February 22, 2000
Fed Unalarmed at Rising Level of Debt
Although Federal Reserve Chairman Alan Greenspan warned Congress last
week that the U.S. economy was growing too fast, he is unconcerned with
the rising level of both consumer and business debt, according to The
Washington Post. While many analysts have singled out private-sector
borrowing as a key element of vulnerability in the U.S. economic
picture, Greenspan doesn't view the increase in private-sector debt with
alarm. The Fed board's semi-annual report on monetary policy, presented
to the House Banking Committee, laid down several reasons why. First,
domestic debt grew at 6.5 percent in 1999, reflecting 'large increases
in the debt of businesses and households that were due to substantial
advances in spending as well as to debt-financed mergers and
acquisitions.' But the substantial drop in federal debt partly offset
the increase in private sector debt, causing the total non-financial
debt to grow in line with the economy. Second, while a large portion of
the debt went toward financing current consumption, it also went toward
a high level of investment. Businesses have put more money into new
equipment, while consumers put much of theirs toward homes and a
near-record number of new vehicles. Third, given their current levels of
income, neither businesses nor consumers are finding it difficult to
handle the repayment of their loans.
Still, the report claimed that household debt rose approximately 9.5
percent last year, the largest increase in a decade. 'The household
sector's debt-service burden edged up to its highest level since the
late 1980s; however, with employment rising rapidly and asset values
escalating, measures of credit quality for household debt generally
improved in 1999,' the report said. 'Delinquency rates on home mortgages
and credit cards declined a bit, and those on auto loans fell more
noticeably. Personal bankruptcy filings fell sharply after having risen
for several years to 1997 and remaining elevated in 1998.'
Boston Chicken Stockholders Asked to Volunteer for
Committee
Stockholders of Golden, Colo.'s Boston Chicken are being asked to
consider volunteering their services for a committee appointed by the
U.S. Trustee, according to a newswire report. The committee would
represent Boston Chicken's debtors and equity holders. Stockholders
wishing to volunteer their services can find out more information by
visiting
target='window2'>www.chicken-stock.com. A list of candidates will be
submitted to the U.S. Trustee within the next few days.
Mexico's Taesa Airline Declared Bankrupt
On Monday, a bankruptcy court judge declared Mexico's Taesa airline, the
country's third largest, officially bankrupt, according to Reuters. The
airline, which had been grounded since a November crash that killed 18
crew members and passengers, had sought to suspend payments on its
nearly $400 million in debt earlier this month, but the judge rejected
the petition. Attorneys working on the case said that Taesa, which had
$60 million in assets, did not have the means to pay its creditors.
Turbodyne Announces Update on the Sale of Its Light Metals
Subsidiaries
Turbodyne Technologies Inc., Carpinteria, Calif., announced on Friday
that the bankruptcy sale of substantially all of the assets of its
subsidiaries—Pacific Baja Light Metals Corp., Baja Pacific Light
Metals Inc. and Optima Wheel Inc.—has been approved, according to
a newswire report. Hawthorne Partners will purchase substantially all
the assets of the subsidiaries for $14.4 million, which includes the
assumption of certain liabilities and a cash payment to Wells Fargo
Bank, which had a financing agreement with the subsidiaries. Wells Fargo
received approximately $7.9 million toward monies it was owed and waived
approximately $900,000 of it claim, which will go toward the
subsidiaries' unsecured creditors.
ICO Global Communications Files Disclosure Statement
ICO Global Communications, London, announced on Friday that it filed a
motion seeking approval of its disclosure statement and plan of
reorganization in the U.S. Bankruptcy Court for the District of
Delaware, according to a newswire report. The global mobile
communications company announced on Feb. 4 that Eagle River Investments
Inc. had entered into a definitive agreement with ICO to acquire control
of the company. A bankruptcy court hearing has been scheduled for March
21.
AmeriServe Announces It Has Been Performing Favorably
AmeriServe Food Distribution Inc., Addison, Texas, announced on Friday
that it has adequate liquidity to finance its business and that it has
been performing favorably against the budget projections presented to
the bankruptcy court on Feb. 2, according to a newswire report. The
company, which filed chapter 11 on Jan. 31 in Delaware, also said it is
in the process of securing long-term financing that it says will enable
the company to reorganize successfully. Subsequent to AmeriServe's
bankruptcy filing, the court had approved financing in the form of a
$150 million loan from AmeriServe's two largest partners, Tricon Global
Restaurants Inc. and Burger King Corp. AmeriServe is the nation's
largest foodservice distributor specializing in chain restaurants.
L.A. Landlord Convicted on Three Counts of Bankruptcy
Fraud
Bernard Gross, a Los Angeles landlord, was convicted on Wednesday of
three counts of bankruptcy fraud for making false statements in his
bankruptcy papers, U.S. Trustee Maureen Tighe announced on
Friday. Since at least 1989, Gross had filed multiple bankruptcies in
his own name and in the names of others to protect as many as 800 rental
properties from foreclosure. In August 1996, Gross filed bankruptcy in
Santa Ana, Calif., making false statements concerning the number of
times he had previously filed for bankruptcy, the number of properties
that he owned and the number of businesses he controlled.
On Jan. 14, 1997, the Bankruptcy Court for the Central District of
California prohibited Gross from filing further bankruptcy cases, and
fined him $85,000 on Feb. 4, 1997. In December 1997, Gross was indicted
on 17 counts, primarily involving bank fraud, and on Dec. 7, 1999, the
bankruptcy court found Gross in contempt and referred the matter to the
district court for appropriate punishment; the district court has not
yet heard the matter. 'Gross's false statements prevented the bankruptcy
court from learning about other potentially related bankruptcy cases,
and about properties and businesses that may have been connected with
other bankruptcy filings,' said Tighe. 'Failure to disclose information
serves to conceal abuse of the bankruptcy system and prevents creditors
from protecting their legitimate claims.'
ATC Group's 4th Amended Disclosure Statement Wins Court OK
ATC Group Services Inc. won court approval of the disclosure statement
on Tuesday related to its reorganization plan after amending the
document for the fourth time in response to the objection of the U.S.
Trustee acting in the case, according to an order. The trustee sought
more information from the company regarding the nonbinding term sheets
it received from both its debtor-in-possession lenders, to provide a
senior exit financing facility, and from ATC Holdings LLC, to provide a
senior subordinated exit financing facility.
Courtesy of
href='http://www.fedfil.com/bankruptcy/developments.htm'>The
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February 22, 2000.
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