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Economy Remains Sluggish
New data suggest the U.S. economy hasn't gained as much momentum since
the end of major fighting in Iraq as many economists had hoped, the
Wall Street Journal reported. The Institute for Supply Management
said its closely watched monthly index of manufacturing activity fell to
45.4 in April from 46.2 in March. A reading below 50 indicates
contraction in the sector. Meanwhile, the U.S. Labor Department said on
Thursday that the number of new workers filing for unemployment benefits
declined by 13,000 to 448,000 in the week ended April 26. But the
current level remains consistent with a flat or rising jobless rate, and
the Labor Department's four-week moving average of claims rose to
442,000, the highest level in more than a year. The two reports
'splashed a bucket of cold water on the view that there was a tremendous
buildup of pent-up demand' postponed by the conflict with Iraq, said
David Rosenberg, an economist at Merrill Lynch & Co., reported the
Journal.
Asbestos Litigation Talks Focus On Trust Fund Structure
The politically loaded question of how to balance corporate defendants'
desire to cap their asbestos litigation exposure with victims' demand
for guaranteed compensation even if a private trust fund runs dry has
become a major focus of ongoing legislative negotiations being overseen
by the Senate Judiciary Committee, CongressDaily reported. In a
meeting on Wednesday among labor officials, corporate representatives,
insurers and Senate aides from both parties, the discussion of risk --
who should bear it and to what degree -- was a key topic of
conversation, sources said. Additional meetings were planned for
Thursday and Friday. Sen. Christopher Dodd (D-Conn.), who is part of the
negotiations, yesterday told CongressDaily that providing
certainty for all sides would be a significant and 'challenging' part of
the debate. It is probably impossible to get a bill 'in the absence' of
an amicable resolution of those concerns, Dodd added. However, Dodd
refused to say whether he would support making the federal government
the guarantor for an asbestos compensation fund, reported the
newswire.
Fastow Faces More Charges; Wife, Others Are Indicted
Former Enron Corp. Chief Financial Officer Andrew Fastow was hit with 31
more criminal charges, while his wife and nine other former executives
were indicted on a host of fraud, insider-trading and other counts, the
Associated Press reported. Fastow now faces 109 charges related to the
2001 collapse of the energy-trading company, according to new
indictments unsealed on Thursday in Houston. His wife, Lea Fastow, is
charged with six counts, including money-laundering conspiracy, filing
false tax returns and conspiracy to commit wire fraud. Seven former
executives with an Internet division called Enron Broadband Services
also were charged in new indictments. They are accused of orchestrating
a scheme to mislead investors through a series of false statements that
portrayed the venture as successful, reported the newswire.
After Inflating Their Income, Companies Want IRS Refunds
Some of the big companies that are under investigation for inflating
their earnings during the stock-market boom of the 1990s want back the
taxes they overpaid along the way, the Wall Street Journal
reported. MCI and Enron Corp. are in the process of collecting or filing
for tax refunds or credits from the Internal Revenue Service because of
tax payments on billions of dollars they falsely claimed to have earned.
Qwest Communications International Inc., which plans to restate $2.2
billion in revenue, also is likely to seek a refund. HealthSouth Corp.,
accused of overstating its earnings by more than $2 billion, said that
it hasn't made a final decision on whether or not to file for a refund
but is considering it, reported the Journal.
PSC Gets More Time To Solicit Votes For Chapter 11 Plan
A bankruptcy court extended PSC Inc.'s exclusive period to solicit votes
in favor of the company's reorganization plan until July 19, Dow Jones
Newswires reported. The company sought the extension in early April,
saying it is making progress in its chapter 11 bankruptcy case. PSC
Inc.'s exclusive solicitation period had been set to expire on May 20,
according to court papers obtained by Dow Jones Newswires. The U.S.
Bankruptcy Court in Manhattan entered the order granting the request on
Tuesday.
Court Gives Recoton Final Approval Of DIP Loan Agreement
A bankruptcy court granted Recoton Corp. final approval of a
debtor-in-possession financing agreement with its pre-petition lenders
and authorized the company to continue using the lenders' cash
collateral, according to court papers obtained by Dow Jones Newswires.
Judge Allan L. Gropper of the U.S. Bankruptcy Court in Manhattan signed
an order on Wednesday that allows the company to borrow up to $6 million
under a revolver from a group of lenders led by Heller Financial Inc.
and General Electric Capital Corp., which is a unit of General Electric
Co. The DIP loan pact also includes roughly $80.2 million of credit line
debt from before the firm filed for bankruptcy on April 8, reported the
newswire.
Galey & Lord Gets Court Approval For Insurance Deal
The U.S. Bankruptcy Court in Manhattan approved Galey & Lord Inc.'s
request to sign an insurance financing deal after the company emerges
from chapter 11 protection, Dow Jones Newswires reported. The ruling on
Monday allows the textile manufacturer to spend $1.1 million on
insurance policies it needs to maintain for its business operations. The
company didn't say when it plans to exit from chapter 11 protection.
Galey & Lord and 11 units filed for chapter 11 bankruptcy protection
in February 2002, listing assets of $694.4 million and liabilities of
$715.1 million as of Dec. 29, 2001, reported the newswire.
Aladdin Gaming Sale Pact Calls For $5 Million Breakup Fee
Aladdin Gaming LLC is seeking bankruptcy court approval to pay a $5
million breakup fee to the lead bidder for its casino in Las Vegas, as
well as to reimburse up to $2.5 million in expenses related to the bid,
Dow Jones Newswires reported. Aladdin Gaming has agreed to sell the
casino to OpBiz LLC for $6.75 million in cash for unsecured creditors,
$510 million in notes, payment of administrative and priority claims,
and an investment of $90 million to renovate the property, according to
the company's motion seeking approval of the bid protections filed with
the U.S. Bankruptcy Court in Las Vegas on April 23, reported the
newswire. A hearing on the breakup fee and procedures for bidding is
scheduled for May 7.
Monitor Recommends Bid Process For Aeroplan Card Pact
A court-appointed monitor has recommended that Air Canada's credit-card
contract be opened for new bidders after reviewing an unsolicited offer
from an unidentified credit-card company, Dow Jones Newswires reported.
In a report on Thursday, Ernst & Young said the bid process is
necessary to determine the best possible deal for the Aeroplan
credit-card contract. An Ontario Superior Court was expected to receive
the monitor's report late on Thursday and rule on it. Air Canada filed
for bankruptcy protection on April 1, and requested that its Aeroplan
credit-card contract be renegotiated. Canadian Imperial had held the
contract since 1997 under its popular Aerogold Visa card, reported the
newswire.
Devon Mobile Communications Gets 90-day Plan-filing Extension
The bankruptcy court handling the chapter 11 proceedings for Devon
Mobile Communications LP has given the company a 90-day extension of its
sole right to file a reorganization plan and lobby for creditor support,
Dow Jones Newswires reported. Tuesday's ruling from the U.S. Bankruptcy
Court in Wilmington, Del., bars third parties from submitting their own
reorganization plans that would outline how creditors would be paid.
Under the ruling, obtained by Dow Jones Newswires, the company can file
a reorganization plan until June 16 and can solicit creditor approval
until Aug. 18.
Qualcomm Likely to Get Stake in Globalstar
Qualcomm Inc. will likely receive an equity stake in Globalstar
Telecommunications Ltd. once it emerges from chapter 11 bankruptcy
protection, Dow Jones Newswires reported. San Jose, Calif.-based
Globalstar owes Qualcomm more than $600 million in debt accrued prior to
its chapter 11 bankruptcy filing in February 2002. The news comes after
ICO Global Communications Ltd. won bankruptcy-court approval on Friday
to purchase a 54 percent equity stake in Globalstar for $55 million.
With the Globalstar-ICO Global deal approved, Qualcomm and other
creditors will likely share the remaining 46 percent stake, said
Globalstar spokesman Mac Jeffrey. He added that Globalstar will likely
file a plan of reorganization detailing the equity distribution later
this month, reported the newswire.
Asia Global Crossing Panel Seeks To File Own Chapter 11
Plan
The unsecured creditors' committee of Asia Global Crossing Ltd. is
asking a bankruptcy court to end or modify the company's exclusive
period to file a chapter 11 plan, thereby opening up the process to
other parties, Dow Jones Newswires reported. Terminating exclusivity
won't disrupt any of Asia Global Crossing's businesses because the
company has no ongoing business, the committee said in a recent court
motion. Asia Global Crossing on March 10 closed the sale of nearly all
of its assets to Asia Netcom Corp. In a March court filing, Asia Global
Crossing said that it couldn't file a chapter 11 plan until the sale is
completed. The committee said the chapter 11 case can be easily resolved
with a straightforward, liquidating plan. It said it would be ready to
file such a plan within a week of an order terminating the company's
exclusivity, reported the newswire.
American Airlines E-Tickets: To Reduce Internal Costs
AMR Corp.'s American Airlines unit, which averted bankruptcy in late
April, plans to eliminate all paper transactions for all domestic
flights to reduce internal costs, Dow Jones Newswires reported. In a
press release on Thursday, American Airlines said it will no longer
issue paper tickets for e-ticket eligible domestic itineraries through
its reservations, airport ticket counters, Travel Centers and AA.com.
The carrier said it reached an important milestone in its effort to go
paperless by implementing interline e-ticketing agreements with 10 other
domestic carriers. It expects the deals to enable easier transfers
between carriers when travel plans are changed due to weather delays,
reported the newswire.
Boots & Coots Reports 10K Will Be Amended
Boots & Coots International Well Control Inc., citing unusual
demands on personnel and temporary staffing constraints, missed a proxy
statement filing with the Securities and Exchange Commission that it had
previously planned to make, Dow Jones Newswires reported. In a press
release on Thursday, the emergency response company said it is currently
working toward the preparation and filing of an amendment to its Form
10-K to include the previously omitted information, which will cure the
filing deficiency. In March, Boots & Coots rejected a restructuring
proposal from a creditor that would have required a voluntary chapter 11
bankruptcy filing, reported the newswire.
Trustee To MCI Debentures Seeks Separate Creditor Panel
HSBC Bank USA is asking the bankruptcy court overseeing the WorldCom
Inc. case to appoint an official creditors' committee for MCI
Communications Corp. and its subsidiaries, according to a motion
obtained by Dow Jones Newswires. The motion, filed with the court late
on Wednesday, said the appointment of an MCI Communications creditors'
committee 'is necessary to assure adequate representation' for all the
creditors of the WorldCom subsidiary. Those creditors so far haven't had
sufficient representation, the filing said. The U.S. Bankruptcy Court in
Manhattan will consider the matter at a hearing on May 27, reported the
newswire.
Adelphia Owes Los Angeles Customers $5.5 Million Rebate, Mayor
Says
Adelphia Communications Corp. owes Los Angeles customers $5.5 million in
rebates because the company has failed to justify a rate increase, the
city's mayor said, Bloomberg News reported. Adelphia in July 2002 raised
rates as much as 10 percent for about 200,000 Los Angeles customers.
Mayor Jim Hahn said the city won't accept the increases because the
company has refused to certify whether the financial information it
provided is correct. The city council must vote on whether to demand the
rebate and Adelphia can take the issue to the Federal Communications
Commission for a final ruling, reported Bloomberg. Adelphia filed for
bankruptcy protection in June after former management was accused of
hiding debt and overstating financial results.
Two Ex-HealthSouth Officials Plead Guilty
Two former chief financial officers of HealthSouth pleaded guilty to
fraud charges and implicated the company's founder yesterday, as the
company said that it had not reached a new deal with banks to permit it
time to make debt payments, Reuters reported. The former executives --
Michael D. Martin and Malcolm E. McVay --pleaded guilty in Federal
District Court in Birmingham, Ala., to conspiracy to commit wire fraud
and securities fraud and to filing false records. During the pleas,
McVay and Martin did implicate Richard M. Scrushy, the founder and
former chief executive of HealthSouth, said Alice Martin, a United
States attorney, Reuters reported.
Essential Therapeutics Files For Reorganization Under Bankruptcy
Code
Essential Therapeutics Inc. and its units filed for chapter 11
bankruptcy protection in Delaware, Dow Jones Newswires reported. In a
press release today, the company said it plans to file a reorganization
plan that will allow it to fulfill its obligations to certain creditors
and to recapitalize as a privately held entity. On April 22, the company
said it didn't have the funds to redeem all of the shares of the series
B stock for which redemption notices have been received, reported the
newswire.
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