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June 16, 2005
Boehner Defends Pension Bill Against Variety of Attacks
House Education and the Workforce Committee Chairman John Boehner
(R–Ohio) yesterday defended his bill to overhaul the pension
system, saying the criticism of it by all sides was an indication that
it strikes the right balance, CongressDaily reported.
Business groups have complained about the bill’s provision to
raise the pension insurance premiums that companies pay from $19 per
employee annually to $30, and then index them, allowing for future
increases. They also have faulted the modified “yield curve”
formula that the bill would establish for companies to determine their
pension contributions. Boehner defended the premium increases, saying
raising premiums is part of a plan to ensure that the nation’s
pension insurer, the Pension Benefit Guaranty Corp. (PBGC), does not
need a taxpayer bailout. “I don’t think we have any choice
but to raise premiums and index them,” he said.
Education and the Workforce Committee ranking member George Miller
(D–Calif.) complained that Congress had not done enough to ward
off the pension problems plaguing the airline industry, including a
decision by United Airlines to shed $6.6 billion onto the PBGC during
bankruptcy proceedings, the newswire reported. Miller said
Boehner’s bill does not do enough to prevent similar situations in
the future, adding that other airlines or troubled companies in other
industries may follow United’s lead.
U.S. Inflation Stays Moderate; Growth Is Steady
Underlying U.S. inflation remained moderate last month as
manufacturing activity rebounded, capacity use tightened and a Federal
Reserve survey found steady growth across the country, the Wall
Street Journal reported. The reports prompted analysts to predict
the Fed will continue to raise short-term interest rates when
policy-makers meet this month. That was reinforced by a central bank
official who indicated that rates still aren’t high enough to
eliminate the risk of inflation and probably will keep rising gradually,
the newspaper reported. Fed Governor Donald Kohn said rising rates will
help address U.S. economic imbalances, such as a low saving rate and
high housing prices. Consumer prices fell 0.1 percent in May from April,
the first decline in 10 months, as energy prices retreated, the Labor
Department said. The 12-month increase slowed to 2.8 percent from 3.5
percent in April.
Visteon Bailout Raises Pension Worry
The auto industry’s latest woes and restructuring moves, such
as the deal by Ford Motor Co. to bail out Visteon Corp., is drawing
additional attention from the government agency that insures private
pension benefits, its executive director said Tuesday, the Detroit
News reported. Pension Benefit Guaranty Corp. (PBGC) Executive
Director Bradley Belt said one of the proactive measures the agency can
take to try to prevent companies from defaulting on pension obligations
is to scrutinize transactions such as spinoffs, mergers and
acquisitions. Belt said when Ford stepped in to save auto parts maker
Visteon and acquired more than $2 billion in additional retiree
liabilities, the pension agency wanted a better understanding of that
deal in order to make sure it did not thwart the automaker’s
ability to keep its own pension promises.
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the full story.
Interstate Bakeries Reports Large Loss
Interstate Bakeries Corp. on Wednesday reported its largest one-month
loss since it filed for bankruptcy in September, citing costs from its
decision to close bakeries and make other cuts on the East Coast, the
Associated Press reported. The Kansas City–based maker of Wonder
Bread and Hostess Twinkies said it lost $24.1 million during the four
weeks ending April 30. The prior low point was $14.5 million in
December. Sales during the period actually improved to $265 million, the
highest since September, and operating expenses were nearly flat at
$128.8 million. But costs related to the company’s reorganization
and its attempts to make its operations more efficient cost $35.7
million. The company filed for chapter 11 protection in September,
blaming low sales and fixed operational costs.
Winn-Dixie Adjusts Retention, Severance Plan
Winn-Dixie Stores Inc. on Wednesday filed a compromise plan in U.S.
Bankruptcy Court that would pay its executives smaller retention bonuses
and severance benefits than the company previously proposed, the
Florida Times-Union reported. The Jacksonville,
Fla.–based chain filed its retention and severance plans on May 27
as part of its chapter 11 bankruptcy reorganization. After receiving
objections from some parties complaining that the proposed payments to
top management were excessive, Winn-Dixie negotiated the compromise plan
with its unsecured creditors’ committee. The new plan is scheduled
to be presented today to U.S. Bankruptcy Judge Jerry Funk at a hearing
in Jacksonville, the newspaper reported. Winn-Dixie is seeking to pay
retention bonuses to 290 key executives, excluding chief executive Peter
Lynch, to ensure that they stay with the company through the chapter 11
process. The company originally proposed paying bonuses ranging from 25
percent to 150 percent of their annual salaries, but the compromise
reduces the range to 25 percent to 100 percent.
Guilty Charge in Bankruptcy Fraud
A 51-year-old Scottsdale man has been found guilty in the U.S.
District Court in Phoenix of nine counts of federal bankruptcy
violations, the Arizona Republic reported. A jury found
Andrew Taylor guilty May 13 of four counts of bankruptcy fraud, four
counts of false declarations in a bankruptcy proceeding and one count of
concealing assets in a bankruptcy proceeding. Each count carries a
maximum penalty of five years in prison, a $250,000 fine, or both.
Taylor is scheduled to be sentenced Aug. 18 by U.S. District Court Judge
Neil V. Wake. Taylor is said to have defrauded creditors by repeatedly
filing chapter 13 bankruptcy petitions and by hiding assets that
included a $400,000 jet, a secret bank account and interests in
Scottsdale businesses.
GM Push to Cut Health Benefits Risks Strike—UAW
General Motors Corp. could trigger a potentially crippling strike by
the United Auto Workers union should it push too hard to slash the
health-care benefits it provides to UAW members, union officials said on
Wednesday, Reuters reported. The UAW has said it is willing to work with
GM to cut its health-care costs, which the world’s largest
automaker sees mushrooming to nearly $6 billion this year. But GM has
also said it wants an agreement by the end of this month, according to a
source familiar with the situation, and local UAW officials say any such
deadline would be both contentious and unacceptable. GM Chairman and
Chief Executive Rick Wagoner is under pressure to accelerate a
turnaround plan after the company’s $1.1 billion first-quarter
loss, its worst result in more than a decade.
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the full story.
Murray Wins More Time to File Bankruptcy Plan
Court filings show lawn care products manufacturer Murray has won
more time to file its chapter 11 bankruptcy plan, the Associated Press
reported. A federal bankruptcy court judge in Nashville entered an order
on Friday, extending the deadline from July 6 to October 3. Judge
Marian Harrison also approved a 90-day extension of Murray’s
exclusive right to lobby creditor support for a plan, according to court
papers obtained by Dow Jones Newswires today. Murray, based in
Brentwood, Tenn., filed for bankruptcy protection in November, following
the August collapse of its China-based sponsor D’Long
International Strategic Investment Company.
Kaiser Reaches Contracts With Steelworkers
Kaiser Aluminum Corp., which locked its Spokane, Wash., workers out
during a bitter labor dispute that began in the late 1990s and helped
plunge the company into bankruptcy protection, has reached a five-year
labor agreement with those and other employees represented by the
steelworkers union, the Associated Press reported. Coupled with last
week’s announcement of a six-year deal to continue supplying
aluminum to plane maker Airbus, it is another encouraging step in the
company’s plan to emerge from chapter 11 protection later this
year. Workers have ratified the contracts, which include a 14-percent
pay increase over the five years, maintenance of current health
benefits, and a $1,000 ratification bonus, plus profit sharing, said
David Foster, district director for the steelworkers. Steelworkers will
also get to place four people on the company’s board. The new
contracts cover more than 800 Steelworkers—more than half in
Spokane and the rest at Kaiser plants in Newark, Ohio; Richmond, Va.;
and Tulsa, Okla.
Frank’s to Emerge from Bankruptcy as Real Estate Development
Company
Lawn and garden retailer Frank’s Nursery & Crafts Inc. has
received court approval of its plan to emerge from chapter 11 bankruptcy
protection as a real estate development company, the Detroit Free
Press reported. The Troy, Mich.–based company will retain
about 42 parcels of real estate, which will be developed by the
reorganized company, Frank’s said in announcing the approval
Wednesday by the U.S. Bankruptcy Court for the Southern District of New
York. Frank’s said it expects to emerge from bankruptcy by the end
of July.
Satmex/Creditors Extend Bankruptcy Decision to July 7
U.S. creditors of troubled Mexican satellite operator Satmex and the
company’s CEO, Sergio Autrey, have reached an agreement to extend
until July 7 the deadline for resolving their differences regarding a
U.S. bankruptcy filing, according to U.S. court documents. The deadline
for Satmex to respond to a suit filed in a New York bankruptcy court in
late May by the bondholders of at least US$379 million that is in
default was June 15. The bondholders aimed to force the company into
involuntary bankruptcy. However, a judge from the U.S. court extended
the deadline after Autrey and the bondholders, who represent 36
investment funds, reached an agreement at the last minute. The new
deadline could still be shortened if Satmex or a creditor decides to
file for bankruptcy under Mexican bankruptcy law, an issue upon which
there has been much speculation in Mexican press over the last week. The
Satmex administration has stalled on responding to the U.S.
bondholders’ attempts to thrash out a quick debt restructuring
solution under U.S. bankruptcy law. Satmex has been in default since
2003, now on a total of US$523 million within a debt load that
reportedly totaled US$800 million in December 2004.
Bankruptcy Judge to Let Creditors Question Officials of LesCare
Kitchens Inc.
A U.S. Bankruptcy Court judge will allow creditors to question top
officials of bankrupt LesCare Kitchens Inc. as part of an effort to
maximize any payout creditors may someday see, reported the
Waterbury Republican-American. Judge Lorraine Murphy
Weil’s approval comes after she also signed off on an order
allowing LesCare to pay $312,000 toward bills employees accrued after
the company stopped paying into their insurance plan, and an order
clearing the way for a North Carolina bank to foreclose on the
company’s Southington equipment. All three orders stem from
LesCare’s ongoing case in the U.S. Bankruptcy Court in New Haven,
Conn. The 60-year-old cabinetry company, which shut down production in
mid-January, was forced into bankruptcy on Feb. 16 by four suppliers
seeking to recover nearly $1.5 million.