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Insurers Seek Class Action, Asbestos Litigation Reforms
Enacting class action and asbestos litigation reforms top the list of
legislative priorities for the Alliance of American Insurers,
CongressDaily reported. Leaders of the Alliance, which represents
property and casualty companies, outlined their goals for the 108th
Congress at a news briefing on Friday. Alliance CEO Rodger Lawson said,
that '[asbestos litigation] is the problem that just won't go away.' The
Alliance aims to educate lawmakers about the expense of asbestos
litigation, 'Inaction,' he added, 'will make this situation an even
greater drain on the overall economy, with the potential to limit job
growth,' reported CongressDaily.
UNITED AIRLINES
UAL Machinists Must Take 14 Percent Wage Cuts, Judge Says
United Airlines mechanics and baggage handlers must accept 14 percent
wage cuts,
Judge Eugene Wedoff ruled after the Machinists union refused to
go along with the airline's plan to reduce labor costs, Bloomberg News
reported. United, which filed for
bankruptcy protection on Dec. 9, has said it needs labor concessions to
meet loan requirements as it begins restructuring. Interim pay cuts with
all unions will allow the world's second-largest airline to save $70
million a month and preserve bankruptcy financing while it negotiates
more extensive wage, benefit and work-rule concessions, reported the
newswire. Ultimately, Chicago-based United wants to reduce labor costs
by $2.4 billion annually, reported Bloomberg.
United to Stop Flying to New Zealand; 96 to Get
Fired
Bankrupt United Airlines said it will stop flying between the United
States and New Zealand, possibly eroding confidence even further and
lowering revenue for the struggling U.S. airline, Bloomberg News
reported. The last daily flight to Los Angeles will depart Auckland on
March 29, ending 17 years of service between the two countries, UAL
Corp.'s United said in a statement. United needs to meet cost-cutting
targets set by banks that lent the carrier $1.5 billion to keep it
operating during bankruptcy proceedings. It has about 10 weeks to
negotiate final wage and benefit cuts as well as work-rule changes with
unions.
United Flight Attendants Seek Review of CEO
Contract
United Airlines' flight attendants union is seeking a review of Chief
Executive Officer
Glenn Tilton's employment contract, which includes a $3 million signing
bonus, Bloomberg News reported. In a motion filed with the bankruptcy
court, the
Association of Flight Attendants asked the court to deny a company
motion to accept the contract. UAL Corp.'s United asked the court on
Dec. 9, the day the carrier sought chapter 11 protection from creditors,
to accept the contract signed in September, noting Tilton offered to
take an 11 percent pay cut.
US Airways Wins Additional Pay Reductions
At US Airways, a unit of US Airways Group Inc., four unions on Friday
and Saturday approved a secondary round of savings, most in benefit
reductions and work-rule changes, that are intended to help the carrier
win a government loan guarantee that would help it secure funds to
emerge from bankruptcy, the Wall Street Journal reported. Workers
represented by the machinists union, the Association of Flight
Attendants, the Communications Workers of America and the Transport
Workers Union narrowly approved the additional savings, valued at an
estimated $98 million a year for six years. The pilots union last month
ratified a savings package valued at $101 million annually. These
concessions are in addition to $840 million in annual cuts the unions
agreed to last summer, when US Airways filed for chapter 11, reported
the online newspaper.
American Airlines to Cut 4 Percent of Its Flight-attendant
Jobs
AMR Corp.'s American Airlines unit plans to cut 836 flight attendant
jobs at the end of the month, or nearly 4 percent of its total number of
flight attendants, the Wall Street Journal reported. Company
spokesman Todd Burke said American will furlough 343 flight attendants,
all in its St. Louis TWA operations, while another 493 attendants
throughout the system will take voluntary furloughs. Last month, the air
carrier said it would reduce its flight attendant ranks by 1,100 through
offering voluntary options such as job-sharing and 'overage leaves,'
reported the Journal.
Airlines Expect Big 4th Quarter Losses, Record-Year Deficits
Suffering from dismal demand and weak fares, the nation's big airlines
are expected to post large fourth-quarter losses and are on track to
rack up a record full-year deficit of $9 billion, Dow Jones reported.
The nine major carriers will report a combined net loss of $2.5 billion
in the quarter that ended Dec. 31, said Samuel Buttrick, airline analyst
at UBS Warburg LLC in Stamford, Conn., reported the newswire.
David Swierenga, the Air Transport Association's chief economist,
expects airlines with annual revenue of $100 million or more to lose a
combined $3 billion to $6 billion in 2003, according to Dow Jones. The
exact amount would depend on the political situations in Iraq and
Venezuela and the direction in corporate profits, which determines
companies' travel budgets. He believes 2004 will be 'the first chance'
for the group to break even, according to the newswire. Plunging revenue
drove two of the nine major carriers into bankruptcy in the past five
months. US Airways Group Inc. filed for chapter 11 bankruptcy-court
protection in August, followed by UAL Corp.'s United Airlines in
December.
Adelphia's Ex-Accounting Chief Pleads Guilty to Fraud
Adelphia Communications Corp.'s former director of accounting, Timothy
Werth, pleaded guilty to criminal charges stemming from the $2.5 billion
accounting scandal that pushed the cable company into bankruptcy,
Bloomberg News reported. Werth is the second company official to plead
guilty since a grand jury indicted John Rigas, his sons and two other
executives. They were accused of hiding debt and looting hundreds of
millions of dollars in company funds, according to Bloomberg News.
The plea comes as Adelphia is embroiled in a corporate governance
dispute over its future. The company wants to hire two former AT&T
Broadband executives to lead Adelphia out of bankruptcy, according to
the newswire. Shareholders, who filed suit yesterday demanding an annual
meeting at which the Rigases would be barred from voting, balked at a
proposed package that would have paid William Schleyer and Ronald Cooper
as much as $65 million over two years, according to the shareholders'
lawyer, the newswire reported.
NHL Gives Hamister Another One-week Extension to Buy
Sabres
The National Hockey League gave a group led by Arena Football League
team owner Mark Hamister a second one-week extension until Jan. 17 to
complete its purchase
of the Buffalo Sabres, Bloomberg News reported. A day after the Ottawa
Senators filed for protection from creditors in an Ottawa court, NHL
Commissioner Gary Bettman granted Hamister and Chartwell Investments
President Todd Berman more time because progress was being made in talks
with state, county and city officials, he said, reported the newswire.
The bid is contingent upon support from New York state, Erie County and
the city of Buffalo to cover debts related to six-year-old HSBC Arena.
Without help, Hamister has said he will withdraw his bid, Bloomberg
reported.
Sprint PCS May Invest in Affiliate to Keep It Going
Sprint Corp.'s wireless unit may invest in one of the financially ailing
companies
that is selling its mobile-telephone service, to help that business
survive and uphold service, said Sprint PCS President Len Lauer,
Bloomberg News reported. One partner, AirGate PCS Inc., a money-losing
seller of PCS service in the U.S. Midwest and Southeast, said last month
it may be in default on loans because of its delayed annual report,
reported the newswire.
AirGate PCS said on Dec. 30 it was delaying its annual report to the
Securities and Exchange Commission until Tuesday to give the
Atlanta-based company time to review what Sprint PCS owes it, reported
Bloomberg. The company's iPCS subsidiary, acquired in 2001 for $821.4
million in stock and assumed debt, has said it may file for bankruptcy.
Some analysts have said AirGate PCS, which had a net loss of $50.1
million, or $1.94 a share, in its fiscal third quarter, may follow suit,
reported the newswire.
Union Acceptance Reaches Interim Settlement with MBIA
Insurance
Union Acceptance Corp., a bankrupt lender to automobile buyers, agreed
to drop a lawsuit against MBIA Inc.'s insurance unit over guarantees on
a portfolio of about $2.35 billion in auto loans, Bloomberg News
reported. Union Acceptance, which filed for chapter 11 protection in
November, asked a federal bankruptcy judge to place a freeze on the loan
portfolio, which it managed, as part of the filing. The company also
sought to have MBIA barred from finding a replacement to oversee the
loans. Under an 'interim settlement'' with MBIA, Union Acceptance
officials agreed to dismiss their suit and allow MBIA to manage the
loans through March 31, according to a statement. Union Acceptance has
the right to re-file the suit after the March deadline, reported the
newswire.
Some in Chapter 11 Calm Vendors with 'Comfort' DIP Loans (Wall Street
Journal)
When Owens Corning was preparing to file for chapter 11 bankruptcy
protection a couple of years ago, the company wanted to make sure the
filing didn't scare customers and critical suppliers into believing the
fiberglass manufacturer was on its last legs, the Wall Street
Journal reported. 'The whole concept was to assure customers and
vendors that they have financing so that people will continue to buy
their products and ship products to them,' said Barry W. Ridings,
managing director of Lazard Freres & Co., a financial adviser that
often helps debtors negotiate DIP loans. 'Loans like this are rarely, if
ever, used. They're comfort loans,' said Ridings, reported the online
newspaper. However, companies negotiating these larger-than-necessary
loans are still faced with paying loan fees equivalent to the loan
amount, reported the Journal. To read the full article, point
your browser to www.wsj.com (subscription
required).
Kmart Will Request Court Permission This Month to Close
Stores
Bankrupt Kmart Corp. will seek court permission this month to close more
stores to cut costs in an attempt to emerge from chapter 11 later this
year, according to Bloomberg News. The Troy, Mich.-based discounter will
finish evaluating its roughly 1,800 stores by mid-January and will
request approval at a hearing on Jan. 28, spokesman Jack Ferry said, the
newswire reported. Analysts have predicted as many as 500 stores may be
closed. The retailer closed 283 under-performing stores in May and June
and fired more than 22,000 workers in the past year, reported Bloomberg.
The retailer has said it plans to file a reorganization plan by Feb. 24
and exit bankruptcy by the middle of this year.
Credit Card Giants Defend Against Antitrust Charges
Lawyers for Visa USA Inc. and MasterCard International Inc. on Friday
defended themselves on charges that the giant credit card companies
conspired to suppress the use of rival debit cards in favor of their
pricier versions, driving up costs for retailers and consumers,
Law.com reported. The allegations were made in a civil lawsuit
filed six years ago in U.S. District Court in Brooklyn, N.Y., by a
coalition of the nation's largest retailers led by Wal-Mart Stores Inc.
The U.S. Supreme Court cleared the lawsuit for class action status last
summer, adding more than 5 million merchants as plaintiffs in the suit,
which seeks tens of billions in damages. The hearing on Friday concerned
cross-motions for summary judgment, with the plaintiffs arguing that the
court should find the credit card companies liable, leaving only damages
to be decided at trial, and the defendants pressing for dismissal of the
case. To read the full article, point your browser to
href='http://www.law.com/jsp/article.jsp?id=1039054577205'>http://www.law.com/jsp/article.jsp?id=1039054577205.
Federal-Mogul Creditors Seek Control of Chapter 11 Plan
Process
Federal-Mogul Corp.'s largest creditors are asking a federal judge to
let them
file a reorganization plan that would give them all of the company's
shares, Bloomberg News reported. The chapter 11 plan, proposed by
separate creditor panels representing bondholders and asbestos
plaintiffs, would give bondholders and other unsecured creditors 49.9
percent of the reorganized company's shares, according to Bloomberg. The
rest of the new shares would be put into a trust for asbestos
plaintiffs. On Wednesday, the two creditor panels asked a federal
bankruptcy judge to end Federal-Mogul's exclusive right to propose a
reorganization plan. The creditors would be able to advance their
reorganization plan if their request is granted at a Jan. 29 hearing,
reported the newswire.
Laidlaw Says It Expects to Emerge From Bankruptcy by March
31
Laidlaw Inc., North America's biggest bus company, said it expects to
emerge
from bankruptcy protection by March 31, Bloomberg News reported. Laidlaw
plans to file an amended reorganization plan in bankruptcy court that
will forecast 2003 profit of about $500 million before interest, taxes,
depreciation, amortization and
restructuring expenses, the company said in a release distributed on PR
Newswire. Laidlaw expects its reorganization to be completed by the end
of March, reported Bloomberg.
As Steel Industry Consolidates, Workers' Benefits Begin to
Shift
Back-to-back takeover bids in the U.S. steel industry last week signaled
a quickening pace toward consolidation of the sector and foreshadowed
what could be an important shift in how an ailing industry doles out
benefits to its workforce and retirees, the Wall Street Journal
reported. Some 30 U.S. steel companies have filed for chapter 11
bankruptcy-court protection in the past five years, weighed down mainly
by huge health and pension obligations. As the companies' financial
circumstances have deteriorated further, the Pension Benefit Guaranty
Corp., a quasipublic insurance agency, has begun stepping in to assume
these retirement liabilities. And labor unions are now willing to
renegotiate more flexible contracts. Unburdened of these costs, buyers
are finally willing to step in to attempt to revive these companies. To
read the full article, point your browser to
href='http://www.wsj.com'>www.wsj.com (subscription required).
Hayes Lemmerz Wins Extension of Exclusive Plan Periods
Hayes Lemmerz International Inc. on Friday won a four-month extension of
its exclusive periods to file a reorganization plan and solicit plan
acceptances, Dow Jones reported. The debtor company filed a proposed
reorganization plan and disclosure statement in December. A hearing to
consider the adequacy of the disclosure statement is scheduled for Feb.
6. The order, signed Friday by Judge Mary F. Walrath of the U.S.
Bankruptcy Court in Wilmington, bars other parties from filing competing
plans through April 15. The order also extends the period during which
Hayes Lemmerz has the sole right to seek votes for a plan through June
16, reported the newswire.
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