January 10, 2006
McLeodUSA Exits Chapter 11 Bankruptcy
Telecom company McLeodUSA Inc., which sought bankruptcy protection last year amid falling revenue and stiff competition from larger players, has emerged from chapter 11 after eliminating more than $600 million in debt, the Associated Press reported yesterday. The company also said that it appointed a new CEO, Royce Holland, who was most recently chairman and CEO of Allegiance Telecom Inc., which was acquired by XO Communications Inc. in 2004. McLeodUSA filed for chapter 11 in late October 2005. The company's reorganization plan called for it to eliminate about $677 million in debt, leaving it with about $50 million in debt. The company has also obtained a new credit agreement that provides another $50 million in funding. As part of McLeodUSA's reorganization, the company's old stock has been canceled and will no longer be publicly traded.
Toyota Head: U.S. Would Save GM
The U.S. government would probably step in to support General Motors Corp. (GM) if the world's No. 1 auto manufacturer falls into further difficulty, said Hiroshi Okuda, chairman of Toyota Motor Corp., Reuters reported today. "GM is a U.S. industry icon," Okuda said. "The U.S. government won't leave it if it tumbles into real difficulty," said Okuda, whose company is widely expected to overtake GM as the world's biggest auto manufacturer in the next year or two. Running through a list of GM's problems, Okuda noted that its market share has been declining and that it had been so far unsuccessful in its attempts to sell a financial unit. GM lost more than $4 billion in North America in the first nine months of 2005, reflecting its declining market share and the costs of a painful restructuring. But GM Vice Chairman Robert Lutz reiterated Monday that the company is moving as fast as possible to turn itself around and has no intention of filing for bankruptcy. Toyota produced its 10th straight year of record U.S. sales in 2005, with growth of 10.1 percent.
Airlines
UAL Announces Launch of $3B Loan Syndication
United Airlines Inc.'s parent company UAL Corp. said on Monday that it has begun marketing a $3 billion loan to help it operate after it emerges from bankruptcy protection next month, Reuters reported yesterday. The loan, to be secured by substantially all of the No. 2 U.S. airline's available assets, comprises a $300 million revolving credit facility and a term loan of up to $2.7 billion. The carrier also has asked for bankruptcy court approval of an agreement with Airbus to defer delivery of 42 aircraft from the A320 family. UAL's exit financing—which received a speculative grade rating from the two main debt rating agencies—is led by JP Morgan and Citigroup. Read more.
Delta Air's Bankruptcy Judge Goes on Medical Leave
The federal judge overseeing the Delta Air Lines bankruptcy proceeding
stepped down for two months for medical reasons, raising the likelihood of
at least a brief delay in the carrier's restructuring efforts, the Wall
Street Journal reported today. Judge Prudence Carter Beatty, who has
been handling Delta's chapter 11 case in the U.S. Bankruptcy Court in New
York's southern district since September, will be replaced by Judge Adlai S.
Hardin. The clerk's office for the bankruptcy court wouldn't disclose
any details of Judge Beatty's medical problem, adding that it isn't clear
when she will return to work. The judge's leave is set at two months "for
now," according to court officials, though she could take back the Delta
case upon returning. Read more.
Labor Unions Object to Executive Bonuses at American
Leaders of three unions at American Airlines are questioning stock-based
bonuses that executives of the money-losing carrier are due to receive in
April, the Associated Press reported yesterday. Last week, the company
provided more details about bonuses for about 1,000 executives, from the
airline's No. 2 official to midlevel managers. Four officials would get
payouts of more than $1 million if parent AMR Corp.'s stock price holds
steady or increases before April. The bonuses, first spelled out in 2003,
were increased because AMR's stock price increased more than any other major
U.S. carrier through the end of 2005. The company also estimated last week
that stock options granted to all employees in 2003 could be worth more than
$500 million when they vest, also in April. Those stock options were granted
when workers took pay cuts to help the company avoid bankruptcy. Still,
leaders of unions for American's pilots, flight attendants and mechanics and
other workers said the executive bonuses were poorly timed because AMR has
lost more than $7 billion since the beginning of 2001. Read more.
California Restaurant Chain Emerges from Bankruptcy
California restaurant chain Fresh Choice has emerged from bankruptcy a
smaller company but one poised to grow into profitability, CEO Tim O'Shea
said Friday, the Gilroy Dispatch reported yesterday. Morgan Hill,
Calif.-based Fresh Choice filed for bankruptcy in July 2004 after closing
nearly two dozen failing stores. One store, at the Valley Fair Mall in San
Jose, was open for just four months. The chapter 11 reorganization allowed
the company to shed its commitments on a series of long-term leases. Fresh
Choice closed stores in Texas, Washington and southern California. It
currently has 28 locations in northern California, including Gilroy and the
Almaden area of San Jose, down from 46 before the reorganizations. The debt
was an estimated $8.5 million. Read more.
Potato Tycoon's Son Files for Chapter 11
Donald J. Simplot, 70, eldest son of Idaho potato baron J.R. Simplot, filed for chapter 11 bankruptcy reorganization last week in response to lawsuits involving failed business investments, the Idaho Statesman reported today. The unsuccessful investments included a Seattle gambling casino, a cruise ship company and a chain of West Coast hotels, according to one of Simplot's lawyers and one of the creditors named in the filing. An attorney for Simplot called the filing a way of temporarily "shelving" lawsuits filed by lenders alleging that Simplot had personally guaranteed loans of more than $40 million to business ventures he was involved with. The attorney, Seattle-based Jerome Shulkin, said the bankruptcy filing means lenders in New York and Washington State that are suing Simplot will have to wait while a series of business partnerships is untangled. Read more.
AmeriDebt Founder Settles Suit Over Alleged Hidden Fees
The founder of the credit counseling firm AmeriDebt on Monday settled a lawsuit filed against him by federal regulators over $172 million in allegedly hidden fees the company collected from financially strapped debtors, the Associated Press reported yesterday. Andris Pukke agreed to pay $35 million to a fund that will be used to reimburse the roughly 300,000 customers the Federal Trade Commission (FTC) claimed AmeriDebt deceived. Pukke, who made a vast fortune off businesses that catered to customers in debt, is also barred from working in credit counseling, debt management or telemarketing. The settlement came a day before a federal court in Greenbelt, Md., was set to hear the FTC's lawsuit against Pukke and a class action lawsuit filed against him by former AmeriDebt customers. The class action case has also been settled, according to the FTC. Read more.
Club Brothers Meet with Bankruptcy Trustee
A bankruptcy court trustee questioned the owners of The Station nightclub in Providence, R.I., about their finances again yesterday, NBC News 10 reported today. Jeffrey and Michael Derderian filed for bankruptcy in September. The Derderians want to be freed from debts they could owe because of the deadly February 2003 fire at their West Warwick club. This was the third and final hearing that the Derderians had with the bankruptcy trustee. The brothers' bankruptcy lawyer, Christopher Lefebvre, said creditors will have until March 9 to oppose the Derderians' request to be free of their debts. The bankruptcy trustee asked Michael Derderian about deposits that were made to the bank account for Derco LLC—the brothers' company—after the February 2003 fire at the nightclub.
International
World Bank Official: Palestinians on Verge of Bankruptcy
Nigel Roberts, a World Bank representative in the West Bank and the Gaza Strip, said that the Palestinian Authority is facing a crisis that could unable it, as early as next month, from paying the salaries of at least 130,000 officials and members of its security forces, Saed Bannoura-IMEMC & Agencies reported yesterday. Roberts said that the Palestinian Authority (P.A.) is on the verge of functional bankruptcy; its failure to pay the hundreds of thousands of employees will make them unable to buy their basis daily needs, which will directly affect thousands of suppliers and merchants who earn their living from the employees. Read more.
French Weekly Faces Bankruptcy after Criticizing Mayor
The provincial weekly Lyon Capitale is facing bankruptcy as a result of its criticism of Lyons mayor Gérard Collomb in October over his allocation of public markets, which prompted the mayor to withdraw all municipal advertising from the newspaper, Reporters Without Borders reported yesterday. Run at a loss for years, Lyon Capitale has depended on municipal subsidies and advertising for its survival. Its financial problems deepened after it was bought by a group of private investors in August. A close aide of the mayor told Reporters Without Borders that Collomb terminated all advertising because he felt he had been libelled, but the decision is likely to result in the newspaper’s closure and the dismissal of all staff. Read more.
Canadian Pulp Mill under Bankruptcy Protection
As of the end of December 2005, Millar Western Pulp mill in Meadow Lake, Saskatchewan, Canada, has been placed under bankruptcy protection, the Meadow Lake Progress reported yesterday. The debt that the mill carries now totals $800 million, with approximately $326 million having been paid by taxpayers. Conrad Hadubiak, the lawyer for the mill, said that the plans for restructuring are still in early stages, but they are working hard to come up with solutions for the situation. Read more.
U.K.’s Golden Wonder Files for Bankruptcy
Snack manufacturer Golden Wonder has filed for bankruptcy, the U.K. Guardian reported today. The company has long been struggling to compete with runaway market leader Walkers. Restructuring company Kroll has taken over as administrator of the company, which employs 850, after "significant" losses in 2005, and declined to comment on the scale of any job cuts. Kroll said that it was considering all options for the business, and added it was closing Golden Wonder's own-label production business in Corby, central England, and moving it to Scunthorpe in the northeast, its other manufacturing site. Golden Wonder made losses of £10.8 million in 2004 on sales of £87.8 million, and further losses in 2005.