|
Fed Says Economy Picking Up Amid Signs of Manufacturing
Recovery
The U.S. economy improved between June and mid-July amid a 'nascent
recovery' in the long-ailing manufacturing industry, the Federal Reserve
said on Wednesday, the Wall Street Journal reported. Economic
activity 'increased a notch' in most of the Fed's 12 districts and
expectations improved for economic growth in the second half of 2003,
the central bank reported. The report is a summary of economic
conditions across the country that Fed policy-makers will use in
deciding monetary policy when they next meet on Aug. 12. Most economists
expect the central bank to hold its key federal-funds rate unchanged at
a 45-year low of 1 percent. 'Nascent signs of a recovery emerged in
manufacturing,' with 10 of the Fed's districts reporting an end to 'an
extended period of declines' in activity, reported the
Journal.
Republicans Raise Doubts About Asbestos Bill
Four Republican senators who supported legislation to reform the
asbestos liability system are calling for major changes before final
passage, aides said on Wednesday, clouding the outlook for the bill,
Reuters reported. The four, all members of the Judiciary Committee,
voted for the bill sponsored by committee Chairman Sen. Orrin Hatch
(R-Utah) when it was narrowly backed by the panel earlier this month.
But along with a fifth Republican who abstained on the vote, the group
is now raising concerns about whether insurers will pay too much of the
national fund of up to $153 billion that would pay asbestos claims, as
well as other provisions in the bill that could bring the fund to an
early end.
'These flaws must be corrected prior to final passage,' the group said
in a draft statement, obtained by Reuters, which is to be published this
week with a committee report on the bill. The doubts are being raised by
Republicans Charles Grassley (R-Iowa), Jon Kyl (R-Ariz.), Jeff Sessions
(R-Ala,), Larry Craig (R-Idaho) and John Cornyn (R-Texas). 'Although the
goal of this legislation to compensate those harmed from asbestos
exposure is both noble and necessary, the means chosen are susceptible
to abuses that could bankrupt the fund, and, ultimately, impose
financial obligations on the taxpayer,' the senators warned in their
draft statement, reported the newswire. The bill is not expected on the
Senate floor until after the August recess.
WORLDCOM
House Panel Chairman Tauzin Asks FCC for WorldCom
Documents
U.S. House Commerce Committee Chairman Billy Tauzin (R-La.) asked
federal regulators to turn over any documents relating to allegations
that WorldCom Inc. illegally avoided paying network-access fees to
rivals, Bloomberg News reported. Tauzin and Fred Upton (R-Mich.),
chairman of the House Telecommunications Subcommittee, asked the Federal
Communications Commission to provide any such documents by Aug. 13,
according to a letter the two Republican representatives wrote to FCC
Chairman Michael Powell, reported the newswire.
FCC Opens Probe Into WorldCom Access-fee
Allegations
The Federal Communications Commission (FCC) launched its own
investigation yesterday into allegations that WorldCom Inc. rerouted
millions of telephone calls in an effort to avoid paying millions of
dollars in fees to other companies, the Washington Post reported.
WorldCom already faces a Justice Department inquiry into claims that
engineers programmed its telecommunications network to disguise
long-distance calls as local. Rivals have alleged that WorldCom was able
to avoid paying the fees, known as access charges, to local phone
companies by improperly rerouting calls or stripping off their
electronic coding. The FCC revealed its inquiry yesterday in response to
a request for documents from Rep. W.J. 'Billy' Tauzin (R-La.), who plans
to hold a hearing on the matter in September, reported the
Post.
Judge Orders Citigroup to Release WorldCom Information
A bankruptcy judge ordered Citigroup Inc. to release documents about its
investment banking relationship with WorldCom Inc. and the allocation of
shares in stock offerings to the bankrupt telephone company's former
chief executive and others managers, Reuters reported. Richard
Thornburgh, an independent examiner appointed by the bankruptcy court
and a former U.S. Attorney General, requested the documents to aid his
investigation into WorldCom's $11 billion accounting scandal. The court
granted that request late on Tuesday.
Under the ruling from the U.S. Bankruptcy Court for the Southern
District of New York, Citigroup must release all documents related to
accounts for former WorldCom CEO Bernie Ebbers or entities controlled by
him, and investment banking dealings with the telephone company.
Citigroup also must release correspondence between its syndicate group,
which had the responsibility of allocating shares of initial public
offerings, and its former telecommunications analyst, Jack Grubman, that
discussed Ebbers or WorldCom, reported the newswire.
WestLB Can Claim $165.2 Million Enron Loan Is Illegal, Court
Rules
WestLB AG, Germany's third-biggest state-owned bank, can argue that its
$165.2 million guarantee for a loan J.P. Morgan Chase & Co. made to
Enron Corp. was legally invalid, the High Court in London ruled,
Bloomberg News reported. Lawyers for New York-based J.P. Morgan had
asked the court in a preliminary hearing to throw out WestLB's argument
that the agreement broke the law. The ruling makes it easier for WestLB
to contest the loan on the basis that it was illegal.
WestLB had sold J.P. Morgan a letter of credit guaranteeing a loan the
U.S. bank made to Enron special purpose vehicle called Mahonia Ltd. The
loan was made up of a series of swap transactions and was constructed so
it would not appear in the energy trader's accounts. WestLB refused to
pay J.P. Morgan the guarantee when Enron collapsed, claiming the swaps
were illegal and that J.P. Morgan and Enron conspired to defraud it.
'There is at least a strongly arguable case that the letter of credit
cannot be permitted to be enforced against the defendant bank,'' Lord
Justice Anthony Colman wrote in the decision. 'That represents at the
very least a realistic prospect of success for the bank's defense, based
on this point,'' reported the newswire.
Fleming Will Seek Approval of Sale to C&S; Auction
Canceled
Fleming Cos. said it will ask a judge on Monday to approve C&S
Wholesale Grocers Inc.'s $400 million offer for its grocery-distribution
business, Bloomberg News reported. Fleming said in a statement it
received no other qualified bids and canceled an auction scheduled for
today.
Fleming is selling its grocery-distribution business to focus on its
convenience-store supply unit. The sale will leave Fleming with only its
Core-Mark convenience-store distribution business. The Lewisville,
Texas-based company has said it is considering the sale of Core-Mark,
which would lead to liquidation, reported the newswire.
Pillowtex to Cut 6,450 Workers, File for Bankruptcy
Pillowtex Corp. said it closed 16 plants and plans to fire 6,450 workers
and file for bankruptcy protection again because the textile maker
doesn't have the cash
to continue operating, Bloomberg News reported. Pillowtex, which makes
household textiles under the Cannon and Fieldcrest brands, emerged from
chapter 11 protection in May 2002 after shedding more than $900 million
in debt. The company filed for bankruptcy in November 2000 after
slumping sales and mounting debts left the company struggling to
survive.
'Due to soft consumer demand, the intensity of foreign competition,
industry over-capacity and downward pricing pressure in all of our
categories, the company simply cannot operate profitably in the current
environment and with our current
business model,'' Chief Executive Officer Michael Gannaway said in a
statement yesterday. Pillowtex's bankruptcy filing would be the latest
by U.S. textile companies, which have struggled with slumping sales and
low-cost imports in the past several years.
Korean, Foreign Creditors Reach SK Global Agreement
Foreign and domestic creditors of South Korea's SK Global Co. reached an
agreement on its debt on Wednesday that will save the company from
bankruptcy court and end a dispute, the Wall Street Journal reported.
Two days before domestic creditors had vowed to seek court receivership
for SK Global, foreign investors settled for a deal that looks
marginally better than the 43 cents on the dollar that domestic
creditors had originally proposed. Foreign banks get a better deal on
their 920 billion won ($779.7 million) portion of SK Global's 9.9
trillion won in debts.
Local creditors, led by Hana Bank, decided last week to put the
company in court receivership after the foreign banks refused their
offer of cash repayment of 43 percent of the face value of their debt.
The foreign banks had sought 72 percent of their loans in cash and the
remaining 28 percent in equity-linked securities such as convertible
bonds, or bonds with warrants. Foreign creditors -- including Citibank,
a unit of Citigroup Inc., Credit Lyonnais SA of France and Standard
Chartered PLC of the United Kingdom -- had fought the receivership move
and said it might even force them to reassess their lending to other
Korean companies, reported the Journal.
C&S Wholesale Declared Only Bidder For Fleming Grocery
Business
Fleming Cos. said Wednesday it didn't receive any qualifying bids to
compete with C&S Wholesale Grocery Inc.'s offer of $400 million for
Fleming's wholesale grocery business. As a result, an auction that was
slated for Thursday won't be held, and Fleming said it will ask the U.S.
Bankruptcy Court in Wilmington, Del., which is overseeing its chapter 11
case, to approve the sale to C&S Wholesale at a hearing on Monday,
according to a press release issued by Fleming. C&S Wholesale
Grocery made a $400 million bid for Fleming's wholesale grocery
operation. That amount consists of $75 million for the assets, $230
million for inventory and $95 million in potential royalties.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Court Extends Amerco's Cash Collateral Use Through Aug. 14
Amerco and its secured lenders agreed to postpone until Aug. 14 the
final hearing on the truck rental company's continued use of the
lenders' cash collateral. Amerco signed a stipulation with JPMorgan
Chase Bank, lead agent for the lenders from which Amerco borrowed funds
before filing for chapter 11 bankruptcy protection. Judge Gregg W. Zive
of the U.S. Bankruptcy Court in Reno, Nev., approved the deal Monday,
marking the second extension of the final hearing, which was initially
set for July 16. The order allows Amerco to continue using the cash
collateral securing its borrowings under a June 2002 credit agreement,
pending the final hearing.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Lord & Taylor to Shut Down Stores and Cut Jobs
Lord & Taylor is closing 32 stores, more than one-third of its total
nationally, and laying off 3,700 employees, the New York Times
reported. Lord & Taylor, owned by May Department Stores chain, is
abandoning whole states - like Florida and Texas - because of weak sales
due to competition from lower-priced stores like J.C. Penney and Kohl's.
Although the stores that are closing made up 38 percent of the chain's
locations, they only brought in 19 percent of the revenue. For the past
two years, Lord & Taylor has been working to change its most recent
image as a shopping-mall retailer with goods constantly on sale,
reported the Times.
US Airways Ends 5 Percent Employee Pay Deferral
US Airways said in a regulatory filing on Wednesday it has ended a 5
percent employee pay deferral put in place when it emerged from
bankruptcy in March, Reuters reported. 'After much deliberation, we have
decided to stop the 5 percent pay deferral and begin repaying the
deferred pay,' Chief Executive David Siegel said in a letter to
employees that was filed with the U.S. Securities and Exchange
Commission. 'This decision is made with significant reservations because
having a one-time grant determine our profitability for the quarter
should by no means indicate that we are back on the road to sustained
profitability,' reported the newswire.
Air Canada Seen Profitable as Smaller Airline
A leading Canadian aviation analyst said on Wednesday that Air Canada is
likely to come out of its fight against bankruptcy as a smaller and
profitable airline, leading to an increase in airfares that will also
help low-cost rival WestJet Airlines Ltd., Reuters reported. Raymond
James analyst Ben Cherniavsky estimated that Air Canada would likely
reduce its operating costs by C$2.3 billion ($1.6 billion) through job
and pay cuts, as well as reduced aircraft lease rates and other smaller
initiatives, such as charging for in-flight meals. 'We have determined
that when the airline emerges from [court protection], it stands a good
chance of being profitable,' Cherniavsky said in research report. He
expects Air Canada to reduce its capacity by about 17 percent under its
restructuring plan, leading to a firming of airfares that will benefit
the entire Canadian airline industry, reported the newswire.
style='FONT-FAMILY: 'Times New Roman''>
Thanks for visiting
Today's Bankruptcy Headlines. New articles are posted here each business
day.
|
