing the event.”
name='2'>Interstate Bakeries Asks for More Time on Bankruptcy Exit
Plan
Interstate Bakeries Corp., the
maker of Hostess Twinkies and Wonder Bread, asked a bankruptcy court for
more time to draft its reorganization plan, the Associated Press
reported yesterday. A year-and-a-half after filing for chapter 11
protection from its creditors, the Kansas City-based company said it
still is trying to get a handle on its wide-ranging business and
renegotiate hundreds of contracts covering its union-represented
members. The company operates 45 bakeries, 800 distribution centers and
has 27,000 employees. The current deadline for Interstate Bakeries to
file a plan for emerging from bankruptcy with the U.S. Bankruptcy Court
is May 18, with July 17 the date by which the company's creditors must
approve the plan. In its motion Thursday, the company requested pushing
back the deadline to file a plan to Sep. 22 and set the deadline for
getting the plan accepted to Nov. 21. U.S. Bankruptcy Judge
Jerry Venters is scheduled to consider Interstate
Bakeries' request April 12.
href='http://www.belleville.com/mld/belleville/news/state/14171270.htm?templa…'>Read
more.
name='3'>Ex-Refco Brokers Settle Suit over Customer
Poaching
Eight former Refco brokers have
reached a settlement over allegations that they left Refco for a rival
firm just days after the company became plagued by an
accountingscandal and
that they lured clients away from Refco as it was slipping into
bankruptcy in October,
size='3'>Portfolio Media reported yesterday.
The group of brokers, located in
face='Times New Roman' size='3'>Chicago
size='3'>, agreed to return documents that were allegedly confiscated
from Refco LLC and to limit the solicitation of former Refco customers,
according to a proposed settlement filed with the U.S. Bankruptcy Court
in
size='3'>Manhattan
proposed settlement also asks for the lawsuit to be dropped against the
brokers and their firm, Brewer Futures Group LLC. The court-appointed
administrator of Refco LLC filed the lawsuit against the brokers,
claiming they left the company along with confidential Refco customer
lists right before the company became entangled in an accounting
scandal.
name='4'>Court Cuts
Calpine Energy Contracts
After an earlier plea from
Acadia Power Partners LLC that bankrupt power generator Calpine Corp.
was forcing it into a state of financial distress, a federal bankruptcy
judgeruled
that
size='3'>Acadia
Calpine and sell its energy to other utilities,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. Judge
size='3'>Burton R. Lifland said Acadia, a
joint venture between
w:st='on'>
size='3'>Louisiana
Cleco Corp. and California-based Calpine, can fix its contracts with
Calpine in order to sell its power to other firms. Under the Calpine
deal,
selling all of the energy from its 1160-megawatt plant to a Calpine unit
under contracts from 2001 and 2003. Earlier this month, Acadia told the
court that it was being put in a “precarious financial
condition,” and said if the contracts were not rejected,
size='3'>Acadia
million it says Calpine owes it.
face='Times New Roman' size='3'>Acadia
size='3'>claimed that Calpine’s delay in throwing out the
contracts was costing it $176,434.80 each day. It also requested that
the court give Calpine a 60-day deadline to void the contracts. The
judge set a hearing for April 26 to decide on
w:st='on'>
size='3'>Acadia
payment of its claim and to set a date when Calpine must reject its
contracts.
General
Motors
size='3'>Pension Agency Seeks Outside Legal
Advice on GM
The Pension Benefit Guaranty
Corp. sought private legal advice this week to help sort through a range
of possible financial scenarios involving General Motors Corp.,
including possible bankruptcy, Reuters reported today. According to
documents outlining its proposal, the PBGC would like outside lawyers to
provide 'advice and counsel' on the potential spinoff of GM's financing
arm, General Motors Acceptance Corp.; the bankruptcy of Delphi Corp.,
GM's chief parts supplier; and issues relating to GM pensions and
workforce reductions as well as the prospects for a chapter 11
bankruptcy filing or out-of-court restructuring. 'GM has suffered large
losses, its credit rating has declined to well below investment grade,
and there has been speculation in the press and elsewhere that the
company may have to seek bankruptcy protection in the future,' the
agency said in its solicitation. GM sponsors several pension plans,
including a salaried plan with 200,000 participants and another covering
current and former hourly workers with about 500,000 participants,
according to the PBGC.
href='http://news.yahoo.com/s/nm/20060324/bs_nm/autos_gm_pensions_dc_1&printe…-'>Read
more .
face='Times New Roman' size='3'>
name='6'>Delphi
size='3'> Creditors Set to Fight GM's Potential
Claim
Delphi Corp.'s unsecured
creditors' committee and a billionaire hedge-fund manager are gearing up
to challenge General Motors Corp.'s potential claim that GM should get
compensated by a restructured Delphi for the money the auto maker pays
out in benefits to Delphi's union work force, the Wall Street
Journal reported today. The question, say some lawyers familiar
with the case, is whether
undercapitalized, beholden to GM and therefore doomed to fail at the
time of its 1999 spinoff. Under terms of the spin-off, GM has an
indemnity clause stating that money it spends on benefits for Delphi
workers would give GM a general, unsecured claim on
w:st='on'>
size='3'>Delphi
GM has estimated that its potential liability for Delphi-related
employee benefits is between $5.5 billion and $12 billion, so it could
have a claim of that size on an equal footing with a bondholder. That
indemnity clause is a sore subject with the unsecured creditors'
committee, as well as hedge-fund manager David Tepper and his Appaloosa
Management LP, which owns 52 million
face='Times New Roman' size='3'>Delphi
size='3'>shares, or 9.3 percent of the company. Tepper's lawyer, Thomas
Lauria, said 'that indemnity clause absolutely needs to be
challenged.'
href='http://online.wsj.com/article/SB114316753183607103-email.html'>Read
more.
name='7'>Commentary: GM Reflects Struggles of Blue-Collar Middle
Class
GM's current problems
remind us of how the disappearing blue-collar middle class struggles
mightily to fend for itself in the face of stagnant wages and job
insecurity, according to an editorial in today’s
face='Times New Roman' size='3'>New York Times
size='3'>. When the automaker extends a blanket offer to buy out every
one of its 113,000 unionized workers in the
w:st='on'>
size='3'>United States
size='3'>, as it did earlier this week, its troubles are the embodiment
of American’s fears. GM worsens the nagging worry about an
size='3'>America
size='3'>without the kinds of jobs that can provide the salaries needed
to support families, good health care and a secure retirement. As its
market share has fallen, GM has needed fewer workers, and it has even
paid many to be idle. Right now the automaker merges the industrial
failure of uninspired designs with the systemic failure of
out-of-control costs, suggesting a bleak future. Cutting costs will help
GM stay afloat, but will not turn it back into a success.
href='http://www.nytimes.com/2006/03/24/opinion/24fri2.html?pagewanted=print'>Read
more.
In related news, city
leaders and
face='Times New Roman' size='3'>Flint
size='3'>,
size='3'>Mich.
are left to weigh what future there could be for a city so deeply tied
to an automobile industry in decline, the
size='3'>Washington Post reported today. Flint
had become a prosperous mid-size city of nearly 200,000 residents by the
1960’s, largely on the strength of 'Generous Motors,' as the auto
giant was sometimes known for its excellent pay and benefits. But in the
past three decades, as GM lost market share to more cost-efficient
competitors, the gray skies and forlorn streets of
w:st='on'>
size='3'>Flint
a universal metaphor for the decline of American industry. Business and
civic leaders have bigger hopes.
w:st='on'>
size='3'>Flint
growing health care sector, they say, and many retired autoworkers are
starting companies of their own. Darryl E. Buchanan, president of the
Flint City Council, said yesterday that the city is recruiting newer
industries, but those pockets of strength have done little to affect
overall employment. The number of jobs in the metro area has dropped 16
percent since 1979, according to federal data, while jobs nationwide
rose 48 percent.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/03/23/AR20060…'>Read
more.
GM
Sells Big Stake in Loan Unit
General Motors sold a 78
percent stake in its commercial mortgage business, one part of its vast
financing division, to an investor group, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The latest move in the struggling automaker's
efforts to raise cash includes $1.5 billion in cash and the repayment of
about $7.3 billion in inter-company loans. The stake in the mortgage
business, GMAC Commercial Holding, was sold to a group of investors that
includes Kohlberg Kravis Roberts & Co., Five Mile Capital Partners
and Goldman Sachs Capital Partners. The mortgage company repaid $7.3
billion in loans to GM's financing division, the General Motors
Acceptance Corporation (GMAC). The sale was for a bigger share of the
unit than the 60 percent stake GM said it would sell to the group in
August. The unit will be renamed Capmark Financial Group in the second
quarter. The deal comes as GM is also negotiating with potential buyers
the sale of a controlling interest in the rest of GMAC for an estimated
$11 billion.
href='http://www.nytimes.com/2006/03/24/business/24auto.html?pagewanted=print'>Read
more.
J.L.
French Requests Approved Amid Protests
Dismissing creditor
objections, a federal bankruptcy judge has approved J.L. French
Automotive Castings Inc.’s request to pay the parties involved in
the auto suppliers’ Restructuring Support Agreement and Backstop
Rights Offering,
size='3'>Portfolio Media reported yesterday.
The decision, handed down on Thursday, propels the company’s
restructuring process one step further as the unsecured creditors’
complaints continue to fall on deaf ears. J.L. French filed for chapter
11 on Feb. 10, succumbing to the industry-wide financial malaise that
has also felled
size='3'>Delphi
among others.The
restructuring support agreement and the rights offering term sheet form
the cornerstone of J.L. French’s reorganization plan, which
depends on a new money equity investment of between $110 million and
$130 million. Under the approved agreement, the automotive company will
now shell out a 1 percent restructuring transaction fee to the creditors
that have pledged to backstop up to $130 million in the rights
offering.The court granted J.L. French permission to pay a 2 percent fee
upon the funding of the new money investment, set to occur after the
reorganization plan is accepted. The company has also been authorized to
pay a maximum 2 percent 'break up' fee ifit receives a 'higher and
better' offer than the transaction proposed in the restructuring support
agreement.
Airlines
Delta,
name='10'>Union
Negotiating
The head of an arbitration
panel ordered the management and pilots union at Delta Air Lines Inc. to
immediately begin negotiating for an agreement to avoid a collapse of
the 77-year-old airline, the Associated Press reported yesterday. ''Make
no mistake: you both are responsible for this proceeding,'' said Richard
Bloch, chairman of the three-person arbitration panel. If the two sides
fail to reach accord and the panel is forced to rule on whether Delta
can toss out its contract with the pilots, he said, ''this will be an
abandonment of responsibility that will, and should, haunt all of you.''
They didn't plan to sit down immediately, but Delta's chief financial
officer, Edward Bastian, said he expected negotiations to begin in a day
or two. The two sides had signaled earlier a hardening of their
positions. Bastian rejected in his testimony Thursday the union's notion
that the difference between the two sides' views -- pegged at $165
million -- is marginal and should be overcome.
href='http://www.nytimes.com/aponline/business/AP-Delta-Pilots.html'>Read
more.
In related news, rising
revenue is helping to lift the long-suffering
w:st='on'>
size='3'>U.S.
size='3'>airline industry, but it is also giving Delta Air Lines a new
headache as it tries to squeeze an 18 percent pay cut from unionized
pilots, the Wall Street
Journal reported today. Last month,
size='3'>U.S.
size='3'>airlines saw their passenger unit revenue, a measurement of how
much revenue was generated from flying one passenger one mile, surge
14.9 percent from a year earlier, the Air Transport Association trade
group reported earlier this week. Unit revenue rose 9.9 percent in
January. Delta doesn't disclose its unit revenue on a month-by-month
basis, but Ed Bastian, the Atlanta carrier's finance chief, said in an
interview that passenger revenue increased last month and the airline's
improved financial performance has allowed it to take in about $400
million more of cash than previously anticipated in its chapter 11
business plan. 'We are ahead of plan, but we have a long way to go,' Mr.
Bastian said in testimony yesterday at the arbitration hearing in
Washington where Delta and its pilot union are battling over the
airline's request to abandon the current contract with about 6,000
pilots. Testimony ended yesterday after nine days, and the panel is
expected to rule by April 15.
href='http://online.wsj.com/article/SB114315128145306763-email.html'>Read
more.
name='11'>Northwest Muscling Through Bankruptcy May Leave Deep
Bruises with Workers
While Northwest Airlines
is looking to quickly emerge from bankruptcy, accomplishing in six
months what took United Airlines two years, its aggressive tendencies
could backfire, the New
York Times reported today. Workers, bitter
over the size of concessions and the way Northwest extracted them, could
become more difficult to manage as the airline tries to improve customer
service and efficiency. In labor talks, Northwest 'went beyond what some
other airlines asked for,' said Philip Baggaley, an airline credit
analyst at Standard & Poor's. Moreover, the company's reputation for
confrontational labor tactics and bruising competitive moves could make
it less appealing as a merger partner — especially if Northwest's
management wants to run a combined company.
href='http://www.nytimes.com/2006/03/24/business/24place.html?pagewanted=print'>Read
more.
name='12'>British Airways Proposes Later Retirement for
Pension
British Airways Plc Chief
Executive Officer Willie Walsh proposed employees work as many as 10
years longer to qualify for full retirement benefits in a bid to close a
pension-fund deficit of 1 billion pounds ($1.73 billion), Bloomberg News
reported yesterday.
size='3'>The retirement age for pilots will rise to 60 from 55, and for
cabin crew to 65 from 55, Walsh said. The proposal is 'completely
unacceptable,'' Brendan Gold, national secretary for civil aviation at
the Transport & General Workers union, said in a telephone
interview. The
Transport & General Workers union represents about 30,000 of the
airline's 46,000 employees, Gold said. The changes, which include a cap
on the annual increase in pension payments, will affect 33,794
employees, including about 2,500 pilots, Walsh said.
href='http://www.bloomberg.com/apps/news?pid=10000102&sid=aAlY4Fe4m8v8&refer=…'>Read
more.
name='13'>Sarbanes Counters Critics of Corporate Accountability
Law
Sen. Paul Sarbanes
(D-Md.) offered his most sweeping defense of a law he co-authored
following the collapse of Enron Corp. and suggested that current efforts
to roll back the law are on shaky legal footing, the Associated Press
reported yesterday. Critics have asserted that the law was enacted
hastily and created too many burdens for companies. A conservative group
has filed a civil lawsuit seeking to abolish the newly created Public
Company Accounting Oversight Board (PCAOB). An advisory panel created by
the Securities and Exchange Commission is calling for the exemption of
about 80 public companies from a key internal-controls requirement of
the law. Sarbanes, who was chairman of the Senate Banking Committee when
the law was enacted, took particular exception to a lawsuit filed by the
Free Enterprise Fund, a
w:st='on'>
size='3'>Washington
w:st='on'>
size='3'>D.C.
organization that seeks to have the PCAOB declared unconstitutional and
prevent board members from exercising their powers. ''It's asserted by
some that the law was enacted in haste,'' Sarbanes said. ''I think this
is an affront to the hard work and the common sense of the members of
Congress who shaped the legislation, moved it through their respective
houses, and voted for it. We had an extremely thorough, careful set of
hearings.''
href='http://www.nytimes.com/aponline/business/AP-Sarbanes-Oxley.html?pagewan…'>Read
more.
name='14'>Defense Weakens Testimony against Enron
Executives
Under questioning by
defense lawyers, Enron's former treasurer backed away from statements
that Jeffrey K. Skilling had supported a controversial off-the-books
transaction as a way to skirt accounting rules, and admitted to other
weaknesses in his earlier testimony, the
size='3'>New York Times reported today. But
Ben F. Glisan Jr., the last high-level manager expected to testify for
the government in the criminal trial of Skilling, a former Enron chief
executive, and the company's founder, Kenneth L. Lay, continued to
insist that the Raptors financing vehicle he designed had no economic
value. Instead, Glisan said, the Raptors was really an accounting
artifice that won plaudits from Skilling and Lay for its ability to help
Enron avoid reporting hundreds of millions of dollars in losses. Glisan
told jurors on Wednesday that Skilling endorsed the use of the Raptors
to 'circumvent the accounting rules.' On Thursday, however, under
cross-examination by Daniel Petrocelli, Skilling's lead lawyer, Glisan
said he could not recall the exact words Skilling used at a May 2000
meeting of the Enron board's finance committee.
href='http://www.nytimes.com/2006/03/24/business/businessspecial3/24enron.htm…'>Read
more.
International
name='15'>Bankrupt Yukos Says $3 Billion in Promissory Notes Were
Stolen
Russian oil company OAO Yukos
said that promissory notes worth more than $3 billion are missing and
may have been stolen from a defunct trading subsidiary whose former
general manager is the subject of a criminal lawsuit, the Associated
Press reported today.The loss is a major hit to what was once Russia's
largest oil producer, and could bolster a bankruptcy suit filed by
Yukos' creditors that is due to be heard Tuesday. The notes --
essentially IOUs guaranteed by Yukos -- ''may have been sold, at a
reduced rate, to external parties,'' the statement said. Yukos said it
discovered last fall that the notes were missing from the subsidiary,
Fargoil, but claimed its attempts to track them down had been frustrated
by the subsidiary's management. Fargoil was dissolved in December. Yukos
suggested the promissory notes' disappearance had been arranged by
parties hoping to receive Yukos assets through the bankruptcy
procedure.
href='http://www.nytimes.com/aponline/business/AP-Russia-Yukos.html?pagewante…'>Read
more.
href='http://www.nytimes.com/aponline/business/AP-Russia-Yukos.html?pagewante…'>