February 24, 2004
Greenspan: U.S. Consumers in Good Shape
Federal Reserve Chairman Alan Greenspan yesterday said U.S.
consumers seemed in generally good financial shape, able to carry more
debt comfortably because they are cushioned by rising home prices,
Reuters reported. 'Overall, the household sector seems to be in good
shape,' Greenspan told the Credit Union National Association. 'Much of
the apparent increase in the household sector's debt ratios over the
past decade reflects factors that do not suggest increasing household
financial stress,' he said. While bankruptcy rates have risen to 'an
unusually high level' in recent years, demonstrating the impact of
economic slowdown, they could not be taken as a reliable gauge of the
household sector's health since it does not forecast the future, the
newswire reported.
A better gauge was payment delinquency rates. 'The recent experience
with some delinquency rates has been encouraging, with rates falling for
several measures of credit card and automobile debt,' Greenspan said,
reported the newswire. He said both the debt service ratio and financial
obligations ration -- which measure how much of a household's income
must go to carrying debt -- had risen modestly during the 1990s but
during the past two years 'have been essentially flat.' Greenspan noted
that debt-to-income ratios have been rising for half a century and the
ratio of net worth to income was currently higher than its long-run
average because household assets were rising as well. That was not
worrying because more alternatives were available for managing debt, he
said. 'So long as financial intermediation continues to expand, both
household debt and assets are likely to rise faster than income,' he
said, but that did not necessarily imply a heavier debt burden, reported
the newswire.
MCI Settles with AT&T, Drops $120 Million Bill
Long-distance telephone companies AT&T Corp. and MCI yesterday
said they had settled claims that MCI improperly routed calls, with MCI
agreeing to forgive about $120 million in charges against AT&T,
Reuters reported. Terms of the settlement, which also included smaller
phone company Onvoy Inc., were not disclosed. As part of the deal, MCI
dropped its contempt of court motion against AT&T; the company had
claimed AT&T's lawsuit violated bankruptcy court rules. In a
bankruptcy court motion filed yesterday, MCI said AT&T owed it about
$220 million for various services, while AT&T had claimed MCI owed
it about $100 million in similar charges. As part of the settlement,
both sides will drop all such charges, reported the newswire.
Parmalat USA Files for Chapter 11
Parmalat USA Corp., a unit of Italian milk giant Parmalat today filed
for chapter 11 bankruptcy protection, court filings show, Reuters
reported. Two other Parmalat-related entities, Farmland Dairies LLC and
Milk Products of Alabama LLC, also sought chapter 11 protection from
creditors, the filings show. The entities filed with the U.S. Bankruptcy
Court for the Southern District of New York, reported the newswire.
Union Contests Rescue of Aladdin by Restaurateur
A rescue of the Aladdin casino by celebrity restaurateur Robert Earl
is being challenged by the Las Vegas-based Culinary Workers Union, which
accuses him of mismanagement and feather-bedding at his Planet Hollywood
chain, the Wall Street Journal reported. In a letter delivered to
Nevada gambling regulators Monday, the union alleges that Earl has a
track record of corporate-governance improprieties and questionable
management practices at Planet Hollywood International Inc., which has
twice filed for bankruptcy protection. Much of the 11-page document is
based on a 2002 report by a bankruptcy-court-appointed auditor. The
union, which represents food and service workers, argues in the letter
to the Nevada Gaming Commission that Earl's past corporate practices
make him unsuitable to hold a license to operate a casino in the tightly
regulated Nevada industry, reported the online newspaper.
Air Canada Unions Refuse Talks On Pension Changes
Air Canada's unions rejected a request for an 'immediate meeting'
over pension changes from the airline's new equity investor on Monday,
saying the matter was not open to discussion, Reuters reported. 'We are
not meeting with these folks. The game is over,' said Dave Ritchie,
vice-president of Air Canada's machinists union. A spokesman for the Air
Canada Pilots Association said employees have already made enough
sacrifices to help the airline emerge in one piece from its
restructuring under bankruptcy protection. Trinity Time Investments
Inc., a company controlled by Hong Kong businessman Victor Li, asked
earlier in the day to meet with the unions to discuss its plan to switch
Air Canada's pension plan to a defined contribution plan from a defined
benefit plan, reported the newswire.
Slater Eyes Exemption from Disclosure Requirements
Slater Steel said yesterday it will seek exemption from disclosure
requirements under securities legislation in a number of Canadian
provinces almost nine months after filing for bankruptcy protection,
Reuters reported. The company, which also said it will seek to delist
its shares from trading on the Toronto Stock Exchange, feels giving
disclosure to shareholders is costly and not warranted. Slater has
submitted applications to regulators in Ontario, Alberta, British
Columbia, Quebec, Saskatchewan, Manitoba, Nova Scotia and Newfoundland
and Labrador for exemption from disclosure requirements. The company has
said it does not believe its shareholders will receive any value from
the insolvency proceedings.
Jury Selection Begins in Rigas Trial
Jury selection began yesterday in the trial of former Adelphia
Communications Corp. CEO John Rigas on charges of looting millions of
dollars from the cable company he founded, Reuters reported. Rigas and
sons Michael and Timothy, who served as top executives of the company,
each face a minimum of 15 to 20 years in prison if convicted on two
dozen counts of securities, wire and bank fraud and conspiracy,
according to prosecutors. Also on trial is Michael Mulcahey, former
director of internal reporting for Adelphia. The Rigases are accused of
using millions in company funds to cover margin calls on Adelphia stock
and for personal extravagances such as a golf course, a professional
hockey team and personal travel on the company jet. The family denies
the charges, arguing the loans were legitimate and were taken out on the
recommendations of their auditor and investment bankers. The questioning
of potential jurors is expected to last a week. Opening arguments in the
case are scheduled for March 1 in a trial that is expected to last three
months, Reuters reported.
Bankruptcy Court OKs Aurora Reorganization
A federal bankruptcy court has approved a reorganization plan for Aurora
Foods Inc. that calls for the maker of Duncan Hines baking mixes,
Lender's bagels and other foods to merge with Pinnacle Foods Holding
Corp., Aurora officials yesterday, the Associated Press reported. The
U.S. Bankruptcy Court in Delaware on Friday approved the plan filed in
December. 'Today's action is a big step forward in our ongoing
restructuring and planned merger with Pinnacle Foods,' Aurora Chairman
and interim CEO Dale Morrison said. 'Our combination with Pinnacle will
create a strong branded foods company that provides high quality
products and services to its customers.' The merger with Pinnacle is
expected to be completed by March 31, reported the newswire.
The bankruptcy plan calls for all vendors, trade creditors and senior
lenders to be paid in full, spokesman Chuck Dohrenwend said. Some
bondholders would be paid in full in cash, while others would get 50
cents on the dollar in cash or 53 cents on the dollar in equity in the
combined company. Certain holders of Aurora's senior subordinated notes
will own up to 42 percent of the equity of the combined company, while
existing common and preferred stockholders will get nothing.
Port Ludlow: Resort's Parent Company Files For Chapter 11
Reorganization
The parent company of resort developer Port Ludlow Associates has filed
for reorganization under chapter 11 of the federal bankruptcy statute,
the Peninsula Daily News reported. San Francisco-based HCV
Pacific Partners filed on Friday in the U.S. Bankruptcy Court for
Northern California to undergo corporate restructuring. The company
purchased Port Ludlow Resort in 2000 for $16.7 million. During a Monday
hearing in San Francisco, a bankruptcy judge set aside a hearing on the
matter until March 11.
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