|
December 13, 2002
Rising Incomes Keep Economy Afloat
Yesterday's report that retail sales were stronger than expected last
month underscores a core element of strength in the current rocky state
of the economy: rising personal income, the Washington Post
reported. After-tax personal income has increased a hefty 8.1 percent
since March 2001, the beginning of the last recession. That is better
than in all but a couple of the boom years of the late 1990s. So, even
with the threat of war looming and the unemployment rate climbing to 6
percent, consumers have money to spend, reported the Post. To
read the full article, point your browser to
href='http://www.washingtonpost.com/wp-dyn/articles/A47734-2002Dec12.html'>
color='#000080'>http://www.washingtonpost.com/wp-dyn/articles/A47734-2002Dec12.html.
Pope Accepts Resignation of Boston's Cardinal Law
Cardinal Bernard Law, under intense fire in the sex abuse scandal,
resigned today as Boston archbishop, the Vatican announced, the
Associated Press reported. The Vatican said Pope John Paul II had
accepted the resignation, after the two men held talks this morning. The
pope named Bishop Richard Lennon an auxiliary bishop in Boston, to run
the diocese temporarily. 'I am profoundly grateful to the Holy Father
for having accepted my resignation as archbishop of Boston,' Cardinal
Law said in a written statement released by the Vatican, reported the
newswire. Abuse victims, lay members and even some priests had
intensified calls for Law to resign after 18 years at the helm of the
Boston archdiocese, as more cases of misconduct by priests unfolded from
the release of Church files.
US Airways Gets More Time to File Reorganization Plan
The Wall Street Journal reported that US Airways Group said a
federal judge extended the deadline for its reorganization plan under
chapter 11 to Jan. 31, but the airline said it intends to submit the
plan earlier. At a bankruptcy-court hearing on Thursday, Judge
Stephen Mitchell granted an extension that allows US Airways to file
its plan without interference from other parties until Jan. 31,
according to the newspaper. The carrier said, however, that it intends
to file its plan by Dec. 31. US Airways has maintained that it will seek
to emerge from chapter 11 bankruptcy protection in early 2003, reported
the Journal.
US Airways also said on Thursday that it and the landlord of its
Arlington, Va.-based headquarters have agreed on terms for an amended
lease. The airline said that the amended lease provides for
'significant' accommodations in rent and it will save the company $4
million a year, the Journal reported.
UAL
UAL's Bankruptcy Shows Pitfalls of Employee-ownership
Plans
In 1995, less than a year after pilots and mechanics gained a 55 percent
stake in UAL Corp., Chairman Gerald Greenwald told shareholders at the
company's annual meeting that employee ownership would save the parent
company of United Airlines, Bloomberg News reported. Seven years later,
the world's second-biggest airline is in bankruptcy and workers who gave
up $4.9 billion in concessions have watched their investment evaporate.
UAL's shares, which touched $101.75 in October 1997, closed at $1.21
yesterday and the bankruptcy may wipe out any remaining value, reported
the newswire.
UAL's employee stock ownership plan (ESOP) was designed to end labor
strife by aligning the interests of workers, executives and
shareholders. Instead, the collapse shows the risks of giving workers
power in a big public company and is a blow to advocates of employee
ownership, labor experts say, the newswire reported. Until UAL adopted
its ESOP, employee ownership was embraced mainly by small and mid-sized
closely held companies. For ESOP advocates, employee-owned companies
such as UAL and Weirton Steel Corp., the nation's second-biggest milled
tinmaker, represented a chance to test the concept on a larger scale,
reported Bloomberg.
Major UAL Shareholders Restricted from Selling
Shares
UAL Corp., operating under bankruptcy-court protection since Monday, has
secured a court order restricting large shareholders, including its
employee-owners, from unloading their holdings, at least until the
month's end, Dow Jones reported. The order, designed to help the world's
second-largest carrier make use of certain tax provisions, leaves
trading of UAL stock in the hands of small investors and speculators,
according to the newswire.
The court order, which took effect on Tuesday, prohibits purchases,
sales and other transfers of UAL equity interests by anyone who owns 2.5
million or more common shares, reported Dow Jones. It also prohibits
transfers of claims by anyone owning $65 million or more in claims
against the company. The order will remain in effect until a Dec. 30
court hearing to reconsider the appropriateness of the relief, reported
Dow Jones.
UAL Strategy Chief Outlines New Business Plan for
Airline
The business plan that UAL Corp.'s United Airlines hopes will be the
foundation for its emergence from bankruptcy-court protection features
competitive costs and a suite of discrete air-service products designed
to make the airline 'relevant' to as many customers as possible, the
Wall Street Journal reported. In a message to employees, Doug
Hacker, UAL's new executive vice president of strategy, said the company
intends to develop a 'mainline' jet service that has the lowest costs
among its peers. United will court international travelers through
increased reliance on its airline partners in the Star Alliance, he
said. To serve small domestic cities, United intends to continue to
build up small-jet flights offered by its regional affiliates. And to
cater to leisure fliers, it expects to operate a separate airline that
offers 'a low-cost, no-frills' product in markets dominated by leisure
customers and low-cost competition, Hacker said.
United Airlines May Save Routes With Smaller Jets, Analysts
Say
United Airlines will try to stem losses and emerge from bankruptcy by
shifting to smaller planes and reducing the number of available seats,
analysts said, reported Bloomberg News. The world's second-largest
airline will most likely try to avoid cutting routes, analysts said.
That will mean eliminating more of its largest aircraft, including the
Boeing 747-400, to tailor capacity to an air travel market that remains
15 percent below the passenger levels of before the Sept. 11 attacks.
The carrier may also seek changes to leases for aircraft and work rules
for employees in an effort to turn around some unprofitable routes
rather than abandon them, analysts said. First, the U.S. trustee for the
bankruptcy proceedings must pick the UAL creditors that will oversee the
restructuring. Selections are scheduled to be made today, reported the
newswire.
Fastow to Sell His Vermont Land, Cabin to Save Property
Taxes
Former Enron Corp. Chief Financial Officer Andrew Fastow, accused of
bilking millions from the bankrupt energy trader, is trying to save cash
by selling a Vermont cabin, Bloomberg News reported. After he was
indicted in October on fraud charges, Fastow posted the 68-acre property
in Norwich, Vt., as bond for his release from custody. A federal judge
in Houston, Texas, gave Fastow permission to sell the land and deposit
the proceeds with the court in an order made public on Monday.
S&P: In Age of Big Bankruptcies, Debt Recovery Shrinking
As bankruptcy filings continue to top the headlines, creditors are
facing another harsh reality - the shrinking of recovery values, Dow
Jones reported. Recovery rates have worsened during this credit cycle to
the point where senior unsecured bond holders are recovering about the
same percentage that subordinated bond holders used to receive
post-restructuring, according to research conducted by Standard &
Poor's, the newswire reported. Throughout the 1990s, holders of bank
debt were nearly certain of seeing their investment emerge from a
bankruptcy situation unimpaired. But that's been far from the case for
holders of bank debt over the last two years, S&P data show,
reported the newswire. To read the full article, point your browser to
www.wsj.com
(subscription required).
Kmart Seeks New Bar Date for 4,000 Omitted Claimants
Kmart Corp. asked the judge overseeing its bankruptcy case here for
permission to establish a supplemental bar date for about 4,000 personal
injury claimants the company failed to notify, according to court
documents made available on Thursday, Dow Jones reported. Troy,
Mich.-based Kmart said the parties were not listed on a series of
documents submitted to the court on April 15 and therefore didn't get
word of the original July 31 bar date. In all, Kmart sent notice to
about 1 million parties, including all employees who had worked for the
retailer within two years of its Jan. 22 filing date, thousands of
vendors, 5,000 landlords and subtenants and about 20,000 personal injury
and related claimants, reported the newswire. A hearing on the matter
has been set for Dec. 18.
Brascan Real Estate Completes Due Diligence
A Brascan Real Estate Financial Partners LLC affiliate completed due
diligence for its purchase of certain stock and debt of commercial
mortgage company Criimi Mae Inc., Dow Jones reported. In addition, Bear
Stearns & Co. completed its due diligence and agreed to provide
Criimi Mae with up to $300 million in secured financing through a
repurchase transaction, reported the newswire. Brascan Real Estate, a
private funds-management company established by Brascan Corp., agreed
last month to recapitalize and refinance Criimi Mae by purchasing 10
percent of its shares outstanding and up to $40 million in subordinated
debt. In a press release on Thursday, Criimi Mae said the companies
expect to complete the deal in January.
Criimi Mae plans to use the combined proceeds of up to $353 million-from
Brascan Real Estate's investments and the Bear Stearns financing,
together with a substantial portion of the Criimi Mae's liquid assets-to
retire the recourse debt incurred with its emergence from chapter 11
bankruptcy protection in April 2001.
Peregrine Systems Seeks OK Of Settlement Pact With IBM
Peregrine Systems Inc. and International Business Machines Corp. are
seeking bankruptcy court approval of a settlement under which Peregrine
would pay IBM for claims under agreements between the firms at an 83
percent discount, Dow Jones reported. Peregrine Systems said that before
filing for bankruptcy, it signed channel agreements with IBM, under
which IBM marketed, licensed and implemented Peregrine's products,
reported the newswire. Also, under outsourcing agreements between the
two firms, Peregrine buys or leases products and services under
outsourcing pacts from IBM and its affiliates.
The company signed financing agreements with IBM that enabled Peregrine
to obtain and implement critical software systems, according to a court
motion filed Wednesday. The two companies also have risk mitigation
pacts, the filing said, through which IBM agreed to assume some of
Peregrine's support obligations in connection with some mutual customers
of the two firms if Peregrine becomes unable to perform the support
duties, reported the newswire. The motion said Peregrine must receive
bankruptcy court approval of the settlement by next Monday as a
condition of the agreement. Peregrine Systems has requested that the
bankruptcy court consider the matter at the company's hearing Friday in
Pittsburgh.
Diageo Sees Burger King Deal by Friday
Britain's Diageo PLC aims to sell its Burger King fast-food chain to a
Texas Pacific consortium for $1.5 billion in an agreement that could
come as early as Friday, sources close to the deal said on Thursday,
Reuters reported. The world's largest spirits group could reveal a
cut-price agreement by the end of this week, five months after an
original deal was agreed with the buying consortium, sources said,
according to the newswire. Details of the transaction were still being
finalized, which will bring to a close Diageo's 30-month long attempt to
sell the world's number two hamburger chain, they added. Diageo may have
to settle for around a third less than the original price. The U.S.
burger price war with McDonald's Corp. was a factor that drove one of
Burger King's largest franchisees, AmeriKing Inc., to file for chapter
11 bankruptcy protection earlier this month, according to Reuters.
General Magic Files for Bankruptcy Protection
Sunnyvale, Calif.-based General Magic Inc. filed for chapter 11
bankruptcy protection, nearly three months after it ceased business
operations and was delisted from the Nasdaq National Market, reported
Dow Jones. In a press release Thursday, the former high-profile
technology company said the bankruptcy filing will allow it to continue
marketing its assets and winding down its affairs to maximize return to
creditors. The company plans to use proceeds of its asset sales to repay
creditors and doesn't expect any assets to be left for distribution to
its common or preferred shareholders, reported the newswire. Most of
General Magic's employees left when it discontinued operations in
September, but a small team remained to handle selling off the company's
assets and resolving its debts.
Judge Upholds Plan Barring More Dow, Corning Implant Suits
The Associated Press reported that a federal bankruptcy judge has upheld
a plan that bars further lawsuits against Dow Corning Corp.'s corporate
parents by the thousands of women claiming silicone breast implants made
them sick. Judge Denise Page Hood made the ruling Wednesday after the
case was returned to bankruptcy court by the Cincinnati-based 6th
Circuit Court of Appeals, reported the newswire. The release from
litigation was one of the keys to the implant settlement, part of a $4.5
billion bankruptcy reorganization plan for Dow Corning worked out by
dozens of lawyers over four years, according to AP. The plan was
approved in November 1999 by U.S. Bankruptcy Judge Arthur
Spector. Dow Corning filed for bankruptcy protection in May
1995.
Impsat Gets Court Approval to Emerge From Chapter 11
Bankruptcy
Impsat Fiber Networks Inc. said it has received court approval to emerge
from bankruptcy, six months after the provider of telecommunications
services in Latin
America sought protection, Bloomberg News reported. The Buenos
Aires-based company said in a press release that it expects to emerge
from chapter 11 bankruptcy by year's end. Impsat filed for protection in
June, listing assets of $667 million and debts of $1.33 billion. Under
the reorganization approved in federal bankruptcy court in New York,
Impsat will owe $270 million, though no payments will be due for two
years, the company said. 'The confirmation of our plan gives us the
financial structure we need to maintain our competitive position in the
region,'' Ricardo Verdaguer, Impsat's chief executive officer, said in a
statement, reported the newswire.
Halliburton Weighs Novel Step to Alleviate Asbestos
Liability
To resolve its growing asbestos liability, Halliburton Co. is
considering a novel step that would put one of its biggest subsidiaries
into bankruptcy court, while allowing Halliburton to hold onto its
businesses, the Wall Street Journal reported. A deal hasn't yet
been struck, though one could be announced as early as today. If
Halliburton is successful, it could set a precedent for many companies,
including Honeywell International Inc. and Dow Chemical Co., that are
trying to contain their asbestos woes in subsidiaries. 'You would see
everybody trying it,' says Mark Taylor, a Washington, D.C., attorney
involved in asbestos bankruptcy law. To read the full article, point
your browser to
href='http://online.wsj.com/article/0,,SB1039745251991114993-search,00.html?c…'>
color='#000080'>http://online.wsj.com/article/0,,SB1039745251991114993-search,00.html?c…%
28article%2Dbody%29.
Court OKs EOTT's Settlement Pact with Enron
EOTT Energy Partners LP said it received court approval for its
separation from Enron Corp. upon confirmation of the EOTT plan of
reorganization, which the company expects early next year, Dow Jones
reported. In a press release, EOTT said the Bankruptcy Courts for the
Southern District of Texas and the Southern District of New York also
approved its disclosure statement that seeks approval from creditors and
shareholders for the reorganization plan. The energy company said the
court scheduled a hearing for Jan. 30 to approve the reorganization
plan, and EOTT expects creditor and shareholder approval by then. EOTT
President and Chief Executive Dana Gibbs said the company is on track to
emerge from chapter 11 in early 2003.
Ex-Safety-Kleen CFO Charged with Fraud
The former chief financial officer of Safety-Kleen Corp. was indicted on
securities and bank fraud charges for allegedly taking part in a scheme
to overstate the company's earnings by $267 million, Dow Jones reported.
Paul Humphreys was charged with manipulating the company's financial
statements between 1998 and 2000 to try to meet the earnings targets the
company predicted in 1998, when it was acquired by Rollins Environmental
Services Inc. Safety-Kleen, one of the nation's leading providers of
hazardous waste disposal services, filed for bankruptcy in June 2000 as
a result of the accounting improprieties. The company is currently
seeking court approval for its reorganization plan that would shed its
outstanding debts and pay off creditors.
Actrade Financial Files for Chapter 11 Bankruptcy
Protection
Actrade Financial Technologies Ltd. and its Actrade Capital unit filed
for chapter 11 bankruptcy protection in the Southern District of New
York as the company faces 'serious questions and issues' regarding its
past financial statements, Dow Jones reported. In a press release on
Thursday, Actrade said its audit committee is reviewing transactions of
its IMT business, which stopped operating in July. Actrade has received
anonymous allegations of possible irregularities and improprieties of
the IMT business. Amos Aharoni, former chairman and chief executive,
resigned in August after refusing to cooperate fully with the audit
committee.
Defendants Charged for Identity Theft in Bankruptcy
Proceedings
Federal prosecutors in Los Angeles yesterday announced charges against
eight defendants involved in identity theft for the purposes of
fraudulently obtaining credit or attempting to conceal their identity in
bankruptcy proceedings, according to a press release issued by the U.S.
Attorney for the Central District of California. The Office of the
United States Trustee has been combating fraud in the bankruptcy system.
'The United States Trustee, through its Debtor Identification
Initiative, ensures that people who file bankruptcy in false names or
with false social security numbers are dismissed from bankruptcy and
never receive a discharge of their debts,' said United States Attorney
Maureen Tighe. 'The U.S. Trustee also refers cases of apparent criminal
identity fraud for prosecution by the U.S. Attorney, as evidenced by the
cases announced today. Bankruptcy relief is solely for those who are
honest and fell on hard times, not for those hiding behind a false
identity or exploiting some innocent person.'
Thanks for visiting Today's Bankruptcy Headlines. New articles
are posted here each business day.
|
