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January 23, 2007
id='1'>Seniors Find Debt Levels Increasing
Soaring health care costs
are hitting seniors at a time when more employers are cutting back on
retiree medical and pension benefits, causing debt levels among seniors
to increase substantially,
size='3'>USA Today reported today. From 1992
to 2004, the percentage of households 55 and older with overall debt
grew faster than the debt rate of the overall population. Those 75 and
older accrued debt the fastest as the average load for those households
with debt shot up 160 percent to an average of $20,234 during this time,
according to research by the Employee Benefit Research Institute, a
nonpartisan group that studies economic security. Among households 65
and older, the average amount of credit card debt more than doubled from
1992 to 2004, to $4,907, according to Demos, a
w:st='on'>
href='http://www.usatoday.com/money/perfi/retirement/2007-01-22-senior-debt-usat_x.htm?POE=NEWISVA'>Read
more .
Airlines
Air's Offer for Delta Loses More Ground with
Creditors
As the Senate Commerce
Committee prepares to take testimony tomorrow on consolidation in the
airline industry, US Airways Group Inc.'s hostile $10.1 billion bid for
Delta Air Lines Inc. appears to be losing traction among creditors,
the Wall Street
Journal reported today. After examining the
details of the US Airways offer and hiring former Continental Airlines
Inc. Chairman Gordon Bethune to help analyze its prospects, the Delta
creditors' committee has grown skeptical of the proposed merger. The US
Airways bid, which expires Feb. 1, is by no means dead. The situation
could change if Delta and its creditors have difficulty reaching
agreement on issues such as board composition and compensation for the
airline's management and employees. Separately, talks about a possible
merger between Delta and Northwest Airlines Corp. have been put on hold,
without a framework for a deal and without specific plans for further
negotiations.
href='http://online.wsj.com/article/SB116951458529084396.html?mod=home_whats_news_us'>Read
more . (Registration required.)
id='3'>Mesaba Air to Exit Bankruptcy as Northwest
Unit
MAIR Holdings Inc., the parent
of Mesaba Airlines, said that it has reached an agreement under which
Mesaba will exit bankruptcy protection as an operating unit of Northwest
Airlines Corp., Reuters reported yesterday. The terms call for MAIR to
buy the 5.7 million of its shares that Northwest owns for $35 million.
Northwest will assign a $7.3 million claim in Mesaba's bankruptcy to
MAIR. The companies will release each other from all claims, although
Mesaba said it will get a claim of $145 million against Northwest that
it plans to sell to pay creditors. Northwest, the No. 5 U.S. carrier, on
Jan. 5 said it agreed to buy Mesaba, a move analysts said could save the
href='http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-01-22T224119Z_01_N22177400_RTRIDST_0_MAIR-NORTHWEST-BANKRUPTCY-UPDATE-1.XML'>Read
more .
Autos
id='4'>GM, Ford Explore UAW Control of Health Care
Obligations
w:st='on'>
size='3'>Detroit
makers and the United Auto Workers (UAW) are examining a potentially
revolutionary plan that would shift to the union responsibility for tens
of billions of dollars in retiree health care liabilities, the
Wall Street Journal
reported today. A deal is far from certain, especially
with formal national-contract talks months away. A big question is where
General Motors Corp. and Ford Motor Co. would get the cash required to
fund a handover of future retiree health care obligations to a
union-managed fund. Another uncertainty is whether the UAW would want
the tough role if the time came to cut future benefits.
href='http://online.wsj.com/article/SB116952370975584550.html?mod=home_whats_news_us'>Read
more. (Registration required.)
id='5'>Dana Opposes Nonunion Retiree’s Bid to Open
Documents
Bankrupt auto parts maker
Dana Corp. filed a motion Monday to keep financial documents out of the
hands of nonunion retirees who say they need the information to evaluate
the company's bid to eliminate retiree health and welfare
benefits, Bankruptcy
Law360 reported yesterday. The nonunion
retirees’ committee requested documents from 2005 and 2006 that
were created at the plant level by controllers and managers. The
information, which Dana has deemed for-professional-eyes-only, contains
bottom-up budgets, projections and analysis of potential business
prospects. Dana said the approximately 2,077 documents provided by Dana,
including preliminary internal projections prepared during 2005 and
2006, already include the information that the committee is
requesting.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16896'>Read
more . (Registration required.)
id='6'>Tower Asks for Three More Months to File
Plan
Tower Automotive Inc.
requested an extension of three months to file its reorganization
plan, Bankruptcy
Law360 reported yesterday. Judge
Allan L. Gropper
will consider the extension to May 3 at a Jan. 30 hearing
in the U.S. Bankruptcy Court for the Southern District of New York. If
the extension is not granted, Tower’s exclusivity period will end
on Feb. 2. The motion, filed Thursday, asks for Tower to have until June
29 to solicit approval of the plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16865'>Read
more. (Registration required.)
RCM
Trustee Objects to Sphinx Filing
The U.S. Trustee for
Refco Capital Markets has lodged a formal objection to a request by
Sphinx Managed Futures Fund Inc. in which the fund has petitioned for
the right to make claims against RCM in the event the $263 million
settlement between the two is overturned,
size='3'>Bankruptcy Law360 reported yesterday.
U.S. Trustee Mark S.
Kirschner argued that the claim should be
dismissed as speculative, since “the claimants do not set forth
any facts at all. Instead the claimants note vaguely that ‘there
have been allegations and evidence in these bankruptcy cases’ that
‘funds may have been held or acquired by RCM, Refco LLC or the
other Refco debtors in an improper, wrongful or fraudulent
manner.” Liquidators for bankrupt Sphinx have objected to Refco
Inc.’s amended
size='3'>chapter 11 plan, arguing that under the plan, Sphinx’s
$263 million settlement with the bankrupt broker could be paid to
creditors before it receives final court approval.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16845'>Read
more . (Registration required.)
id='8'>Creditors Oppose Class Claim in Musicland Case
Musicland Holding
Corp.’s unsecured creditors’ committee is opposing
efforts by a group of store managers seeking class status in a lawsuit
brought against the music retailer for alleged violations of
California's overtime laws,
size='3'>Bankruptcy Law360 reported yesterday.
The unsecured creditors, among others, asked the U.S. Bankruptcy Court
for the Southern District of New York on Thursday to deny the
certification motion because the class claim would throw a wrench in the
administration of Musicland’s estates and could severely hamper
its chapter 11 plan. The creditors claimed that the store managers have
been slow to act in their request for class certification, alleging the
managers did not file the certification motion until more
than 10 months after the petition date and more
than seven months after they filed the class claim.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16835'>Read
more. (Registration required.)
id='9'>Partial Bailout Offered in Book Publisher
Bankruptcy
Perseus Books Group
announced that it was offering to acquire the distribution contracts of
roughly 150 book publishers who employ Publishers Group West, a
subsidiary of bankrupt Advanced Marketing Services, as their book
distributor, the New
York Times reported today. Perseus promised to
pay 70 cents for every dollar owed to the publishers, an amount that
could total $20 million if all the publishers accepted the
deal.Advanced
Marketing Services, which distributes books to discount clubs including
Costco and Sam’s Club, filed for bankruptcy protection on Dec. 29,
reporting more than $200 million in debt to dozens of publishing
companies. The largest creditor, Random House, is owed more than $43
million, and Simon & Schuster is owed more than $26 million.
href='http://www.nytimes.com/2007/01/23/business/23books.html?pagewanted=print'>Read
more.
id='10'>States Seek to Rein in Home Insurers
A backlash against
insurers is building in several coastal states where homeowner premiums
have increased sharply despite several years of rising industry profits
and an uneventful hurricane season in the East, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. In
w:st='on'>
size='3'>Florida
back-to-back hurricanes have helped some rates more than double since
2004, the state legislature yesterday approved a measure aimed at
reducing homeowner premiums offered by private insurance companies by 5
to 25 percent or more. The legislature has been meeting since last week
in a special session specifically aimed at addressing the state's
insurance crisis. The measure now goes to Republican Gov. Charlie Crist,
who has made insurance-rate cuts a top priority since taking office this
month. That comes after several large insurers in
w:st='on'>
size='3'>California
size='3'>recently agreed to roll back homeowner insurance rates by as
much as 20 percent, or a total of $439 million.
href='http://online.wsj.com/article/SB116951414949084368.html?mod=pj_main_hs_coll'>Read
more. (Registration required.)
id='11'>Holidays and Decrease in Bankruptcy Write-Offs Aid American
Express Earnings
The American Express Corp.
reported yesterday that stronger holiday shopping and a reduction in
bankruptcy write-offs helped lift fourth-quarter profits by 24 percent,
the Associated Press reported today. The results follow the same growth
seen at American Express’s biggest rivals. JPMorgan Chase &
Co., Citigroup, the Capital One Financial Corporation and Morgan Stanley
all reported that their card divisions had stronger profit during the
fourth quarter. The company had set aside $277 million for losses from
its credit card unit to partially cover for potential losses due to
href='http://www.nytimes.com/2007/01/23/business/23amex.html?pagewanted=print'>Read
more .
id='12'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
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size='3'>Dimensions Healthcare System, a
financially-troubled
George
w:st='on'>
size='3'>Md.
seeking another $5 million from the county to keep operating in the
short term. The company reportedly needs up to $14 million to make
it through fiscal 2007.
size='3'>Ford Motor Co., Dearborn, Mich., and
Japan's Toyota Motor Corp. may be inching toward some sort of alliance,
although one that would likely fall short of an outright merger or even
the three-way teamup recently mulled by General Motors Corp., Renault SA
and Nissan Motor Co. Ford, which has forecast large losses for the
year and which continues restructuring its North American operations,
may be assisted by Toyota's hybrid technology. In turn,
size='3'>Toyota
benefit not only in selling its technology but also in the political
arena. By teaming up with Ford,
face='Times New Roman' size='3'>Toyota
size='3'>may be able to avoid protectionist heat given
w:st='on'>
size='3'>Toyota
the
size='3'>U.S.
among its
w:st='on'>
size='3'>U.S.
size='3'>rivals.
size='3'>General Motors Corp., which wants to
dump billions of dollars from its retiree healthcare obligations, is
reportedly taking a look at a recent agreement between Goodyear Tire
& Rubber Co. and its biggest union regarding costs at the tire
maker. In Goodyear's case, the firm transferred its healthcare
liabilities to an independent trust fund. So far, GM isn't
directly discussing the issue with the United Auto Workers
union.
size='3'>M/I Homes Inc., a Columbus, Ohio
homebuilder, will take fourth quarter charges of as much as $78 million
related to land-impairment charges and related costs. The firm also
warned that per-share earnings for the year will fall as much as 57%
from the year-earlier period. The company plans to release its full
financial results on 2/1.
size='3'>Motorola Inc. will try to get back on
track by rethinking its cellphone business. The
w:st='on'>
size='3'>Schaumburg
conceded that it goofed in its pricing plans and product alignment in
the competitive mobile-handset market. The company tried to gobble
up marketshare by cutting the price of its popular Razr products, and
while sales were successful (to the tune of more than 75 million of the
devices sold), profit margins tumbled from nearly 12% to only 4.4%
during the third quarter. Further, by focusing on the Razr,
Motorola came up short in trying to sell its higher-margin
handsets. The firm also said it would try to cut costs by slashing
3,500 jobs (5% of its workforce), which could save it $400 million over
a two-year period. However, the job cuts baffled some investors,
who questioned why the firm is lopping its payroll when its problems
seem to lie not with bloated infrastructure but rather with bad
marketing. In its fourth quarter, Motorola's net income sank
48%--to $624 million. Sales rose 17%--to $11.8 billion. For the
year, its net fell 20%--to $3.7 billion, on a 22% sales increase--to
$42.9 billion. The quarter included a $125 million charge and the year
included a $41 million gain related to the sale of investments and
businesses.
size='3'>Pfizer Inc., facing generic
competition and looking to cut costs, will lay off another 7,800
workers. Including 2,200 layoffs announced a month ago, that brings job
cuts to 10,000, or about 10% of its worldwide workforce, including
thousands of its sales staff. Pfizer will also shutter two U.S. plants,
in Brooklyn, N.Y. and Omaha, Ne., and seek to sell a third factory in
Germany. On the research side, Pfizer, which will get out of dermatology
and gastroenterology research, will shutter three R&D sites
in
size='3'>Michigan
in
size='3'>France
size='3'>Japan
The big
face='Times New Roman' size='3'>Manhattan
size='3'>,
size='3'>N.Y.
hopes the moves will yield annual cost savings of up to $2 billion, on
top of earlier announced goals of $4 billion in cost reductions.
Meanwhile, Pfizer reported flat fourth quarter sales of $12.6
billion. Earnings soared more than threefold, to $9.4 billion,
but, not counting a $7.9 billion gain on the sale of its consumer unit
last month to Johnson & Johnson, Pfizer's profit fell 12% in the
quarter.
size='3'>Sovereign Bancorp Inc.,
size='3'>Philadelphia
size='3'>Pa.
fourth quarter loss of $129 million, compared to net income of $165
million in the year-earlier period. The company incurred after-tax costs
of $192 million for provisions for credit losses, nearly $43 million in
charges for realigning its balance sheet, more than $50 million in
severance and restructuring charges along with $6.9 million in
integration costs.
size='3'>Wilsons The Leather Expert Inc.,
the
size='3'>Brooklyn Park
size='3'>Minn.
reported that its same-store sales in December slumped 23%, compared to
a 7.7% drop in same-store sales in December of 2005. The company's
total sales for the final five weeks of 2006 were $75.7 million, down
from $110 million a year ago.