src='/Images/headlines/headline.gif' />
October 25, 2006
Consumer Bankruptcy Filings at Historic Lows, But Rising
Consumer bankruptcy filings continued to increase in every region in the third quarter of this year, according to data released Tuesday by Lundquist Consulting Inc., the Associated Press reported yesterday. The consulting firm tallied 160,198 new filings in the July-September period, down sharply from 509,626 in the third quarter of 2005, but up from 102,949 in the first quarter of this year and 142,815 in the second quarter. Lundquist analysts set the number of bankruptcy filings in the past 12 months at around 475,000, compared with an average 1.4 million to 1.5 million a year from 2000 through 2004. Within the smaller number overall, 57 percent of the filings were chapter 7, compared with the usual 70.9 percent, Lundquist said. Chapter 13 filings were around 42 percent, up from the 2000-2004 rate of 29 percent. Read more.
id='2'>Commentary: New Bankruptcy Law Not as Bad as Some Predicted
More than a year after the new bankruptcy law was enacted, evidence suggests that the fears of a few groups that lobbied against the legislation may have been misplaced, according to an editorial in today’s Wall Street Journal. Between 1995 and 2004, personal bankruptcies rose 78 percent as more people were running up credit card and other debt. Under the new law, bankruptcy filings are down some two-thirds from what they’ve been in recent years. While part of this can be explained in consumers' rush to file before the new law was implemented, there are also indications that people are responding to the new incentives. In the past, nearly 20 percent of bankruptcy filers have had incomes above the national median. However, since the law took effect, nearly all filers are below the median. Read more. (Registration required.)
id='3'>Autos
Dana Gets Extension to Devise Exec Pay Plan
Dana Corp. received two more weeks to work with creditors and formulate an acceptable compensation plan for its CEO Mike Burns and five other top executives, the Toledo (Ohio) Blade reported today. Last month, Judge Burton Lifland of the U.S. Bankruptcy Court in Manhattan denied Dana's most recently revised executive compensation request, which would have given a bonus of at least $4 million to the chairman and chief executive if the Toledo auto supplier emerges from chapter 11 bankruptcy protection or is sold. Judge Lifland had ruled that Dana's proposal violated the new bankruptcy law's provisions preventing executives from receiving sizable bonuses while workers take cuts in pay or benefits. A third hearing on Dana's request to reconsider and clarify the judge's executive compensation ruling was held yesterday, and the company revealed it has reached an agreement with the unsecured creditors’ committee on a draft plan. The next hearing is scheduled for Nov. 8. Read more.
id='4'>Meridian Creditors to See Recovery
Meridian Automotive Systems Inc. has amended its disclosure statement to win back the support of its unsecured creditors, who had objected to the bankrupt auto parts supplier’s most recent reorganization plan, Portfolio Media reported yesterday. According to court documents filed Monday with the U.S. Bankruptcy Court in Wilmington, Del., the unsecured creditors will now get 10 percent, or up to $2 million, of a litigation trust to be set up once the company emerges from chapter 11, although this is a fraction of the $96 million owed to the general unsecured creditors. A judge will review the amended disclosure statement on today.
id='5'>Overstocked Inventories May Hurt U.S. Automakers
The vehicle stockpiles the Big Three auto makers are holding on their dealer lots may be a bigger problem than the companies' inventory numbers indicate and could cause them further financial pain next year, the Wall Street Journal reported today. Many analysts already predict that U.S. vehicle sales will decline as a result of the housing slump and slowing economy. Higher inventories could result in further production cuts and hurt revenue at a time when General Motors Corp., Ford Motor Co. and DaimlerChrysler's Chrysler arm already are coping with high gasoline prices, high costs and increased popularity of models from Toyota Motor Corp. and other rivals. The auto makers generally acknowledge their inventories are too high. Spokesmen for Ford and Chrysler said their companies expect current production cuts to bring inventories down to acceptable levels by the end of the year. A GM spokesman said the company hasn't made its production plans for the first quarter. Read more. (Registration required.)
id='6'>Foamex Unveils Plan to Exit Chapter 11
Foamex International Inc. on Monday filed an amended reorganization plan and disclosure statement under which creditors are expected to receive more than $650 million, Portfolio Media reported yesterday. The plan, filed in the U.S. Bankruptcy Court for the District of Delaware, would allow senior secured note claims of more than $312.4 million, plus accrued and unpaid post-petition interest. The senior subordinate note claims will be more than $208 million, which includes accrued and unpaid interest, according to court documents. Foamex also expects to pay back its $130 million in
debtor-in-possession financing, which funded the company during its year in bankruptcy. If the court approves the plan, the company plans to also hand out an estimated $13 million in general unsecured claims. A court hearing on the plan is scheduled for Nov. 21. The case is Foamex International Inc., case number 05-12685, in the U.S. Bankruptcy Court for the District of Delaware.
id='7'>Entergy New Orleans Files Reorganization Plan
After months of wrangling, bankrupt utility Entergy New Orleans Inc. has submitted a reorganization plan that pledges to fully compensate its creditors while continuing to restore the beleaguered city’s electric systems, Portfolio Media reported yesterday. Under the proposal, all employee and retiree programs and benefits will remain in place, as will the make-up of the company’s board, according to Entergy. In addition to paying off creditors, the utility also intends to establish a storm reserve that will help cover any future hurricane damages, court documents state. A hearing date has not yet been set but Entergy said it believes that the disclosure statement will be considered by the court sometime in the next 45 days. The case is In re Entergy New Orleans Inc., case no. 05-17697, in the U.S. Bankruptcy Court for the Eastern District of Louisiana.
id='8'>Interstate Bakeries Reaches Settlement with Pension Plan
Interstate Bakeries Corp. has reached a deal with one of its pension plans that will save the bankrupt snack cake maker $17.9 million, Portfolio Media reported yesterday. The company has agreed to pay the Central States Southeast and Southwest Area’s Pension Fund, which covers 3,400 of its workers, $1.1 million to resolve the fund’s $16 million claim against the baker. In return, the fund will allow Interstate to skip its required contributions for the next three years. If a deal had not been reached, the company would have been forced to contribute a $1.3 million initial payment, and $21.9 million over the next five years. A Kansas bankruptcy court will hold a hearing on the settlement on Nov. 8.
id='9'>Finance Chief of Refco Is Indicted
The former finance chief of Refco, once one of the world’s largest commodities brokerage firms, was indicted yesterday, accused of helping to hide hundreds of millions of dollars in losses, the New York Times reported today. Federal prosecutors in Manhattan said the former chief financial officer Robert C. Trosten helped the firm’s former chief executive, Phillip R. Bennett, engage in a complex series of transactions that hid customer trading debts that Bennett had assumed. Their actions defrauded Refco’s investors of more than $1 billion, prosecutors said in a statement. Read more.
Credit Managers Daily Business News Report
The following articles are taken from the Daily Summary of Troubled & Fast Growing U.S. Companies published by Bastien Financial Publications.Ê For more of the latest business news visit http://dailybusiness.creditmanagers.biz.
ABI Members receive a 50 percent discount when subscribing to the complete Daily Summary.
id='10'>AOL, the online unit of Time Warner Inc. of Manhattan, N.Y., is shutting down a call center in Albuquerque, N.M. The move, part of a broader restructuring, will result in the loss of 900 jobs. In the spring, AOL announced plans to close a call center in Jacksonville, Fl. and lay off 1,300 employees.
id='11'>DaimlerChrysler AG, in a move to bring its Chrysler Group operations in the U.S. 'back on track', is considering shutting down a plant in Newark, De.
id='12'>Chrysler Group has unsold inventory of as many as 50,000 vehicles. The amount is particularly high since it includes unsold cars and trucks that were not earlier counted as unsold inventory because of the company's counting method. Earlier, the firm didn't count vehicles that were produced but not yet assigned to a dealer..
id='13'>Ford Motor Co., coming off a $5.8 billion net loss in its third quarter, predicted larger operating losses in the fourth quarter as it continues its efforts to restructure to overcome falling sales, particularly of its large SUVs, in the North American market. The Dearborn, Mi. automaker is still sitting on a fat pile of cash and equivalents, to the tune of more than $23 billion, but investors are beginning to worry about the amount of cash it's been burning. The recent quarter included $4.6 billion in restructuring charges. Total restructuring charges for the full year could reach $10.5 billion.
id='14'>Galileo International LLC, a travel-services unit of Travelport Inc., announced it will reduce its payroll by 500 employees (a fifth of its workforce) as part of a cost-cutting plan. Travelport itself was purchased over the summer for $4.3 billion by Blackstone Group, which is now pushing to restructure the operations.
id='15'>Getty Images Inc., a Seattle, Wash. photo-licensing company, is rumored to be laying off about thirty employees. The firm recently reported a 35 percent drop in its second quarter earnings
id='16'>Schult Homes Corp. said that it will lay off 150 workers at its plant in Middlebury, Ind.
id='17'>Xerox Corp. reported its third quarter net income soared more than eightfold--to $536 million. Its operating income was also $536 million. Revenue increased 2 percent--to $3.8 billion. The Stamford, Ct. maker of printers and copiers benefited from a $416 million gain from a tax refund. Xerox, which took $110 million in restructuring costs in the recent quarter, added that it will incur another $130 million in restructuring expenses in the fourth quarter as it continues its strategy of trimming its payroll.