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September 10, 2002
Credit Card Spending in First Half of 2002 up over First Half of
2001
During the first six months of this year, $920.90 billion in purchases
and cash volume was generated by Visa, MasterCard, American Express,
Discover and Diners Club brand credit and debit cards issued in the
United States-up 8.1 percent over the first half of 2001, according to
The Nilson Report, a trade paper of the credit card industry. Of
678.5 million bank cards in circulation, 24.4 percent were debit cards,
up from 23.9 percent. Credit cards accounted for 73.6 percent of $563.75
billion in total purchase volume, down from 76.1 percent during the
first half of 2001. Delinquencies as a percent of outstandings were 4.96
percent, up from 4.80 percent, and net charge-offs as a percent of total
volume were 3.53 percent, up from 3.10 percent.
Rep. Pitts Criticizes Abortion Amendment
In today's Washington Times, an op-ed by Rep. Joe Pitts (R-Pa.)
criticizes the abortion amendment to the bankruptcy bill, stating that
the current bankruptcy bill would force peaceful, otherwise law-abiding
pro-life protestors to unique punishment and financial ruin.
'There is something terribly wrong with America's bankruptcy laws,'
notes Rep. Pitts. 'Despite two of the longest economic expansions in
history, consumer bankruptcies have nearly quadrupled since the early
1980s. There is no consensus on why this has happened, but it seems
clear that bankruptcy is increasingly being used as a convenient tool
for those who want to escape their debt burdens.' The
href='/AM/Template.cfm?Section=Home'>full article is available on the ABI
World home page.
Justice Department Opens Investigation into Sunbeam
The Justice Department has begun an inquiry into Sunbeam Corp.'s
activities during the tenure of former chief executive Albert J. Dunlap,
reported the Wall Street Journal. Sunbeam, which was loaded with
debt under the management of Dunlap, also filed an amended
reorganization plan to emerge from bankruptcy proceedings that would
sharply reduce its leverage and put nearly all the equity in the hands
of its bankers. The bankruptcy proceedings have been repeatedly
postponed as Sunbeam negotiated modifications to its reorganization plan
to try to satisfy various creditor groups. A hearing on the amended
disclosure statements is set for Oct. 4 in the U.S. Bankruptcy Court in
New York, and a confirmation hearing is slated for Nov. 4. Sunbeam and
its domestic operating units filed for chapter 11 reorganization in
February 2001.
WORLDCOM
Ex-WorldCom Workers Seek Severance, Health Benefits
Laid-off WorldCom Inc. employees demanded Monday that the bankrupt
telecommunications giant cough up tens of millions of dollars in
severance and health benefits that were promised but not paid, the
Associated Press reported. With legal help funded by the AFL-CIO, more
than 40 ex-WorldCom workers from around the country asked the U.S.
Bankruptcy Court in Manhattan to require the company to provide
severance payments to at least 4,000 employees and possibly thousands
more.
WorldCom itself asked the court last week to let it pay $36 million more
in severance it had promised-and to cancel lucrative severance packages
it had given to 19 executives. The company said those actions would
improve the morale of its remaining employees. The motion is scheduled
to be heard on Oct. 1.
Electronic Data Systems Seeks Turnover of Funds from WorldCom
Electronic Data Systems Corp. is asking a bankruptcy court to force
WorldCom Inc. to turn over almost $15 million that the company said it
transferred to WorldCom solely to pay amounts owed to local telephone
companies under an agreement between the two firms, Dow Jones reported.
In early 1999, Electronic Data Systems and WorldCom signed an 11-year
bilateral outsourcing agreement, under which WorldCom outsourced its
information technology functions to Electronic Data Systems. The pact
also called for Electronic Data Systems to outsource its
telecommunications and network functions-and those of its clients-to
WorldCom. The U.S. Bankruptcy Court in Manhattan will consider the
matter at a hearing on Oct. 1, and objections are due Sept. 26.
Louisiana State Board Opposes Terms of Panaco Cash Collateral
Use
The Louisiana State Mineral Board opposes final court authorization for
Panaco Inc. to use the cash collateral of a secured creditor, Dow Jones
reported. According to an objection filed Friday, the state board has
granted a number of oil, gas and mineral leases to Panaco through which
exploration or production activities have been or are now ongoing. Those
activities have or will generate liabilities for rents, royalties or
payments and obligations to explore and develop, and obligations to plug
and abandon wells and conduct site clean-up and restoration, the filing
said. The U.S. Bankruptcy Court in Houston will consider final approval
for Panaco to use Foothill Capital's cash collateral at a hearing on
Thursday, reported Dow Jones.
Judge Letitia Z. Clark authorized the company to use the collateral on
an interim basis through the final hearing. When Panaco filed for
chapter 11 bankruptcy on July 16, it owed Foothill roughly $38.6 million
plus fees and expenses under a pre-petition credit agreement. That pact
is secured by a first-priority lien on most of Panaco's oil and gas
properties, which constitutes the lender's collateral, the newswire
reported.
Conseco's Deadline on Bond Grace Period Expires Monday
Indianapolis-based Conseco Inc.'s 30-day grace period for missed bond
interest payments expires on Monday, barring an agreement with its
creditors to restructure about $6.5 billion in debt, Dow Jones reported.
A waiver by the company's bank lenders also expires Monday on a default
on its $1.5 billion credit facility and $700 million in guaranteed loans
to current and former officials, reported the newswire. Conseco
disclosed in its 10-Q filing last month that it defaulted on the
facility and the loans after violating a debt-to-capitalization ratio.
In recent weeks, Conseco has been in discussions with an ad hoc group of
bondholders about possibly restructuring its debt. If the company is
unable to restructure its debt, it may be forced to seek chapter 11
bankruptcy protection.
United Hires Financial Advisor
United Airlines parent UAL Corp. said Monday the company has hired a
financial consultant known for advising companies on bankruptcy and
financial restructuring,
Dow Jones reported. UAL spokesman Joe Hopkins said the Chicago company
has retained Rothschild Inc., a firm that advised Trans World Airlines
on its chapter 11 bankruptcy protection filing last year and subsequent
sale to American Airlines parent AMR Corp., reported the newswire.
Creditors Push for Napster CEO, Board Appointments
A bankruptcy judge on Monday continued a hearing to convert Napster
Inc.'s case to a chapter 7 bankruptcy after the company's committee of
unsecured creditors said it would try to get shareholders to appoint a
board and a chief executive to run the company, Dow Jones reported.
Chief Judge Peter J. Walsh of the U.S. Bankruptcy Court in Wilmington
said that if a board and a CEO are appointed, he will consider giving
the committee more time to execute an asset sale while Napster remains
in chapter 11 bankruptcy. 'I think it may be worth some effort to
salvage this case before a possible conversion to chapter 7,' Judge
Walsh said. 'But it can only be done with appropriate corporate
governance.' If a board of directors and CEO aren't appointed, Walsh
said he will convert the case to chapter 7 on Friday.
SLI Inc., U.S. Units File for Chapter 11 Bankruptcy
SLI Inc. and its U.S. units filed voluntary petitions for reorganization
under chapter 11 of the Bankruptcy Code in Delaware, Dow Jones reported.
The Canton, Mass.-based company listed assets of $830.7 million and debt
of $721.2 million in its chapter 11 petition, filed Monday morning in
the U.S. Bankruptcy Court in Wilmington, Del., the newswire reported.
SLI said it had 33.4 million outstanding common shares and no
outstanding preferred shares. In a press release yesterday, SLI said it
also obtained a commitment for $35 million in debtor-in-possession
financing from a lenders group led by Fleet National Bank.
Enron Creditors Amend Suit; SEC Seeks to Move Case
Creditors of Enron Corp. have scaled back their claims against former
executive Michael Kopper from $12 million to $8 million, according to
their latest filing with a federal bankruptcy court, Dow Jones reported.
The creditors, who are owed billions of dollars, moved two weeks ago to
claim the money Kopper agreed to surrender to the government as part of
his guilty plea-including $8 million to the Securities and Exchange
Commission and $4 million to the Department of Justice, reported the
newswire. At that time, however, the $4 million already had been frozen
as part of the order issued by a Texas district court judge who presides
over the prosecutors' criminal case against Kopper.
Acknowledging the pre-existing order, albeit belatedly, Enron's official
creditors' committee stripped off the $4 million in its amended suit
against Kopper, currently pending in the Manhattan bankruptcy court,
reported Dow Jones. Subsequently, on Friday, Judge Arthur
Gonzalez, who oversees Enron's bankruptcy proceedings, vacated the
portion governing the funds in the temporary restraining order he issued
on Aug. 28. Judge Gonzalez's restraining order still bars-until Sept.
16-the transfer of the $8 million Kopper agreed to turn over to the
SEC.
Versatel Gets Preliminary Approval of Debt Deal
Troubled telecoms group Versatel rolled closer towards completing a
life-saving debt swap deal on Monday after a Dutch judge gave a
preliminary go-ahead for the plan that was backed by creditors, Reuters
reported. Versatel has filed for bankruptcy protection in Dutch and U.S.
courts to push ahead with the plan that will erase 1.7 billion euros
($1.67 billion) in debt from its balance sheet and give the bondholders
80 percent of the company. A court in the United States, where Versatel
filed for chapter 11 bankruptcy protection, backed the reorganization
plan last week.
TransCare Corp. Reaches Deal With Lenders, Files For Chapter
11
TransCare Corp. and 13 subsidiaries filed for chapter 11 bankruptcy
protection Monday after reaching a restructuring deal with its bank
lenders, reported Dow Jones. The privately held ambulance service
provider said in papers filed with the U.S. Bankruptcy Court in
Manhattan that it has reached a restructuring agreement that would
provide its lenders with senior secured notes and new common stock,
allowing TransCare to deleverage its balance sheet. The company said it
will soon file a reorganization plan that would provide for its
creditors to get cash, notes and/or equity. According to court papers,
the company had consolidated assets of $90.3 million and debts of $139
million as of May 31, reported the newswire.
TransCare's debt obligations include a $75.3 secured loan with a
group of lenders led by agent State Street Bank and Trust Co. Secured
creditors include ARK II CLO 2001-1 Limited, which is owed $16.7
million; ARK Investment Partners II LP, which is owed $20.6 million; and
First Dominion Funding I and II, which together are owed about $21
million, TransCare said in court papers.
Adelphia Communications Holders Seek Info. From Co., Ex-Auditor,
Banks
A shareholders committee in Adelphia Communications Corp.'s chapter 11
case wants court authority to examine the company, its former auditor
Deloitte & Touche LLP and some banks that were party to loan
agreements with Adelphia and entities controlled by the founding Rigas
family, reported Dow Jones. The request was contained in documents filed
Monday afternoon with the U.S. Bankruptcy Court in Manhattan. The
committee said questions exist about the nature and extent of the banks'
claims against Adelphia and whether affirmative claims exist against the
banks as a result of Adelphia's failure to receive adequate
consideration for guaranteeing billions of dollars of loans to the Rigas
entities, reported the newswire.
The committee seeks authority to orally examine and to review
documents from the company, the banks and Deloitte & Touche. The
request was made pursuant to Bankruptcy Rule 2004, which authorizes
examinations into a bankrupt company's financial condition or matters
affecting how its bankruptcy estate is administered, reported Dow Jones.
A hearing on the committee's request is scheduled for Sept. 20.
CPUC Requests Re-Vote
Despite the fact that the Official Committee of Unsecured Creditors,
which represents the largest creditor class in terms of debt at $4.5
billion, recommended its members vote 'yes' for both plans, most members
rejected the California Public Utility Commission (CPUC) plan and
approved the utility plan, Pacific Gas & Electric noted, reported
Dow Jones. 'This group, consisting of sophisticated financial
institutions and capital market participants, clearly did not believe
that the CPUC's plan is credible,' the utility said in a statement,
reported the newswire. The CPUC and the Official Creditors Committee
announced in late August that they had worked together to modify the
CPUC plan such that the committee would state its preference for it, the
CPUC noted in a release. The commission has filed a request with the
bankruptcy court to redo the voting so the new plan may be considered.
Bankruptcy Judge Dennis Montali will hold a hearing Sept. 20 to consider
the request to reopen voting. Confirmation hearings on the plans are set
to begin Nov. 12.
Digital Now Inc. Exits Chapter 11
Reston, Va.-based Digital Now Inc., which makes high-speed film scanners
and production software for large photofinishers, has emerged from
bankruptcy protection after practically eliminating its U.S. operations
to focus on European markets, reported the Washington Post. The
company raised about $30 million in a public offering on the Australian
Stock Exchange in 2000, part of which was used to acquire two European
companies. But the company entered bankruptcy in October, listing assets
of less than $50,000 and liabilities $1 million to $10 million, reported
the Post. The company then eliminated most of its American operations to
focus on Europe.
Emerald Operators Face Bankruptcy Ruling
U.S. Bankruptcy Judge Eugene Wedoff on Friday ordered Rosemont,
Ill.-based Emerald Casino operators to file for bankruptcy by noon on
Tuesday, reported the Las Vegas Sun. This ruling is considered a
victory for the village of Rosemont because it stalls a settlement
between the casino company and the state of Illinois that would leave
the suburb without the casino it covets. Rosemont officials want to
delay the casino company's pending settlement with state gaming
regulators because the deal forces Emerald to sell its gaming license,
reported the Sun. Rosemont officials want a new casino built
there, but if the license is sold, the new casino could go to another
community. The settlement is meant to put to rest a legal battle with
Emerald that began in January 2001 when the board rejected the company's
application to build a casino in Rosemont, a Chicago suburb near O'Hare
International Airport.
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