April 17, 2000
Fed Warns of Unrestrained Inflation
Federal Reserve Chairman Alan Greenspan has been warning the nation
for the last few years that there are limits to how fast the New
American Economy can grow without setting off inflation, but that 'we do
not know where that point is,' The Wall Street Journal reported.
'When we reach that point,' he warned, 'short of a repeal of the law of
supply and demand,' inflation will return. Friday's consumer-price
report showed that retail prices rose from 0.4 percent in March from
February, up from 2.4 percent the previous year. It's the biggest
monthly increase in the core inflation rate in five years, and could
have a large impact on the economy in general. The rise comes at a time
when many of the anti-inflationary forces of the 1990s are decreasing;
costs for raw materials, imports and health care are no longer falling.
In addition, overseas economies are beginning to grow again. However,
American spending has not decreased. 'We're in a period of heightened
alert,' said Edward Boehne, president of the Federal Reserve Bank in
Philadelphia. 'We've moved beyond just the risk of accelerating
inflation to some preliminary, fragmentary suggestions that we might be
seeing some accelerating inflation.' Some officials have been advocating
pushing up interest rates by half a percentage point next month. But the
Fed is loath to make matters worse by doing so, and Greenspan had
indicated earlier this year that the market could grow as fast as 6
percent without contributing to inflation.
MicroAge Gets Court Approval for $225 Million in DIP Financing
A day after MicroAge Inc. announced it had filed for chapter 11 on
Thursday, the company announced on Friday that it received bankruptcy
court approval for a $225 million debtor-in-possession financing
commitment by a group of financial institutions led by Citibank N.A.,
and also received approval to pay pre-petition and post-petition
salaries during its voluntary restructuring, according to a Dow Jones
newswire report. The Tempe, Ariz.-based computer distribution and
services company said the court approved its motion to pay pre-petition
obligations to freight shippers, and that there will be no interruption
in operations as the company continues to make purchases from its
vendors. MicroAge, a Fortune 500 company, had filed chapter 11 petitions
in the District of Arizona in Phoenix for itself and its principal
subsidiaries, including Pinacor Inc. and MicroAge Technology Services
L.L.C.
Bennett Trustee Proposes $105 Million to Unsecured Creditors
The trustee of the bankrupt Bennett Funding Group and related
companies, Richard C. Breeden, announced on Friday that he has filed a
motion with the bankruptcy court seeking authority to distribute $105
million in cash to unsecured creditors, according to a newswire report.
If approved by the court at its hearing on May 11, the actual payout is
expected to be completed by June 30, bringing total cumulative payouts
to secured and unsecured creditors, tax authorities, vendors, employees
and other parties in interest to more than $500 million. Of this amount
in total distributions, $180 million, or 36 percent, will have been paid
to unsecured creditors as of the trustee's latest distribution.
Unsecured creditors received two previous interim distributions of $50
million in 1998 and $25 million in 1999, together with the $105 million
now proposed by Breeden. The Bennett companies had total debts of more
than $1 billion when they filed for bankruptcy in 1996. To date, the
trustee has recovered $564.8 million for the estate, believed to be the
largest-ever recovery by investors in a Ponzi-style fraud. The estate's
asset recovery efforts are continuing, including major lawsuits against
various parties that assisted in the conduct of one of history's largest
frauds. The Bennett estate has more than 12,000 creditors in more than
40 states.
United Artists Blocked from Paying Debt in Creditor Dispute
United Artists Theater Co., Englewood, Colo., is being blocked from
paying $12.3 million in debt this week in a dispute between its
creditors, the company's president said, the Associated Press reported.
Meanwhile, Arthur Anderson and Co., the independent accounting firm that
reviewed the company's accounts, is raising questions about the
company's viability. 'UATC has suffered recurring losses from operations
and may not generate sufficient liquidity to meet its financial
obligations as they become due, which raises substantial doubt about its
ability to continue as a going concern,' Arthur Anderson officials said
in a filing with the Securities and Exchange Commission. The $12.3
million debt due this week is part of the company's $440 million line of
credit. Senior creditors, led by Bank of America Corp., blocked United
Artists on Wednesday from making a $12.3 million payment to subordinated
creditors that was due Saturday. 'Senior creditors don't want any of the
money going to subordinated creditors,' said Kurt Hall, president of
UATC. United Artists has been hurt by a glut of movie houses and
expensive leases at bad theaters, Hall said, and the company has already
said it might declare bankruptcy to get rid of some of the expensive
leases. 'We are not considering bankruptcy right now,' Hall said. 'It is
a strategy that may be employed to expedite getting rid of some of these
leases. We have a lot of bad deals that we have to get out of with our
landlords. We've done a good job of getting out of some leases. But
using the court process may be one way of getting out of certain
leases.' Russ Solomon, an analyst at Moody's Investors Service, said the
banks have been working with United Artists for more than a year and
likely will not continue to be lenient. 'No one in the bank group will
throw good money after bad,' Solomon said. 'The banks are in control
here. The situation will get worse before it gets better.' United
Artists owns more than 2,000 movie theater screens in the United
States.
