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September 25, 2002
U.S. Lawmaker Asks Credit Unions to Push Bankruptcy Bill
House Judiciary Chairman James Sensenbrenner (R-Wis.) called on credit
union executives Tuesday to press lawmakers to pass new bankruptcy laws
before November's federal elections, Dow Jones reported. 'When you go to
Capitol Hill today to do this member-to-member lobbying, the message is:
'We want this bill passed. The votes are there. We want this bill
scheduled for a vote,'' Sensenbrenner said, speaking to credit union
executives at a National Association of Federal Credit Unions
meeting.
House leaders pulled a broad bankruptcy bill from the floor earlier this
summer after a group of conservative, anti-abortion Republicans
protested a compromise provision in the broader legislation. The measure
was designed to prevent abortion protesters from filing for bankruptcy
protection to avoid court-ordered fines. Credit unions, retailers, banks
and credit card companies have pushed for tighter bankruptcy laws for at
least five years. The crux of the legislation would make it more
difficult for individuals who earn more than their state's median income
to discharge their debts in a chapter 7 bankruptcy. It would instead
force roughly 10 percent of all filers to repay some of the bills under
chapter 13, a reorganization of debt, the online newswire reported.
Federal Reserve Keeps Interest Rates Unchanged
The Federal Reserve yesterday left the federal funds rate - the interest
that banks charge each other on overnight loans - at 1.75 percent, the
lowest level in 41 years, CongressDaily reported. Meanwhile,
consumer confidence fell for the fourth consecutive month in September,
slipping to its lowest level since November. And according to the Census
Bureau, the poverty rate rose last year for the first time in eight
years and household income fell. There were 32.9 million Americans
living in poverty last year, up from 31.6 million in 2000.
Mary E. May Appointed U.S. Trustee for Kansas, Oklahoma and New
Mexico
Mary E. May has been appointed U.S. Trustee for Kansas, Oklahoma and New
Mexico, according to the Executive Office for United States Trustees.
May's appointment takes effect Sept. 23, 2002. Before her appointment,
May was a partner with the Wichita law firm Fleeson, Gooing, Coulson
& Kitch L.L.C. Her practice included bankruptcy, creditors' rights,
banking law and regulation, commercial law, and real estate and
commercial lending. Since 1997, she also served as a chapter 7 panel
trustee in the District of Kansas. May served on the Kansas Board for
Discipline of Attorneys from 1996 to 2002, and she is a long-time member
of the Wichita Bar Association's Ethics Committee, acting as vice-chair
from 1998 to 2002. She is also a frequent speaker on issues pertaining
to bankruptcy, commercial law, attorney ethics and professional
opportunities for women lawyers.
Airlines Down on Bankruptcy Worries, Higher Crude Oil
Shares of the nation's major airlines fell Tuesday for the second
straight day after crude oil prices rose to their highest level in more
than a year and investors remained wary of the industry's financial
health and possibilities of more bankruptcies, Dow Jones reported.
America West Airlines parent America West Holdings Corp. and United
Airlines parent UAL Corp. were among the hardest hit, falling as much as
16 percent and 8 percent, respectively.
Shares of the No. 8 and No. 2 airlines declined after Financial Times
Deutschland quoted Gordon Bethune, the outspoken chairman and chief
executive of Continental Airlines Inc. as saying that they will be the
next U.S. carriers to go bankrupt. 'We will see at least two further
bankruptcies, one in Chicago and one in Phoenix,' the paper quoted
Bethune as saying. The paper said his comments refer to Chicago-based
United and Phoenix-based America West. Bethune joins the growing ranks
of industry executives and analysts to predict the bankruptcy of United,
which has said it may file for chapter 11 this autumn if it can't reduce
labor costs and win a $1.8 billion federal loan guarantee.
Level 3 Objects to Network Plus Efforts to Drop Contract
Level 3 Communications LLC has filed an objection to Network Plus Corp.
and Network Plus Inc.'s efforts to reject a portion of a contact
regarding data circuits, Dow Jones reported. A hearing on this issue has
been scheduled for Oct. 9 in the U.S. Bankruptcy Court in Wilmington,
Del. Court papers filed by Level 3 said the companies can't pick and
choose parts of contracts to accept or reject, but must accept or reject
them in their entirety with all of their benefits and burdens. Level 3
also said it objects to the debtors' efforts to reject the contracts
retroactively to the date in which the motion was filed on Sept. 4,
court papers said, the newswire reported. Upon entering bankruptcy,
Network Plus served 75,000 customers, including hospitals, trial courts,
universities, religious organizations and other public service and
charities. On Feb. 4, the company filed for chapter 11 protection,
listing assets of $433 million and liabilities of $206 million.
Sealed Air Trial Postponed
Sealed Air Corp. reported that a fraudulent transfer trial has been
adjourned due to a recent opinion by the U.S. Court of Appeals for the
Third Circuit in an unrelated case, Dow Jones reported. In a press
release Tuesday, the packing materials maker said the original trial was
set for Sept. 30 and that no new trial date has been set. In a Sept. 20
ruling, the Third Circuit court held that a creditor or creditors'
committee may not assert a fraudulent transfer claim in a bankruptcy
proceeding and that only a debtor-in-possession or an appointed trustee
may bring such actions. Because the fraudulent transfer case against
Sealed Air was filed by the creditors' committees, the court is
reviewing how this case should proceed in view of the recent ruling,
reported the newswire. In August, the federal court overseeing the W. R.
Grace & Co. bankruptcy proceeding did not allow Sealed Air to
immediately appeal its July 29, 2002, order on the legal standards to be
applied to the issue of Grace's solvency. Asbestos plaintiffs filed a
fraudulent-transfer lawsuit against Sealed Air, which merged with a
former Grace unit in 1998. The plaintiffs want billions of dollars
transferred back into Grace's estate to pay off claimants and other
creditors.
Bankrupt Communication Dynamics, Unit Owe $64 Million Under
Notes
Communication Dynamics Inc., its TVC Communications Inc. unit and other
company affiliates owe $64 million under private placement subordinated
notes, Dow Jones reported. The companies, which filed for chapter 11
bankruptcy protection late Monday, also owe $121 million in senior
secured debt to lenders led by General Electric Capital Corp., the
financial services arm of General Electric Co. The companies' bankruptcy
petitions, filed in the U.S. Bankruptcy Court in Wilmington, Del.,
listed assets of more than $100 million. A more exact estimate of the
asset amount wasn't available.
Buba's Welteke Slams Big IMF Loans Ahead of Fund Meeting
Head of the Deutsche Bundesbank Ernst Welteke Tuesday criticized the
International Monetary Fund for granting large loan packages to
developing countries that face financial problems, Dow Jones reported.
The IMF hosts its annual meeting in Washington D.C. from Sunday, an
event at which finance ministers and central bankers from around the
world are set to discuss new proposals to deal with emerging markets
financial crises.
Speaking to an audience of bankers, Welteke, who is also a member of the
European Central Bank's governing council, made it clear he believes the
availability of large loan packages from the IMF is part of the problem,
since it encourages bank lenders and investors to take too many risks.
Finance ministers and central bankers attending the IMF meeting will
discuss an IMF proposal to establish a sovereign bankruptcy process
analogous to the chapter 11 regime for private companies.
Asbestos Trial Gets Under Way in West Virginia
A closely watched asbestos trial against some of the world's largest
companies got under way in West Virginia on Tuesday, despite an
11th-hour wave of out-of-court settlements that sharply reduced the
number of corporations facing litigation, Reuters reported. Two Kanawha
County Circuit Court judges began the jury selection process by
dismissing one of two prospective juror pools. About 8,000 people who
claim they were exposed to the deadly substance sued 259 corporate
defendants ranging from manufacturers to groups of employers and
building owners, the newswire reported. The cases were consolidated into
a mass trial by the Supreme Court of Appeals of West Virginia, sparking
an appeal by defendants to the U.S. Supreme Court. The U.S. high court
is still expected to consider the appeal just before the start of its
next term on Oct. 7.
Edison International Shares Fall after Legal Setback
Renewed uncertainty about the legality of a plan to rescue utility
Southern California Edison (SCE) from bankruptcy sparked a 15 percent
drop in the stock of parent Edison International on Tuesday, Reuters
reported. A federal appeals court said on Monday that a deal struck by
California utility regulators to keep SCE from bankruptcy appeared to
violate some state laws but shifted the case to the state's supreme
court for a ruling on the issue.
The California Public Utilities Commission and SCE agreed last October
on a pact designed the save the utility from bankruptcy. Its legality
has been challenged by a San Francisco-based consumer group, The Utility
Reform Network. California's investor-owned utilities ran up billions of
dollars of debt buying power for their customers at sky-high prices
during the state's power crisis in 2000 and 2001. The utilities were not
allowed to fully collect their power purchase costs from customers due
to a price freeze imposed under California's power deregulation
legislation.
Peregrine Court Hearing Over $60 Million DIP Loan Continued
A bankruptcy court Tuesday continued a hearing to consider interim
approval of a $60 million debtor-in-possession loan to fund Peregrine
Systems Inc.'s operations after the lender said it may not be able to
provide the loan, Dow Jones reported. Judge Judith K. Fitzgerald
of the U.S. Bankruptcy Court in Wilmington was set to authorize
Peregrine to tap the DIP loan for any amounts necessary until she signed
an order approving the loan on an interim basis. However, Judge
Fitzgerald said she wouldn't grant interim approval of the loan with a
provision that waives all claims against certain of the debtor's and
lender's officers, as well as other parties, the newswire reported.
Judge Fitzgerald said she would only consider approval of such a
provision at a hearing for final approval of the loan, at which an
official committee of unsecured creditors could participate. The
creditors' committee will be formed next week, Dow Jones reported.
Peregrine filed for chapter 11 bankruptcy protection on Sunday amid
investigations into its accounting practices.
KMART
Kmart Gets Court OK to Assume Thalia Licensing Deal
Kmart Corp. on Tuesday got bankruptcy court approval for a new product
licensing deal featuring Mexican superstar singer Thalia, Dow Jones
reported. Kmart lead attorney Jack Butler told bankruptcy court Judge
Susan Pierson Sonderby that the star, known for her hit 'Amor a la
Mexicana' (Love Mexican Style) and a romantic soap opera role, would
help the retailer better target one of its key customer bases, the
newswire reported. Kmart believes that focusing its merchandising and
marketing approach on quality name brands will build customer loyalty
and increase shopping frequency, Dow Jones reported.
Three Retailers Get Court OK to Take over Kmart
Leases
A federal bankruptcy court judge has given three retailers permission to
take over some Kmart store leases, the Associated Press reported. Bids
from Burlington Coat Factory, Kohl's and Home Depot were approved on
Tuesday in Chicago. Kohl's will move into Kmart stores in Livonia and
Marquette, Mich.; Folsom, Calif.; Simpsonville, S.C.; Rancho San Diego,
Calif. and Birmingham, Ala. Burlington Coat Factory will take over
leases in Glen Oaks, N.Y.; Orlando, Fla.; Lexington, Ky. and Austin,
Texas. Home Depot will move into a Forest Lake, Minn., store. Troy,
Mich.-based Kmart filed for chapter 11 bankruptcy protection on Jan. 22.
The retailer has not posted a profit since the fiscal fourth quarter of
2000.
EMC Makes Offer for Sanrise Group Assets
After raising $203 million in venture capital from some of the biggest
names in private finance, the bankrupt storage services company Sanrise
Group Inc. has received a modest offer for the crown jewels of its
assets, the Daily Deal reported. On Friday, Sept. 20, the storage
giant EMC Corp., which has been low bidding to acquire intellectual
property from troubled rivals, offered $2.5 million for software that
the once-high-flying Dublin, Calif.-based company had hoped to parlay
into a storage business empire. Sanrise is perhaps the most prominent of
a number of storage service companies that emerged amid the Internet
boom's easy access to venture capital. Companies in the sector
maintained physical backup storage for large enterprises and storage
management for expanding IT networks.
Velocita Plans Fiber Auction
Unable to line up debtor-in-possession financing, bankrupt wholesale
telecommunications carrier Velocita Corp. plans to sell its fiber-optic
network and other assets within the next month despite a depressed
market for anything telecommunications-related, the Daily Deal
reported. When it filed for chapter 11 protection in late May 2002,
Velocita listed $483 million in total assets and debts of $827 million.
Its chief holding is a 14,000-mile fiber-optic network the company
estimates is about 80 percent complete. Velocita's lenders have said
they would offer $75 million for the network and other assets,
suggesting that the company could fetch at least 15 cents on the
dollar.
Impala Partners LLC, of Norwalk, Conn., is leading the auction for
Velocita. Bids must be submitted by Oct. 15, and the auction will take
place on Oct. 17 at the offices of Velocita's law firm, Weil, Gotshal
& Manges LLP. Objections to the bids must be filed by Oct. 21, and
will be considered at the sale hearing on Oct. 25 before U.S. Bankruptcy
Judge Donald Steckroth in Newark, N.J, the newspaper
reported.
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