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July 15, 2005
Bankruptcy Reform May Have Little Effect on Bankruptcy Filing
Rates
Claims that many consumers will no longer have the safety net of
bankruptcy once bankruptcy reform goes into effect may be unfounded,
Best Case Solutions announced in a press release yesterday. A study by
the provider of bankruptcy preparation software indicates that at least
85 percent of debtors who file for bankruptcy under chapter 7 would
still be eligible for chapter 7 when the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 goes into effect on October 17.
href='http://biz.yahoo.com/prnews/050714/cgth028.html?.v=18'>Read the
full release.
Stelco and Unions Fail to Reach Agreement on Refinancing Plan
Stelco Inc., an insolvent Canadian steelmaker, failed to reach
agreement with its unions and bondholders on a refinancing plan needed
to exit bankruptcy protection, Bloomberg News reported yesterday.
Hamilton, Ontario–based Stelco said it will disclose today an
outline of a plan to restructure the company’s finances. The
company’s unions back a C$1.35 billion ($1.1 billion) offer from
Tricap Management Ltd., which Stelco says is weighted too heavily in
favor of the unions and will be rejected by bondholders. The Tricap
proposal includes a C$600 million revolving line of credit, a C$350
million loan and a commitment to back the sale of C$400 million of
equity-linked securities to be offered to existing stakeholders.
Stelco’s C$1.3 billion pension shortfall would be reduced by C$500
million under the proposal. A hearing is scheduled in a Toronto court
July 18.
United Airlines Parent Wants More Money
UAL Corp., parent ofUnited Airlines, is seeking another $310 million
in bankruptcy loans to stabilize the company, according to court
filings, the Associated Press reported. Chicago-based UAL plans to
emerge from bankruptcy this fall, but has said it may need more money.
This request is separate from other exit financing the company is
seeking. In U.S. Bankruptcy Court filings, UAL said that the money will
provide more time to restructure.
BCGI Back in Court over Patents
Boston Communications Group Inc. (BCGI) is back in the fight of its
corporate life, after court-ordered mediation talks with Freedom
Wireless Inc. failed, and the companies resumed arguments in Boston
federal court, the Boston Business Journal reported
yesterday. BCGI says a decision in its favor in the current case would
negate a $125 million jury verdict last month favoring Phoenix-based
Freedom Wireless in the companies’ long-running patent dispute.
Based in Bedford, Mass., BCGI manages prepaid mobile telephone customer
accounts on behalf of wireless carriers and employs approximately 400
people.
BCGI said it would appeal a judgment against it, likely having to
post a bond or collateral to do so, according to the Boston
Business Journal report. Company officials have contemplated
filing for bankruptcy protection if the damage award is upheld in
full.
Bankruptcy Lawyer Faces Failure-to-disclose Claim
Veteran bankruptcy lawyer Neil R. Flaum may have to face trial on
allegations that he failed to disclose to his client and to a U.S.
Bankruptcy Judge a possible conflict of interest, the New York Law
Journal reported on Wednesday. While a New York panel upheld the
December 2003 ruling that malpractice claims brought by Izko Sportswear
Co. and its principal, Ira Soblick, were barred once the bankruptcy
court judge approved Flaum’s fee, the panel reinstated the
plaintiffs’ cause of action under New York State Judiciary Law
§487.
Salton Makes Interest Payment, Eases Concerns
Salton Inc., which sells George Foreman grills, eased investor
concerns yesterday about its solvency by saying it made an interest
payment and that a majority of certain noteholders agreed to tender
their notes to the company, Reuters reported. Shares of the small
appliance maker jumped 18.2 percent in the morning before being halted
ahead of the announcement. The stock skyrocketed once it resumed trading
on the New York Stock Exchange, more than doubling to $2.36 from
Thursday’s closing price of $1.10, according to the Reuters
report.
Last month, Salton did not make the $6.7 million interest payment
that was due June 15 on its 10¾ percent senior subordinated notes
as it sought ways to raise funds. The terms of the notes allowed it a
30-day grace period.
Xybernaut Denied Funding for Possible Chapter 11
Xybernaut Corp., the Fairfax, Va., company that makes wearable
computers, said that it was unable to secure the financing necessary to
operate under bankruptcy protection, the Washington Post
reported. Last month, in preparation for a possible bankruptcy filing,
the company asked an undisclosed lender to start work on the loans and
paperwork that would ensure the company
“debtor-in-possession” financing if it pursues chapter 11
protection. Xybernaut also sent the lender a $125,000 deposit.
But on Wednesday, Xybernaut said in a filing with the Securities and
Exchange Commission that the lender returned about $54,000 and declined
to commit to the debtor financing.
Court Orders KPMG to Pay $100 Million in Damages
The Norwegian branch of international accounting group KPMG was
ordered to pay $100 million in damages Friday after one of
Norway’s worst bankruptcies, the Washington Post
reported. The company will appeal. The Oslo district court found that
the group had been negligent in auditing the books of Finance Credit,
which went bankrupt in 2003 owing about $200 million to eight banks. In
addition to the damages, the court ordered KPMG to pay $1 million in
legal costs.
Reports Say Hewlett Is Planning Layoffs
CNET News.com, a technology news site, is reporting that Hewlett
Packard may announce layoffs as early as Monday. The Wall Street
Journal said on its web site last night that the company would
announce a restructuring on Tuesday. Both reports cited unidentified
sources. In May, Hewlett announced that 1,900 employees in its printing
division had accepted voluntary retirement. If layoffs are forthcoming,
whatever the timing, they are expected to be large, the newspaper
reported. Last month, A. M. Sacconaghi, an analyst with Sanford C.
Bernstein & Company, suggested that 10 percent of the work force
might be cut, or 15,000 of the 150,000 employees worldwide.
Enron Former Executive Pleads Guilty to Conspiracy
A former Enron executive pleaded guilty yesterday to a criminal
conspiracy count and agreed to cooperate with prosecutors in a matter
that is expected to be part of the coming criminal trial of the former
top officials of the fallen energy company, the Wall Street
Journal reported today. The guilty plea in Houston federal court
yesterday by Christopher Calger, a 39-year-old former vice president in
Enron’s North American unit, involved a 2000 transaction known as
Coyote Springs II in which the company sold some energy assets,
including a turbine, to another company. Calger faces up to five years
in prison.
Parmalat Bank Suit Is Dismissed
A federal judge in New York dismissed a lawsuit brought against
accounting firm Deloitte & Touche’s U.S. arm by the
Italian-government-appointed administrator running Parmalat SpA, the
Wall Street Journal reported today. District Court Judge
Lewis Kaplan’s decision late yesterday goes further in limiting
the potential liability of the accounting firm’s U.S. operations
than a similar ruling last month that allowed a class-action lawsuit to
proceed on a limited basis against Deloitte’s U.S. arm. Judge
Kaplan ruled that a suit brought by the administrator running Parmalat,
Enrico Bondi, didn’t have sufficient legal grounds to proceed
against Deloitte & Touche LLP. He did allow the suit to proceed
against Deloitte’s international arm, Deloitte Touche Tohmatsu,
according to the Journal report.
Delta Raises Cap on Fares in Response to Fuel Costs
Delta Air Lines Inc., the nation’s third largest airline, said
yesterday that it is raising the cap on its most expensive fares by $100
because of persistently high fuel costs, the Wall Street
Journal reported yesterday. The move comes six months after it
announced a ticket price overhaul designed to draw in more business
travelers. Its shares surged more than 11 percent. The Atlanta-based
airline said that effective immediately, one-way walk-up fares are
capped at $599, up from $499, for economy class and at $699 for first
class. Delta has been trying to cut costs to avoid bankruptcy
protection, but high fuel costs have caused its losses to continue to
mount, according to the Journal report.
Mayor: Bankruptcy an Option for New Orleans Schools
Mayor Ray Nagin says the solution for troubled Orleans Parish public
schools might be for the system to declare bankruptcy and turn its
financial operations over to a judge, the Associated Press reported.
Nagin says the city is not planning to take over any troubled schools
for the upcoming year as he had hoped earlier, the newswire
reported.