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June 13, 2006
name='1'>Bankruptcy Filings Up Despite Reforms
While the new bankruptcy law
caused filings plunge to a 20-year low in the first quarter of 2006, a
rapid rise in new cases since then raises questions about whether the
law is working as expected, Reuters reported yesterday.
New consumer filings plunged to 13,758 in November, then rose
to 21,636 in December, 27,235 in January, 35,352 in February and 49,977
in March, according to the Administrative Office of the U.S. Courts.
Some experts say the upward trend is likely to continue, but it may take
several more months before a clearer picture emerges. 'Some people think
that merely reducing the number for filings regardless of who they are
and what kinds of problems they have is a success,' said Melissa
Jacoby, a bankruptcy law professor at the University of North
Carolina. While some consumers will file for traditional reasons, such
as poor money management, loss of a job, medical expenses and divorce,
some are also falling behind on monthly mortgage payments as interest
rates continue to rise.
href='http://money.cnn.com/2006/06/12/pf/personal_bankruptcy.reut/index.htm?s…'>Read
more.
name='2'>Somber Tone and Protest as UAW Convenes
The United Automobile
Workers' convention opened with leaders and members in a familiar
fighting mood, but with a new battle plan aimed at protecting what they
have rather than gaining new ground, the
size='3'>New York Times reported today. The
change reflected the falling fortunes of
w:st='on'>
size='3'>Detroit
automakers, a new reality that the union's president, Ron Gettelfinger,
laid out for members both in his speech and in a written report that the
UAW issued on Sunday. 'This isn't a cyclical downturn,' Gettelfinger
told the convention. 'The kind of challenges we face aren't the kind
that can be ridden out. They're structural challenges, and they require
new and farsighted solutions.' Gettelfinger vowed to
fight for changes in bankruptcy laws, aiming his criticism at
size='3'>Delphi
parts suppliers that have demanded steep concessions from
workers.
href='http://www.nytimes.com/2006/06/13/business/13union.html?_r=1&adxnnl=1&o…'>Read
more.
Airlines
name='3'>
Calling Truce, Northwest
and Attendants to Resume Talks
Northwest Airlines and
its 8,700 active flight attendants agreed yesterday to a temporary truce
until June 30 by agreeing that there would be no strike by the flight
attendants and no effort by the company to set aside their contract,
the New York
Times reported today.
face='Times New Roman'>Northwest, based in
size='3'>Eagan
w:st='on'>
size='3'>Minn.
$195 million in annual pay cuts from the flight attendants as part of a
plan to reduce costs by $1.4 billion and emerge next year from
bankruptcy proceedings. Other worker groups have agreed to pay
concessions, but their deals are contingent on the flight attendants
also taking a big pay cut. Last week, the flight attendants rejected a
contract their union leadership had tentatively agreed to that would
have given Northwest the concessions it sought. In the months since the
tentative agreement was reached, the airline industry's finances have
improved, with fares rising and planes full.
href='http://www.nytimes.com/2006/06/13/business/13air.html?pagewanted=print'>Read
more.
name='4'>GAO Report Says Regulating Airlines Would Hurt
Consumers
A Government
Accountability Office (GAO) report released yesterday said that
re-regulating the airline industry probably would reverse consumer
benefits, namely lower fares and slightly better service, and not save
the pensions of airline workers, the St. Louis Post-Dispatch
size='3'>reported today. Overall, the median airline fare has dropped
nearly 40 percent since 1980, as measured in 2005 dollars, the GAO study
said. Reiterating its findings in a 2005 report, the GAO said pension
problems are the result of market forces, poor airline management and
union decisions, and inadequate pension funding rules. Boosting fares
via government-imposed price floors, similar to those that existed
before the Airline Deregulation Act of 1978, would not generate enough
revenue to adequately fund worker pension plans, the report said.
href='http://www.stltoday.com/stltoday/business/stories.nsf/story/270BB186184…'>Read
more.
href='http://www.stltoday.com/stltoday/business/stories.nsf/story/270BB186184…'>
name='5'>Debt Collection Agencies Under Scrutiny at
size='3'>New York City
size='3'>Hearing
Collection agencies are
increasingly resorting to illegal practices like making frequent and
harassing phone calls, disregarding letters from consumers disputing the
validity of debts, and passing on difficult cases to new collection
agencies without first trying to resolve the disputes, according to
testimony at a New York City hearing yesterday, the
face='Times New Roman' size='3'>New York
Times reported today. Complaints to the city
about such practices have risen 70 percent over the past two years, and
yesterday the city's Department of Consumer Affairs, which licenses and
oversees debt collection agencies, detailed the extent of the growing
problem during a public hearing.
size='3'>Karen Gross, a professor at
w:st='on'>
size='3'>Law
face='Times New Roman'
size='3'>School
the president of the Coalition for Consumer Bankruptcy Debtor Education,
which promotes financial literacy, said many consumers were often asked
to pay debts and related credit-card fees for expenses they did not
incur, because of identity theft or shoddy information. The frequent
buying and selling of debt, she said, means that the collecting agency
is often far removed from the original creditor.
href='http://www.nytimes.com/2006/06/13/nyregion/13debt.html?pagewanted=print'>Read
more.
Big
Pension Plans Are at Risk of Losing Accounting Benefit
The balances of
public-company pension plans had been improving until the stock market
swooned again, and congressional action could deal many of these funds
another setback, the
size='3'>Wall Street Journal reported today.
The House and Senate both have passed versions of a bill that could
limit the use of a key pension-accounting benefit. The legislation would
affect dozens of companies in the automotive, aerospace and
basic-materials industries. At issue are credit balances, which
companies accumulate by putting more money into a plan than required in
a given year to meet obligations to retirees. President Bush and other
critics of pension accounting see the rules for credit balances as a
growing threat, and some limits on their use seem certain to be in a
final bill that could emerge from a conference committee before
Congress's July 4 recess, according to leaders of both houses.
href='http://online.wsj.com/article/SB115016487129578583.html'>Read
more. (Registration required.)
name='7'>Ladder Company Files for Chapter 11
Ladder producer Werner
Co. said it voluntarily filed for chapter 11 bankruptcy, but the company
said it will operate normally during its reorganization, the
Pittsburgh Business Times reported yesterday. Werner, based
in
size='3'>Greenville
size='3'>Mercer County
size='3'>Pa.
secured a commitment for $99 million in debtor-in-possession financing
from Black Diamond Commercial Finance of Stamford, Conn. Werner
president and CEO Steven Richman said the bankruptcy filing was made
necessary by 'unprecedented high prices for aluminum and other raw
materials.'
href='http://pittsburgh.bizjournals.com/pittsburgh/stories/2006/06/12/daily3…'>Read
more.
name='8'>Aphton to Auction Off Assets
Three weeks after filing
for chapter 11 bankruptcy protection, Aphton Corp. received permission
on Friday from the U.S. Bankruptcy Court in
w:st='on'>
size='3'>Wilmington
w:st='on'>
size='3'>Del.
its assets without a lead bidder,
size='3'>Portfolio Media reported yesterday.
Bids for the pharmaceutical company’s assets are due by July 12,
with the auction itself scheduled to take place two days later before
Bankruptcy Judge
size='3'>Christopher S. Sontchi, according to
court documents. Aphton said it has already identified 28 potential
buyers and that it may designate a stalking-horse bid to keep the
purchase price high. The company also retained the right to reject any
inadequate or insufficient bids, though any final sale will be subject
to bankruptcy court approval.
name='9'>Sphinx Wants Refco Transfer Mystery Revealed
Several hedge funds once
run by PlusFunds Group Inc. have sued the fund’s chairman and two
directors for allegedly transferring money without their knowledge to an
unregulated unit of the former brokerage giant,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported yesterday. Sphinx Ltd. and two other hedge funds filed
suit in
face='Times New Roman' size='3'>Manhattan
on Friday, blasting PFGI and its managers for purportedly
violating their fiduciary duties by failing to keep Sphinx's assets
separate from those transferred to unregulated Refco Capital
Markets. Sphinx,
through its Sphinx Managed Futures Fund SPC, had invested an estimated
$312 million in Refco Capital Markets shortly before Refco Inc. and
several units sought bankruptcy protection last October.
name='10'>Calpine Creditors Seek Canadian Counsel
The unsecured
creditors’ committee in Calpine Corp.’s chapter 11 case has
asked the court for permission to retain a Canadian law firm to help
deal with the bankrupt power company’s Canadian
subsidiaries, Portfolio
Media reported yesterday. If the request is
approved by U.S. Bankruptcy Judge
size='3'>Burton R. Lifland, Fasken Martineau
DuMoulin LLP will charge Calpine as much as $775 an hour for services
including advising and assisting the committee with respect to their
“rights, duties and powers” as they relate to the Canadian
proceedings. Calpine said in a May filing with the SEC that it was
mulling over whether to liquidate or sell its Canadian assets, given the
enormous number of creditor claims those subsidiaries
face.
name='11'>Device Won't Let Engine Start for Consumers Late with Car
Payment
Starter-interrupt devices are
becoming a popular way for lenders to ensure they get paid, and
consumers seem willing to accept them to get into nicer cars, use a
smaller down payment and qualify for a lower interest rate, according to
device manufacturers, the Associated Press reported yesterday. The
device, the size of a cigarette pack and mounted under the dashboard,
flashes green if a consumer makes a car payment on time. If they miss a
payment, it won't let them start their vehicle. Ken Shilson, managing
partner at Shilson Goldberg Cheung & Associates in Houston, an
accounting firm that works with auto dealers who make use of the device,
said the market is growing. The major manufacturers of the device report
double-digit increases in sales so far this year, compared with the same
period a year ago. About 1 million are in use today, he said.
href='http://www.msnbc.msn.com/id/13284249'>Read more.
International
name='12'>Canadian Bankruptcy Rate Expected to Jump in
2007
Canadian personal
bankruptcies, which hit the lowest level in seven years in the past few
months, could mushroom next year because of higher interest rates and a
slowing economy, according to today’s Toronto Globe and
Mail. Canadian Imperial Bank of Commerce
forecast little change in the number of bankruptcies this year and an
increase of 3 to 5 percent next year as economic activity weakens. 'To
the extent that the current increase in interest rates and the strong
dollar would result in somewhat weaker economic activity, say in late
2006 and early 2007, the subsequent softening in labour market activity
should lead to some increase in the number of personal bankruptcies
in
face='Times New Roman'
size='3'>Canada
the bank's economist, Benjamin Tal, said in the report. So far this
year, a strong labor market has dampened the number of insolvencies.
Bankruptcies fell 7.6 percent from last year on a three-month moving
average basis.
href='http://www.theglobeandmail.com/servlet/story/LAC.20060613.RBANK13/TPSto…'>Read
more.
name='13'>Bank of
w:st='on'>
size='3'>America
size='3'>Strikes Back at Parmalat
As Parmalat seeks to
dismiss some of Bank of America Corp.’s counterclaims related to
the Italian diary giant's implosion, the nation’s number two bank
has asked the court to deny the motion and allow its $1 billion damages
claim to proceed,
size='3'>Portfolio Media reported yesterday.
On Thursday, Bank of America asked U.S. District Judge Lewis A. Kaplan
to stick to his original March decision and let the North Carolina-based
bank press on with its counterattack. Last month, Parmalat's chief
executive officer, Enrico Bondi, lobbied the court to dismiss part of
the bank’s countersuit, contending that Bank of America had not
sufficiently proven that it suffered an economic loss or demonstrated
wrongdoing by the bulk of counter-defendants.