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April 6, 2006
name='1'>Study Says
Orleans
Bankruptcy
Bankruptcy should be
considered as an option for
w:st='on'>New
Orleans
crippled city government and public school system, which are 'teetering
on the edge of a cliff' seven months after Hurricane Katrina, according
to a report by two government watchdog groups, the
face='Times New Roman' size='3'>New Orleans Times-Picayune
reported today. 'For a devastated community, continuing
to shoulder pre-Katrina debt loads and obligations may interfere with
its ability to create the conditions needed for recovery,' said the
analysis prepared by the Bureau of Governmental Research and the Public
Affairs Research Council.
size='3'>Mayor Ray Nagin's administration dismissed the recommendation,
saying they have a plan to keep city government solvent. 'The city is
not considering bankruptcy as an option,' said Finance Director Reggie
Zeno. BGR and PAR, which did not take a position for or against
bankruptcy, acknowledge in the report that such action is a relatively
rare occurrence that does not wipe the financial slate clean for a
government entity.
href='http://www.nola.com/news/t-p/frontpage/index.ssf?/base/news-5/114431009…'>Read
more.
name='2'>Indigent Debtor Sues to Get Pre-Bankruptcy Counseling Fee
Returned Plus Damages
An indigent consumer
debtor, living on disability income in
w:st='on'>
size='3'>Newport
w:st='on'>
size='3'>R.I.
a federal court action for damages against a nonprofit credit counseling
agency that insisted on receiving a $50 fee for the required pre-filing
counseling session. The debtor filed his
chapter 7 on Jan. 13, 2006, in forma
pauperis as the new law permits, and he also qualified for free
legal counsel from the
w:st='on'>Rhode
Island
The debtor requested that Credit Counseling Centers
of
face='Times New Roman'
size='3'>America
size='3'>waive the fee under his circumstances, consistent with
BAPCPA’s provision that such services are to be provided
“without regard to ability to pay the fee.”
National practice is that fees are being waived in many
such cases. Allegedly however, the CCCA
representative told the debtor that “everyone is required to pay
the fee regardless of ability to pay.”
size='3'>The debtor paid the fee and then filed an adversary proceeding
in the bankruptcy court to recover the costs and other unspecified
damages. The case is
face='Times New Roman' size='3'>Sullivan v. Credit Counseling Centers of
America, 06-1567, District of Rhode
Island.
Autos
face='Times New Roman' size='3'>
name='3'>Delphi
size='3'> Creditors Object to Repaying GM for Worker
Benefits
Creditors said that
Delphi Corp. could owe General Motors Corp. billions of dollars for
worker benefits under its plan to eliminate jobs, Bloomberg News
reported yesterday. GM, Delphi and the United Auto Workers union agreed
March 22 to offer 13,000
incentives to retire and to give jobs at GM to 5,000 more. GM,
size='3'>Delphi
agreed to assume the cost of the incentives. Unsecured creditors said
the bankruptcy court should reject the plan as written because it allows
GM to file a claim against Delphi, based in
w:st='on'>
size='3'>Troy
w:st='on'>
size='3'>Mich.
the cost of benefits to the 5,000 employees it hires. Under a 1998
agreement, Detroit-based GM has the right to demand payment from Delphi
equal to the projected costs of benefits for any employee that moves to
GM from
size='3'>Delphi
size='3'>Delphi
determined before the company leaves bankruptcy. The creditors want the
provision removed. U.S. Bankruptcy Judge
size='3'>Robert Drain will consider the plan
at a hearing in
face='Times New Roman' size='3'>New York
on Friday. The case is In re Delphi Corp., 05-44481,
U.S. Bankruptcy Court, Southern District of New York.
href='http://www.bloomberg.com/apps/news?pid=10000103&sid=ac5s6_TAvtTw#'>Read
more.
name='4'>Ford CEO Says Bankruptcy Isn't an Option
Ford Motor Co. Chairman
and CEO Bill Ford said that bankruptcy isn't an option for the nation's
No. 2 automaker, which is struggling to return its North American
division to profitability, the Associated Press reported yesterday. Ford
said the company has strong liquidity with about $20 billion in cash and
that regions outside
size='3'>North America
well. Ford earned $2 billion last year, down 42 percent from a year
earlier but still its third consecutive yearly profit. Nonetheless,
Ford's North American division lost $1.6 billion last year, and the
automaker's debt rating has been slashed to below investment grade. Ford
also is steadily losing
w:st='on'>
size='3'>U.S.
size='3'>market share. The company now has around 18 percent of
the
face='Times New Roman'
size='3'>U.S.
size='3'>market, down from 26 percent a decade ago. 'We're acutely aware
of the state of our industry, of the state of a lot of the companies we
do business with, and frankly, our own deteriorating ratings with the
ratings agencies, and so we're working very hard on the fundamentals of
our business,' Ford said. The company says it is moving ahead with its
North American restructuring plan, which calls for cutting up to 30,000
jobs and closing 14 plants by 2012.
href='http://news.yahoo.com/s/ap/20060405/ap_on_bi_ge/ford_outlook_4&printer=…-'>Read
more.
name='5'>Tower Automotive Reaches Retiree Health Care
Agreements
Bankrupt Tower Automotive
Inc. said that it has reached agreements covering retiree health care
benefits and that talks continue with its unions over wage and benefit
cuts, Reuters reported yesterday. Tower, a producer of metal frames for
vehicles, expects to file papers late Wednesday in
w:st='on'>
York
care agreements, which need bankruptcy court approval. The agreements
resolve over 90 percent of retiree obligations, covering some 4,600
current or future retirees among several unions in
w:st='on'>
size='3'>Milwaukee
salaried retirees, Tower spokesman Joe Kirik said. Tower will make
one-time contributions of $30 million for the hourly retiree group and
$5 million for the salaried group to create voluntary employees
beneficiary associations to administer health care benefits starting
July 1, Kirik said. Tower CEO Kathleen Ligocki also said Tower hopes to
reach an agreement with its unions on wage and benefit cuts by the end
of April, and if not, by the end of spring. Unions represent about
two-thirds of Tower's 6,000
w:st='on'>
size='3'>U.S.
size='3'>employees.
href='http://www.nytimes.com/reuters/business/business-autos-tower.html?pagew…'>Read
more.
name='6'>J.L. French Files Reorganization Plan
Two months after filing
for chapter 11 protection, bankrupt auto parts maker J.L. French has
submitted its reorganization plan, which calls for the total repayment
of a $295 million first-lien debt and the repayment in full of all trade
creditors, Portfolio
Media reported yesterday. In addition to the
repayment of first-lien debt and trade creditors, the reorganization
plan calls for the conversion of $177 million in second-lien notes to
between 8 and 22 percent of the new common stock. Holders of these
notes will be granted the right to participate in an offering set to
raise between $110 million and $130 million in exchange for between 78
and 92 percent of the new equity. The company’s unsecured
creditors will receive the greater of either $50,000 or common stock
having a value equal to property unaffected by liens. J.L. French plans
to finance these distributions using a cash investment, according to the
reorganization plan. Cash will be raised through securing $255 million
in exit financing, including a $205-million term loan and a revolver of
$50 million. The company does not yet have an exit financing commitment,
but is considering a number of options, according to the
plan.
name='7'>Commentary: Pension Legislation May Allow Private Pensions
to Disappear
While the Bush
administration has been pushing for years to shore up the nation's
increasingly shaky private pension systems, Congress now appears poised
to deliver just the opposite, giving companies new leeway to fake their
pension math, according to an editorial today in
face='Times New Roman' size='3'>USA Today.
More pensioners would be placed at risk, and chances that taxpayers will
be stuck with a huge bill would rise significantly under the proposed
pension legislation. Traditional pensions offered by private employers,
known as defined-benefit plans, are underfunded by more than $450
billion — an eleven-fold increase in just five years. At the same
time, the government-sponsored pension insurance system, designed to
protect workers whose company's plans go belly up, is running a $23
billion deficit — about $200 for every household in the
country.
href='http://www.usatoday.com/news/opinion/editorials/2006-04-05-our-pension_…'>Read
more.
GB
Holdings Creditors Submit Chapter 11 Plan
In a move sure to draw
fire from majority stakeholder Carl Icahn, the unsecured creditors for
GB Holdings Inc., the former owner of the Sands Hotel and Casino in
Atlantic City, have filed a chapter 11 plan this week on behalf of the
struggling company,
size='3'>Portfolio Media reported yesterday.
On Tuesday, the unsecured creditors’ committee submitted a plan in
U.S. Bankruptcy Court in
w:st='on'>New
Jersey
pay secured creditors in full and offers shareholders the possibility of
some recovery if the first condition is met.
face='Times New Roman' size='3'>In the chapter 11 plan, the
creditors’ committee outlined its intention to transfer the shares
and potential causes of action to a liquidating trust that would try to
maximize the recovery for unsecured creditors, according to court
documents. The liquidating trust would require a $5 million exit loan to
fund the trust while it pursues the stock sale and litigation, according
to the unsecured creditors’ chapter 11 plan. A five-member board,
including one shareholder, would be appointed to oversee the trust, the
plan stipulated. But Icahn and his affiliates would be barred from
serving on the board, according to the creditors.
Owens
Corning Wins Delay over Hearing on Disclosure Statement
Citing progress in
settlement negotiations with opposing creditors, Owens Corning has won a
delay in a hearing that was to have opened on the disclosure statement
to be sent along with ballots for voting on its chapter 11 exit plan,
the Toledo
Blade reported yesterday. The hearing was to
have been held in
size='3'>Pittsburgh
Judith
Fitzgerald, who is handling OC's case in U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Delaware
lawyer who represents the firm's bondholders, who are the main hold-outs
in a reorganization plan that allots 41 cents to 48 cents on the dollar
to most creditors, declined to comment.
href='http://toledoblade.com/apps/pbcs.dll/article?AID=/20060405/BUSINESS03/6…'>Read
more.
Airlines
name='10'>American Airlines CFO Says Labor Costs Must Be Cut
More
American Airlines' new chief
financial officer said that the carrier needs to cut labor
costs further to stay competitive, even while hewing to the
union-friendly strategy it has adopted in recent years, Reuters reported
yesterday. AMR Corp.'s American Airlines won major concessions in
2003 after flirting with chapter 11, but has since insisted that further
pay cuts were off the table as it sought suggestions from unions on
non-wage-related cost reductions and revenue increases. The No. 1 U.S.
airline in the fourth quarter had higher unit costs than Continental
Airlines and UAL Corp.'s United Airlines and various discount carriers,
but lower than some other traditional carriers. But with Delta Air Lines
and Northwest Airlines slashing wages in bankruptcy, it may soon end up
with the industry's highest expenses.
href='http://www.nytimes.com/reuters/business/business-airlines-amr-cfo.html?…'>Read
more.
name='11'>Northwest Airlines’ Mechanics Denied
Unemployment
A
w:st='on'>
size='3'>Minnesota
ruled that striking mechanics at Northwest Airlines are ineligible for
unemployment benefits because their strike is still active, according to
the Associated Press yesterday. Judge Kent Todd wrote that striking
mechanics don't qualify for jobless benefits because, in previous state
Supreme Court cases, ''the court held that the labor dispute ended
either when the parties reached a settlement or when the striking
workers unconditionally agreed to return to work.'' He said leaders of
the Aircraft Mechanics Fraternal Association have not called off the
strike, which began Aug. 19, and the two sides haven't reached
agreement. In December, union members rejected a contract offer that
would have changed their status from 'on strike' to 'laid off.' If the
strike ends, the mechanics would become eligible for state unemployment
benefits.
href='http://www.nytimes.com/aponline/business/AP-Northwest-Labor.html?pagewa…'>Read
more.
name='12'>Russian Bank Hits Refco Unit with Lawsuit
Refco Securities LLC has
been slapped with a lawsuit by
w:st='on'>
size='3'>Russia
size='3'>’s biggest commercial bank in an attempt to enforce a
$121.7 million judgment issued by a court in the United
Kingdom,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. The Savings Bank of the
size='3'>Russian Federation
or Sberbank, filed a lawsuit in federal court in
w:st='on'>
size='3'>Manhattan
week, accusing Refco Securities, a subsidiary of the embattled Refco
Inc., of failing to redeliver Sberbank’s collateral after loan
agreements between the two companies had ended. Refco Securities would
have to file a chapter 7 bankruptcy petition rather than enter chapter
11 proceedings due to provisions under the Securities Investor
Protection Act.
size='3'>Sberbank claims that it had entered into a deal “whereby
(Refco Securities) as a lender would advance securities and other
financial instruments to Sberbank as a borrower, against the transfer of
collateral by Sberbank to (Refco Securities) of a value equivalent to
case or securities advanced,” according to the lawsuit. Court
documents further noted that, since last December, the collateral
provided by Sberbank had considerably exceeded the amounts outstanding
under the loan arrangements.
w:st='on'>
name='13'>North Carolina
face='Times New



Roman'
size='3'> Bankruptcies Sink after New Law
North Carolina bankruptcy
filings plunged this year after the new law was enacted,
the Raleigh
News-Observer reported today. Filings in the
state plunged 61 percent to 3,567 in the first quarter, compared with
9,142 a year earlier, according to Lundquist Consulting, a financial
research firm in
face='Times New Roman' size='3'>Burlingame
size='3'>,
size='3'>Calif.
November, just after the stricter law kicked in, filings have begun
marching back from about 20 per day to a daily average of 66 last month.
'People still owe money,' said Marjorie Lynch,
w:st='on'>
size='3'>U.S.
size='3'>bankruptcy administrator for the Eastern District of North
Carolina. 'We're going to see more people coming back into bankruptcy.'
In the Raleigh Division of the U.S. Bankruptcy Court's Eastern District
of North Carolina, filings dropped 64 percent to 432 in the first
quarter but are making similar gains in recent months.
href='http://www.newsobserver.com/104/story/425709.html'>Read
more.
face='Times New Roman' size='3'>Northwest
Ohio
size='3'> Bankruptcy Cases Increase in March
After a slowdown in
filings because of the new law, the number of new cases in March for the
21-county northwest Ohio area more than doubled from the previous month,
the Toledo Blade reported
yesterday. Dave Fickel, clerk of the U.S. Bankruptcy Court in
size='3'>Toledo
appears that the slowdown may be over as people cope with the changes,
but that it is still too soon to tell. The local court had 342 new
cases in March, up 112 percent from February but down 77 percent from a
year ago. Chapter 13 wage-earner repayment filings totaled 74 in March,
and chapter 7 liquidation cases amounted to 445. So far this year, the
court has had one chapter 11 business reorganization and one chapter 12
farm filing.
href='http://www.toledoblade.com/apps/pbcs.dll/article?Date=20060405&Category…'>Read
more.
name='15'>Allied Holdings Extends Forbearance on DIP
After failing to meet
certain loan covenants under its $230 million debtor-in-possession loan
facility, car transporter Allied Holdings Inc. has won bankruptcy court
approval to extend the terms of its forbearance agreement with DIP
lenders until April 18, according to
size='3'>Portfolio Media yesterday. The
lenders, including GE Capital Corp., Marathon Structured Finance Fund LP
and Morgan Stanley Senior Funding Inc., agreed to forbearance last month
after Allied did not meet its target revenue, according to Richard
Herzog, counsel to Allied’s unsecured creditors committee at
Nelson Mullins Riley & Scarborough LLP in Atlanta. The Georgia-based
transporter of new and used vehicles originally notified its lenders
back in December that it would be in default of certain loan covenants,
according to court papers. As a result, Allied originally obtained its
first forbearance agreement
size='3'>from the DIP lenders, which expired on Monday, April 3. The
lenders have stipulated that Allied hire New York-based Glass &
Associates Inc., an operational improvement manager, according to
Herzog. Allied’s appointment of Glass & Associates will need
bankruptcy court approval. The lenders will continue to advance funds to
Allied as long as the company meets its financial target.
name='16'>Winn-Dixie Seeks More Time for Bankruptcy
Plan
Court records show Winn-Dixie
Stores Inc., the Jacksonville, Fla.-based supermarket chain, is seeking
an additional 70 days to file a reorganization plan without interference
from creditors, the fifth time it has sought an extension, Reuters
reported yesterday. The retailer asked U.S. Bankruptcy Judge Jerry Funk
to extend its sole right to file a plan to June 29 from April 19, and
its exclusive solicitation deadline to Aug. 29 from June 21. A hearing
is set for April 20. The company's official committee of unsecured
creditors said on Wednesday it supports the extensions.
href='http://www.nytimes.com/reuters/business/business-retail-winndixie.html?…'>Read
more.
International
w:st='on'>
name='17'>Italian
Court
Law
Aiding Parmalat
SpA’s recovery from a massive accounting fraud scandal,
size='3'>Italy
highest court has upheld a controversial law allowing the food and dairy
conglomerate to pursue up to €7.5 billion in claims against former
bank creditors, according to Portfolio Media yesterday. On
Tuesday, the
Constitutional Court
permitting Parmalat’s so-called “clawback” claims,
dismissing lenders’ earlier protests as
“groundless.” Last week,
Parmalat suffered a blow in its clawback pursuit after a federal judge
cleared the way for Bank of America Corp. to seek more than $1 billion
in damages against the Italian company. The bank is accusing
Parmalat’s former executives of wasting the bank’s cash
through fraud and conspiracy when it shocked
w:st='on'>
size='3'>Europe
financial world—with its collapse.
name='18'>British Citizens Confused over Pension
Changes
A survey found that more
than two in five of the British public are unaware of the sweeping
pension rule changes coming into force this week, Reuters reported
yesterday. The survey by market research firm Mintel found 43 percent of
those asked were unaware of the changes, to be introduced on Thursday.
The new pensions regime allows people to take charge of their pensions
for the first time by allowing much greater flexibility in saving for
retirement. The new regulations, introduced on what the government is
calling “Pensions A-Day,” will also let investors take
greater control over their retirement savings by taking out a
Self-Invested Personal Pension (SIPP). The survey, which gathered
responses from more than 2,000 adults, also found that more
than half do not believe that people should be forced to pay money
into an occupational or personal pension to fix
w:st='on'>
size='3'>Britain
size='3'>'s estimated £57 billion pension shortfall.
href='http://today.reuters.co.uk/news/newsArticle.aspx?type=personalFinanceNe…'>Read
more.