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May 5, 2005
Consumers Turn Cautious, Damping Retailers’ Results
Consumers showed more signs of caution during April, giving the
nation’s retailers mixed sales results for the month, the
Wall Street Journal reported. As merchants began to report
their sales results today, Wal-Mart Stores Inc. again turned in a
disappointing performance, but teen retailers and wholesale clubs had
substantial sales gains. Meanwhile, consumers appeared increasingly
concerned about the economy. A spike in gasoline prices, higher interest
rates, and a still uncertain job market are weighing heavily on
shoppers, analysts said, the newspaper reported.
Labor Dept. Cautions AFL–CIO on Pension Plan Pressure
The Labor Department in a letter to the AFL–CIO on Tuesday said
the Employee Retirement Income Security Act (ERISA) prohibits pension
fund managers from hiring financial advisers based on their view on
Social Security legislation, CongressDaily reported.
“Under ERISA’s stringent standards of prudence and loyalty,
it would be unlawful for a plan fiduciary to review the plan’s
service providers based, not upon the quality and expense of their
services, but rather upon their view on Social Security or any other
broad area of public policy,” Deputy Assistant Labor Secretary for
Program Operations Alan Lebowitz wrote to AFL–CIO General Counsel
Jonathan Hiatt. The Labor Department comment came in response to a March
18 letter from House Education and the Workforce Chairman John Boehner
(R–Ohio) requesting that the department investigate whether the
AFL–CIO had inappropriately used its influence with union pension
fund managers to affect the public debate over Social Security, the
newswire reported.
Montana May Complicate U.S. Asbestos Fund Bill
An asbestos tragedy in Libby, Mont., which has allegedly sickened
hundreds of people, could complicate efforts by U.S. lawmakers to curb
the explosion of asbestos injury lawsuits, Reuters reported. When work
resumes May 12 on legislation to establish a $140 billion fund to pay
asbestos victims, senators will be wrestling with dozens of amendments,
including one extending special treatment for residents of Libby, Mont.
to another site that received asbestos-contaminated material from the
same mine. Some say extending those benefits could exhaust the fund and
hurt the chances of reaching agreement on the legislation, the newswire
reported.
Maybe the Rich Really Are Like Us—In Debt
Adding to the nation’s personal-debt load, wealthy people have
been borrowing increasingly against their homes, stocks and businesses
to fund purchases and investments, the Wall Street Journal
reported. Private bankers and wealth managers say that borrowing among
the richest Americans has grown in the past few years as interest rates
have remained historically low. The richest 1 percent of American
households—or those with more than $5.9 million in net
worth—had $346 billion in debt in 2001, up $50 billion from 1998,
according to the most recent data compiled by Arthur Kennickell, a
senior economist with the Federal Reserve, the newspaper reported.
Trump Co. to Emerge from Bankruptcy Soon
Trump’s casino business is now expected to emerge from chapter
11 bankruptcy protection on May 12, the Associated Press reported. Trump
Entertainment Resorts Holdings had been expected to emerge from
bankruptcy on May 4. The company will have a reduced debt load when it
emerges from chapter 11 protection for a second time. It will also have
significantly less interest expense and $1.25 billion of new 8.25
percent secured notes due 2015.
Federal Mogul Cancels Finance Plan
Federal-Mogul Corp. canceled plans for a $1.43 billion financing
package that would help it exit bankruptcy protection, Standard &
Poor’s and Moody’s Investors Service said. S&P and
Moody’s withdrew their ratings for the Southfield-based company.
In October, the company said it would receive a $933 million seven-year
term loan and a $500 million five-year revolving credit. It has a $500
million loan to pay for operations while under court protection,
according to court documents.
Delta
Delta Execs Aren’t Planning More Pay Cuts
Despite continuing huge losses and high fuel prices, Delta Air Lines
executives say they don’t plan to go back to pilots or other
workers for more pay cuts, the Atlanta Journal and
Constitution reported. CEO Gerald Grinstein said the airline
hopes to avoid more worker sacrifices because of the negative effect
they have on morale and service.
Delta Air Estimates $3.1 Billion in Pensions 2006–08
Delta Air Lines said it must pay $3.15 billion to fund its
employee-retirement plans over the next three years, the Wall
Street Journal reported. The airline in terms of traffic said in
a Securities and Exchange Commission filing yesterday that in addition
to the $450 million it will spend this year to meet its minimum funding
obligations, it now estimates its funding obligations to retired workers
will grow to $600 million in 2006, $950 million in 2007 and $1.6 billion
in 2008. Delta hasn’t disclosed its funding obligations
previously, though the carrier has warned in the past that its growing
obligations posed a threat to its efforts to restructure and avoid a
bankruptcy-court filing.
Owens Corning Posts $4.2 Billion Net Loss
Bankrupt building materials company Owens Corning said on Wednesday
that it increased its asbestos reserves by $4.3 billion after a court
ruling, Reuters reported. As a result the company posted a $4.2 billion
first-quarter loss despite a 16 percent increase in sales. For the same
period last year, the company reported a net income of 5 million.
US Airways to Cut Fleet Again, Restates Loss
Bankrupt US Airways Group Inc. took a $91 million charge for
terminating employee pension plans on Wednesday and said it would shrink
its mainline fleet by another 10 aircraft this summer, Reuters reported.
The airline also said its load factor, or the percentage of available
seats that are filled each month, fell 3.9 percent to 75.9 in April. US
Airways said the decline was partly due to the shift in Easter holiday
travel from April 2004 to March 2005.
PG&E Quarterly Profit Falls, Reaffirms Outlook
PG&E Corp., parent of California’s largest utility, on
Wednesday said quarterly net income fell, but operating earnings rose
and it reaffirmed its 2005 and 2006 outlook, Reuters reported. The San
Francisco–based company said first-quarter net income fell to $218
million, or 54 cents a share, down from $3.03 billion or $7.15 a share
for the same period last year.
American Tower to Buy Spectrasite for $3.1 Billion
American Tower Corp. on Wednesday agreed to buy Spectrasite Inc. for
about $3.1 billion in a deal that could lead to more consolidation in
the U.S. wireless broadcast tower industry, Reuters reported. Shares of
Spectrasite, which has recovered in the last few years after emerging
from bankruptcy in 2003, jumped more than 10 percent. Shares of American
Tower rose more than 1 percent.
Spiegel Gets Approval for $300 Million Financing
Spiegel Inc., which operates Eddie Bauer clothing stores, on
Wednesday got court approval for $300 million in financing to help it
exit bankruptcy and pay creditors, Reuters reported. Affiliates of GE
Commercial Finance, JPMorgan and Credit Suisse First Boston agreed to
provide the exit financing. The loan, which was first disclosed April
22, was approved on Wednesday, according to an electronic order posted
by the U.S. Bankruptcy Court for the District of New York in
Manhattan.
Ousted Leader Tower Snow Breaks Silence About Brobeck
In a court document filed with the San Francisco bankruptcy court
last week, Tower Snow Jr., the former chairman of Brobeck, Phleger &
Harrison, responds to a $2.7 million suit filed against him by
Brobeck’s bankruptcy trustee, Ronald Greenspan, the
Recorder reported. Read the full article at
href='http://www.law.com/jsp/article.jsp?id=1115197520406'>www.law.com/jsp/article.jsp?id=1115197520406.
IBM to Lay Off Over 10,000 in Struggle to Keep Up Profits
IBM announced yesterday that it would lay off 10,000 to 13,000
workers, mostly in Europe, as it struggles to keep up its profits at a
time when global competition in the technology business spreads beyond
selling computers to providing services, the Wall Street
Journal reported. The cutbacks come after IBM reported
disappointing quarterly earnings last month and the price of its shares
dropped.