February 5, 2004
House Judiciary Democrats Circulate Letter on Investment Banker
Provision
Ranking members of the House Judiciary Committee--John Conyers (D-Mich.)
and Jerrold Nadler (D-N.Y.)-- circulated a letter to their colleagues
yesterday, calling attention to a provision in the bankruptcy bill that
would eliminate most conflict of interest restrictions on investment
bankers working in bankruptcy reorganizations. They cited a
href='http://www.washingtonpost.com/wp-dyn/articles/A7276-2004Feb2.html'>Washington
Post article in support of their argument that the provision should
be stripped from any future language.
'In response to the problems highlighted by recent scandals and large
bankruptcies, Congress has moved to tighten rules against conflicts of
interest among not just investment bankers, but other professionals
including attorneys and accountants,' wrote Conyers and Nadler. 'The
current bankruptcy bill takes us in the wrong direction. That is why we
supported a motion to instruct the conferees on the bankruptcy bill that
would have eliminated this dangerous step backwards. If Congress wants
to protect the integrity of the bankruptcy process, the last thing we
should do is open the door to more conflicts of interest,' they
concluded.
Americans Are Buckling Under the Weight of Debt
On the surface, the outlook for Americans' finances appears bright, the
Wall Street Journal reported. The economy is improving and the
weak job market seems to be stabilizing. Meanwhile stock prices and home
prices have climbed, raising average household net worth figures near
their early 2000 peaks. But the upbeat numbers mask serious stress from
mountainous debt, according to the online newspaper.
Consumer debt hit a record $1.98 trillion in October, not including
mortgages, according to the latest figures from the Federal Reserve.
Including mortgages, household debts comprised 111 percent of disposable
income halfway through last year, up more than 32 percent from 10 years
earlier, according to figures from Economy.com. 'Consumer debt is huge
today,' says Alan Levenson, chief economist at Baltimore, Md.-based
mutual-fund firm T. Rowe Price, reported the Journal. 'Every kind
of debt is far higher than its historical average now.' To read the full
article, point your browser to
href='http://www.wsj.com/'>www.wsj.com (subscription required).
Productivity Slows at End of 2003
The productivity of America's workers slowed in the final three months
of 2003, advancing at a 2.7 percent annual rate, the Associated Press
reported. The slowdown came after productivity increased at a 9.5
percent rate in the third quarter, the Labor Department reported today.
Analysts were predicting productivity to slow in the fourth quarter as
economic growth moderated. The economy grew at a 4 percent annual rate
in the final quarter of 2003, down from a blistering 8.2 percent pace in
the prior quarter. That marked the best performance in nearly two
decades. For all of 2003, productivity grew by a solid 4.2 percent,
following an even stronger 4.9 percent increase in 2002, reported the
newswire.
Tower Records Parent to File Chapter 11
The parent of Tower Records plans to file for chapter 11 bankruptcy
protection after failing to find a suitable buyer, sources familiar with
the matter told Reuters today. The filing by MTS Inc., expected as soon
as this week, would cap a long period of distress for the privately held
international chain of about 100 retail stores, which put itself up for
sale last year amid declining sales and growing losses. Like other
retailers in the recorded entertainment industry, Tower suffers from
stiff competition from mass market retailers such as Wal-Mart Stores
Inc., and high costs from retail leases.
Appeals Court Orders Bankruptcy Examiner to Repay Big Rivers'
Fees
The U.S. Court of Appeals has ruled against the court-appointed examiner
in the Big Rivers Electric Corp. bankruptcy case, agreeing that he may
not collect a $3.9 million bonus for his work and must also refund Big
Rivers nearly $1 million he was paid in hourly fees, Gleaner.com
reported. In an opinion issued on Thursday, a three-judge panel said
Louisville attorney J. Baxter Schilling violated his fiduciary duties by
negotiating secret deals with three of Big Rivers' creditors to receive
extra pay for helping them receive more money from the power company.
Read the
href='http://www.myinky.com/ecp/gleaner_news/article/0,1626,ECP_4476_2566465,…'>full
article.
Air Canada Builds Up Zip Unit to Take on WestJet
Air Canada will nearly double the fleet size of its low-cost subsidiary
Zip, it said on Wednesday, as the airline builds up the unit to compete
with growing rival WestJet Airlines Ltd., Reuters reported. Air Canada
said Zip will retire all 12 of its Boeing 737-200s by the end of the
year. They will be replaced with 20 Airbus A319s transferred from Air
Canada's mainline fleet. Air Canada President and CEO Robert Milton said
the newer and more efficient Airbus aircraft should help reduce
operating costs. Air Canada is currently in bankruptcy protection as it
works out a restructuring plan. Air Canada will make up for the transfer
of the Airbus A319s by adding 90 smaller regional jets from Bombardier
Inc. and Embraer SA to its fleet, starting in September. Milton has said
those jets will replace the larger aircraft, which are flying with too
many empty seats, while maintaining or even increasing the flight
frequency, Reuters reported.
U.S. Power Industry Sees Few Grid Deals This Year
Grid companies expect few mergers or acquisitions in the U.S.
electricity transmission system this year as uncertain regulations and
wariness about the depressed power sector keep investors at bay, Reuters
reported. Only a few grid transactions were completed last year, despite
hopes that investors would buy up the millions of miles of power lines
from their regulated owners and pour in new money to upgrade the aging
network. Macquarie Securities USA, a unit of Australian Macquarie Group,
which bought part of General Electric Structured Finance's 85 percent
stake in the Michigan Electric Transmission Co. in December, expects
only a handful of transactions in 2004. 'We contacted pretty much all
the utilities and I think we have a good idea where they stand. We are
not expecting many divestments in the short term,' Chris Leslie,
director of Macquarie Securities' Infrasture Group told Reuters.
The demise of Enron Corp. and the California energy crisis of 2000-2001
pushed many merchants to the brink of bankruptcy, forcing them to put
power plants up for sale at a fraction of their construction values
because of an oversupply of generating capacity. 'I think you've got to
have a robust generation market' to support the market for power lines,
Bernie Schroeder, president of Reston, Va.-based power line company
Trans-Elect Inc., told Reuters.
Kaiser Aluminum Reports on Results of Court Hearing
Kaiser Aluminum announced yesterday in a press release that, in a
special hearing on Feb. 2, the U.S. Bankruptcy Court for the District of
Delaware conditionally approved the company's previously announced
agreement in principle with the United Steelworkers of America (USWA),
and the recently concluded agreements in principle with the 1114
Committee, which represents salaried retirees, and the International
Association of Machinists (IAM), which represents hourly employees at
two Kaiser locations, regarding certain pension and post-retirement
benefits. The USWA and the IAM represent the vast majority of the
company's U.S. hourly employees.
The agreements in principle are subject to various approvals, including
ratification by union members, approval by the company's board of
directors, and final approval by the bankruptcy court. The agreements
are also conditioned upon the satisfactory resolution of certain
intercompany claims. Separately, the company continues to have
discussions with four additional unions concerning pension and
post-retirement benefits.
Spiegel Seeks Restructuring Extension
Spiegel Inc. has asked the U.S. Bankruptcy Court in Manhattan to extend
the deadline to file the company's restructuring plan case by three
months to May 10, the Associated Press reported. The parent company of
Spiegel's catalog, Eddie Bauer stores, and Newport News said it is
making progress in its restructuring but is reviewing the results of the
holiday season and using that information to adjust its 2004 forecast.
That forecast will serve as the basis for talks on the reorganization
plan, according to the motion filed last Friday. A hearing on what would
be Spiegel's third exclusivity extension is scheduled for Tuesday, with
objections due on Friday. Spiegel filed for bankruptcy protection in
March 2003 listing assets of $1.74 billion and debts of $1.71 billion,
reported the newswire.
Ohio-based Home-products E-retailer Files for Bankruptcy
Protection
TooHome Inc., a Beavercreek-based online retailer of home products, has
filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court
in Dayton, reported Knight-Ridder. TooHome Inc. owed its top 20
creditors more than $1.3 million, according to court documents. Its
largest creditor, Kesslar Industries of Patterson, N.J., is seeking
$195,451.88, followed by Cincinnati-based Keidel Supply Co. seeking
$150,120.70 and Greenville-based Hughes Supply Co. seeking
$137,952.80.
TooHome hired attorney Ira Rubin of Dayton-based law firm Goldman, Rubin
& Shapiro to oversee it through bankruptcy, according to court
papers. Rubin declined to comment on the case, saying only that TooHome
intends to emerge from bankruptcy, according to the newswire.
AstroPower Files for Bankruptcy
AstroPower Inc. has filed for bankruptcy as part of an offer by General
Electric Co. to buy most of the company's assets for $15 million, the
News Journal reported. The solar-power pioneer filed for chapter
11 bankruptcy protection on Sunday, listing debts at $143.5 million and
assets at $205 million. The court action sets up a bidding process that
will result in a new owner by the end of April. GE has already made an
offer. The bidding will be overseen by the bankruptcy court in
Wilmington. CEO Carl H. Young III said a sale of most of the company's
U.S. assets should allow AstroPower to continue operating.
After the company failed to file several financial reports required by
the federal government last year, AstroPower saw its stock price fall to
less than $1 from a high of more than $40 a share in 2000. The company
also lost about half its workforce through layoffs and attrition,
reported the News Journal.
US Airways To Meet With Unions on Concessions
US Airways executives hope to secure concessions from employees at a
meeting with union leaders tomorrow in an effort to head off the sale of
several key assets, sources close to the carrier said yesterday, the
Washington Post reported. Executives of the Arlington-based
airline expect to outline a revised business plan at the meeting,
scheduled after the carrier releases its fourth-quarter financial
results. Airline analyst Ray Neidl of Blaylock & Partners LP said he
estimated that the airline would report a loss of about $125 million for
the period.
At a board meeting yesterday, executives indicated that the airline's
most immediate threat was meeting the financial covenant set by the
federal government in exchange for guarantees on loans of $900 million.
As part of US Airways' agreement with the Air Transportation
Stabilization Board (ATSB), the airline must maintain $1 billion in cash
through June. The goal of the meeting tomorrow is to 'discuss options
other than an asset sale because the company is not going to default on
its loan covenant with the ATSB,' said US Airways spokesman David
Castelveter, reported the Post.
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