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September 11, 2003
Mortgage Delinquencies Rise As Recovery Remains Fragile
Mortgage delinquencies rose in the second quarter, a sign that Americans
are still struggling to keep up with debt payments despite recent
evidence of an improving economy, the Wall Street Journal
reported. The Mortgage Bankers Association of America said the
percentage of borrowers who fell behind on their mortgage loans rose to
a seasonally adjusted 4.62 percent in the second quarter, from 4.52
percent the previous quarter. The delinquency rate for loans insured by
the Federal Housing Administration jumped to 12.59 percent from 11.65
percent.
Delinquencies had been declining over the past several quarters, which
some analysts took as evidence that credit quality was finally
stabilizing in the aftermath of the recent recession. But the latest
numbers seem to suggest that problems with credit quality aren't over
yet. 'I think mortgage credit quality is destined to erode measurably
further, even with a better job market and economy,' said Mark Zandi,
the chief economist of Economy.com, a West Chester, Pa.-based consulting
firm, reported the online newspaper. He noted that home price
appreciation is slowing, which could make it harder for families that
are falling behind on their loans to sell their houses and get out of
trouble. According to the Office of Federal Housing Enterprise
Oversight, a federal housing agency, home prices rose just 0.78 percent
during the three months through June, the slowest quarterly rate of
appreciation since 1996.
The percentage of loans in the foreclosure process at the end of the
second quarter fell, however, to 1.12 percent from 1.2 percent.
Foreclosure trends typically lag results in the delinquency data by one
or two quarters, the MBA said, so the latest decline was expected,
reported the newspaper.
Jobless Claims Post Unexpected Rise
The number of U.S. workers filing initial claims for unemployment aid
rose for a third straight week last week, according to a government
report showing unexpected weakness in the job market, Reuters reported.
First-time filings for state jobless benefits rose by a slim 3,000 to
422,000 in the week ended Sept. 6, the Labor Department said. The
increase, which brought claims to their highest level since early July,
defied predictions on Wall Street for a drop to 400,000 from the 413,000
originally reported for the Aug. 30 week. Numerous signs have suggested
the U.S. economy is now growing, but companies have continued to lay off
workers and hold the line on hiring as they seek to bolster profits,
reported the newswire.
Treasury Disavows Pension 'Talking Points'
Treasury Secretary John W. Snow said yesterday that he would look into
reports that International Business Machines Corp. lobbyists altered a
document to make it look as if the department opposed restrictions on
cash-balance pensions, the Washington Post reported.
At issue is a document that IBM lobbyists sent to congressional offices
stating that the department opposed an amendment, sponsored by Rep.
Bernard Sanders (I-Vt.), to its 2004 appropriations bill. The amendment,
which the House approved on Tuesday, would bar the department from
writing regulations that are contrary to the finding of a federal judge
that cash-balance plans violate age-discrimination laws. IBM was sued by
some participants in its pension plan after it was converted to a
cash-balance plan in 1999. While such plans usually provide more
benefits to workers who change jobs frequently, they can reduce pensions
for long-term workers. A federal judge in Illinois this summer found
that IBM's plan, and by inference virtually all cash-balance plans,
discriminate against older workers because of the way their formulas
work, reported the Post.
Former Enron Treasurer Pleads Guilty
Former Enron Corp. Treasurer Ben Glisan pleaded guilty to conspiring to
commit securities and wire fraud, becoming the highest-ranking former
employee to admit
wrongdoing in the accounting scandal that drove the energy company into
bankruptcy, Bloomberg News reported. Glisan entered his plea yesterday
in the U.S. District Court in Houston and was sentenced to five years in
prison. He also agreed to make restitution. 'I take full responsibility
for my actions,'' Glisan said in court, reported the newswire.
Conseco Emerges from Bankruptcy
Insurer Conseco Inc. said on Wednesday it emerged from chapter 11
bankruptcy a day after its exit plan was approved by a federal judge,
Reuters reported. The company in December filed the third-largest
bankruptcy in U.S. history after rapid expansion into the high-risk
loans business saddled it with too much debt. Under the plan, Conseco's
debt and preferred securities obligations were cut to $1.3 billion from
about $6.5 billion. The company will also function as an insurance-only
operation. Conseco's existing common stock was canceled, and the company
said 100 million new shares are expected to be issued 'shortly.' A new
seven-member board headed by former ING Americas Chief Executive Glenn
Hilliard will replace the current 11-member board. In a statement,
Conseco said its new capital structure consists of a $1.3 billion
secured bank facility and new convertible preferred stock with a
liquidation preference of about $860 million, reported the newswire.
Talks Set Over US Airways' Pittsburgh Operations
US Airways Group Inc. is finishing up a counterproposal over the future
of its route hub in Pittsburgh, and talks between the airline and state
and local officials are scheduled for next Wednesday, a source close to
the negotiations said, Reuters reported. US Airways accounts for about
80 percent of passenger traffic at Pittsburgh International Airport. The
airline rejected its leases at Pittsburgh before it emerged from
bankruptcy in late March, and has said it could eliminate Pittsburgh as
a hub if the airport did not improve its facilities and cut back its
debt. In June, Pennsylvania proposed $264 million in cost savings and
improvements at Pittsburgh and Philadelphia's airports to keep US
Airways' hub operations in the state. US Airways has not responded with
a counteroffer, but spokesman David Castelveter said the airline is
evaluating the issues and running a study of the airline's economic
impact on the area, reported the newswire.
Lightyear to Buy Maxxim Medical Out of Bankruptcy
Lightyear Capital, a buyout fund led by former PaineWebber chief Donald
Marron, said on Wednesday it agreed to purchase Maxxim Medical, a
bankrupt medical products company, Reuters reported. Clearwater,
Fla.-based Maxxim was previously controlled by San Francisco buyout fund
Fox Paine & Co., which took the company private in a $130 million
leveraged buyout in 1999, according to Maxxim Chief Executive Thomas
Cochill. Unable to service some $400 million in debt the company said it
filed for bankruptcy protection last February. The Lightyear purchase is
subject to approval by the bankruptcy court in Delaware. The deal is
expected to close in October. New York-based Lightyear manages about $2
billion in assets, reported the newswire.
California Assembly Committee Impedes Group's Plan For Pacific
Gas
A consumer group's alternate plan for how to reorganize bankrupt
PG&E Corp. utility Pacific Gas & Electric Co. was dealt a major
blow on Wednesday when a state Assembly committee rejected a bill that
supported the group's plan. The Assembly Utilities and Commerce
Committee rejected, 3-5, Senate Bill 772, sponsored by Sen. Debra Bowen
(D-Marina del Rey) who chairs the Senate Energy Committee. The measure
would have given the state Public Utilities Commission authority to
allow Pacific Gas to issue revenue bonds to repay some creditors.
Consumer group The Utility Reform Network has proposed a reorganization
plan for Pacific Gas whereby the utility would issue $2 billion in
bonds, to be repaid through a 'dedicated rate component' in customers'
bills.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Daisytek International Lenders Object To Proposed Plan-filing
Extension
Daisytek International Corp.'s lenders from before it filed for
bankruptcy opposed the company's request to extend its sole right to
file a chapter 11 plan, according to court papers. In an objection filed
on Tuesday, the lenders -- from which Daisytek International had
borrowed before it filed for chapter 11 protection earlier this year--
said the company hasn't provided sufficient evidence to support the
proposed extension. The company hasn't filed any report or proposed
timetable with the court, the filing said.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
HealthSouth Faces Medicare Fraud Investigation
Federal law enforcement officials are investigating possible Medicare
fraud at HealthSouth after a Texas jury awarded $1.5 million in damages
to the former medical director of a Houston hospital, officials said
yesterday, the New York Times reported. Government investigators
said they were looking for patterns of wrongdoing in the extensive
system of HealthSouth hospitals and centers after obtaining admissions
of fraudulent behavior by former executives at the company's
headquarters in Birmingham, Ala.
In a related action, the House Energy and Commerce Committee has sent
three investigators to HealthSouth's headquarters to look for Medicare
fraud and other possible violations, Ken Johnson, a committee spokesman,
said yesterday. A spokesman for HealthSouth, Andrew Brimmer, said the
company 'takes all matters related to Medicare seriously and is
cooperating with all government inquiries,' reported the
Times.
Hollywood Publisher Seeks Bankruptcy After Losing Suit
Michael Viner, a Hollywood publisher best known for books tied to
scandals, sought bankruptcy protection yesterday for his company, New
Millennium Entertainment, the New York Times reported. Last
month, a jury ordered New Millennium to pay $2.8 million to a bookstore
owner for breach of contract and other improprieties. Nicholas A.
Gravante Jr., a lawyer with the law firm Boies, Schiller & Flexner
who represents the bookstore owner, Otto Penzler, vowed to pursue Viner
personally for his company's liability in the case, the newspaper
reported. He said Viner had threatened to file for chapter 11 before the
jury trial that resulted in the verdict.
The bankruptcy filing is the latest turn in a legal and literary wrangle
that began last summer when David Baldacci, the best-selling thriller
writer, sued New Millennium, reported the Times. Baldacci contended that
the company improperly tried to capitalize on his reputation by
packaging a short story collection to look like one of his novels. The
collection included a story by Baldacci, and New Millennium initially
printed the title of his story and his name as the author in prominent
letters on the cover. Baldacci won a court order blocking publication,
and Viner eventually agreed to print the book with a different cover,
according to the newspaper.
PG&E Tax Refund Dispute Trial Set for July 2004 Trial
PG&E Corp. said on Wednesday that a trial in its $361 million tax
refund dispute with its bankrupt unit, PG&E National Energy Group
(NEG), was set to begin in July 2004, Reuters reported. The San
Francisco-based company also said in a filing with the Securities and
Exchange Commission that on Sept. 5 it had reached an agreement with NEG
that dissolved a temporary restraining order on the use of the tax
refund. NEG, which owns power plants and gas pipelines, filed for
chapter 11 bankruptcy protection on July 8 and subsequently won a
restraining order from the bankruptcy court prohibiting PG&E from
using the funds. PG&E said that under the new agreement, it agreed
to provide NEG with 10 days notice before voluntarily allowing the cash
balance on institutional money market accounts to drop below $361
million, Reuters reported. PG&E said it received a 2002 federal tax
refund of $533 million, of which $361 million was related to NEG losses
and deductions, reported the newswire.
EchoStar Files Complaint with the Bankruptcy Court
Satellite television service EchoStar Communications Corp. on Wednesday
accused bankrupt satellite maker Loral Space and Communications Ltd. of
withholding information EchoStar needs to decide whether to make an
offer to buy the company, Reuters reported. EchoStar, which operates the
No. 2 U.S. satellite TV service Dish Network, said in a filing with the
bankruptcy court that Loral was not letting it see 'certain due
diligence information' for certain assets and refused to let it see any
information on parts of the company. 'EchoStar is left with no choice
but to seek this court's intervention to rehabilitate the sale process
that (Loral has) impeded at virtually every turn,' the document read.
The complaints came as Loral prepares to receive bids by Oct. 15 for an
auction of its assets, Reuters reported.
Loral filed for bankruptcy in July. It has already agreed to sell six
North American satellites for about $1 billion to another operator,
Intelsat. EchoStar said last month it could be interested in buying the
entire company, including Loral's satellite-making business and other
satellites in operation, for $1.45 billion, reported the newswire.
U.S. Offers Trade Aid to Idled Pillowtex Workers
The government on Wednesday cleared the way for special aid to 5,000
former Pillowtex Corp. workers who lost their jobs when the sheet and
towel maker gave in to foreign competition and shut down its 16 plants
in July, Reuters reported. The aid, known as Trade Adjustment
Assistance, includes retraining and an array of other benefits and
services for workers who lose their jobs to foreign competitors.
Pillowtex Corp., maker of Cannon and Fieldcrest home furnishings,
declared on July 30 that it would lay off 6,450 workers and file for
chapter 11 bankruptcy protection for a second time in two years because
it does not have the cash to continue operating. It was the single
largest loss of textile jobs in an industry that has dropped from
606,000 workers in 1998 to 409,000 jobs by April 2003, according to
trade group American Textile Manufacturers Institute, reported the
newswire.
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