Congress Returns From Recess to Unknown Agenda
The presidential transition is the first order of business as
Congress returns today to confront lingering disputes with the current
president and uncertainty about the next one, according to the
Associated Press. Republican leaders declined last week to set a
schedule or agenda for the next round of budget discussions, waiting to
gauge the mood of returning lawmakers. Congress has yet to
complete work on four of the 13 spending bills that must be passed to
operate the federal government in the fiscal year that began Oct.
1.
If the unfinished spending bills are held over until a new Congress
convenes in January, appropriators will have to introduce new
legislation and deal with new House Appropriations subcommittee chairmen
and new political dynamics in the White House and Senate. Most
conspicuous among them is a $350 billion measure for labor, health and
education programs that contains many of the educational priorities of
the outgoing administration. Senate Republicans also want another
shot at the long-stalled bankruptcy bill (H.R. 2415) that would make it
more difficult for people to sweep away credit card debt in bankruptcy
court.
Bankruptcy Pace For Individuals Accelerating
as Internet Rates Increase
With interest rates up and the economy slowing, many households are
discovering that their bills for years of torrid spending are coming due
just as they are ill prepared to pay them. As a result, growing numbers
of Americans are seeking court protection from their creditors,
according to the Wall Street Journal. Personal
bankruptcies, as measured by a 12-week moving average of filings, have
increased nearly 10 percent since January. The moving average hit
24,288 for the week ending Nov. 4, up from 22,291 in the week ending
Jan. 1, according to data from Visa. Extended over an entire year, that
pace would translate into about 1.26 million personal bankruptcy
filings, a notch lower than the 1.28 million filings recorded last
year. After rising steadily for most of the past decade, personal
bankruptcies fell in 1999 amid low interest rates and solid wage gains
associated with the nation's tight labor market.
But what concerns many analysts is that the pace of bankruptcies
appears to be accelerating. SMR Research Corp., a consumer-debt research
firm in Hackettstown, N.J., estimates that bankruptcy filings will rise
as much as 15 percent next year, surpassing 1998's record 1.4 million
filings. On Thursday, a new government report on personal income
suggested that consumer spending will advance at an annual rate of just
3 percent this quarter, far slower than the 4.5 percent pace recorded a
quarter earlier. The weaker pace could easily translate into a
relatively weak holiday season for the nation's retailers.
Americans are also feeling the sting of higher interest rates. The
Federal Reserve has increased them six times since June 1999 in an
effort to cool the economy. SMR President Stuart Feldstein argues
that the number of bankruptcy filings has actually been increasing
relatively steadily since around 1985, with the only exceptions coming
immediately after periods in which interest rates fell sharply, reducing
the cost of borrowing money. When the Fed cut interest rates in
1998 in the wake of the Asian currency crisis, for example, bankruptcies
dutifully fell a year later. “Interest rates quell the
bankruptcy rate temporarily, but when rates go back up, bankruptcies
resume their climb,” he said.
U.S. Trucking Units File for Bankruptcy
U.S. Trucking Inc., a transportation services holding company,
announced on Friday that four of its subsidiaries will liquidate their
assets in a bankruptcy filing after industry weakness and problems with
computing systems led to a “a difficult operating year,”
according to a Reuters report. U.S. Trucking’s subsidiaries,
UST Logistics Inc., Mencor Inc., Prostar Inc., and Gulf Northern
Transports Inc., filed for chapter 11 protection in U.S. Bankruptcy
Court in Florida and will liquidate their assets. The Charleston,
S.C.-based company said, “The loss of revenues from these
companies will dramatically impact consolidated revenues and earnings as
a whole.”
Judge Rejects A&P Objection to Sale
The Grand Union Company (GUCO) Friday announced that at a hearing held
in the U.S. Bankruptcy Court in Newark, N.J., Bankruptcy Judge Novalyn
Winfield overruled an objection by the Great Atlantic and Pacific Tea
Company (A&P), according to a newswire report. The A&P
objection alleged that C&S Wholesale Grocers Inc. (C&S) had
unlawfully engaged in collusive bidding and had violated anti-trust
statutes. In reviewing the asset sale agreement between Grand
Union and C&S and the conduct of the bankruptcy auction on Nov. 16,
the court found that the company had met the good faith requirements of
the Bankruptcy Code in conducting its sale and also found “no
substance to the A&P objection.” The court has scheduled
a hearing for Friday to address landlord and other occupancy issues
relating to the C&S asset sale agreement.
Regal Cinemas Nears Brink of Bankruptcy
Regal Cinemas, the largest movie theater chain in the United States, has
lurched closer to bankruptcy after its latest interest payment was
blocked by creditors, according to a newswire report. Friday's
blockage of the semiannual $28.5 million payment resulted from the
company's deteriorating financial condition. Creditors found the closely
held firm had violated its covenants owns about 4,400 screens, primarily
in the eastern and northwestern United States, and carries a long-term
debt load of about $1.8 billion.
“While the payment blockage was not the company's
decision,” said chairman and CEO Michael Campbell, “we
anticipate that we will continue to maintain existing payment terms and
remain current with our vendors while the company explores various
strategic restructuring alternatives.” Dick Westerling,
senior VP of marketing and advertising, stressed that Friday's
announcement should not be interpreted as a negative statement about
Regal's cash reserves. “The company has sufficient cash to
maintain our obligations to our studio partners.”
Legend Airlines Files for Bankruptcy
Legend Airlines yesterday announced that it filed chapter 11 in the U.S.
Bankruptcy Court for the Northern District of Texas, according to the
Associated Press. The announcement came just one day after the
struggling airline shut down operations due to $44.7 million in losses
since it was launched in 1996. The airline's president and chief
executive officer, T. Allan McArtor, said he has not ruled out selling
the company but hoped to avoid that option.
“We are doing our best to assemble the necessary resources to
get our airline back in the air with service for our customers,”
McArtor said. He said the company was talking to venture-capital
firms, other airlines and individual investors and hopes to resume
flying by the end of the year.
Last week Legend said they lost $25.6 million during their first six
months of service. The airline had just $184,522 in cash on hand as of
Sept. 30 - enough, at its current rate of drawing down cash, to last
until Christmas week. Other airlines are honoring Legend tickets,
including America West, American, Continental, Continental Express,
Frontier, National, as well as Delta Air Lines and its Delta Connection
carrier, Atlantic Southeast Airlines.
Bankrupt Daewoo Motor Co. Back in Business
Daewoo Motor Co.'s biggest plant will open for business again today
after a 24-day closure caused by the firm's bankruptcy, according to a
newswire report. Employees at the Bupyong factory in the western
city of Inchon were ordered to report for work at 8:30 a.m. today, a
Daewoo spokesman said. But with tough negotiations over job cuts
still ahead, the chairman of South Korea's second largest car maker has
warned that sacrifices still have to be made.
An Inchon court made Daewoo Motor Co. chairman Lee Jong-Dae the
official administrator of the bankrupt firm last week. He will
control the firm while the court decides whether it is possible to put
Daewoo Motor into receivership and attempt to save it. Creditors
promised to inject 90 billion won into Daewoo Motor by the end of this
year, along with 354 billion won for next year's operational funds.
Contractors will receive 285 billion won. The cash lifeline
followed a layoff agreement required to help a takeover deal with U.S.
giant General Motors Corp. (GM) and Fiat SpA of Italy.
Ventas Reaches Agreement on its Amended
Reorganization Plan
Ventas Inc. announced today that it has reached agreement with
its primary tenant, Vencor Inc., on the economic terms of the amended
reorganization plan for Vencor, according to a newswire report.
Vencor filed bankrupty with the Delaware Bankruptcy Court on Dec.
1.
The court is expected to hold a hearing to approve the Vencor
disclosure materials on Dec. 6. The Louisville, Ky.-based Ventas
is working with Vencor, its creditors and the Department of Justice to
resolve all matters prior to that date. Ventas is a real estate
investment trust whose properties include 45 hospitals, 217 nursing
centers and eight personal care facilities operating in 36 states.
Judge Freezes Lernout's Dictaphone
Assets
Judge Judith Wizmur on Friday agreed, at the request of bankrupt speech
software developer, Lernout & Hauspie Speech Products NV (L&H),
to issue an emergency order affirming the protection provided to debtors
by U.S. bankruptcy law against any efforts by creditors to collect debts
or enforce claims, according to a Reuters report. On Wednesday,
L&H and its affiliates, Dictaphone Corp. and L&H Holdings USA
(formerly Dragon Systems Inc.), filed for chapter 11 protection in the
U.S. Bankruptcy Court in Delaware.
The action followed this week's default actions by bank lenders who
are owed nearly $500 million and a lawsuit by Stonington Partners Inc.
seeking to revoke Dictaphone Inc.'s merger with L&H because it was
acquired under fraudulent misrepresentation, court papers say. In May,
Stonington swapped its 96 percent stake in Dictaphone Inc. for 9 million
shares of L&H stock.
“This company is out of cash,” said L&H attorney Lue
Desprin. Because L&H had not yet arranged debtor-in-possession
financing, Judge Wizmur said she would reconvene the hearing
today. The extension will give L&H more time to negotiate with
its bank lenders for interim financing to pay employees and to seek
court approval for other motions allowing normal business operations to
continue. Stonington attorney James Garrity told Judge Wizmur,
“We believe this case should be suspended and moved to
Belgium.” Colleague Alan Goudiss added that on today,
“We will ask the court to dismiss this action [for chapter 11
protection]. We believe the Belgian courts may not accede to this
action.”
Continental Investment Corp. Subsidiary
Files for Chapter 11
Continental Technologies Corp. of Georgia (C&D), a Georgia
corporation and a wholly owned subsidiary of Continental Investment
Corp., announced on Friday that it filed a chapter 11 petition in the U.
S. Bankruptcy Court for the Northern District of Texas, Dallas
Division. The subsidiary owns and operates a construction and
demolition landfill, known as Scales Landfill, located in Lithonia, Ga.
The landfill facility accepts C&D debris from customers in the
Atlanta area. The subsidiary expects to continue the operations of the
landfill as a debtor-in-possession (DIP) while in bankruptcy
proceedings, during which time the subsidiary intends to propose a plan
of reorganization.
Athey Starts Layoffs, Considering Bankruptcy
Athey Products Corp., which said on Friday said that it would consider
filing for bankruptcy protection, is laying off most of its
production-related employees and selected salaried employees, effective
today, according to a Reuters report. Athey, which makes street
sweeping and material handling equipment, said the layoffs will remain
in effect until further notice and that during this period, the company
will perform limited operational-related tasks. The Wake Forest,
N.C.-based Athey also said it received a written demand from its lender
for repayment of certain amounts under its loan and security
agreement.
Athey also said that it had violated its loan covenant. The
previous waiver from its primary lender expired on Nov. 30 without being
extended. Athey said it is continuing discussions with its lender
but that the lender is no longer making advances to the company, leaving
Athey to consider alternatives, including a chapter 11 filing.
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