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September 12, 2002
Democrats Angered by Delay of Action on Bankruptcy Measure
Rep. Calvin Dooley (D-Calif.) said yesterday that he and other moderate
Democrats are 'outraged' by House Republican leaders' decision to
indefinitely delay action on the bankruptcy reform legislation, which
had been tentatively scheduled for a vote today, reported
CongressDaily. Dooley told the newswire that his whip count
indicates ample votes to pass both the rule and the bill.
A leading member of the New Democrat coalition, he said he and fellow
Reps. Adam Smith (D-Wash.) and Rick Boucher (D-Va.) have been working
their own membership and have been pleased with the response. 'We are
confident that there will be a big majority vote for the rule, as well
as for the conference report,' he said, according to
CongressDaily. 'We're outraged that leadership is allowing a
handful of the most extreme pro-life members [to] hold this important
legislation hostage.'
House Republican leadership sources agreed this week that they
probably have the needed votes, but they are not currently unwilling to
overrule the objections of several anti-abortion Republicans. An aide to
one of the dissenting Republicans disputed those vote counts late
yesterday, saying, 'We are increasingly confident we have enough votes
to put this off for some time. With the pro-family groups as energized
as they are, leadership would be crazy to bring this up before the
elections.'
Industry supporters likewise bemoaned the House's decision not to
muscle through the vote, saying it calls into questions whether the
legislation will ever be scheduled-especially as the dissenting
Republicans are not apt to change their minds about the bill, reported
the newswire.
AFL-CIO Urges House to Vote Against Conference Bankruptcy
Report
The AFL-CIO turned the heat up on House lawmakers this week, urging them
to vote against a pending bankruptcy conference report, as well as the
rule bringing it to the floor, CongressDaily reported. 'This
legislation was flawed when it went to conference, and corporate
bankruptcies since then have rendered it even more harmful to working
families,' AFL-CIO legislative director Bill Samuel wrote in a letter to
legislators Tuesday, reported the newswire. He added, 'We are especially
alarmed by one provision in the conference report, not contained in the
original House bill, which is so broadly drafted that it could have a
chilling effect on legitimate protest activities,' the newswire
reported. That provision also has raised the ire of anti-abortion
activists, reported CongressDaily. Noting that the union has
opposed the bankruptcy legislation in the past on the grounds that it
would have a 'particularly harmful effect' on workers who face job
losses, Samuel said the measure was particularly inappropriate now,
given the recent corporate scandals and resulting losses of jobs.
Judiciary Panel to Debate Reform of Asbestos Litigation
The Senate Judiciary Committee is preparing for a Sept. 25 hearing on
asbestos litigation reform, CongressDaily reported. A committee
source confirmed that it is a 'tentative date,' but stressed that no
hearing had yet been officially scheduled. Senate Judiciary Chairman
Patrick Leahy (D-Vt.) agreed last month to hold an informational hearing
on the asbestos litigation - an area that industry lobbyists are priming
for serious action next year. Leahy's spokesman at the time warned that
the hearing would not necessarily lead to the introduction of
legislation this year.
Two Investors to Pressure Kmart to Speed Exit from
Bankruptcy
Edward S. Lampert's ESL Investments Inc. and Martin Whitman's Third
Avenue Value Fund have accumulated blocks of Kmart debt with a face
value of more than $1 billion, and were added Wednesday to a creditors
committee, the Wall Street Journal reported. Both intend to press
Kmart to come up with a plan to quickly get out of bankruptcy. 'We want
them to reorganize fast,' said Mr. Whitman, a veteran distressed-debt
investor.
According to the Journal, the unexpected move underscores the
increasing role sought by institutional investors during recent years to
push for action at troubled companies. The addition of distressed-debt
investors to a committee previously consisting entirely of Kmart's
bankers is testament to the inherent tension in high-stakes
reorganization efforts. Insiders trying to fix the company want to work
at their own pace while outside institutional investors, with their
money on the line, demand quick results.
Sarbanes to Open Banking Panel Consideration of Privacy
Issues
Senate Banking Chairman Paul Sarbanes (D-Md.), who has kept a low
profile on financial privacy issues since assuming control of the
committee last year, will break his silence at an information hearing
next Thursday, committee sources confirmed yesterday, reported
CongressDaily. Sarbanes previously stated that he wants to reopen
a debate that appeared permanently closed under the 1999 Gramm-Leach
Blilely financial modernization act: whether financial companies should
have to obtain a customer 'opt-in' for the sharing of certain personal
information. The hearing is being coordinated by Sarbanes and Sen.
Richard Shelby (R-Ala.) and will cover a range of privacy-related
matters, according to CongressDaily.
Sept. 11 Attacks Led to Jump in Bankruptcy Filings
The terrorist attacks last Sept. 11 accelerated bankruptcy filings by
several companies already hurt by last year's recession, reported Dow
Jones. Since that time, 215 publicly traded companies in the United
States filed for bankruptcy protection, according to Bankruptcydata.com.
'[Sept. 11] changed the whole direction and magnitude of economic
activity,' said Joel L. Naroff, president of Naroff Economic Advisors in
Philadelphia, reported the newswire. 'The data in September of last year
showed that the economy was coming out of a recession and 9-11 hit, and
those on the edge didn't have much of a chance.' The 215 bankruptcy
filings in the 12 months following the terrorist attacks compare with
176 corporate bankruptcies in 2000. To read the full story, point your
browser to 'http://www.wsj.com' (subscription required).
NewPower Committee Opposes Pa. Refunds without Court OK
The unsecured creditors' committee of NewPower Holdings Inc. is asking a
bankruptcy judge to prohibit the company from making payments to
improperly billed customers without the authority of the bankruptcy
court, Dow Jones reported. According to an objection filed Monday, the
committee said NewPower failed to disclose refunds to some Pennsylvania
customers of subsidiary New Power Co. to the bankruptcy court. Also,
it's unclear how much money has been refunded to the affected customers,
the filing said.
According to the newswire, Enron Corp. started NewPower in an attempt to
revolutionize the retail energy business. The company provides
electricity and natural gas to residential and small commercial
customers in markets that have been deregulated to permit retail
competition. NewPower filed for bankruptcy on June 11, listing total
assets of about $231.8 million and total debts of roughly $78.9 million
as of March 31 in its chapter 11 bankruptcy filing. New Power Co. and
TNPC Holdings Inc., another subsidiary, also filed for bankruptcy
protection on June 11.
Conseco, in Default of $2.5 Billion in Bonds, Has Few Options
Conseco Inc. may have staved off an immediate plunge into bankruptcy by
obtaining a further waiver of principal and interest payments on its
bank debt until October 17, Dow Jones reported. However, the prevailing
sentiment in the financial market is that the firm will ultimately have
to file for chapter 11 bankruptcy protection. The company has
acknowledged that the waiver didn't extend to the publicly-owned
corporate debt, and it has now defaulted on about $2.52 billion of
outstanding Conseco Inc. obligations.
A person familiar with the situation said that although the company has
stated its intention to reach a 'consensual restructuring' of its debt
structure, it would be highly unlikely to achieve because a consensual
restructuring would require 100 percent approval by all classes of
debtholders, reported the newswire. Rather, the person said, the more
likely outcome is that the company will seek to file a prepackaged
bankruptcy plan which would include the consent of most of its debtors
but not require 100 percent approval.
Adelphia Will Not Pay Founder Rigas' $4.2 Million Severance
Deal
Bankrupt cable operator Adelphia Communications Corp. has decided not to
pay former Chairman and Chief Executive John J. Rigas' $4.2 million
severance package, Dow Jones reported. Rigas and four other Adelphia
executives were charged in July with securities fraud and other alleged
violations related to the company he founded. Earlier this year,
Adelphia disclosed it had guaranteed billions of dollars in
off-the-books loans to Rigas family partnerships and said it would
restate financial reports for 1999 and 2000 and an interim 2001
statement.
Clean Harbors Closes Buy of Safety-Kleen's Chemical
Services
Clean Harbors Inc. acquired Safety-Kleen Corp.'s chemical services unit
and secured $260 million in financing needed to complete the deal, Dow
Jones reported. In a press release Wednesday, Clean Harbors, a provider
of hazardous waste services, said it bought the unit for $34.4 million
in cash plus the assumption of about $265 million in environmental
liabilities.
In June, Columbia, S.C.-based Safety-Kleen won approval from the U.S.
Bankruptcy Court in Wilmington, Del., to sell its chemical services unit
to Clean Harbors. Safety-Kleen filed for chapter 11 protection on June
9, 2000, listing assets of $4.45 billion and liabilities of $3.14
billion, the newswire reported.
Reliance Steel & Aluminum Co. Completes Metals USA Buy
Reliance Steel & Aluminum Co. completed the acquisition of a Metals
USA Inc. business, after final approval by the U.S. Bankruptcy Court
overseeing Metal USA's bankruptcy filing, Dow Jones reported. Reliance
bought the Metals USA Specialty Metals Northwest Inc. assets for $30
million in cash. Metals USA, whose shares trade on the over-the-counter
Bulletin Board, filed for chapter 11 bankruptcy protection in November.
Pacific Metal Co., which has operated in Portland since 1883, processes
and distributes mainly aluminum and coated carbon steel products,
reported the newswire. Sales for 2001 were $76.2 million. Current
management will continue to operate these facilities.
Judge Will Ok SLI's $20 Million Interim DIP Loan if Fees Are
Cut
U.S. Bankruptcy Judge Mary F. Walrath on Wednesday said she would
approve SLI Inc.'s proposed $20 million interim debtor-in-possession
loan if the company's lenders agree to receive a reduced fee, reported
Dow Jones. Judge Walrath said she would authorize SLI to pay a $2
million DIP fee and a $1 million facility fee to receive the $20 million
interim loan. SLI had sought approval to pay the lenders a $3 million
DIP fee, reduced from an initial request of $3.75 million, and a $1
million facility fee. Judge Walrath thought the fees were too high. The
hearing to consider interim approval of the $20 million loan will
reconvene this morning. Judge Walrath did authorize SLI to use the cash
collateral of its pre-petition lenders to fund payroll.
Also on Wednesday, Judge Walrath authorized the debtor to pay up to
$8.1 million owed to vendors it deems critical to its business. The
Canton, Mass.-based company filed for chapter 11 bankruptcy protection
on Monday. The company listed assets of $830.7 million and debts of
$721.2 million in its chapter 11 petition.
Group That Sold Properties to Panaco Opposes Some Terms
A number of companies that have sold oil and natural gas-producing
properties to Panaco Inc. have objected to Panaco's proposed continued
use of a secured creditor's cash collateral, saying the company's
proposed budget doesn't specifically outline that lease operating
expenses would be paid, reported Dow Jones. In an objection filed
Monday, the group of energy and oil and gas companies-which includes
Conoco Inc., some units of BP PLC and a subsidiary of Occidental
Petroleum Corp.also expressed concern that those lease operating
expenses may not be paid at a higher priority than other claims,
reported the newswire. At a hearing Thursday, the U.S. Bankruptcy Court
in Houston will consider approval for Panaco to continue to use
prepetition creditor Foothill Capital Corp.'s cash collateral. Panaco
listed total assets of about $130.2 million and total debts of roughly
$170.2 million in an exhibit to its chapter 11 bankruptcy petition.
Vocal Enron Creditor Wants Estate to Pay Its Legal Fees
A vocal creditor in Enron Corp.'s bankruptcy case wants the company to
reimburse its legal expenses, raising concerns that other creditors may
follow suit, reported Dow Jones. Wiser Oil Co. recently asked the court
to approve a motion that would require Enron to pay for lawyers' fees
and other expenses totaling about $212,900. Enron's estate has already
run up a legal tab of more than $60 million since its chapter 11 filing
in December, reported the newswire.
The U.S. Bankruptcy Code allows for a creditor to be reimbursed for
its legal fees if it has made a 'substantial contribution' to the
reorganization process. That means that if a creditor's actions serve
not only itself, but also the estate of the bankrupt company, then the
creditor may ask the estate to pay its legal bills. Enron argues that
Wiser's motion doesn't meet this requirement. 'If Wiser gets
reimbursed,' said Martin Bienenstock of Weil Gotshal & Manges,
Enron's lead bankruptcy lawyer, 'it would effectively encourage other
creditors to use the same tactic Wiser uses,' reported the newswire. A
hearing on Wiser's reimbursement request is expected to be held in the
Manhattan court Oct. 17.
PG&E's Bankruptcy Plan Advances
The bankrupt California utility Pacific Gas and Electric Co. heads into
a critical bankruptcy hearing next week with considerable momentum
behind its plan to exit chapter 11, the Daily Deal reported. The
utility's proposal got a boost earlier this week with the announcement
of the final tally of votes from creditors. The utility's plan won
approval from nine out of 10 voting creditors' classes. A rival plan put
forth by the utility's regulator, the California Public Utilities
Commission, won approval from one out of eight voting classes. Creditors
could vote 'yes' on more than one plan, however, which means that even
though the PUC plan did not draw as much support as PG&E's, it did
meet the criteria to proceed in bankruptcy court.
In its reorganization plan, PG&E calls for the utility to transfer
transmission lines, power plants and other assets to three new companies
that would fall under federal, not state, regulation. The shift, the
Deal reported, would allow the utility to repay the $13 billion
it owes creditors by borrowing more money to repay its debts, since it
would escape state control over how much it can charge for electricity.
The utility attributed its chapter 11 filing to buying power at prices
higher than state law permitted it to charge customers. Montali
scheduled a confirmation hearing for Nov. 12.
UAL's United Air May Ask for Loan Request Deadline Delay
UAL Corp.'s United Airlines said Wednesday it may, as expected, ask the
government for an extension of the Monday deadline for delivering
additional labor cost reduction pledges aimed at obtaining $1.8 billion
in federal loan guarantees, the Dow Jones reported. However, UAL, which
has warned that it may have to seek bankruptcy protection this autumn
absent the cost cuts and loan guarantees, said it first needs to find
out what kind of concessions its labor unions are willing to accept.
United is scheduled to begin paying off large debts in mid-November.
Analysts have said the carrier is highly likely to file for chapter 11
given the debt repayment requirements and the wide gap between
management and labor over concessions.
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