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Fed Warns It Won't Bail Out Markets
Federal Reserve Chairman Alan Greenspan sent a warning to nervous markets that said the Feds shouldn't be counted on to bail them out if the recent financial turbulence increases, The Wall Street Journal reported. 'We must be careful not to foster an expectation that policy makers will ultimately solve all serious potential problems and disruptions,' Greenspan told a Chicago banking conference. His comments appeared to be designed to correct the misperception that if the oscillating swings of the economy of late turned into a steep dive, the Feds would step in to limit the losses. Fed officials have stated that they were not trying to boost up the market in the past and won't do so now; the recent fluctuations were the result of disruptions in the basic operations of the market, not to the price levels themselves. Yet a recent survey conducted by the National Association of Business Economists found that 48 percent of respondents said they believed that the Fed 'has effectively given the stock market an implicit guaranteeŠthat if the stock market were to crash, it would ease to cushion the blow.' But this perception can have serious implications, Greenspan warned. 'Such a conviction could lull financial institutions into believing that all severe episodes will be handled by their central bank,' he said. That 'overreliance on public policy could lead to destabilizing behavior by market participants.' The Fed plans to raise interest rate possibly half a percentage point on May 15.
In related news, The Wall Street Journal reported that during the first few months of 2000, productivity slowed, but experts say it's too soon to determine if productivity, which is an important indicator of inflation, has begun to weaken. The Labor Department said that workforce productivity rose 2.4 percent, which was lower than expected, a less than the 6.9 percent increase reported in the last quarter of 1999. The current numbers suggest that the recent sharp productivity advances, which had helped employers keep the rising wage and compensation expenses without having to raise their prices, may be tapering off. 'I don't think the roof is falling in, but I worry about productivity continuing to slow in the short-term, leading to higher labor costs and greater inflation risks,' said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. 'For the long term, the trends are still very positive.'
Houston Bar and Bench Come Together to Solve 'Delaware Problem'
While the early 1980s were a busy time for bankruptcy lawyers in Texas, the early 1990s have seen a dramatic downturn in filings, according to law.com. Companies with Texas roots were drawn toward Delaware to file for bankruptcy because of the speed at which filings were processed and heard. To resolve the Delaware problem, bankruptcy judges in the Southern District of Texas (Houston, Corpus Christi and the Rio Grande Valley) have joined forces with lawyers and created new procedures that a promise quicker, more predictable resolution of complex chapter 11 cases. According to the new procedures, if a case is deemed complex, i.e., a case of significant scope, a judge must hear certain emergency cases no later than two days after a request for a hearing has been filed. In the past, once a business enters a bankruptcy court, it often must file a 'first day' motion in order to get authority to pay employees and creditors. Delaware has developed a reputation as being extremely quick in addressing first-day motions, but in Houston, the motions have languished. Many lawyers believe the new procedures will reverse the flow of cases to Delaware. For the complete text of the article, log on to law.com.
Family Golf Centers Files for Chapter 11
Family Golf Centers Inc., Melville, N.Y., which operates golf centers throughout North America, announced yesterday that it and all of its U.S. subsidiaries have filed voluntary chapter 11 petitions with U.S. Bankruptcy Court for the Southern District of New York, according to a newswire report. The company's Canadian subsidiaries are not part of the chapter 11 filing. At the hearing, the bankruptcy judge authorized the interim use of cash collateral by the company. A hearing to consider a $15 million debtor-in-possession credit facility is scheduled for today. Currently, the company owns, operates and has under construction 111 golf facilities and 19 ice rink and family entertainment facilities in 23 states and three Canadian provinces.
Continuum Group Effects Changes to Outstanding Common Stock
The Continuum Group Inc. has effected several adjustments to outstanding common stock since it went into bankruptcy more than two years ago, including those ordered by the bankruptcy court as part of its discharge from bankruptcy in October 1999, according to a newswire report. As a result of these adjustments, each share currently outstanding is the equivalent of approximately 40 shares outstanding prior to bankruptcy. Continuum also announced that is changing its name to NuWeb Solutions Inc. and that it had combined with Webnet Design LLC and its affiliates, a Pompano Beach, Fla.-based producer of adult entertainment on the Internet.
SubMicron Systems Liquidating Plan Is Confirmed
SubMicron Systems Corp., Allentown, Pa., which filed chapter 11 on Sept. 1 and consummated the sale of substantially all of its assets in October, announced yesterday that its liquidating chapter 11 plan was confirmed by the U.S. District Court for the District of Delaware on Wednesday, according to a newswire report. The effective plan date is May 16, at which time all remaining assets will be transferred to a plan administrator to be designated by the unsecured creditors' committee; In addition, all shares of SubMicron stock will be cancelled then.
AgriBioTech, Creditors Assess Offers To Purchase Company
AgriBioTech Inc. met Tuesday with its creditors, growers, lenders and other
parties in interest to evaluate numerous offers to purchase the Henderson, Nev.-based vertically integrated, full-service seed company. Bill Brandt of
Development Specialists Inc. serving as AgriBioTech's responsible person,
told DBR that DSI and restructuring accountants Arthur Andersen LLP made
recommendations to the creditor constituencies and others concerning the
sale process and lead bidders. Brandt said the offers to purchase
AgriBioTech as a going concern are 'substantial' and in excess of nine
figures, but he wouldn't be more specific.
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