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September 23, 2002
Bankruptcy Reform Bill Is Stalled in the House
A holding pattern remains in effect for legislative maneuvering on
bankruptcy reform, which is stalled in the House over a controversial
provision opposed by anti-abortion Republicans, CongressDaily
reported. The bankruptcy measure is unlikely to see floor action in that
chamber before the November election, and Senate leaders already have
said they would not take up the conference report until the House passes
the measure.
Lawmakers Received Millions from Credit Card Interests
While lobbying Congress to approve legislation making it harder for
individuals to erase their debts in bankruptcy, credit card interests
gave more than $63 million to political candidates and parties,
CongressDaily reported. A seven-year review of the Federal
Election Commission records showed that Republicans and Democrats alike
benefited from the donations that came mostly from a small number of
major banks, consumer lenders and credit card companies. Those are the
same forces pushing legislation that critics say would set
insurmountable barriers for families who declare bankruptcy due to
unforeseen hardship such as job loss, divorce or illness. The Common
Cause analysis shows that Republicans received nearly two-thirds of the
donations given between 1995 and 2001 at nearly $41.5 million, while
Democrats took in close to $21.5 million. The 23 House and Senate
Judiciary Committee conferees negotiating the bill fared especially
well, collecting more than $2 million from creditor interests between
Jan. 1, 1995 and June 30, 2002, the newswire reported.
Struggling Peregrine Will Sell Remedy Subsidiary to BMC
Peregrine Systems Inc. agreed to sell its Remedy software subsidiary to
BMC Software Inc. for $350 million, the Wall Street Journal
reported. On Sunday, Peregrine filed for chapter 11 protection in the
U.S. Bankruptcy Court in Delaware, seeking shelter from creditors after
it was unable to file audited financial statements dating back to 2000.
Peregrine also said its board has authorized a lawsuit against auditors
Arthur Andersen LLP, Arthur Andersen Germany and Arthur Andersen
Worldwide S.C., the Andersen audit partner on the account and other,
unnamed defendants, seeking damages in excess of $250 million. The deal
would add to BMC's earnings per share 'within 12 months.' The companies
hope to conclude the sale, which must be approved by the bankruptcy
court, within 60 days.
Firm's Bankruptcy Ensnares Creditors at Radio Networks
A chapter 11 bankruptcy filing by a San Antonio company that peddled
weight-loss supplements through broadcast endorsements and promotions
has put major radio networks on the hook for close to $40 million, the
Wall Street Journal reported. Mark Nutritionals Inc. sold Body
Solutions, a diet program and weight-loss supplement that has been
endorsed by local radio disc jockeys and on-air employees including CBS
Radio's Charles Osgood. The closely held company filed for chapter 11
reorganization in U.S. Bankruptcy Court in San Antonio last week. The
three-year-old company's bankruptcy filing lists liabilities of about
$40 million and assets of about $10 million, according to Bill Oliver,
an attorney for Mark Nutritionals.
Judge Authorizes Settlement between Dow Corning and the United
States
A federal judge authorized a $9.8 million settlement between Dow Corning
and the federal government for medical expenses stemming from breast
implant-related injuries, the Associated Press reported. U.S. District
Judge Denise Page Hood approved the settlement on Thursday. Dow Corning
is owned by the Dow Chemical Co. and Corning Inc. Company officials
couldn't immediately be reached for comment. The agreement prevents the
government from seeking any additional compensation for implant claims
from Dow Corning or from claimants who had Dow Corning breast implants
except in instances of criminal or fraudulent activity. However, the
government is free to pursue compensation from other manufacturers. Once
the world's largest maker of silicone breast implants, Dow Corning
sought bankruptcy protection in 1995 after thousands of implant
recipients sued the company.
Court Allows New Vote on PG&E Reorganization
Pacific Gas and Electric Co. creditors will get another chance to choose
between competing plans to lift the utility from chapter 11, a judge
ruled on Friday, the Daily Deal reported. U.S. Bankruptcy Judge
Dennis Montali ruled that the California Public Utilities Commission may
have creditors vote on whether they prefer the reorganization plan
proposed by the PUC or the plan put forth by PG&E. Montali then will
weigh the results of the so-called 'preference vote' when he decides
which plan to approve later this year or early next year. Montali will
determine at a later hearing how many creditors will get the vote. The
vote might be tallied by December, attorneys said.
IMF Moves Ahead of Wall Street on Sovereign Bankruptcy
Plans
With the International Monetary Fund forging ahead with its chapter
11-style plan for debtor countries, the stakes now appear to be higher
for the private-sector to push through its own remedy for disorderly
debt restructurings, Dow Jones reported. IMF First Deputy Managing
Director Anne Krueger said this week that she expected a major
endorsement of her controversial international bankruptcy plan at the
Fund's annual meeting next week. Such support would involve drafting
language to amend the IMF's charter that establishes a bankruptcy
process for troubled sovereigns similar to the procedure used by U.S.
companies. As its stands, the IMF may beat Wall Street to the punch on
formalizing a broad-base policy for orderly debt workouts as the private
sector tries to develop a market-oriented approach amid divisions on how
to best build a new financial architecture.
Krueger first floated her bankruptcy plan late last year, sparking a
massive outcry on Wall Street as investors argued the proposal
compromised creditors' rights, raised countries' borrowing costs and was
extremely cumbersome to implement. To counter the Krueger plan, the
private sector organized this year to develop a unified, market-based
debt workout policy that includes greater use of so-called collective
action clauses. We're 'moving ahead with our own' plans, said Clifford
Dammers, secretary general of the International Primary Market
Association, adding that the IMF's actions won't undermine the private
sector's efforts on the issue. The amended language on the IMF's
Articles of Agreement would be debated during the Washington lender's
spring meetings next April.
IDT Acquires Nationwide Fiber Network
IDT Corp.'s Telecom unit acquired certain indefeasible rights of use and
equipment from the bankruptcy estate of Star Telecommunications Inc. in
a cash transaction, Dow Jones reported. In a press release Friday,
telephone company IDT said it completed the acquisition after the U.S.
Bankruptcy Court in Wilmington, Del., selected the company as the
winning bidder. The assets acquired represent long-term capacity on U.S.
nationwide fiber networks operated by Qwest Communications International
Inc. and Broadwing Inc.
Star Telecommunications purchased the IRUs in 1998 for about $68
million. IDT paid cash for the right of use of the capacity on the
network for the remainder of the terms of the IRUs, most of which are in
excess of 16 years. IDT expects to recover the cost of the acquisitions
in less than a year, solely on the basis of costs avoided, representing
the money saved by moving traffic onto its own network in lieu of
leasing network capacity from other carriers.
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