November 28, 2003
Stocks to Open Lower, Sales in Focus
U.S. stocks were expected to open lower today, undercut by a down dollar
and a lack of players on Wall Street, with many investors taking the day
off after the Thanksgiving holiday, Reuters reported. 'There's no
economic data today, and it's a shortened session,' said Peter Cardillo,
chief strategist at Global Partners Securities. 'The big story is that
today is the first full day of the holiday shopping season,' he
added.
Retailers will be in the spotlight today, which marks one of the year's
biggest shopping days. And this year most U.S. retailers are
anticipating a stronger holiday shopping season than last year thanks to
the rebounding economy. Some analysts are expecting a sales rise of 5 to
7 percent over last year, though Wal-Mart Stores Inc. and other chains
have tried to cool such expectations, reported the newswire.
Aurora Moves Closer to Pinnacle Merger
The makers of Duncan Hines cake mixes and Vlasic pickles are one step
closer to merging, Reuters reported. Aurora Foods, troubled producer of
Duncan Hines and Log Cabin syrups, and Pinnacle Foods Corp., which makes
Vlasic and Swanson frozen dinners, have signed a definite agreement to
combine their operations, Aurora said in a statement late on Tuesday.
The agreement mimics the letter of intent signed by the two companies in
October, shortly after J.P. Morgan Partners agreed to purchase a
controlling stake in both companies. The merger agreement signed on
Tuesday was approved by Aurora's senior lenders and bondholders owning
slightly more than half the company's subordinated notes. The proposed
merger will ultimately be presented to a bankruptcy court judge for
approval under a prearranged bankruptcy filing by Aurora, expected in
the coming weeks. Aurora said it anticipates closing the transaction by
March 31, Reuters reported.
International Steel to Sell 15 Million IPO Shares
Steel producer International Steel Group Inc. said on Wednesday that it
will sell 15 million common shares for $22 to $24 each in an initial
public offering that could raise as much as $360 million, Reuters
reported. The Richfield, Ohio-based company disclosed the IPO terms for
the first time in a filing with the Securities and Exchange Commission.
It predicted it will net about $318.5 million in proceeds and will use
the money to repay all amounts outstanding under a term loan. As of the
end of September, $228.4 million was outstanding under the loan, the
filing said. International Steel will have 95.4 million shares
outstanding, giving it a potential market value of $2 billion to $2.3
billion based on the price range. The company, which began operations in
the second quarter of 2002, was formed by merchant banking firm WL Ross
& Co. LLC to acquire and operate steel facilities, reported the
newswire.
Bad Credit Pushes Energy Traders to New Risk Tools
U.S. energy merchants are turning to new tools to manage credit risk,
Reuters reported. Failure to assess credit risk, a measure of credit
exposure and likelihood of default on a contract or trade, exacted a
heavy toll in a sector spoiled by growing business and easy financing in
the late 1990s. But the subsequent downgrades in the post- Enron world
triggered a cash crunch that forced companies to pay down debt and post
billions of dollars in collateral to cover supply contracts. 'It
actually creates a damper on the entire sector,' said Dr. Michael Ong,
executive director at the Illinois Institute of Technology and former
risk manager at banks ABN AMRO and Credit Agricole. Three companies,
Mirant Corp, Xcel Energy's NRG Energy and PG&E Corp.'s Pacific Gas
& Electric, have filed for bankruptcy protection, and analysts
expect more to enter chapter 11 before a sector recovery. As a result,
merchant companies are tightening their risk controls to gauge their
vulnerability to default from suppliers and customers, turning to tools
such as credit derivatives to reduce exposure.
Court Approves Sale Rules For Some Penn Traffic Assets
The bankruptcy court handling the chapter 11 case for Penn Traffic
Co. has approved the company's request to sign a sale agreement and put
its properties up for auction, according to court papers. On Nov. 21,
the U.S. Bankruptcy Court in White Plains, N.Y., issued an order
allowing the company to enter into a sale deal with the Kroger Co.,
which plans to buy 11 Big Bear supermarkets in central Ohio owned by
Penn Traffic. The bankruptcy court has scheduled a sale hearing for Dec.
11 in White Plains. Objections to the sale are due by Dec. 8.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2'>http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Oakwood Homes Seeks $11 Million Breakup Fee For Berkshire Unit
Oakwood Homes Corp. asked permission from a bankruptcy court Tuesday
for an opening bid of about $372.5 million in cash from Clayton Homes
Inc., a Berkshire Hathaway Inc. subsidiary. Oakwood Homes' deal to be
acquired by Clayton Homes was announced Tuesday, almost on the eve of
confirmation hearings on Oakwood Homes' plan to exit chapter 11 a
stand-alone company. Rules for the auction of the company include an $11
million breakup fee, payable if the Berkshire Hathaway subsidiary is
outbid at the auction.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2'>http://www.djnewsletters.com/trial-form.html?promo=TDBRABI2)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
ENRON
CSFB Called An 'Enabler' Of Enron Fraud (Wall Street
Journal)
A report this week on Credit Suisse First Boston's role in the Enron
affair puts the bank on a short list of Wall Street firms considered by
a bankruptcy examiner to be key enablers of the massive fraud, the
Wall Street Journal reported. The bank had avoided being singled
out in August, when the court-appointed examiner released reports on six
of the failed energy company's bankers: Citigroup Inc., J.P. Morgan
Chase & Co., Merrill Lynch & Co., Deutsche Bank AG, Barclays PLC
and Canadian Imperial Bank of Commerce, some of which have reached
settlements with various investigators while others defend their
conduct.
The report on the unit of Credit Suisse Group was released late Monday
by Enron examiner Neal Batson along with separate, critical
reports on Enron transactions handled by Royal Bank of Scotland PLC and
its predecessor, National Westminster PLC, and by Toronto Dominion Bank.
The examiner concluded that there was 'sufficient evidence' to conclude
that these three banks, in addition to the others, aided and abetted
Enron officers in breaching their fiduciary duties and that their claims
in the Enron bankruptcy proceedings could be subordinated, or paid
after, other creditors. To read the full article, point your browser to
www.wsj.com (subscription
required).
Enron Puts Headquarters In Texas on Auction Block
Two years after Enron filed for bankruptcy protection, the rented
oval-shaped glass tower that the company calls home is going on the
auction block, the Associated Press reported. Interested buyers whose
bids are deemed acceptable will attend an auction on Tuesday at the
Houston headquarters. Enron spokesman Eric Thode said on Wednesday the
highest bid will be presented to U.S. Bankruptcy Judge Arthur Gonzalez
in New York for approval. A sale is expected to close early next year,
coinciding with the relocation of the roughly 1,000 workers still at
Enron's headquarters. A partnership of banks, led by J.P. Morgan Chase
& Co., one of Enron's largest creditors, owns the building, which
has an appraised value of $92.5 million. Proceeds of the sale will be
divided among those lenders, reported the newswire.
Doman Says Court to Hear Bid on Labor Pact
Doman Industries Ltd. said on Thursday a bankruptcy judge will consider
its bid to negotiate its own labor pact with workers on strike against
British Columbia's coastal lumber industry, Reuters reported. The forest
products company wants to pull out of the industry's bargaining agent,
Forest Industrial Relations, which it accuses of provoking the strike by
imposing a temporary contract that the Industrial, Wood and Allied
Workers union has said was unacceptable. Doman said in a news release
that a British Columbia Supreme Court judge had agreed to hear arguments
on the labor case as soon possible. The court, as expected, also
extended a stay in the company's reorganization proceedings until Dec.
18, reported the newswire.
Special Metals Exits Bankruptcy
Special Metals Corp., which makes nickel-based alloys, on Wednesday said
it completed its plan of reorganization and emerged from bankruptcy,
Reuters reported. During the reorganization process the company reached
six new collective bargaining agreements with its workers and its three
largest pension plans were assumed by the Pension Benefit Guaranty
Corporation. Huntington, W.V.-based Special Metals also said its exit
financing, a new $200 million revolving credit facility, closed on
Wednesday. 'With a much stronger financial position, a significant
reduction in debt, lower interest payments and operating costs, we look
forward to ... the opportunity to focus our attention solely on the
business, with an emphasis on growth and customer service,' said Chief
Operating and Restructuring Officer Dennis Wanlass, reported the
newswire. Special Metals filed for chapter 11 bankruptcy in March
2002.
AIR CANADA
Air Canada Needs C$4 Billion to Renew Fleet
Air Canada needs some C$4 billion ($3 billion) to renew its fleet over
the next five to seven years, the insolvent airline has indicated in
court papers, Reuters reported. Air Canada's CFO Robert Peterson made
the estimate in a signed affidavit to the Ontario court that is
overseeing the airline's restructuring under bankruptcy protection.
'The renewal of the fleet and the acquisition of a fleet of smaller,
more cost-efficient aircraft is a critical component of Air Canada's
strategy to stabilize its domestic business while exploiting the cost
advantages that its new structure will give it in the higher margin, but
highly competitive, international and transborder markets,' Peterson
said. In the affidavit, Peterson asks the court to quickly approve a
C$650 million equity investment proposed by Hong Kong-based businessman
Victor Li. Air Canada's C$4 billion estimate for fleet renewal would
come on top of the roughly C$1.3 billion of 'minimum' equity and debt
funding Air Canada expects to need to finance its emergence from
bankruptcy protection, reported the newswire.
Air Canada Sinks into the Red in Third Quarter
A big drop in international traffic following the SARS outbreak in
Toronto and Asia pushed Air Canada into the red in the third quarter as
it worked to emerge from bankruptcy protection, the carrier said on
Wednesday, Reuters reported. Air Canada said its net loss reached C$263
million ($202 million), or C$2.18 a share, in the quarter ended Sept.
30, down from a year-earlier profit of C$125 million, or 91 Canadian
cents a share. Revenues fell 19 percent to C$2.2 billion from C$2.7
billion. Excluding all charges linked to its court-supervised
restructuring, it posted an operating profit of C$17 million, 10 times
smaller than last year's C$168 million. 'Given the rapid and precipitous
fall off in revenues due to SARS, I am pleased with the speed with which
we were able to eliminate costs during the period,' Air Canada CEO
Robert Milton said in a statement. Air Canada said it cut operating
expenses by 14 percent during the quarter, after laying off 6,300
employees, or 16 percent of its workforce, reported the newswire.
Alterra: Court OKs Reorganization Plan
Alterra Healthcare Corp., which operates nursing homes for Alzheimer
patients, said on Wednesday its reorganization plan to exit from
bankruptcy in December received court approval, Reuters reported. Under
the plan, a reorganized Alterra would receive a $76 million equity
investment from FEBC-ALT Holdings Inc., a subsidiary of a joint venture
formed by Fortress Investment Group LLC, Emeritus Corp. and NW Select
LLC. The reorganized Alterra will continue to operate 305 residences
located in 21 states financed primarily by pre-existing mortgage loan
and sale lease-back financing arrangements, company said. All of
Alterra's unsecured debt and its equity before the bankruptcy filing
would be extinguished. Unsecured creditors would get a $23 million
distribution that is subject to adjustment, reported the newswire.
