July 82003

Submitted by webadmin on Tue, 2003-07-08 00:00

July 8, 2003

U.S. Consumer Debt Seen Rising at Slower Pace

Growth in U.S. consumer credit may have slowed in May as the economy
emerges from recession, economists said in advance of today's report
from the Federal Reserve, Bloomberg News reported. Consumers may have
added $5 billion in debt to their credit cards and through auto loans
and other installment borrowing, based on the median of 42 forecasts in
a Bloomberg News survey of economists. In April, Americans added $10.7
billion in new debt.

Concerns about rising unemployment have curbed consumer spending,
which accounts for two-thirds of the economy. Unemployment in June rose
to 6.2 percent, an almost nine-year high. Consumer spending grew at a 2
percent annual rate in the first three months of the year, half the
average during the 1992-2000 economic expansion, reported the
newswire.

Asbestos Bill May Be Boon For Halliburton

Halliburton stands to save more than $3.5 billion under pending asbestos
legislation, according to an analysis submitted to the Senate Judiciary
Committee, CongressDaily reported. Sen. Richard Durbin (D-Ill.)
noted at the committee's most recent markup session that the company
already has agreed to pay $4.2 billion to asbestos claimants. But it
would have to pay far less -- perhaps $675 million or as little as $364
million -- under the bill, according to an analysis prepared by a New
York law firm, reported the newswire. Charles Dominy, vice president of
government relations for Halliburton, said Halliburton would pay about
the same amount under the bill as under the negotiated settlement,
including insurance, according to CongressDaily.

The asbestos legislation is scheduled for markup on Thursday in an
effort to complete work on the measure. Senate Judiciary Chairman Orrin
Hatch (R-Utah) has been working for months to resolve a situation where
approximately 600,000 people have made claims for compensation in court
for workplace related asbestos-caused illnesses. As observers await an
indication of where the Bush administration stands on the issue, two
Democratic Senate staffers suggested the White House may be staying in
the background because it fears embarrassment over Halliburton, which
has 200,000 claims against it, reported the newswire.

WorldCom Wins Judge's Approval of $750 Million SEC Settlement; Cuts
Outlook for 2005

WorldCom Inc. won a judge's approval of a $750 million settlement
resolving accounting-fraud claims brought by the U.S. Securities and
Exchange Commission, Bloomberg News reported. The accord is the
largest-ever in an accounting-fraud case. U.S. District Judge Jed Rakoff
in Manhattan yesterday approved the pact, turning aside complaints by
WorldCom competitors that the company should be fined more. Investors
lost as much as $200 billion in WorldCom's collapse, reported the
newswire.

Separately, the Wall Street Journal reported that the company
cut nearly $3 billion from a 2005 revenue projection it made less than
three months ago, citing steep declines in the telecommunications bills
of consumers and small businesses. MCI revised its financial
projections, which many analysts said at the time seemed overly
optimistic, in a filing with the U.S. Bankruptcy Court for the Southern
District of New York that also detailed the SEC settlement, reported the
Journal.

Redback Creditors to Get Most of Shares

Redback Networks Inc. on Monday unveiled a financial restructuring that
would see creditors take almost full ownership of the struggling
telecommunications equipment maker, Reuters reported. The San Jose,
Calif.-based company said that the move was needed to shore its balance
sheet but warned that it could file for chapter 11 bankruptcy protection
if its proposed debt-for-equity swap was rejected.

Redback said it has agreed with holders of 67 percent of its 5-percent
convertible subordinated notes due in 2007 to exchange the notes for
common stock. The deal, which provides for the exchange of common stock
for $467 million in debt for common stock, would give the noteholders
about 95 percent of Redback's common. Existing common shareholders would
initially retain about a 5 percent in Redback common stock after the
deal, with the right to increase their stake to about 15 percent,
reported the newswire.

UAL Flight Attendants Oppose Worker Bonus Plan

The flight attendants union at United Airlines said on Monday it plans
to file an objection this week in U.S. Bankruptcy Court to a plan
proposed by the carrier that would give bonuses to a select group of
employees, Reuters reported. United said in a court filing late last
week it needs to create the retention bonus plan for 600 technical and
professional employees that it says are critical to its business. The
total cost of the bonus program would not exceed $9.5 million, the
company said.

A bankruptcy court judge in February approved an initial retention
program for the carrier, which covered 350 employees with a cap of $20.7
million. United's unions have agreed to $2.56 billion in annual wage
cuts and other concessions as part of the carrier's reorganization.
'Flight attendants are outraged at the prospect of a select group of
employees receiving bonuses in light of what we have been through the
past two years,' said Greg Davidowitch, president of the United unit of
the Association of Flight Attendants, reported the newswire.

Allegheny Energy Names New CFO

U.S. power company Allegheny Energy Inc., struggling with about $5.8
billion in debt, on Monday named a former treasurer with International
Business Machines Corp. as its new CFO, Reuters reported. Allegheny
tapped Jeffrey Serkes for the post, filling a vacancy left by Bruce
Walenczyk, who retired in June. Serkes previously served as vice
president and treasurer for IBM. Allegheny said Serkes will receive an
'inducement award' of 550,000 stock units on Jan. 2, subject to upward
adjustment based on Allegheny's stock price.

In late June, Allegheny Energy said it may seek bankruptcy protection
unless it can raise new capital, noting that a decline in the value of
trading positions, project cancellations and weaker-than-expected
financial performance could lead to a financial crunch, reported the
newswire.

HealthSouth Might Avoid Bankruptcy, Chairman Says

HealthSouth Corp. said it can avoid bankruptcy and asked creditors to be
patient, Bloomberg News reported. The rehabilitation hospital operator
will generate as much as $700 million before interest, taxes and debt in
the next 12 months, officials from the Birmingham, Ala.-based company
said in their first briefing in almost four months.

HealthSouth is trying to avoid bankruptcy after defaulting on bond
payments and a bank credit line following allegations by U.S. regulators
on March 19 that the company and former CEO Richard Scrushy fabricated
profits. The company will meet with lawyers and advisers next week to
offer a more detailed version of its business plan. 'There is no
assurance of where we are going,'' HealthSouth Chairman Joel Gordon said
during the New York meeting. 'We are confident that with another 90 to
120 days we have an awfully good chance of avoiding bankruptcy,''
reported the newswire.

Safety-Kleen Gets OK To Pay Lender Fee To Get Exit Loan

Safety-Kleen Corp. received court approval Monday to pay a lender fee of
$750,000 as due diligence expenses, which it said will help in getting
$275 million in financing to exit from bankruptcy protection. U.S.
Bankruptcy Judge Peter J. Walsh approved Safety Kleen's motion
for permission to pay due diligence fees to the lender after no one
objected to the motion, according to court papers recently obtained by
Dow Jones Newswires. Safety-Kleen said the payment of fees would help it
negotiate a timely exit financing deal. The court also approved
Safety-Kleen's bid for a longer period of its exclusive right to lobby
creditors in support of its reorganization plan, which is scheduled for
a confirmation hearing on Aug. 1. The company wants the exclusivity
extended until July 25.

NRG Energy Asks To Stop CL&P Power Supplies Until Court
Decision

NRG Energy Inc. asked the Federal Energy Regulatory Commission (FERC) on
Thursday to let it stop delivering power under a contract with Northeast
Utilities unit Connecticut Light & Power until the commission or a
court decides on NRG's request to terminate the deal. NRG, which filed
chapter 11 in May, is currently delivering power to the utility under an
order that FERC issued last week. Failure to lift the delivery
requirement will hinder NRG's restructuring efforts and throw the future
of its power-marketing subsidiary into question, NRG said in the
Thursday filing with FERC. 'Unless stayed, the Order for all practical
purposes sidetracks NRG Energy Inc.'s bankruptcy proceeding, undermines
the entire NRG restructuring plan, places NRG-PMI on a clear path
towards liquidation,' and could effect NRG's ability to seek legal
review of FERC's order, NRG said in the filing.

California Negotiator Defends PG&E Bankruptcy Deal

A lead negotiator of a proposed agreement to settle the Pacific Gas
& Electric Co. (PG&E) bankruptcy case on Monday defended the
accord against claims it would charge consumers too much for their
electricity, Reuters reported. Paul Clanon, director of the energy
division at the California Public Utilities Commission (CPUC), said the
agreement 'is nobody's idea of the perfect plan,' but it would pull the
state's biggest utility out of bankruptcy and restore its financial
health, while keeping it intact under CPUC regulation, the newswire
reported.

Clanon and a top attorney for PG&E spoke at a two-hour public
meeting to review the 36-page settlement reached on June 19 after three
months of secret talks between CPUC and PG&E negotiators and
presided over by a federal bankruptcy judge. Pacific Gas & Electric,
the utility unit of San Francisco-based PG&E Corp., sought
bankruptcy protection in April 2001 after running out of cash buying
electricity for its customers during California's power market crises.
At least two of the five CPUC commissioners, along with California Gov.
Gray Davis, have said the $12.1 billion settlement plan leaves power
prices too high, relying too much on consumers to pay off the utility's
debts, reported the newswire.

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