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April 23, 2007
Passes Bill to Strengthen Shareholders on Exec Pay
The House passed
legislation on Friday that would require public companies to allow
nonbinding shareholder votes on the salary packages of top
executives,
size='3'>CongressDaily reported. The bill,
H.R. 1257, passed 269-134, with 55 Republicans supporting it and five
Democrats against it. The measure, sponsored by Financial Services
Chairman Barney Frank (D-Mass.), would require public companies to
include in their annual proxy statements an advisory vote for
shareholders to weigh in on executive pay practices. It also would allow
another vote if a company provides a 'golden parachute' pay package to
executives while simultaneously negotiating to buy or sell a company.
Frank said the bill would provide teeth to a recent SEC rule requiring
public companies to improve their executive compensation disclosures,
such as including in their annual proxy to investors the opportunity for
shareholders to vote on the company's executive pay
plans.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h1257eh.txt.pdf'>Click
here to read the text of H.R. 1257 as passed by the
House.
id='2'>Bankrupt Shoe Retailer Case Settlement Brings Personal
Liability Concerns for Corporate Misdeeds
Five former outside
directors of a bankrupt shoe retailer have paid $41.5 million to settle
a lawsuit, in a case likely to fan fears among directors about personal
liability for corporate misdeeds, the Wall Street
Journal reported today. The settlement,
finalized last month, is believed to be among the largest out-of-pocket
payments by outside directors following corporate-fraud allegations. It
ends a lawsuit brought by the trustee in the bankruptcy of Just for Feet
Inc., once the second-largest athletic-shoe retailer in the
States
personal payments by the Just for Feet former directors top those in two
better-known cases. In 2005, former WorldCom Inc. outside directors paid
roughly $24.8 million of their own money to settle a shareholders' suit
with aggrieved investors. Also that year, former outside directors of
Enron Corp. paid about $13 million to settle shareholders' claims. A
recent survey by consulting firm Towers Perrin found that potential
directors are increasingly concerned about personal liability if
something goes wrong.
href='http://online.wsj.com/article/SB117728671802378484.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Subcommittee to Examine Abusive Credit Card Practices
The Financial Services
Financial Institutions Subcommittee will hold a hearing Thursday to
examine credit card practices that consumer groups have called abusive,
such as high fee structures, confusing interest rates and short grace
periods,
size='3'>CongressDaily reported today.
Financial Institutions Subcommittee Chairwoman Carolyn Maloney (D-N.Y.)
said she wants to explore whether the banking industry and federal bank
regulators can take action on their own to correct such
problems.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr042607.shtml'>Click
here for more information on Thursday's subcommittee hearing titled
'Credit Card Practices: Current Consumer and Regulatory
Issues.'
Airlines
id='4'>Northwest Airlines to Establish New Board
Northwest Airlines Corp.,
poised to emerge from bankruptcy-court protection in June, said it will
establish a new 12-member board, the Wall Street
Journal reported on Saturday. Gary Wilson, the
current chairman and a key investor in a 1989 leveraged buyout of the
airline, said he will step down. Northwest, based in
w:st='on'>
size='3'>Eagan
w:st='on'>
size='3'>Minn.
will continue its longstanding practice of separating the roles of
chairman and chief executive officer, and intends to appoint Roy
Bostock, a director since 2005, as its new nonexecutive chairman. The
former chairman and CEO of advertising agency D'Arcy Masius Benton &
Bowles Inc., Bostock is a principal of Sealedge Investments LLC, a
private investment company. Besides Bostock, six other current directors
will sit on the new board, including Northwest CEO Doug Steenland and
William Zoller, a Northwest pilot and former executive of the Air Line
Pilots Association union. Among the new directors are Mickey Foret, a
former Northwest chief financial officer, and Mike Durham, a former CFO
of AMR Corp.'s American Airlines.
href='http://online.wsj.com/article/SB117709570138977191.html?mod=us_business_whats_news'>Read
more. (Registration required.)
id='5'>Restructuring Delta Cost Hundreds of
Millions
As Delta Air Lines turns
onto final approach in its bankruptcy case this week, the company has
spent more than $137 million on legal fees and related expenses, and the
total could push $200 million by the time the dust settles, the
Atlanta
Journal-Constitution reported yesterday. Delta
goes to court Wednesday for a hearing on its reorganization plan with
confirmation considered a virtual certainty since creditors have
overwhelmingly endorsed the plan. It will be a final gathering for the
platoons of lawyers and financial consultants who have helped Delta chop
some $10 billion in debt off its balance sheet during restructuring
talks with various creditors. Through the first 16 1/2 months of its
chapter 11 case, Delta's bankruptcy-related bills averaged more than $8
million a month. The biggest charges were from its lead law firm, New
York-based David Polk & Wardwell, which had billed Delta for $36.5
million through the end of January, according to court filings.
href='http://www.ajc.com/business/content/business/delta/stories/2007/04/22/0422sbizdelta.html'>Read
more.
id='6'>Billionaire Investor to Buy Part of Collins &
Aikman
Billionaire investor
Wilbur Ross' auto parts company in North America has agreed to buy the
soft trim business of bankrupt
w:st='on'>
size='3'>U.S.
size='3'>auto parts maker Collins & Aikman for $134 million, Reuters
reported on Friday. The acquisition, which is subject to U.S. Bankruptcy
Court approval and a potential auction if competitive bids emerge, would
add to the growing auto parts empire Ross has assembled in recent years.
The emergence of Ross as lead bidder for the unit appears to have been a
shift away from private equity firm Cerberus Capital Management, which
was identified by sources as having a deal to buy the unit back in
December. The sale would include 16 facilities in the
size='3'>United States
size='3'>,
size='3'>Canada
size='3'>that produce carpeting, molded flooring, dashboard insulators
and other products. The facilities have about 4,300 workers and annual
revenue of about $615 million.
href='http://money.cnn.com/2007/04/20/news/companies/bc.collinsaikman.reut/index.htm?section=money_email_alerts'>Read
more.
id='7'>Vonage, Facing Bankruptcy on Patent Case, Seeks Court
Reprieve
Vonage Holdings Corp.,
ordered to stop adding customers after it lost a patent ruling, may get
a reprieve allowing the Internet phone company to conduct business as
usual while it appeals the decision, Bloomberg News reported today.
Vonage will ask a court in
w:st='on'>
size='3'>Washington
size='3'>tomorrow to extend a temporary freeze of a lower court order
that bars it from winning new business during the appeal. A judge issued
the ruling on March 23, after Vonage was found to have infringed
call-connection technology owned by Verizon Communications Inc. Vonage
said on April 17 it may be forced into bankruptcy or liquidation if it
loses the appeal. A favorable decision tomorrow would give Holmdel,
N.J.-based Vonage time to find a way to connect calls without infringing
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=akcy9GODKpmY&refer=news'>Read
more.
International
id='8'>ABN Amro Agrees to Sell to Barclays of
w:st='on'>
size='3'>Britain
ABN Amro, the largest
Dutch bank, and Barclays of Britain announced Monday that they had
agreed to merge in one of the largest European banking deals ever,
reportedly worth more than $90 billion, the New
York Times reported today. To fend off a rival
group of bidders seeking to break up the 183-year-old bank, ABN Amro and
Barclays struck a separate deal on Sunday to sell LaSalle Bank, a unit
of ABN, to Bank of America for more than $21 billion. That deal requires
shareholder approval, so it is possible that the rival bidders, led by
the Royal Bank of
w:st='on'>
size='3'>Scotland
size='3'>, may still try to woo ABN. That group is scheduled to meet
with ABN today.
href='http://www.nytimes.com/2007/04/23/business/worldbusiness/23bank.html?ref=business&pagewanted=print'>Read
more.
id='9'>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'>Advanced Micro Devices Inc.,
the
size='3'>Sunnyvale
maker of semiconductor chips, reported a first quarter net loss of $611
million, including extra charges of $113 million related to its
acquisition of ATI Technologies and compensation expenses of $28
million. The loss was worse than had been expected as the firm suffered
from the effects of a price war with archrival Intel Corp. Revenue
declined 7%–to $1.2 billion. Advanced Micro, which earlier
said it would slash capital spending by $500 million this year, added
that it will also reduce discretionary expenses by $100 million and trim
its workforce. On the positive side, some observers believe that the
worst of the price war with Intel could be coming to a
close.
size='3'>Briggs & Stratton Corp.,
the
size='3'>Wauwatosa
w:st='on'>
size='3'>Wi
engine-manufacturing company, plans to shut down its facility in Rolla,
Mi. in conjunction with a strategy to move production to Chinese
factories. The closure of the plant involved a more than $21 million
charge, which resulted in an 87% drop in its third quarter net
income–to $7.8 million. Sales fell 10% in the recent
quarter–to $717 million. Briggs & Stratton is also considering
closing a factory where it makes lawn-and-garden equipment, which would
result in further writedowns of up to $10
million.
size='3'>Cree Inc., a
w:st='on'>
size='3'>Durham
w:st='on'>
size='3'>N.C.
devices, reported its third quarter net income declined 12%–to
$21.1 million. Revenue declined 16%–to $90.3
million.
size='3'>HealthSouth Corp., the
size='3'>Birmingham
operator, is selling its diagnostic unit, which includes more than fifty
freestanding diagnostic-imaging centers, to Gores Group LLC, a
size='3'>Los Angeles
private-equity firm, for $47.5 million, as part of its efforts to reduce
debt and focus on its postacute inpatient rehabilitation services.
HealthSouth, which earlier sold off its surgery division for $945
million, is also in agreements to sell all three of its ambulatory
units.
size='3'>Lenovo Group Ltd., the Chinese
computer maker, said it will shake up its workforce, in a restructuring
that will either cut or move some 1,400 jobs, or about 5% of its
worldwide payroll. This is the Chinese PC maker’s second
reorganization since it acquired the PC unit of International Business
Machines Corp. two years ago for more than $1.2 billion. Lenovo hopes
that the recently announced restructuring, which is aimed mostly at jobs
in the
size='3'>U.S. and
size='3'>Europe
million. The move will result in pretax restructuring charges of at
least $50 million.
size='3'>Novell Inc., a
w:st='on'>
size='3'>Waltham
software and services firm, announced that it conducted an internal
review and uncovered “incorrect measurement dates” on
certain stock-option grants in the period 1996 through 2006. Novell will
incur unspecified expenses for correcting the problem.
size='3'>WMC Mortgage, a subprime-lending unit
of General Electric Co., shuttered three of its call centers and cut its
payroll by more than 770 workers. In addition, WMAC won’t
refill 300 vacant positions.