September 122003

Submitted by webadmin on Fri, 2003-09-12 00:00

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September 12, 2003

Economists Predict GDP Growth Will Be Fastest Since Late
1999

The U.S. economy in the second half of this year is expected to grow at
its strongest pace in almost four years, the Wall Street Journal
reported. The nation's gross domestic product is expected to grow at a
seasonally adjusted annual rate of 4.7 percent during the current
quarter and 4.0 percent in the fourth quarter, according to a monthly
survey of 53 economists conducted by The Wall Street Journal
Online. The growth rates taken together would be the fastest since
the economy expanded at an annual pace of more than 6 percent in the
second half of 1999. And those projected quarterly growth rates mark a
sharp upward revision from August estimates of 3.6 percent and 3.8
percent respectively, reported the newspaper.

Divisions Forming On Pension Rate Fix

Proposals to change the rate that companies use to calculate the
contributions they must make to their pension plans are expected to be
addressed in both chambers in the next few weeks, as a debate emerges
over what the rate should be and how long it should stay in place,
CongressDaily reported. Lawmakers are all but certain to put off
major overhauls of pension rules until next year, leaving the rate as
the major outstanding pension policy question for this year. Current law
requires companies with defined-benefit pension plans to use the 30-year
Treasury rate in calculating pension plan contributions. After the
government stopped offering 30-year Treasury bonds in 2001, rates
dropped, and Congress adopted a temporary fix that expires at the end of
the year.

Without action this year, companies again will have to use the 30-year
Treasury rate, which will force them to artificially inflate payments,
diverting resources that they say could be used to expand their
businesses and hire more workers. Businesses favor moving to a higher
corporate bond rate for as long as possible, a change that in most cases
will lower the payments they make to their pension plans. Many lawmakers
agree on temporarily moving to a corporate rate, but differ over the
details, including how long the rate would stay in place and how to
permanently replace it, reported the newswire.

Pension Issues Loom Large at United Airlines

United Airlines, seeking ways to ease a huge pension burden before
emerging from bankruptcy, faces several options, including, as a last
resort, terminating the plans, according to industry analysts and
sources familiar with the issue, Reuters reported. In a recent
regulatory filing, United said $4.2 billion in cash contributions to
pensions were required over five years. Its underfunded liability is
estimated at more than that, by some figures in the $6 billion to $7
billion range. 'The challenge with exit financing is the amount of cash
flow to pension plans, especially in the early years of the business
plan,' CFO Jake Brace said in an interview, reported the newswire.

Bill Warlick, senior airline analyst at Fitch Ratings, said United might
try a variety of options used by other companies. One is to ask the
Internal Revenue Service for waivers on contributions for a one-year
period, he said, reported Reuters. Another is to continue to press for
legislation that changes pension funding rules. A third is to ask unions
to reopen pension discussions and perhaps change formulas that determine
contributions. Finally, United may simply ask the bankruptcy court to
terminate the plans. Given the complexity of the issue, Warlick said it
is likely that some combination might ultimately be used. 'I don't think
any of them would be seen as a sure thing,' reported the newswire.

PG&E Renames Bankrupt National Energy Group Units

California power company PG&E Corp. on Thursday said it was changing
the name of its bankrupt wholesale energy unit, National Energy Group,
to National Energy & Gas Transmission Inc., pending court approval,
Reuters reported. San Francisco-based PG&E said the name change
would reflect the Bethesda, Md.-based unit's pending separation from the
parent company. The name change is expected to take effect in October,
though legal separation will come later. All of National Energy's
businesses will delete any reference to PG&E, including pipeline
company PG&E Gas Transmission Northwest Corp., which did not file
for bankruptcy. U.S. Gen New England Inc., which filed for bankruptcy in
July, will retain its name, reported the newswire.

National Energy, which has 7,300 megawatts of power generation across
the country and 1,350 miles of gas pipelines, filed for bankruptcy
protection earlier this year. The unit struggled to keep up with hefty
debt payments as wholesale power prices plunged and energy trading
markets collapsed, Reuters reported.

Court to Rule on Mirant-Pepco Contract Next Week

A federal bankruptcy court judge will decide next week whether the
Federal Energy Regulatory Commission (FERC) can force bankrupt Mirant
Corp. to honor power supply contracts with Pepco Holdings Inc., Reuters
reported. The U.S. Bankruptcy Court, which has issued a temporary
restraining order barring FERC from requiring Mirant to continue buying
or selling power to Pepco, will issue its ruling on Wednesday, Pepco
spokesman Robert Dobkin said.

Mirant, which filed for bankruptcy in Fort Worth on July 14, has sought
to cancel 'back-to-back' contracts it inherited as part of the 2000
purchase of four power plants for $2.65 billion from Pepco Holdings
Inc., reported the newswire.

FERC, which is seeking jurisdiction over the fate of the contracts, has
previously moved to prevent another bankrupt company, Xcel Energy Inc.'s
NRG Energy, from canceling money-losing supply contracts. Pepco, which
joined FERC in asking the court to give the federal regulator
jurisdiction over the contracts, has also sought to have the case moved
to U.S. District Court from the bankruptcy court, Reuters reported.

WorldCom Pleads Not Guilty to Oklahoma Securities Fraud
Charges

WorldCom Inc. pleaded not guilty to criminal charges that it defrauded
investors in Oklahoma out of at least $64 million, Bloomberg News
reported. WorldCom and ex-Chief Executive Officer Bernard Ebbers, along
with five other former officials, last month were charged with
securities fraud in the state for allegedly falsifying the

company's accounts to inflate its stock price. Ebbers pleaded not guilty
last week.

The charges against Ashburn, Va.-based WorldCom come as it tries to
repair its image and emerge from the biggest bankruptcy in U.S. history
by year's end. They are the first criminal charges against Ebbers and
WorldCom stemming from the alleged accounting fraud, reported the
newswire.

Ex-Enron Trader in `Preliminary' Plea Bargain Talks With U.S.

Former Enron Corp. trading manager John M. Forney, who prosecutors
say is the 'architect'' of schemes to manipulate California power
prices, is in 'preliminary'' plea negotiations with the United States,
Bloomberg News reported. Assistant U.S. Attorney Matt Jacobs told a
federal judge in San Francisco that the government has 'engaged in some
preliminary conversations to resolve'' the criminal case against Forney,
who was charged with wire fraud and conspiracy in June.

EchoStar Says Loral Space & Communications Must Provide More
Information

EchoStar Communications Corp. said in court papers Wednesday that
Loral Space & Communications Ltd. has undermined EchoStar's ability
to get due diligence information in the Loral asset sale process. In a
motion filed with the U.S. Bankruptcy Court in Manhattan, EchoStar asked
the court to order Loral 'to cooperate in good faith with EchoStar
during the due diligence process and to provide EchoStar with immediate
and unfettered access' to all information needed to allow EchoStar to
form a bid for all of Loral's assets. The Manhattan bankruptcy court
will consider EchoStar's request at a hearing Friday.

KPMG's Role as Spiegel Failed To Disclose Woes Is Criticized

A court-appointed examiner's review of the collapse of Spiegel Inc.
criticizes the catalog retailer's independent auditor, KPMG LLP, for
standing by as its client failed to disclose its worsening financial
condition, according to people familiar with the matter, the Wall
Street Journal reported. The examiner's 214-page report, which is
expected to be released publicly, is likely to fuel the debate about
whether the Big Four auditing firms are tough enough with all of their
clients. KPMG said in a statement on Thursday it is 'confident that it
acted appropriately at all times and stands behind its actions in the
Spiegel matter.' But the role of KPMG, already fighting criticism from
the Securities and Exchange Commission about its alleged passivity at
Xerox Corp., will bring unwanted attention to the fourth-largest
auditing firm in the United States Spiegel filed for chapter 11
bankruptcy-court protection in March, reported the online newspaper.

DVI Gets Bankruptcy Court Approval to Sell Assets

Bankrupt medical finance company DVI Inc. said on Thursday it received
bankruptcy court approval to sell its assets at an auction, Reuters
reported. The Jamison, Penn.-based company filed for bankruptcy last
month after the discovery of accounting irregularities blocked it from
getting new financing. DVI makes loans and leases for medical equipment
and offers lines of credit to health-care providers in exchange for
unpaid patient bills. In July the company said it had lost its sources
of liquidity and could no longer continue its lending and leasing
activities. Roman''>

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