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June 14, 2006
name='1'>Pension Law Not Likely to Aid Firms from Past
Lawsuits
House Majority Leader
John Boehner (R-Ohio) said federal pension legislation probably will not
include the retroactive protection from lawsuits that companies such as
International Business Machines Corp., Bank of America Corp. and
AT&T Inc. want, Bloomberg News reported yesterday. More than 1,800
companies have switched their pensions from defined-benefit plans to
so-called hybrid plans. Companies that have been sued over the switch in
plans had been pushing for a retroactive shield that would end the
litigation. 'The idea of going back in a retroactive fashion has met
with stiff resistance in both the House and the Senate,' Boehner said at
the U.S. Chamber of Commerce in
w:st='on'>
size='3'>Washington
are dealing with it, and there will be some agreement on this issue in
the pension bill.'
href='http://www.philly.com/mld/inquirer/business/14811632.htm?template=conte…'>Read
more.
SEC
to Clarify Rules on Backdating of Stock Options
Federal regulators plan
to crack down on an increasingly popular corporate practice that boosts
executive compensation by guaranteeing profits on stock-option awards,
the Washington
Post reported today. The Securities and
Exchange Commission (SEC) is to issue a statement, possibly as early as
next month, clarifying the agency's view of when current law allows
backdating of stock options -- picking a date when the stock was at a
low point to be the date of the award, thereby immediately guaranteeing
a profit. Companies need the permission of directors, consistent with
company policy, and full disclosure to investors, including properly
counting the added costs against earnings.
face='Times New Roman' size='3'>The action stems from a widening federal
probe by the SEC and the Justice Department into whether several dozen
companies backdated stock options illegally, making them more valuable
by changing the date on which they were said to have been issued without
telling shareholders and without recording the additional compensation
cost as an expense against the bottom line.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/06/13/AR20060…'>Read
more.
Airlines
name='3'>Bankruptcy Judge Approves Northwest
Deals
A bankruptcy court on
Tuesday approved nearly $550 million in concessions between Northwest
Airlines Corp. and two of its unions representing pilots, baggage
handlers and ground workers, but the airline will not realize the cost
savings from the deals until it reaches agreement with the flight
attendants, the Associated Press reported today. Each of the major
unions negotiated a clause mandating that their concessions take effect
only when the others do. The airline and the Professional Flight
Attendants Association, which represents 9,300 Northwest employees, are
scheduled to meet today. The concessionary contract from the pilots
union calls for $358 million in givebacks, while Northwest, the No. 5
U.S. carrier, will save $190 million annually with the new pacts with
12,200 baggage and ground workers. They were approved Tuesday by
Judge Allan
Gropper of the Southern District of New
York.
href='http://www.nytimes.com/aponline/business/AP-Northwest-Labor.html?pagewa…'>Read
more.
name='4'>Judge Upholds United Pension Termination
A federal judge Tuesday upheld
the termination of United Airlines pilots' pension plan in 2004, saying
the government's pension agency acted responsibly in taking over the
pensions despite objections by the pilots' union, the Associated Press
reported yesterday. U.S. District Judge Joan Lefkow adopted the
recommendation of federal bankruptcy court, where United parent UAL
Corp. ended a three-year restructuring Feb. 1, that the Pension Benefit
Guaranty Corp. (PBGC) had established at a trial that the move was a
financial necessity. 'The court concludes that the termination of the
pilot plan is necessary to avoid an unreasonable increase in PBGC's
liability,' Lefkow wrote in the opinion. The PBGC, operating at a deep
deficit, already was facing the required takeover of the United pension
plans in 2005. By acting at the end of 2004 instead of the following
May, when the pilots' pensions were to have been terminated, the agency
avoided the annual increase in mandated benefit payments and estimated
it saved as much as $140 million in additional payouts.
href='http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&D…'>Read
more.
name='5'>Calpine Wants to Stop Footing the Bill for
Bondholders
After repaying the debt
to a bondholders group that contributed to its meltdown into bankruptcy,
Calpine Corp. does not want to pay more to bondholders for mounting
professional fees,
size='3'>Portfolio Media reported yesterday.
The energy giant, which had wrangled with its first-lien bondholders
long before it filed for chapter 11 in December, contends that these fee
payments will only fuel the bondholders' dispute with the company.
Calpine has paid approximately $350,000 for the fees each month, which
are estimated to increase to about $470,000, according to the energy
company’s filing on Friday with the U.S. Bankruptcy Court for the
Southern District of New York. The company requested bankruptcy
Judge Burton
Lifland to stop the fee payments after May 26,
which was the same day that Calpine fully reimbursed its first-lien
bondholders with $646.1 million. A court order required Calpine to pay
the fees for the bondholders’ lawyers and consultants in order to
sufficiently guard the bondholders’ interests. However, Calpine
argued that the fee payments were no longer necessary because the
first-lien noteholders no longer have a secured interest in the
company’s property.
Autos
name='6'>Commentary: Wrenching Changes on the Assembly
Line
The road back to
prosperity will be a long and hard one for American automakers.
Companies like Ford and General Motors groan under the weight of their
history, manifested in the legacy costs that are a result of decades of
promises to support workers and provide them with health care in their
old age, according to an editorial in today’s
face='Times New Roman' size='3'>New York Times
size='3'>. Foreign companies like Honda and
w:st='on'>
size='3'>Toyota
double advantage. their much-newer manufacturing plants in the
size='3'>United States
size='3'>have hardly any retirees, and their workers overseas can
rely on national health care systems. Meanwhile, for American
automakers, costs continue to rise as General Motors spent $3.6 billion
to provide health benefits to 1.2 million workers, retirees and
dependents. By 2005 the cost had ballooned to $5.3 billion for 1.1
million workers. One potential idea to help offset some of the health
care costs has been proposed by Sen. Barack Obama (D-Ill.), who is
looking to strike a bargain with American automakers to help them with
retiree health costs in exchange for higher fuel-efficiency
standards.
href='http://www.nytimes.com/2006/06/14/opinion/14wed3.html?pagewanted=print'>Read
more.
name='7'>UAW Will Use Part of Strike Fund to Aid Recruitment of New
Members
The United Automobile
Workers union voted Tuesday to use part of its $914 million strike fund
to pay for the recruitment of new members, the Associated Press reported
yesterday. The amendment to the union's constitution, approved
overwhelmingly by voice vote at the UAW's convention here, allows the
international leadership to spend up to $60 million from the strike
fund, mainly for organizing efforts during the four years between
conventions. The union's membership peaked
at 1.5 million in 1979. It dropped to 676,000 in 2002 and now stands at
just less than 599,000. Officials say the union has recruited about
66,000 new members since its last convention in 2002, with 42,000 coming
from the traditional manufacturing sector and 24,000 from other areas.
But the growth has not been enough to counter the loss of members
because of restructuring, plant closings, outsourcing and privatization,
the union's president, Ron Gettelfinger, said in his opening-day speech
on Monday.
href='http://www.nytimes.com/2006/06/14/business/14union.html?pagewanted=print'>Read
more.
GM
CEO Says Being Top Seller Is No Longer Primary Focus
General Motors Corp.
Chairman and Chief Executive Rick Wagoner said the company was no longer
fixated on being the world's No. 1 auto maker by sales volume, saying
that rescuing GM's finances was now a bigger priority, the
Wall Street Journal
reported today. GM has for decades been the world's
largest auto maker by volume, but
w:st='on'>
size='3'>Japan
Toyota Motor Corp. is steadily closing the gap. Wagoner said the fact
that GM had taken out capacity in the
w:st='on'>
size='3'>U.S.
meant it would be harder to stay the leader in world wide sales,
although sales in developing markets like
w:st='on'>China
w:st='on'>
size='3'>Russia
size='3'>were growing strongly. The company’s
investment in
with GM's reducing capacity in other more mature markets like the
size='3'>U.S.
size='3'>Europe
company proposed cutting nearly 1,000 jobs this year at its Ellesmere
Port plant in the
w:st='on'>United
Kingdom
scales back production of the Opel/Vauxhall Astra.
href='http://online.wsj.com/article/SB115021933881479099.html?mod=us_business…'>Read
more. (Registration required.)
Two
Utilities to Pay Enron $50 Million in Settlement
Two small utilities are
set to pay more than $50 million to Enron for electricity that they
agreed to buy but that Enron will never deliver, under terms of a
settlement, the New York
Times reported today. As part of the
settlement, which may be approved as early as today, the staff of the
Federal Energy Regulatory Commission will not investigate fraud claims
against Enron for manipulating electricity prices, critics say. They
added that the settlement might allow the destruction of evidence
crucial to proving that Enron cheated customers and would prevent others
from resolving their fraud claims. Enron, which is in bankruptcy
proceedings, made $1.6 billion in profits from what the commission's
staff has testified was 'unjust and unreasonable' pricing. The
commission ruled earlier that Enron could be forced to give up all its
profits since 1997 because of its manipulations.
face='Times New Roman' size='3'>Enron said that under terms of its
contracts with the two utilities, it was owed more than $170 million
whether or not the power was delivered. The utilities said that they did
not owe anything but decided to pay the smaller amount to remove a big
financial risk from their books.
href='http://www.nytimes.com/2006/06/14/business/businessspecial3/14enron.htm…'>Read
more.
In related news, lawyers
for Jeffrey Skilling have asked the government to release $60 million in
assets under its control, citing the former Enron Corp. CEO's acquittal
on insider trading charges connected to the funds, the Associated Press
reported today. Defense attorney Daniel Petrocelli filed a motion
with
face='Times New Roman' size='3'>U.S. District Court
Judge
size='3'>Sim
face='Times New Roman' size='3'>Lake
on Monday requesting that the assets be released to
Skilling. ''He has obligations to his children, his family and of course
he owes substantial sums of money to his lawyers,'' Petrocelli told
the Houston
Chronicle for a story in Wednesday editions.
During his trial, Skilling listed his remaining assets as including a $5
million Houston house, a $350,000 condo in Dallas, a Mercedes Benz, two
Land Rovers and nearly $50 million in stock and bonds frozen by the
government.
href='http://www.nytimes.com/aponline/us/AP-Enron-Skilling.html?pagewanted=pr…'>Read
more.
w:st='on'>
name='10'>Louisiana
face='Times New Roman' size='3'> Apartment Owner Files for
Bankruptcy
The owner of the largely
shuttered Saulet apartment complex in the Lower Garden District of New
Orleans filed for chapter 11 bankruptcy protection Monday because of
problems getting insurance money, as well as alleged construction
defects in the six-year-old, 703-unit complex, the
face='Times New Roman' size='3'>New Orleans
Times-Picayune reported today. The 13-building
complex has been practically closed since Hurricane Katrina, although
there presently are 40 tenants and employees living at the complex.
Management quit allowing tenants back last fall at the order of the
owners. Unless a settlement is reached or new financing is obtained, the
building will remain closed to other tenants. Some former tenants still
have belongings in many units, and have access to their belongings each
day until 5 p.m. Despite the Saulet's problems, real estate broker Larry
Schedler said that if properly repaired, the site alone makes the
complex a sure-fire winner. 'It is a sliver on the river, and since
Katrina that location is even hotter than it was before,' said
Schedler.
href='http://www.nola.com/business/t-p/index.ssf?/base/money-1/11502648044639…'>Read
more.
name='11'>Krispy Kreme to Post Loss
Krispy Kreme Doughnuts Inc.
said on Tuesday that it expects to post a 24 percent drop in revenue,
due in part to lower sales to franchisees and a loss on costs associated
with legal and regulatory problems for the most recently completed
quarter, Reuters reported yesterday. The struggling doughnut chain also
said it expects to have enough cash to meet its liquidity needs. On
Monday, Krispy Kreme said it could not file its quarterly report because
it devoted substantial resources to completing its annual report for
2005. The company said it would not be able to finalize the fiscal 2007
first-quarter report until it completed its reports for 2006. Krispy
Kreme has grappled with a restatement of past results, an SEC
investigation into past accounting and a decline in doughnut sales that
has hurt many of its franchisees, some of whom have filed for
bankruptcy.
href='http://www.nytimes.com/reuters/business/business-leisure-krispykreme.ht…'>Read
more.
w:st='on'>
name='12'>New York
face='Times New Roman' size='3'> Senior Citizen Community Ready to
Emerge from Bankruptcy
A senior citizen
community in
face='Times New Roman' size='3'>Greenfield
size='3'>,
size='3'>N.Y.
emerge from chapter 11 bankruptcy with the help of a $14 million loan
form the state's retirement fund, according to
face='Times New Roman' size='3'>The Saratogian (N.Y.)
size='3'>today. State Comptroller Alan G.
Hevesi was at Prestwick Chase Monday to announce the loan, saying it is
a win-win for the state: Not only will it put Prestwick Chase on sound
footing and provide housing for senior citizens, but the pension fund
has a guaranteed investment returning 6.56 percent interest. The loan
was actually made by the Community Preservation Corp. (CPC), a nonprofit
organization made up several banks, said Christopher Betts, CPC regional
director. CPC then sold the loan to the state pension fund. Prestwick
filed for chapter 11 protection in March 2005, when it owed $11.7
million to M&T Bank and $3.5 million to APC Partners II, a
size='3'>New York City
that bought the debt from Ballston Spa National Bank. At the
time,
size='3'>Prestwick
said the company missed mortgage payments in 2003 when it was 72-73
percent occupied.
href='http://www.saratogian.com/site/news.asp?brd=1169&pag=460&dept_id=510538'>Read
more.
name='13'>Radio Licenses Put Up For
w:st='on'>Sale
w:st='on'>
size='3'>Virginia
size='3'>Bankruptcy Trustee
Bankruptcy Trustee
R.
size='3'>Clinton Stackhouse Jr. has asked the
U.S. Bankruptcy Court in
w:st='on'>
size='3'>Norfolk
size='3'>for approval to sell the licenses and assets of WBVA &
WVAB/Norfolk to Chesapeake-Portsmouth Broadcasting Corp., the company
currently operating the AM pair, according to RadioandRecords.com
yesterday. Chesapeake-Portsmouth, led by President Nancy Epperson,
assumed control of the stations after owner Ronald W. Cowan Jr. was no
longer financially qualified to retain control of them. Stackhouse's
petition also asks for a possible auction of WBVA & WVAB for any
qualified parties that wish to raise the selling price for the stations
beyond Chesapeake-Portsmouth's $775,000 offer.
International
w:st='on'>
name='14'>US
size='3'> Judge Allows
w:st='on'>
size='3'>Brazil
Varig to Fly Planes until June 21
A U.S. judge gave
Brazilian airline Varig until June 21 to fly its planes, as companies
circled the bankrupt carrier trying to seize the aircraft for unpaid
debts, Agence France Presse reported today. Meanwhile, a second,
unidentified potential buyer for the company emerged as the airline
further slashed flights. Judge
size='3'>Robert Drain of the U.S. Bankruptcy
Court in
size='3'>New York
the airline succeed in what he called 'last-ditch' negotiations to avoid
liquidation, which are underway in
w:st='on'>
size='3'>Brazil
Varig's U.S. court protection of its leased planes
was to have expired Tuesday. The beleaguered airline has failed to honor
contracts on leased aircraft, which make up 80 percent of its
fleet.
href='http://news.yahoo.com/s/afp/20060614/ts_alt_afp/usbrazilairlinecompanyv…-'>Read
more.
href='http://news.yahoo.com/s/afp/20060614/ts_alt_afp/usbrazilairlinecompanyv…-'>