March 1, 2000
Consumer Confidence Still High but Drops Slightly in
February
Skyrocketing energy prices and the initial impact of higher
interest rates depressed consumer confidence slightly in February, but
low unemployment rates and increasing wages are holding the consumer
confidence at high levels, The Wall Street Journal reported.
The Conference Board's monthly index that measures the economic outlook
of U.S. households dropped nearly three points to 141.8 from 144.7 in
January. This is the first decline since October, but the number is
still the third highest in survey's 32-year history. 'Money is burning a
hole in people's pockets, and they're going to continue spending until
the rate hikes are more fully felt,' according to Richard Yamarone,
director of economic research for New York-based Argus Research
Corp.
Eagle Food Centers Seek Chapter 11 Protection
Regional supermarket chain Eagle Food Centers Inc. announced
yesterday that it filed for chapter 11 protection in the District of
Delaware and that it will close 19 of its 83 stores, according to a
newswire report. Eagle said that it has secured $50 million in financing
and negotiated the terms of a reorganization plan with its largest
secured lenders. Eagle, which operates under the Eagle Country market
and BOGO's names, will continue operating 64 stores in Illinois and Iowa
and said that is has already negotiated the critical terms of the plan
with its largest secured lender, Congress Financial. Eagle has entered
into a $50 million debtor-in-possession agreement with Congress.
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Internet Backbone Company Files Chapter 11
Bethesda, Md.-based Apex Global Information Services (AGIS),
one of the oldest operators of an Internet backbone, has filed for
bankruptcy protection, Inter@ctive Week reported. Founder
Phillip Lawlor said that one of the factors in the filing was that
NetZero Corp. bounced a $480,000 check to the company. Lawlor said he
was uncertain why NetZero failed to pay and that he anticipates a
lawsuit will be filed if the money does not come through within the next
48 hours. NetZero denies the check bounded but did acknowledge a billing
dispute. NetZero's total outstanding debt to AGIS is $900,000, Lawlor
said. AGIS, which once employed more than 100 people, laid off 60
workers on Friday. The company has experienced management turmoil since
it decided to open its backbone to 'spammers,' operators of unsolicited
bulk messaging firms. The policy has since been abandoned, but it made
AGIS a 'pariah' in the Internet community, Inter@ctive Week
reported.
Tower Air to Negotiate with Creditors Through Chapter 11
Filing
Tower Air Inc. said yesterday that it has filed for chapter 11
protection and that it will continue normal operations while negotiating
with creditors, according to a newswire report. CEO Morris Nachtomi
said, 'Given the company's current financial condition, we had no choice
but to file for chapter 11 protection.' Tower, which filed in
Wilmington, Del., said its existing secured lender, GMAC Business Credit
LLC, has agreed to provide an $18 million debtor-in-possession credit
facility.
Great Train Store Co. to Reorganize in Bankruptcy
Citing poor performance and the principal lender's decision not
to advance sufficient funds, the Great Train Store Co., Dallas, has
filed for chapter 11 protection in the District of Delaware, according
to a newswire report The national chain of train-themed toy, hobby and
gift stores will continue to operate its business and manage its
properties as debtor-in-possession (DIP). However, it does expect to
close up to 11 of its 56 stores that are performing below acceptable
levels. The Great Train Store has obtained DIP financing from it its
principal lender.
Genicom May Go Out of Business
Genicom Corp., Chantilly, Va., is considering filing chapter 11
or other alternatives upon receiving notice of default from its
creditors, Reuters reported. The computer consultant company said there
is no assurance that it can stay in business and that on Feb. 25 it
received formal notice from its lender group, led by Bank of America
N.A., that it was calling due all amounts under the credit facility
because Genicom failed to make principal or interest payments. Genicom
said it has been operating in violation of its credit facility since the
third quarter of 1999. The company is negotiating with its lender and
considering all options, including bankruptcy and refinancing.
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Arbitration Seems to Favor Business, Not Consumer
Like other banks, car dealers and retailers, First USA N.A. no
longer allows customers to sue the company in court and has instead
implemented an arbitration system to resolve disputes, The
Washington Post reported. First USA, the second largest issuer of
credit cards in the United States, which chooses the arbitration firm,
said that arbitration is faster for all parties involved, more efficient
and less costly. Data disclosed last month by the company shows that it
has sought arbitration far more often than consumers and that it has won
in 99.6 percent of the cases that went all he way to an arbitrator. A
growing number of suits on the issue contend that the National
Arbitration Forum, the firm involved, is so financially dependent on the
banking industry that it cannot afford to rule against such companies.
And they say the forum's marketing materials promise a 'positive impact
on the bottom line,' suggesting that the organization is inherently
biased against the consumer. Edward Anderson, managing director of the
Forum, said, 'We are impartial, and more importantly our
arbitrators--former judges, lawyers and law professors--are
impartial.'
A Senate Judiciary Committee subcommittee will hold a hearing today
on the growing number of contacts that require employees, businesses and
consumers to agree, in advance of any disputes, to give up their rights
to sue and submit all future disputes to arbitration. Sen. Charles E.
Grassley (R-Iowa) said he supports arbitration as a means of lessening
the burden on courts but also that he wants to 'make sure that consumer
interests are protected in the process and that the arbitration is being
conducted in a fair way.' Sen. Russell Feingold (D-Wis.) plans to
introduce legislation that would bar mandatory-arbitration provisions in
consumer contracts, and in fact, he tried to attach this provision to S.
625, the bankruptcy reform bill recently passed by the Senate. He
dropped the amendment in exchange for the subcommittee hearing.
KCS Energy Announces Court Decision
Houston-based KCS Energy Inc. announced yesterday that the U.S.
Bankruptcy Court for the District of Delaware orally denied on Feb. 25
the company's motion for an order determining that the class of senior
notes under its proposed chapter 11 plan would be unimpaired if the
notes were reinstated and the third supplemental indenture were
effective, according to a newswire report. KCS President and CEO James
W. Christmas said, 'Taking into account the court's ruling and remarks,
we believe we are unable to submit an amended plan which leaves the
holders of the senior notes unimpaired. Accordingly, the disclosure
statement hearing has been adjourned to March 26.' He also said that he
believes an amended chapter 11 plan can be filed based on the existing
noteholder agreement, but that there is no assurance that the proposed
plan will be approved. KCS is an independent energy company engaged in
the acquisition, exploration, development and production of natural gas
and crude oil.
Aetna Retains Turnaround Specialist
Aetna Inc. has appointed turnaround specialist Robert S. Miller
as special adviser to assist the troubled health insurer improve its
share price, according to a newswire report. Miller made a name for
himself at Chrysler Corp., where he served as CFO and vice chairman
during a 12-year career and helped the automaker negotiate from
near-bankruptcy. In the late 1980s and early 1990s he earned a
reputation at several other companies for his advice on refinancing,
restructuring and acquisitions. Aetna is facing lawsuits from physicians
who say that it does not pay claims on time, and customers are
increasingly complaining about poor service.
Disney to Purchase Planet Hollywood All Star Cafe
Walt Disney Co. announced that it is negotiating to purchase a
sports-themed restaurant on its central Florida property from Planet
Hollywood International Inc. by the end of the week, according to a
newswire report. The purchase price for the 280-seat Official All Star
Cafe at Disney's Wide World of Sports attraction was not disclosed. The
park hosts sporting events year-round and is the spring training site
for the Atlanta Braves. The restaurant is one of eight All Star Cafes
owned by Planet Hollywood, which emerged from chapter 11 protection last
month.
Ventas Completes Second Phase Closing of Long-term Credit
Facility
Ventas Inc., Louisville, Ky., announce that as part of its
recently completed amended long-term senor credit facility, it has
executed and delivered to its lenders mortgages, assignments and other
related documentation granting liens and security interests in
substantially all its real property assets and in other related assets
by the date required under the loan agreement. President and CEO Debra
A. Cafaro said, 'Our energies our now entirely focused on our continuing
work to finalize Vencor's plan of reorganization and with it, a
settlement of the government investigations of Ventas and Vencor.'
Vencor is the company's primary tenant. Ventas also said that it will
not declare or pay a dividend at this time and will maintain a strong
cash position pending developments in Vencor's bankruptcy proceedings.
Vencor filed for chapter 11 protection last September; its exclusivity
period ends March 13. Recently the company announced that it intends to
expand its debtor-in-possession financing until June 30, if the court
permits.
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