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January 3, 2007
id='1'>Court Allows Suit Against Air America
A federal bankruptcy court in New York ruled Thursday that a lawsuit against radio network Air America could proceed, AFX News reported yesterday. CACI International asked the bankruptcy court in November to allow its case to go forward, arguing that its claims against Air America are covered by an insurance policy and any damages would be paid out of that policy and not from the company's assets. CACI is seeking $1 million in compensatory damages and $10 million in punitive damages in the defamation lawsuit. Read more.
id='2'>Hedge Funds Win Refco Case
A group of hedge funds that fought to boost payments to stockholders in Refco Inc.'s bankruptcy proceedings won the right to collect more than $1.2 million in legal fees and expenses from the former commodity brokerage, the Wall Street Journal reported today. Bankruptcy Judge Robert Drain of the U.S. Bankruptcy Court in Manhattan approved the reimbursement Friday to Refco's ad hoc equity committee. The committee consists of King Street Capital Management LLC, QVT Financial LP, JMB Capital Partners LP, Mason Capital Management, Smith Management LLC and Triage Management LLC, which collectively owned about 30 percent of the company's stock. The reimbursement includes $1.15 million in professional fees, $132,032 in expert-witness expenses and assorted other fees accrued during a protracted court battle. Read more. (Registration required.)
id='3'>Radnor Holdings Seeks to End Headquarters Lease and CEO Contract
Radnor Holdings Inc., a maker of foam cups and containers, is asking for bankruptcy court permission to end its employment pact with founder and chief executive Michael T. Kennedy, as well as its $557,000-a-year headquarters in the Philadelphia suburbs, the Associated Press reported today. California private-equity investor Tennenbaum Capital Partners LLC bought Radnor's operating assets in a court-approved sale in November. Lawyers for the company indicated in court documents that Tennenbaum doesn't want the Radnor, Pa., headquarters, a $333,000-a-year warehouse in Fort Worth, Texas, or employment pacts with top executives, including Kennedy. Read more.
id='4'>Commentary: Available Liquidity to Continue into 2007
Indicators are showing that the steady stream of resources to the most perilous of emerging markets, the most hopeless of troubled companies and the most overextended of home buyers looks to continue into 2007, according to a commentary in today's Wall Street Journal. Private-equity fund raising set a record last year, as did private-equity deal-making, and most experts expect 2007 to be even bigger. The swollen river of liquidity is also behind predictions that housing will recover later this year. Despite rising default rates, mortgages remain cheap and easy. Lenders are still willing to let borrowers bury themselves in debt to buy a new home. The liquidity gusher also helps explain why the federal government in Washington can keep spending and why the dollar remains relatively strong, despite swelling trade deficits. Fed Chairman Ben Bernanke has argued the money flows are the result of a 'global savings glut.' Read more. (Registration required.)
id='5'>Chief Justice Says Inadequate Pay Threatens to Undermine Judiciary's Independence
Chief Justice John Roberts said in a year-end report that pay for federal judges is so inadequate that it threatens to undermine the judiciary's independence, the Associated Press reported yesterday. Issuing an eight-page message devoted exclusively to salaries, Roberts says the 678 full-time U.S. District Court judges, the backbone of the federal judiciary, are paid about half that of deans and senior law professors at top schools. 'Inadequate compensation directly threatens the viability of life tenure, and if tenure in office is made uncertain, the strength and independence judges need to uphold the rule of law -- even when it is unpopular to do so -- will be seriously eroded,' Roberts wrote. Over the past 16 years, Congress has provided the judiciary occasional cost-of-living adjustments, but Roberts said the absence of salary increases is 'grievously unfair.' Read more.
id='6'>Home Builder Sees Industry Downturn Continuing
Lennar Corp. Chief Executive Stuart Miller said he sees no signs the home-building market has hit bottom, signaling the industry could continue to face pressure on its financial results, the Wall Street Journal reported today. The Miami company also said it expects to report a fiscal fourth-quarter loss amid land-related write-downs of between $400 million and $500 million. Lennar said it slashed its exposure in California, where market conditions have been deteriorating. The builder's orders fell 6 percent in the quarter ended Nov. 30, which is better than many of its rivals, which have been experiencing declines of 20 to 40 percent. Read more. (Registration required.)
id='7'>Mortgage Lenders Network to Discontinue Sub-Prime Lending
Mortgage Lenders Network USA became the third company in a month to stop issuing some loans as U.S. housing sales slowed and defaults by borrowers rose, Bloomberg News reported yesterday. The company said yesterday that it will 'temporarily discontinue' wholesale lending operations. The Middletown, Conn.-based company is 'involved in strategic negotiations with several Wall Street firms' about the wholesale unit, which consists of a network of independent mortgage brokers that bring in loan requests. Nationwide, late payments on sub-prime loans rose during the third quarter to 12.56 percent of the total, the most since the first quarter of 2003, the U.S. Mortgage Bankers Association said. Read more.
id='8'>Commentary: Sarbanes-Oxley Act Should Be Revisited
While well-intentioned after Enron's collapse, the Sarbanes-Oxley Act has harmed American corporations and financial markets without increasing investor confidence and should be revisited, according to a commentary in today's New York Times. The section of the law requiring companies to perform internal audits has turned out to be far more costly than proponents projected, especially for smaller firms. These costs have led some small companies to go private, hardly a victory for public oversight, and some foreign firms to withdraw their stocks from American exchanges. Other costs associated with the act may turn out to be more important, such as the stringent financial regulations and increased penalties for accounting errors, which may make senior managers too risk-averse. Most chief executives are not accountants, so the requirement that they personally affirm tax reportsat the risk of jail time should anything be amissmay make them reluctant to partake in perfectly legitimate activities. Read more.
International
id='9'>British Insolvencies Likely to Reach New Highs in 2007
Accountants Grant Thornton are predicting that almost 30,000 British people are likely to become insolvent in the first quarter of 2007 with some 10,000 tipped over the edge by Christmas spending, the London Guardian reported today. Two hikes in interest rate last year, soaring energy bills and increases in unemployment have pushed more people into financial trouble. Only 18 months ago total net lending to Britons passed £1 trillion. Now the total is nudging £1.3 trillion and rising by £1m every four minutes, according to the consumer group Credit Action, which believes that almost one in 10 people show signs of 'financial stress.' Read more.
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id='10'>Cosi Inc., after a dozen years of operating under different names such as Zuzu's Coffee Bar, Xando Coffee and others, is still trying to map out its niche. The Deerfield, Il. sandwich-shop operator is now targeting its fast-casual format at the 18-to-34-year-old demographic of single adult upscale suburbanites, customers it believes will pay a little extra for a quick tasty meal. While Cosi has failed to report a fiscal profit since it went public five years ago and will likely face another loss for 2006, it has been improving its operating profits for three years running. One item in Cosi's favor is its ability to sign up commitments for franchisees over the past year to build about 350 franchised units over the next several years. In 2005, Cosi, now with more than about 120 restaurants, lost $13.1 million on revenue of $117 million.
Delta Natural Gas Co. Inc., Winchester, Ky., reported a first quarter net loss of $540,000. Revenue declined nearly 8%--to $13.1 million.
E Med Future Inc., a Columbus, Oh. manufacturer of medical devices, has reportedly missed payments on a $750,000 loan, resulting in the company being put into receivership. E Med could be brought back from the dead by a former research director at the firm, who reportedly wants to buy out E Med.
Harbourton Capital Group Inc., McLean, Va., said that its wholly-owned mortgage business has ceased operations. Harbourton will likely write off its investment in the mortgage unit, following significant losses it already incurred last year at its mortgage business.
Isolagen Inc., an Exton, Pa. biotech firm, reported a third quarter net loss of $6.7 million. Revenue declined 17%--to $1.5 million.
Mills Corp.'s chief executive, Mark Ordan, tried to assure shareholders that there won't be any more surprises in its finances, as it prepares to soon file its much delayed 2005 earnings report, hopefully by the end of the month, with quarterly results for 2006 to come soon after that. Mills, a Chevy Chase, Md. real-estate developer, is restating results going back as far as 2000.
Retractable Technologies Inc., a Little Elm, Tx. maker of syringes and related products, reported a third quarter net loss of $1.2 million. Revenue declined 15%--to just under $6 million.
Ultradata Systems Inc., a financially troubled Creve Coeur, Mo. company, is reportedly selling its remaining subsidiary, RW Data Inc., to Design Manufacture Distribution LLC, also in Creve Coeur, for about $200,000. Design Manufacture is a privately-held electronics-design firm that makes electronic kitchen scales, food timers and related products.
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