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November 13, 2002
GOP Leaders Revive Prospects for U.S. Bankruptcy Bill
Congressional leaders said on Tuesday they hope to finally pass a
long-delayed rewrite of U.S. bankruptcy laws before they adjourn for the
year, reported Dow Jones. Republican House and Senate lawmakers revived
the bankruptcy bill's prospects after meeting with President Bush to
outline their agenda for the lame-duck session of Congress.
Sen. Rick Santorum (R-Pa.), chair of the Republican Conference
Committee, said the GOP would like to get the bankruptcy bill passed,
reported the newswire. 'That's another piece of legislation, again,
because it's a conference report, [that] would not take a whole lot of
time.' The legislation was slated for final passage after more than five
years of debate in late July when House lawmakers unexpectedly pulled it
off the floor because of the opposition of a small group of antiabortion
GOP lawmakers, Dow Jones reported. They were protesting a last-minute
deal needed to gain Senate approval on bankruptcy procedures for debts
related to abortion-clinic violence. GOP leaders said they would put the
bill to a final vote after the November elections.
Proponents Push Reform
With the fate of bankruptcy reform legislation hanging in the balance,
proponents are making their voices heard on Capitol Hill,
CongressDaily reported. Groups including the
href='/research/IndustryNettingLetter2002.pdf'>
color='#000080'>Bond Market Association, the Credit Union
National Association and the
href='http://www.nrf.com/content/default.asp?folder=press/release2002&file=ba…'>
color='#000080'>National Retail Federation separately sent
letters to House and Senate leaders today urging passage of the
legislation. House Republican leaders could opt to pass a pending
conference report, a move that would offend a number of social
conservatives, but satisfy the numerous financial and business interests
eager to conclude the long-running legislative effort. A Democratic
filibuster has been threatened in the Senate, but Majority Leader Tom
Daschle (D-S.D.) has pledged to bring the bill up for a vote in that
chamber if the House manages to pass it. The Bond Market Association,
joined by the American Bankers Association, the Financial Services
Roundtable and the Securities Industry Association, noted that the
conference report contains critical updates to the 'netting' provisions,
which are supposed to reduce systemic risk in the financial markets.
Conservative voices are pushing back against the proponents. In a
memo on Tuesday, Ken Connor, President of the Family Reserach Council,
wrote: 'Before the election, Republican leaders in Congress put a hold
on bankruptcy reform legislation because they needed the pro-life vote.
The Schumer amendment, a sop to pro-abortion interest groups, would
expose even peaceful pro-life protestors to financial ruin. Now that the
election is over, however, will the Republican leadership betray
pro-life voters by ramming the bill through the lame-duck session? The
GOP is under enormous pressure from the well-heeled business lobby and
may be inclined to swallow the Schumer amendment. This would be a
strange way of expressing gratitude to pro-life voters who made a
significant contribution to the GOP's stunning election victory.'
Imminent Decisions on the Bankruptcy Bill?
The House could vote as early as today on bankruptcy overhaul
legislation, and the White House is trying to unwind a deal it cut with
Senate Democrats on terrorism insurance before the election, sources
said Tuesday, the American Banker reported. A decision on
bankruptcy reform was expected to be made late Tuesday afternoon
following White House and House leadership meetings. Republican leaders
had to determine whether to bring up the measure over the objections of
conservative members, who have been holding it up because of a provision
involving abortion clinic protesters. 'The biggest question is do we
really want to alienate our pro-life people if ultimately the bill can't
get out of the Senate,' a source in a House leadership office said
before the meetings.
Senate Majority Leader Tom Daschle (D-S.D.), who still controls the
calendar for at least this week, has said he would not bring up the
bankruptcy bill -- which was reconciled in July by House and Senate
negotiations and now needs final approval in both chambers -- until the
House approves it. Sen. Russell Feingold (D-Wis.) has promised a
filibuster as a tribute to the late Sen. Paul Wellstone.
Municipalities Lose Bid for Panel in Adelphia Chapter 11
Case
The bankruptcy judge handling Adelphia Communications Corp.'s chapter 11
case has declined to order the appointment of a formal committee to
represent local franchise authorities, Dow Jones reported. The ruling
could prevent governmental units from serving on creditor committees in
the Southern New York judicial district, even as the governmental units'
relationships with private entities have become increasingly
business-oriented. The judicial district includes Manhattan, where some
of the largest chapter 11 cases in the country are filed. In making his
ruling, Judge Robert E. Gerber of the U.S. Bankruptcy Court of
the Southern District of New York said he couldn't get around language
in the Bankruptcy Code that appears to exclude governmental units from
serving on creditors' committees, according to Frank Zerunyan, whose law
firm represents several California counties and cities. Bankruptcy Code
Section 1102 says committees that get their expenses paid for by the
bankruptcy estate and generally have a bigger say over the debtor's
reorganization shall ordinarily consist of 'persons' with the top claims
against a debtor. 'Persons' is defined under the Bankruptcy Code to
include individuals and corporations, but generally not governmental
units.
WORLDCOM
WorldCom Reaches Settlement with Insurance Carrier
WorldCom Inc. reached a settlement with its insurance provider that
alleged the company's director, officer and corporate liability policies
were obtained by fraud, according to a motion filed in bankruptcy court
on Friday, Dow Jones reported. Before Dec. 31, 2001, National Union Fire
Insurance Co. of Pittsburgh issued WorldCom a director, officer and
corporate liability insurance policy and an excess director, officer and
corporate liability policy. The period of the policies is from Dec. 31,
2001, through Dec. 31 of this year. The insurance provider also issued
the company a fiduciary liability and crime guard policy, which ran from
Aug. 11, 2001, through Aug. 11, 2002.
As part of the settlement, National Union Fire Insurance and WorldCom
would commit to a debtor-in-possession insurance program. Under that
program, WorldCom would purchase a supplemental directors, officers and
corporate liability policy to provide coverage to directors and officers
hired after the bankruptcy filing, as well as additional coverage for
existing directors and officers. The U.S. Bankruptcy Court in Manhattan
has scheduled a hearing on the proposed settlement for Nov. 26.
Interested parties may file objections through Nov. 21.
WorldCom to Refocus Asian Operations; Will Cut Jobs,
Rationalize
WorldCom Inc. said on Wednesday it is refocusing its Asia-Pacific
operations to emphasize profits rather than revenue, in moves that will
involve layoffs in the region and rationalizing its network, Dow Jones
reported. The embattled telecommunications provider, which employs 1,800
in the Asia-Pacific region, plans to lay off about 390 staff, and move
its customer service operations in Australia to Singapore, a spokeswoman
said. The company didn't give details, but noted it would maintain its
retail and wholesale voice, Internet-protocol and data services across
the region.
Napster Trustee Seeks OK of Bid Rules for Proposed Sale
The trustee managing the chapter 11 case of defunct Internet music
service provider Napster Inc. on Thursday will ask a bankruptcy court to
approve bid procedures for the sale of substantially all of the
company's assets, Dow Jones reported. The trustee, Hobart G. Truesdell,
already has signed an asset purchase agreement under which an
undisclosed public company will purchase the assets for $5 million in
cash plus warrants to purchase stock in the public company. The
unidentified buyer, which created an entity called Napco through which
it will purchase the assets, also will assume some liabilities,
Truesdell said in his motion. A hearing to consider approval of the bid
procedures is scheduled before Chief Judge Peter J. Walsh of the U.S.
Bankruptcy Court in Wilmington on Thursday at 11 a.m. EST. Under the
terms of the proposed procedures, bids must exceed Napco's $5 million
offer by at least $150,000 and can't be subject to due diligence
contingencies. Subsequent bids must be made in $100,000 increments,
Truesdell said in the motion.
Kaiser Aluminum Says Pension Liability Could Be $75 Million-$125
Million
Kaiser Aluminum Corp. estimated that its minimum pension liability
adjustment as of Dec. 31 could be $75 million to $125 million, according
to a Form 10-Q quarterly report filed Tuesday with the Securities and
Exchange Commission, Dow Jones reported. The estimate follows an earlier
disclosure that the company may have to significantly increase minimum
pension liability in its year-end financial statements unless there's
improvement in the capital markets. Like many other company plans, the
assets of Kaiser's main operating unit's sponsored pension plans are
invested to a substantial degree in the capital markets. Kaiser's main
operating unit is Kaiser Aluminum & Chemical Corp., which, like its
parent, has been under chapter 11 protection for the past nine months.
The filings, which listed assets of $3.3 billion and debts of $3.1
billion, were made as the companies faced significant near-term debt
maturities during an unusually weak aluminum market and increased
asbestos litigation and retiree medical and pension cost obligations.
Kaiser Aluminum said on Tuesday it could emerge from chapter 11
bankruptcy in 2004, despite swinging to a net loss in the third quarter
because of tough business conditions, Reuters reported.
Thermadyne Seeks to Extend DIP Loan Pact Through May 21
Thermadyne Holdings Corp. is seeking bankruptcy court approval of a
second amendment to its $60 million debtor-in-possession financing
agreement that would extend the maturity date of the pact to May 21,
2003, and reduce the overall commitment to $50 million, Dow Jones
reported. Under the amendment, the loan pact would mature when a
potential chapter 11 plan takes effect if that date is before May 21.
Thermadyne would also pay the agent bank, on behalf of the lenders, a
$175,000 DIP amendment fee. Thermadyne said in its motion filed recently
with the bankruptcy court that it needs more time to seek an
unconditional offer to buy its assets or to develop an internal
reorganization plan, and that the extension would be in the best
interest of all interested parties. Thermadyne makes cutting and welding
products and accessories. On Jan. 8, it received final bankruptcy court
approval of its $60 million DIP financing agreement with a group of
lenders led by agent ABN Amro Bank NV. Terms of the original DIP
agreement call for the loans to mature on Nov. 21. The U.S. Bankruptcy
Court in St. Louis will consider the proposed amendment at a hearing on
Friday.
Personnel Group of America Announces Financial Restructuring
Personnel Group of America Inc. reached agreement with certain creditors
for a financial restructuring that will lower its debt by more than $125
million, Dow Jones reported. The consulting and staffing company also
reported a third-quarter loss of $2.2 million, or 8 cents a share,
compared with a loss of $1.2 million, or 4 cents a share, a year
earlier. Revenue fell to $137.7 million from $173.6 million last year.
In a press release on Tuesday, Personnel Group said it agreed with the
holders of about 42 percent of its senior revolving credit debt and
about 57 percent of its 5.75 percent convertible subordinated notes due
2004 to restructure its debt. In addition, the company and the senior
lenders signing the agreement secured options from the nonparticipating
senior lenders to acquire those lenders' interests in the revolving
credit facility. This ensures participation by 100 percent of the
holders.
Personnel Group's restructuring will include a registered bond exchange
offer in which the company's $115 million in outstanding 5.75 percent
convertible subordinated notes and accrued interest would be exchanged
for cash equal to six months' interest on the notes and newly issued
common stock representing 83 percent of the company's equity
outstanding. The company also expects to solicit consents from the
current 5.75 percent noteholders to modify certain terms of the notes
that may remain outstanding after completion of the exchange offer. If
the restructuring isn't completed within 150 days after execution of
definitive agreements, Personnel Group expects to file a chapter 11
bankruptcy petition and pursue a specified plan of reorganization.
Collection Agencies Report 30 Percent Increase in Accounts
Business is both good and bad for debt collectors in a slow economy, the
St. Louis Business Journal reported. The number of accounts is
way up, with some collection agencies reporting 30 percent increases and
collection attorneys reporting up to a 300 percent gain in accounts.
However, it's harder to collect on the accounts because individuals and
businesses may not be able to pay. 'When the economy's good, people pay
a little more voluntarily,' said John Clay, president of both the
Missouri Collectors Association and the Kansas City firm Mid-States
Financial Services. 'When the economy's bad, they're a little slower
paying, but customers place more accounts with us. Either way, our
business is pretty good.'
National recovery rates on debt for credit and collection professionals
was 16 percent in 2001, higher by 5 percent than in 2000, according to
figures from the Association of Credit and Collection Professionals.
Collectors don't necessarily love a slow economy, because accounts are
less collectible, the association said in a 'separating fact from
fiction' fact sheet. The number of accounts increases in a slow economy
because creditors look for payment on accounts they normally 'would have
swept into files,' said Michael Reilly, president of Florissant-based
MCS Receivables Management. The number of new accounts at MCS is up by
about a third, said Jim Hill, vice president of finance and
administration for the company. Recovery rates for 'bad debt,' debt that
has been written off by companies, is down about 10 percent, but the
recovery rates for 'active receivables,' debt that hasn't been written
off, is up 15 percent, Hill said.
Corporate Leaders Are More Pessimistic Than the Fed
Federal Reserve officials expect the economy to improve soon, but
corporate executives remain skeptical, the New York Times
reported. Most chief executives of large companies plan to cut jobs next
year to respond to economic growth that they predict will remain meager,
according to a survey released yesterday by a prominent business group.
Offering a more optimistic view, several Federal Reserve officials gave
separate speeches yesterday arguing that the economy was slowly gaining
strength. 'There is no question that an economic expansion, an economic
recovery, is under way,' Gary H. Stern, president of the Federal Reserve
Bank of Minneapolis, said in a speech in La Crosse, Wis. Since the
economy began weakening in 2000, executives have consistently offered
more pessimistic forecasts than Fed officials or Wall Street economists
have, and the executives have been more accurate so far. Last week, the
Fed cut its benchmark short-term interest rate for the 12th time in the
last two years, acknowledging that the recovery is weaker than it
expected. In the survey of executives, conducted by the Business
Roundtable, 60 percent said they planned to eliminate jobs next year,
and 11 percent thought they would add to their payrolls. The average
company planned to reduce employment by almost 2 percent. To read the
full article, point your browser to
href='http://www.nytimes.com/2002/11/13/business/13ECON.html.'>
color='#000080'>http://www.nytimes.com/2002/11/13/business/13ECON.html.
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