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May 3, 2005
The Fed Is Expected to Raise Rates Again
Despite growing evidence of an economic slowdown, the Federal Reserve
is not going to keep rates steady, the New York Times
reported. The Federal Open Market Committee, which sets monetary policy,
is expected to raise short-term rates today to 3 percent, from 2.75
percent, the eighth increase since last June.
A Bank-friendly Bankruptcy Law?
Lenders ultimately are going to benefit from the tougher standards of
the new bankruptcy law. But they may be hit by lots of filings first,
the online Business Week reported. “We believe the
prime beneficiaries of this new law are the banks with consumer-finance
exposure, either banks with large consumer-lending portfolios or
credit-card issuers,” Evan Momios, large-cap bank analyst at
Standard & Poor’s Equity Research Services says. However, he
adds, because the law doesn’t take effect for six months, some
consumers may rush to file for bankruptcy now, while they still can do
it under less onerous terms. Read the full article at
href='http://www.businessweek.com/investor/content/may2005/pi2005052_3745_pi0…'>www.businessweek.com/investor/content/may2005/pi2005052_3745_pi041.htm.
Bankruptcy Rules Open Window for Small Creditors
The new federal bankruptcy rules may be aimed primarily at consumers,
but there is plenty for businesses to learn, too, bizjournal.com
reported. The new bankruptcy law is intended to make it tougher for
people to file under chapter 7. But what hasn’t gotten much
attention are the provisions aimed specifically at businesses filing for
bankruptcy protection—or what effect they could have on bankruptcy
lawyers. Read the full article at
href='http://www.bizjournals.com/seattle/stories/2005/05/02/focus7.html'>www.bizjournals.com/seattle/stories/2005/05/02/focus7.html.
Pension Bill Could Keep Delta Aloft
Sen. Johnny Isakson (R–Ga.) is pushing a bipartisan pension
bill that could play a pivotal role in whether Delta Air Lines Inc. ends
up in bankruptcy, the Atlanta Business Chronicle reported.
Isakson introduced a bill in mid-April that would allow Delta and other
legacy carriers such as Northwest Airlines Inc. to stretch their pension
funding obligations over 25 years instead of the current three-year
“catch-up” payment plan mandated by law. Without sweeping
changes in pension funding law, Isakson says “it’s a matter
of when, not if” additional legacy carriers are forced to file
chapter 11.
Judge Installs New Board at Pan American Hospital
After reviewing an examiner’s report filled with criticism for
Pan American Hospital’s board of directors, federal bankruptcy
Judge A. Jay Cristol installed a creditor-approved board to
replace it, the South Florida Business Journal reported.
The creditors’ committee, meanwhile, reports that five parties are
interested in buying the hospital. Modesto Mora, a co-founder of the
Miami not-for-profit in 1963, gave up leadership of the board at the
judge’s urging on April 22.
Restructuring Approved for Air Canada
An Ontario court approved Air Canada’s restructuring plan
yesterday, while one of Canada’s major banks sold off its debt in
the airline. CIBC said it had struck a deal to sell all its proven
claims as an unsecured creditor of Air Canada to a third-party for cash
in a move that will result in a pre-tax gain of about $52 million for
the bank, the Winnipeg Sun reported.
Hawaiian, Pilots Union Agree
Hawaiian Airlines reached a new agreement with its pilots’
union hours before the bankruptcy court would have imposed a labor
contract, bizjournal.com reported. This is the second agreement reached
between the airline and the Air Line Pilots Association. The first one
wasn’t ratified by the union members because the contract
didn’t deal with the contentious issue of pilot pensions.
Witness in Enron Trial Admits Video Error
The government’s key witness in the trial of five former Enron
Corp. employees admitted under questioning yesterday that financial
analysts never saw a video touting the company’s Internet software
that prosecutors played at the trial last week, Reuters reported. In a
blow to the prosecution’s case against the former employees of
Enron Broadband Services, former EBS Co-chief Executive Kenneth Rice
said he was mistaken in his earlier testimony that the video was shown
to analysts at the January 2000 conference, the newswire reported.
United Airlines Mechanics Planning Strike –Union
The union representing mechanics at bankrupt United Airlines
yesterday said it was making plans for a labor strike, saying the
carrier was putting their retirement plans in jeopardy, Reuters
reported. The threat from the Aircraft Mechanics Fraternal Association
(AMFA) comes in response to news that United, a unit of UAL Corp., and
federal pension insurers last month reached a settlement, clearing the
way for the carrier to cut its four employee retirements plans. A
bankruptcy judge was expected to rule on the settlement on May 10.
“We have no choice now but to plan for a strike at some point
soon,” said AMFA National Director O.V. Delle–Femine in a
press release. “United is not only destroying our livelihoods, but
our retirement security,” he said, the newswire reported.
Qwest: No Longer in Best Interest to Continue MCI Process
Qwest Communications International yesterday responded to MCI
Inc.’s latest move to declare Verizon Communications’ bid
for the company as “superior” by saying that “it is no
longer in the best interests of shareowners, customers and employees to
continue in a process that seems to be permanently skewed against
Qwest,” MarketWatch.com reported. Qwest also said
that “it appears that MCI’s board of directors has
surrendered control of the bidding process once again,” and that
“MCI never intended to negotiate in good faith with Qwest nor
maximize shareowner value.”
US Airways Delays Reorganization Filing
Last month, US Airways moved its reorganization deadline from April
15, saying it was continuing discussions with its leading creditor,
General Electric Co., about the airline’s progress in finalizing a
business plan in bankruptcy, the Business Journal of
Milwaukee reported. This is the fourth time the Arlington,
Va.–based airline and GE have postponed filing a plan.