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June 2, 2005
Boehner: Companies Must Do Better Job Funding Pensions
House Education and the Workforce Chairman John Boehner
(R–Ohio), who plans to introduce a bill overhauling the rules
governing traditional pension plans next week, wants employers to do a
better job of funding their pension promises, CongressDaily
reported. Boehner warned that unless the rules are changed, more
companies might dump their pensions onto the Pension Benefit Guaranty
Corp. (PBGC). “Today’s outdated rules also put the taxpayers
at significant risk of a possible multibillion dollar bailout of the
PBGC if the agency’s financial condition continues to
worsen,” Boehner said.
Senate Finance Chairman Charles Grassley (R–Iowa) also is
preparing pension legislation. His committee will hold a hearing on
Tuesday to examine the recent decision of a bankruptcy court to allow
United Airlines to shift its pension liabilities to the PBGC. Lawmakers
have said they want to act on a bill before the end of the year, when a
temporary fix setting the rate companies must use to calculate pension
contributions expires.
Low Mortgage Rates Defy Expectations
Defying predictions, U.S. mortgage rates are lower than they were a
year ago and are falling, the Washington Post reported. The
rate on the average 30-year fixed-rate mortgage fell to 5.65 percent in
the week that ended May 26, the lowest rate since mid-February and below
the 6.32 percent level of a year ago, according to mortgage financier
Freddie Mac. “The housing market is going to be robust if rates
stay where they are,” said Freddie Mac’s chief economist,
Frank Nothaft. “But it’s hard for me to fathom why they
would stay this low for long.”
Delta Wins Credit Amendment
Delta Air Lines Inc. yesterday said General Electric Co.’s
finance arm has agreed to relax certain requirements under a credit
agreement, a move seen as likely allowing the cash-strapped carrier to
stave off a bankruptcy filing this year, Reuters reported. The amended
deal lowers the specified levels of required earnings before interest,
taxes, depreciation, amortization and aircraft rent. Delta, whose shares
rose 1 percent, said it asked for the reduction due to historically high
fuel prices.
Judge Allows Enron Broadband Trial to Continue
A federal judge on Wednesday allowed a majority of the case to
continue against five former Enron Corp. Internet executives, ruling
that prosecutors have done enough to prove their case at trial, Reuters
reported. U.S. District Judge Vanessa Gilmore dropped one wire fraud
charge against two former Enron Broadband Services finance executives,
Kevin Howard and Michael Krautz. She also considered dropping two money
laundering charges against two other defendants.
Shea Kicks Off Mayoral Campaign with Pitch for City Bankruptcy
Pat Shea, an attorney who played a key role in Orange County’s
bankruptcy reorganization, started his mayoral campaign on Wednesday by
saying municipal bankruptcy is the only route for the city’s
financial recovery, the San Diego Union Tribune reported.
“There’s no easy answer here. There’s only one
process… one orderly structure that will lead to the resolution of
these problems and the protection of the taxpayers,” Shea said.
Shea estimated San Diego’s financial shortfall at somewhere
between $2 billion and $5 billion, far higher than the $1.4 billion
pension deficit estimate that has been often cited by city
officials.
Fitch Downgrades Northwest Airlines Debt
Fitch downgraded Northwest Airlines Corp. debt on Wednesday, saying
the nation’s fourth-largest airline is taking too long to cut
worker pay while fuel costs remain high, the Associated Press reported.
Fitch cut $1.7 billion of Northwest’s senior unsecured debt to
CCC+, from B. It also rated Northwest’s $975 million secured bank
line of credit at B-, and said its outlook for Northwest remains
negative.
Winn-Dixie Seeks Approval for Executive Bonuses
Bankrupt supermarket chain Winn-Dixie Stores Inc. is seeking approval
to pay nearly $14 million in retention bonuses to key executives and up
to $120 million in severance benefits to laid-off employees, the
Associated Press reported. The plan is an incentive for upper-level
management to stay with the Jacksonville-based chain as it goes through
chapter 11 reorganization, Winn-Dixie said in a U.S. Bankruptcy Court
filing Friday. It would provide about 290 employees with bonuses ranging
from 25 percent to 150 percent of their salaries, to be paid in three
installments.
Parmalat Settles Dispute with Former U.S. Units
Italian dairy company Parmalat said on Wednesday it had settled a
dispute with three former U.S. dairy units and their creditors, Reuters
reported. Under the agreement, creditors and representatives of the
three U.S.companies—Parmalat USA Corp., Farmland Dairies and
Farmland Stremicks—have agreed to drop claims in the Parmalat
bankruptcy proceedings with the exception of $70 million already allowed
by an Italian court.
UAL Labor Deals Are Key to Progress, But Work Remains
United Airlines still aims to exit bankruptcy this year, but experts
warned on Wednesday of other high hurdles on the road to restructuring,
Reuters reported. Analysts generally agree that the carrier, a unit of
UAL Corp., has strengthened its competitive position. Still, soaring
fuel costs and a weak revenue environment could hamper some of
United’s progress. “I don’t have any sense of a
schedule,” said aviation consultant Robert Mann about
United’s intention to exit bankruptcy in the fall. “I
don’t think their late-this-year schedule is particularly
achievable. Energy prices and the competitive situation are not
cooperating.”
Diocese One Step Closer to Bankruptcy Reorganization Plan
A federal bankruptcy judge on Wednesday overruled all objections to
the Roman Catholic Diocese of Tucson’s amended disclosure
statement, marking a major step toward confirming the diocese’s
chapter 11 bankruptcy reorganization plan, the Arizona Daily
Star reported. Judge James M. Marlar’s rulings indicate he
will approve the diocese’s disclosure statement, which accompanies
the bankruptcy plan. The diocese filed for bankruptcy reorganization
protection Sept. 20, becoming the second diocese in the nation to seek
federal protection in the face of continued litigation over claims of
sexual abuse by clergy. Hearings to confirm the reorganization plan are
scheduled for July 11–15.
U.S. Bankruptcy Court Approves Loral’s Disclosure
Statement
Loral Space & Communications Ltd. yesterday announced that the
U.S. Bankruptcy Court for the Southern District of New York has approved
Loral’s disclosure statement with respect to its proposed plan of
reorganization, according to the company’s press release. At a
hearing in New York, the Honorable Robert D. Drain ruled that,
subject to the company making certain clarifications, Loral’s
disclosure statement contained adequate information for the purpose of
soliciting creditor approval of Loral’s plan of
reorganization.
Eddie Bauer to Exit Bankruptcy
Outdoor clothing maker Eddie Bauer Holdings Inc. says it will emerge
from bankruptcy this month with the help of a $450 million loan arranged
by banks including JPMorgan Chase & Co. and GE Commercial Finance,
Bloomberg News reported. Eddie Bauer’s parent company,
100-year-old catalog marketer Spiegel Inc., won court approval to leave
bankruptcy last Wednesday. When the financing closes in mid-June,
Spiegel will take the Eddie Bauer name, said Stuart Erickson, a
principal at Miller Buckfire & Co., the financial adviser for both
companies. Eddie Bauer is based in Downers Grove, Ill.
Airlines May Have to Fly Without Lifeline
The Bush administration is pushing Congress to make it harder for
companies to make new pension promises they can’t afford to keep,
the Wall Street Journal reported. But Delta and Northwest
Airlines want a break on paying for past promises. They want Congress to
allow them to spread payments to their underfunded pension funds over 25
years, an eternity in the airline business. The administration is
resisting, but Michael E. Levine, a former airline executive now at the
Yale School of Management, predicts it’ll eventually agree to a
break designed to keep Delta, Northwest and other pension plans out of
the PBGC safety net—even if the airlines end up in bankruptcy
court, the newspaper reported.