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February 7, 2006
Asbestos
id='1'>Senate Likely to Reject Asbestos Litigation Reform Bill
A bill to overhaul asbestos litigation, which the Senate will take up this afternoon, is in serious trouble and has only a slim chance of passing Congress this year, The Wall Street Journal reported today. 'I think it's going to be difficult,' said Sen. Sam Brownback (R., Kan.), one of a handful of Republicans in the Senate who have criticized the bill. Even aides to the bill's Republican backers doubt it will survive the Senate debate. At issue is legislation that will come to the Senate floor today that would create a $140 billion trust fund paid for by manufacturers and insurance companies to compensate Americans who have become sick because of their exposure to asbestos. Opponents plan to try to sink the bill by filing a set of procedural and budgetary motions that would require Specter to find 60 senators to back the bill, rather than the usual 51. Separately, Minority Leader Harry Reid of Nevada has signaled that he plans to filibuster the legislation. Even if Specter is able to pull off a surprise victory by moving the bill through the Senate, the measure faces an uncertain future on the other side of the Capitol. Republicans in the House are likely to craft a bill that appeals more to the conservative base of the party, leaving little room for the House and Senate to merge their competing asbestos bills before lawmakers leave Washington to campaign for re-election. Read more.
id='2'>Report Estimates Nearly 80 Corporations Bankrupted by Asbestos Lawsuits
The American Academy of Actuaries says U.S. litigation over asbestos has bankrupted at least 78 corporations, according to the United Press International Monday. The group's Mass Torts Subcommittee also said more than 500,000 additional asbestos lawsuits remain in the judicial pipeline. 'Despite the huge costs, the asbestos litigation system has been inefficient, with only 41 percent of total spending reaching claimants,' the actuary group said in a statement. The academy warned that the sheer volume of lawsuits means 'the sickest individuals might not be compensated adequately or promptly.' Also, the academy indicated that only 41 percent of total spending (reaches) claimants. Read more.
id='3'>Calpine Restructing Looks to Turn Leases over on Two New England Plants
Calpine Corp. is asking the U.S. Bankruptcy Court to approve giving up the leases to two New England power plants as part of its chapter 11 restructuring proposal, the Silicon Valley Business Journal reported Monday. Under the proposal, the two plants totaling 530 megawatts, would be turned over to a Philip Morris Capital Corp. subsidiary as of Monday, unless the court intercedes. San Jose-based Calpine claims the lease obligations 'would cause significant harm to the bankruptcy estate.' The plants are located in Rumford, Maine, and Tiverton, R.I. The power supplied by these plants are typically sold into the wholesale New England electricity market. Read more.
id='4'>GM Appears Headed for Bankruptcy
In recent months both Moody's and Standard & Poor's have made increasingly grim statements that General Motors (GM) is headed for bankruptcy unless it can turn around its reeling North American auto operations, now reduced to an embarrassing market share of 26 percent, according to an article in Fortune Magazine yesterday. The company lost $8.6 billion last year, burning up billions of dollars in North America, earning too little back overseas. Its product mix in the U.S., heavily weighted toward trucks, pickups, and SUVs, is on the wrong side of gas prices. It has a finance subsidiary, GMAC, whose majority interest it needs to sell to keep that business healthy and itself in cash--and so far, no buyer has emerged. It is inextricably entangled in the bankruptcy of its biggest supplier, Delphi. In that imbroglio, as in countless others, it is up against a formidable and sometimes militant union whose ability to accept the full reality of GM's problems is not assured. The company is even under investigation by the SEC for accounting sins, as yet unrevealed. GM is also burdened by health costs, which it supplies for a population of 1.1 million employees, retirees, and dependents. GM's retiree health burden, a mountain that at year-end totaled an unfunded $64 billion, adds about $1,300 to the cost of every car and truck GM makes in the U.S. Read more.
id='5'>Enron Official Says `Aggressive' Accounting Discussed
Enron Corp. managers discussed 'aggressive' accounting practices used to meet earnings targets during a meeting in 2001 led by ex-Chairman Kenneth Lay, a former company executive testified, Bloomberg News reported Monday. Prosecutors intend the testimony of Mark Koenig, Enron's former head of investor relations, to refute Lay's defense that he was unaware that subordinates manipulated the company's earnings. Koenig testified in his third day on the witness stand that during a two-day managers' meeting on Sept. 5-6, 2001, former Chief Financial Officer Andrew Fastow and former accounting chief Richard Causey defended the company's accounting practices when other managers challenged them.'Mr. Causey's and Mr. Fastow's point was the accounting was aggressive, but it benefited a lot of the people at the table,' said Koenig, who attended the meeting. Koenig said managers discussed the threat posed by two off- the-books entities, known as Whitewing and Marlin. Fastow created the entities to handle more than $1 billion in Enron-related financings without having them recorded on the company's books. The case is U.S. v. Skilling, No. 04-cr-25, U.S. District Court (S.D. Texas (Houston)). Read more.
id='6'>Delays Continue for WCI Steel Bankruptcy Case
Bankruptcy Judge Marilyn Shea-Stonum said she decided to postpone confirmation hearings when attorneys came up with a list of 63 'threshold legal issues' to be settled before WCI Steel case can move forward, the Youngstown (Ohio) Business Journal reported today. Most of the discussions centered on two recent developments related to retiree pensions. First, bondholders trying to win ownership of the company revealed in late January that they won't assume WCI's under-funded pension plan for 761 retirees. They intend to provide a new pension plan for workers who retire under their corporation. Then, last Friday, the federal Pension Benefit Guaranty Corp. filed a lawsuit in U.S. District Court, Youngstown, aimed at forcing WCI's parent company, the Renco Group of New York, to shoulder the cost of the steel millÕs under-funded pension plan. Renco attorneys argued that their client and WCI retirees will be hurt if the bondholders leave the pension plan behind. They maintained that WCI will be able to continue paying its retirees' pensions, even under new ownership. Judge Shea-Stonum called the hearing 'chapter three,' reminding attorneys that it was the third try at confirmation hearings for WCI. Read more.
id='7'>Louisville Orchestra Musicians Look to Avert Bankruptcy
In an effort to jump-start stalled contract talks, the Louisville (Ky.) Orchestra's musicians said yesterday they would accept a two-year wage freeze, the Louisville Courier-Journal reported today. They also said they would stop trying to get the orchestra to cover the cost of dependent health insurance. In exchange, the musicians want the orchestra to agree to submit all other contract provisions to mediation. However, the orchestra's executive director says the proposals address a limited number of concerns, and a substantial restructuring would still be needed to avoid a chapter 7 bankruptcy liquidation. The freeze the musicians say they are willing to accept is the same that management offered recently -- which it said actually amounts to a 2.8 percent increase over 24 months because of the way weekly salaries are structured. The present contract expires Sept. 1, but management had wanted an early agreement with its musicians. Provancher said the orchestra was projecting a $500,000 deficit for the current season, and that a $3.5 million recapitalization campaign was needed to address immediate cash-flow pressures and to stabilize the orchestra over the longer term. Read more.
id='8'>Kaiser Aluminum Plan of Reorganization Confirmed by U.S. Bankruptcy Court
Kaiser Aluminum today announced that the U.S. Bankruptcy Court for the District of Delaware has confirmed the company's second amended reorganization plan according to a company press release yesterday. The confirmation order must now be affirmed by the U.S. District Court before the company can emerge, and is also subject to appeal. Kaiser Aluminum is a leading producer of fabricated aluminum products for aerospace and high-strength, general engineering, automotive and custom industrial applications. 'We are very pleased by the ruling and it means that the finish line is within sight,' said Jack Hockema, president and chief executive officer, Kaiser Aluminum. 'We are hopeful that we can proceed quickly through the steps necessary for us to emerge before the end of the first quarter of 2006.' The company's restructuring would resolve prepetition claims that are currently subject to compromise including retiree medical, pension, asbestos, and other tort, bond, and note claims. The majority of the new equity would be distributed to two voluntary employee benefit associations that were created in 2004 to provide medical benefits or funds to defray the cost of medical benefits for salaried and hourly retirees. Retiree medical plans existing at that time were cancelled. Read more.
id='9'>Retired Pilots Given Larger Voice in Delta Restructuring
Retired Delta pilots will get a larger voice in Delta Air Lines' chapter 11 restructuring, a bankruptcy court judge said Monday in a ruling that could complicate the airline's bankruptcy proceedings, the Associated Press reported today. U.S. Bankruptcy Judge Adlai Hardin said the retired pilots, who had no representation on a previously appointed retiree committee, deserved under law to have an official say in how Delta would restructure in bankruptcy Ñ and how that could affect their retirement benefits. Hardin, in his first hearing since taking over the Delta case, said the statute gave him no other alternative but to appoint a second 1114 committee to represent the retired pilots. However, he warned the pilots that they would have to work closely with the other retirees committee to ensure Delta's chapter 11 process continued as smoothly as possible. Delta must now go before the two retiree committees as well as its creditors as it goes through the bankruptcy process. In a separate matter, Hardin ruled that Delta can continue using funds earmarked for a disability and survivors trust to meet other financial obligations as it reorganizes under chapter 11, but only so long as it continues to make payments to retirees and other beneficiaries. Read more.
id='10'>New West Virginia Bankruptcy Judge Appointed
Patrick Flatley, an assistant U.S. Attorney for the Northern District of West Virginia, will succeed Judge L. Edward Friend II as judge, according to an announcement by U.S. District Court Chief Judge Ireme M. Keeley, the Wheeling News-Register reported yesterday. Flatley will begin his new duties March 12, succeeding Friend, who is retiring. The district covers the 32 northern counties in the Mountain State. Flatley has been an assistant U.S. Attorney for nearly 20 years. He currently serves as chief of the U.S. AttorneyÕs Office Civil Division. Read more.
International
id='11'>CBI Predicts New Pension Rules May Cause a Cash Crisis
One in five British companies that still run final salary pension schemes face a cashflow crisis because of the government's new regulations that govern the pension system, according to the Confederation of British Industry in a report today in ABCMoney. The CBI said it is particularly concerned about the Pension Regulator's approach to the funding of the defined benefit pension schemes, which require an equivalent of at least 0.5 per cent of GDP -- more than 5 billion pounds to diverted to pension schemes every year over the next 10 years. The regulator has said it may take action against firms failing to plug the deficit within 10 years. The said pension fund trustees will be compelled to make companies adopt aggressive funding plans without caring for their impact on the business. 'It could have the perverse effect of throttling private sector investment, thereby damaging the UK economy - putting the very pension schemes the regulator is trying to protect under even more pressure,' said CBI's deputy director general John Cridland. CBI said the regulator should give time up to 15 years to close pension gaps to companies that are financially strong. Read more.
id='12'>Record U.K. Bankruptcies Boost Debt Management Firms
The record numbers of people filing for bankruptcy or voluntary insolvency have helped drive up profits at Debt Free Direct, one of Britain's biggest debt management firms, according to the Guardian today. The Aim-listed company said yesterday that its profits for the nine months to January 31 were 'ahead of management expectations,' and that it had enjoyed a 'very strong post-Christmas response' to its advertising. Most debt management firms make much of their money selling 'individual voluntary arrangements' (IVAs), and Debt Free Direct said 600 clients applied for IVAs last month - up from 260 in January 2005. Read more.