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Hatch Bill to Set Asbestos Compensation Fund at $108
Billion
Senate Judiciary Chairman Orrin Hatch (R-Utah) said he is close to
ending private sector negotiations aimed at crafting a system to
compensate victims of asbestos, essentially forcing unions and
businesses to compromise on a $108 billion trust fund,
CongressDaily reported. The size of the fund was one of the
biggest outstanding questions surrounding the negotiations, which the
Judiciary Committee is overseeing. Unions were seeking $120 billion,
while defendant companies in asbestos litigation wanted a $90 billion
fund. Hatch said he informed both sides of his decision to establish a
$108 billion fund, adding that he hopes to introduce legislation early
next week. Appearing to settle another contentious issue, Hatch said the
program likely would not contain a 'backstop' mechanism to guarantee
funding for victims.Organized labor had pushed for a backstop of federal
funds to ensure that the trust fund would not run dry. But a backstop is
not needed with a fund of that size, Hatch said, reported the
newswire.
On the bankruptcy bill front, Sen. Hatch said he intends to bypass a
committee vote and ask the Senate to act directly on the bankruptcy
bill, reported Reuters. 'It looks to me like we'll bring it to the
floor. After all, it's been debated so many times—it's basically
the same bill—there's no reason to go through another two weeks in
committee,' he told reporters at the Capitol, the newswire reported.
Reuters reported that Hatch said his focus will be on asbestos lawsuit
legislation before turning to the bankruptcy bill, which the House of
Representatives passed in March.
Fed Holds Key Rate Steady But Opens Door for a Cut
The Federal Reserve left interest rates unchanged but signaled that it
may cut rates if the economy doesn't pick up, the Wall Street
Journal reported. Citing a threat of deflation, as well as
'disappointing' employment and manufacturing data, the central bank on
Tuesday said economic risks lean toward weakness—a condition
typically used to indicate the possibility of an interest-rate cut down
the line. 'Recent readings on production and employment, though mostly
reflecting decisions made before the conclusion of hostilities, have
proven disappointing,' the Fed said in a brief statement, reported the
newspaper.
U.S. March Consumer Borrowing Seen Rising $3.5 Billion
U.S. consumer borrowing through credit cards and auto loans crept higher
in March as retail sales rebounded, economists said they expect the
Federal Reserve to report today, Bloomberg News reported. Consumers
probably took out $3.5 billion more in loans during the month, following
an increase of $1.5 billion during February, based on the median of 40
estimates in a Bloomberg News survey. Economists' projections ranged
from a decline of $3 billion to an increase of $9.5 billion. 'Consumer
confidence was still sliding in March as the U.S. went to war,'' said
Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York.
'Fewer trips to the mall means that revolving credit charges were
modest,'' reported the newswire.
Kmart Exits Bankruptcy After Closing 599 Stores
Kmart Corp. exited chapter 11 protection yesterday, concluding the
largest retail bankruptcy in U.S. history after almost 16 months,
Bloomberg News reported. The reorganization plan for the third-largest
U.S. discount retailer wipes out about $7.8 billion in debt. Hedge fund
ESL Investments Inc., owned and run by Connecticut multimillionaire
Edward S. Lampert, and the Third Avenue Value Fund will become Kmart's
controlling shareholders with a combined stake of more than 54 percent.
Troy, Mich.-based Kmart filed for bankruptcy in January 2002 after
struggling against an economic slowdown plus stiff price competition
from Wal-Mart Stores Inc. and Target Corp. While reorganizing, Kmart
closed 599 stores and fired 57,000 workers, reported the newswire.
U.S. Steel Offers Early Retirement to Trim Workforce
Steelworkers are being offered as much as $40,000 to retire early under
a tentative contract which U.S. Steel Corp. hopes will trim one in five
jobs following its purchase of National Steel, union officials said, the
Associated Press reported. The United Steelworkers of America last week
began mailing details of the proposed contract to U.S. Steel and
National Steel workers, union officials said. Steelworkers have until
May 19 to accept or reject the contract, which would cover some 28,500
employees of U.S. Steel and National Steel. The contract is an integral
part of Pittsburgh-based U.S. Steel's $850 million bid to buy National
Steel, which was approved by the Mishawaka, Ind.-based steelmaker and a
federal bankruptcy judge last month, reported the newswire.
Union Acceptance Completes Second Leg of Asset Sales
Union Acceptance Corp. completed the second part of its asset
liquidation program last week, transferring its $5 million auto loan
portfolio to Century Liquidation Inc., Dow Jones Newswires reported.
According to documents obtained on Friday by the newswire, Union
Acceptance received $1.22 million for the portfolio, for which the total
value was just under $5 million as of Feb. 28. Under terms of an
agreement signed on March 26, Century paid 27.5 percent of the value of
the active, non-bankrupt loans in the portfolio, 8.5 percent of the
value of chapter 13 and reaffirmed chapter 7 loans, and 2.5 percent for
current chapter 7 loans. The sale was completed at an April 28 court
hearing, reported the newswire.
United Air To Close Indianapolis, Oakland Facilities
United Airlines, a unit of UAL Corp., this month will shut down
permanently two maintenance facilities in Indianapolis and Oakland,
Calif., according to a company spokesman, Dow Jones Newswires reported.
Heavy maintenance will be outsourced to other companies, which should
cut expenses in half, the company said. Other maintenance work will be
shifted to a facility in San Francisco, according to company spokesman
Jason Schechter. This is the first action taken after new cost-saving
labor contracts were approved on Friday by a federal bankruptcy court
judge in Chicago, reported the newswire.
Today's Man Delays Annual Report; Sees Wider FY03 Loss
Today's Man Inc. said it couldn't file its annual report on time because
of complications related to its bankruptcy, according to a report filed
with the Securities and Exchange Commission, Dow Jones Newswires
reported. In the filing from late Monday, the company said it expects a
loss of $13.6 million for the year ended Feb. 1, wider than the $10.3
million loss reported a year earlier. Today's Man said it couldn't file
its annual report without 'unreasonable effort or expense,' but plans to
submit periodic financial reports to the SEC in Form 8-Ks in lieu of its
year-end financials. The company and its subsidiaries filed for chapter
11 protection on March 4 in the U.S. Bankruptcy Court in Camden, N.J.,
listing assets of $37.8 million and debts of $36.5 million, reported the
newswire.
Fleming Wins Final Approval of $150 Million Bankruptcy
Loan
Lewisville, Texas-based Fleming Cos., the largest U.S. grocery
distributor, won final court approval of a $150 million loan and vendor
lien program, clearing a major hurdle of its bankruptcy case, Bloomberg
News reported. Fleming's bankruptcy filing last month and questions
about its accounting had undermined the confidence of suppliers, who
typically ship goods paid for on credit, analysts said. The vendor
program will let some vendors place liens on Fleming's assets in
exchange for continuing to ship products on the same terms as before the
bankruptcy filing, according to the newswire. Lenders Deutsche Bank
Trust Company Americas and JP Morgan Chase Bank have agreed to provide
the funding. U.S. Bankruptcy Judge Mary Walrath granted final approval
of the loan today.
Telecom's Acterna Files for Bankruptcy
Germantown, Md.-based Acterna Corp. on Tuesday said it filed for chapter
11 bankruptcy protection because of the prolonged downturn in the
telecommunications industry, reported Reuters. The provider of
communications test instruments, services and systems said it had
arranged DIP financing of $30 million that, with its current cash, will
allow it to continue operations and meet its normal business plan, the
newswire reported. A group of banks led by JPMorgan Chase Bank and
General Electric Capital Corp. will provide the funding. The company,
which filed for bankruptcy with the U.S. Bankruptcy Court for the
Southern District of New York, proposed terms of its pre-negotiated
reorganization that would allow it to cut its debt by $750 million, or
78 percent, according to Reuters. The plan also would allow Acterna to
cut its annual cash interest expense by at least $45 million, it said,
the newswire reported.
US Air Posts Gains After Bankruptcy Emergence
US Airways Group Inc. reported an income of $1.64 billion in its first
quarter, possibly associated with its March 31 emergence from chapter
11, The Wall Street Journal reported. The airline, which no
longer trades publicly, said that its pretax operating loss in the same
quarter was $282 million, compared with a $435 million pretax loss the
year before. Despite the surprise first-quarter gain, US Airways's Chief
Executive David Siegel said that if the airline's fares and traffic
don't improve during the summer, the carrier will decrease its fleet
come September. The Arlington, Va.-based airline said it ended the
quarter with $1.84 billion, aided by a $1 billion bailout backed mostly
by the federal government.
Kmart Names Chairman, Sees $2.7 Billion Liquidity Position at
Emergence
Troy, Mich.-based Kmart Kmart said its liquidity position is estimated
to be $2.7 billion, including net borrowings available (after letters of
credit) under the new $2 billion exit financing facility and cash of
about $1.1 billion, reported Dow Jones Newswires. After completing all
remaining payments related to consummation of the reorganization plan,
including payments for cure claims related to leases and executory
contracts, reclamation claims, retention bonuses for certain employees
and financing facility commitment fees, the company expects that its
cash will be about $750 million, according to the newsletter.
Accordingly, the company does not expect to borrow funds under the new
exit financing facility until the planned seasonal inventory build
occurs in the fall. Kmart said in its reorganization plan it had
projected EBITDA of $75 million for the full 2003 fiscal year, reported
Dow Jones.
Metromedia Fiber Wants More Time to File Chapter 11 Plan
White Plains, N.Y.-based Metromedia Fiber Network Inc. has asked the
bankruptcy court overseeing its chapter 11 case to give it 90 more days
to file a reorganization plan, Dow Jones Newswires reported. The
fiber-optic network company wants its deadline to file a reorganization
plan extended to Aug. 14 from May 16, and its deadline for soliciting
sufficient support from creditors for the plan pushed to Oct. 14 from
July 16, the motion dated April 29 and obtained by Dow Jones Newswires
said. A hearing on the motion is scheduled for May 15 in the U.S.
Bankruptcy Court in Manhattan, with objections due by May 12. Metromedia
filed for bankruptcy protection in May 2002, saying it had overbuilt its
communications network.
Heartland, Creditors Reach Employee Bonus Plan Compromise
The bankruptcy court handling chapter 11 proceedings for Heartland
Securities Corp. approved a deal with creditors that trims about 30
percent of the company's planned $600,000 employee retention program,
Dow Jones Newswire reported. According to documents obtained by Dow
Jones, Heartland agreed to reduce its bonus plan for managers by about
$60,000 and its non-management plan by about $121,000. The deal also
allows for medical coverage and severance payments. The terms of the
agreement, approved May 1, are based on Heartland closing a $4.2 million
asset sale to Trillium Trading LLC and Schoenfeld & Co., which was
approved by the bankruptcy court on April 21, according to the newswire.
Heartland filed for chapter 11 bankruptcy protection March 27, listing
$13.4 million in assets against $25.8 million in debts.
Creditors Object to Maxxim Medical's Retention Plan
The official committee of unsecured creditors for bankrupt Maxxim
Medical Group Inc. objected to the company's proposal for a key
employee-retention plan, saying it proposes to give too much money to
the executives, Dow Jones Newswires. In court papers obtained Tuesday by
Dow Jones Newswires, the creditors said retention plans are generally
set up as an incentive to employees who might otherwise leave, but under
the proposed plan, 51 percent of the payments would be made to
executives hired to turn the company around. 'Any payments to these
executives, retained for the very purpose of taking the company through
a reorganization and none of whom presents a flight risk, is improper
and inconsistent,' the objection said. A hearing on the retention plan
is scheduled for Wednesday in the U.S. Bankruptcy Court in Wilmington,
Del.
Judge OKs Fees in Agway Case
The judge overseeing Agway Inc.'s bankruptcy protection case in court
Tuesday approved nearly $3.5 million in professional fees for the first
four months of work on the case, the Syracuse Post-Standard
reported. The fees submitted by the lawyers and consultants have been
cut by about $126,300 thanks to voluntary reductions worked out with the
U.S. Trustee's office, according to the online newspaper. The judge also
approved expenses as part of the fee applications. Agway filed for
chapter 11 bankruptcy protection Oct. 1 with $1.510 billion and assets
of $1.574 billion as of June 30.
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