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Consumers Spending More as Prices Fall
U.S. consumer optimism faded in June as worries about jobs hurt
confidence, but separate figures for the previous month showed spending
had already picked up enough to promise faster economic growth, Reuters
reported. Falling prices helped boost consumption, but also suggested it
was too early for the Federal Reserve to relax its guard against
deflation even after this week's cut in interest rates to 45-year lows.
The University of Michigan's survey of consumer sentiment decreased
slightly in June, but the Commerce Department provided a brighter
picture on personal consumption.
'The spending figures were actually very strong for May,' said Robert
Mellman, senior economist at J.P. Morgan, Reuters reported. He pointed
to the booming housing market as one reason for the pickup, while noting
that, in this case, falling inflation was a boon since it lifted
spending in real terms, reported the newswire.
U.S. Considers Suspending WorldCom Contracts
The U.S. government has begun weighing whether to stop doing business
with WorldCom Inc., Sen. Susan Collins (R-Maine) said on Friday, Reuters
reported. The General Services Administration (GSA) initiated the
suspension proceedings after an agency official recommended the review
since WorldCom and some of its former executives had faced fraud
charges. 'I am hopeful that these proceedings, which GSA should have
started months ago, will answer the question of whether the government
should be doing business with WorldCom,' Collins, head of the Senate
Governmental Affairs Committee, said in a statement, reported the
newswire. WorldCom gets roughly $1 billion in revenue each year from
U.S. government contracts.
Deltagen Inc. Files for Chapter 11 Bankruptcy Protection
Deltagen Inc., a biotechnology company which has closed units and fired
workers in an effort to stay in business, filed for chapter 11
bankruptcy protection after its top two executives quit earlier this
month, Bloomberg News reported. The company reduced its workforce to 28
employees, Redwood City, Calif.-based Deltagen said in a PR Newswire
statement. Deltagen also named Larry Hill its chief executive and Daniel
Ratto its CFO.
Deltagen said earlier this month that it lacked funds to repay a $5
million loan and that it may have to file for bankruptcy. In January,
the company reduced its workforce to about 200 people as the
biotechnology company discontinued its drug-development business and
sold two subsidiaries to save money, reported the newswire.
Fleming Sells Grocery-Wholesale Business to C&S
Fleming Cos. agreed to sell its main grocery-distribution business to
closely held C&S Wholesale Grocers Inc. for an undisclosed price,
Bloomberg News reported. Lewisville, Texas-based Fleming expects the
sale to be completed by early August, pending bankruptcy court approval.
Until then, Brattleboro, Vt.-based C&S will supply Fleming with some
products to ensure it can meet customers' orders, Fleming spokesman
Shane Boyd said, Bloomberg reported.
Selling the unit will leave Fleming with only its Core-Mark
convenience-store distribution business, which it's also trying to sell.
Fleming may have had to liquidate the businesses for which it couldn't
find buyers, analysts said. 'This is and was the only option for Fleming
at this point because their customers are leaving,'' said Andrew
Ebersole, a bond analyst at KDP Investment Advisors. 'It's more than
likely they will a buyer for Core-Mark. We don't expect them to get a
very full price for their assets.'' Fleming filed for chapter 11
protection from creditors after Kmart Holding Corp. canceled a supply
agreement in February. Fleming's accounting is under investigation by
the Securities and Exchange Commission, Bloomberg reported.
Wisconsin Offers Debt Support for Midwest Express
Midwest Express Holdings Inc., parent of Midwest Airlines, said on
Friday that Wisconsin officials have proposed a block grant plan that
could free up some of the carrier's assets, but bankruptcy remains a
possibility, Reuters reported. Under the plan, Milwaukee County would
guarantee payments on bonds issued in 1998 and 2001 to build two hangers
for Midwest Express at General Mitchell International Airport. The air
carrier would still make the debt payments, but relieving it of the
letter of credit backing those bonds would increase its ability to
obtain cash. Midwest Express for months has sought to restructure
contracts with workers, lenders and plane lessors and told employees
last week that bankruptcy was possible by mid-July if the deals were not
reworked by then, reported the newswire.
Enron Reaches Agreement with Creditors, Asks for Extension to File
Reorganization Plan
Bankrupt Enron Corp. on Friday said it had reached a tentative agreement
with its creditors and asked a U.S. Bankruptcy Court in New York for a
short extension to file its reorganization plan, Reuters reported. The
energy company said it had asked U.S. Bankruptcy Judge Arthur Gonzalez
to approve a filing delay until July 11. If Gonzalez approves it at a
hearing on the original June 30 deadline, Enron said it would file its
chapter 11 reorganization plan and bankruptcy disclosure statement on
July 11, reported the newswire. Enron has asked for several extensions
before, and Gonzalez indicated that any further granting of a delay
would be final.
On Wednesday, Enron asked the court to approve its formation of a
company, called CrossCountry Energy Corp., that would hold its interest
in three interstate pipelines. The shares of that company would be
distributed to creditors after the bankruptcy reorganization plan is
filed. Enron also plans to create a similar holding company, temporarily
called InternationalCo, for its international power and natural gas
interests. Its shares would also be distributed to creditors, reported
Reuters.
Lead Plaintiffs Named in HealthSouth Cases
A federal judge has designated lead plaintiffs for shareholder and
bondholder class-action cases against HealthSouth Corp., Reuters
reported. Judge Karon Bowdre ruled late on Thursday that Retirement
Systems of Alabama would be the lead plaintiff on behalf of holders of
some $3.4 billion in HealthSouth bonds who believe they were cheated as
a result of the company's financial collapse.
Stockholders will be represented by portfolio managers Oracle Partners
LP and Orbitex Management Inc., the judge ruled. Bondholders and
shareholders will have until September 15 to submit documentation that
they held HealthSouth securities and wish to be included in the cases.
Holders of HealthSouth shares and debt claim they were cheated by years
of fraud that led to the company admitting its past financial statements
could not be trusted and left it fighting to avoid bankruptcy. The
company's stock has dropped to about 50 cents from about $12 last
summer, when HealthSouth first began to disclose its financial problems,
reported the newswire.
Allegheny Energy to Take Loss on Pennsylvania Plant Sale
Allegheny Energy Inc., which warned of a possible bankruptcy filing
earlier this week, said on Friday it expects to record a $29 million
loss, before taxes, for the sale of a Pennsylvania power plant, Reuters
reported. The Hagerstown, Md.-based power company said in a statement
that its Allegheny Energy Supply Conemaugh LLC unit closed the $51.25
million sale of its Conemaugh coal-fired plant, located near Johnstown,
Penn., the newswire reported. Allegheny is counting on its aggressive
asset-sale program to help raise cash to pay down debt and help avert a
bankruptcy filing.
UAL Posts $456 Million May Monthly Cash Increase, Meets Bankruptcy
Requirements
United Airlines parent UAL Corp. on Friday reported that its May monthly
cash flow increased by about $456 million, leading to a cash balance of
about $2.2 billion at month's end, Reuters reported. Of the total cash,
$659 million was restricted or needed to pay specific bills. The airline
also said it met its targets for its debtor-in-possession financing for
the fourth consecutive month. It said it was confident it will also do
so in June. United expects to emerge from chapter 11 protection by the
end of this year or early next year. Changes to union collective
bargaining agreements at UAL went into effect during the month, cutting
salary and labor-related costs. Combining that with a 15 percent
reduction in available seat miles for the quarter, the airline said it
is on track to cut labor costs for the period by $500 million or more,
reported the newswire.
Bankruptcy Court Approves Valero Refinery Buy
Valero Energy Corp. on Friday said its $400 million purchase of a
Louisiana refinery from bankrupt Orion Refining Corp. has been approved
by a U.S. Bankruptcy Court, Reuters reported. The deal has already been
approved by the Federal Trade Commission and is expected to be completed
on July 1. Orion filed for bankruptcy in May. Valero, which will also
pay about $130 million for the refinery's on-hand inventories, said the
purchase will add 185,000 barrels per day of capacity. The company said
it expects to save more than $55 million a year in costs from reduced
overhead as well as operational improvements at the refinery. It said it
has also identified about $25 million in additional expansion and
upgrades that should add more than $50 million to annual operating
income, reported the newswire.
Waterlink Inc. Files for Reorganization Relief Under Chapter
11
Waterlink Inc. on Friday filed voluntary petitions for reorganization
under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware, the company announced in a press
release distributed by Business Wire. The company also announced that it
is seeking an order of the court to obtain the use of cash collateral
that it expects will support current operations. This cash collateral
will be comprised of the company's collections of existing receivables.
FOCUS Management Group has been retained by the company to supervise and
direct its reorganization efforts, including all capital transaction
programs and activities.
Metromedia Fiber Noteholders Say More Plan Info. Needed
Metromedia Fiber Network Inc.'s disclosure statement describing its
reorganization plan faces opposition from holders of both the company's
senior secured notes and subordinated notes. Holders of the senior
secured notes said in court papers that the disclosure statement doesn't
adequately identify the terms and provisions of new notes to be issued
to them under the plan -- and the reorganized company's ability to repay
the new notes. The senior noteholders -- Citicorp USA Inc., Merrill
Lynch Global Allocation Fund Inc. and several affiliated funds -- said
the disclosure statement's fleeting, two-sentence description of the new
notes is 'patently inadequate.'
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Court OKs CLEC Pact Between Adelphia, Adelphia Business
A bankruptcy court approved Adelphia Communications Corp.'s
agreement with Adelphia Business Solutions Inc. under which the company
will wind down some of its local exchange carrier markets managed by
Adelphia Business. Judge Robert E. Gerber of the U.S. Bankruptcy
Court in Manhattan on Thursday authorized the wind-down agreement that
calls for Adelphia Business to aid in the wind-down of operations in
some markets, according to a court order. Adelphia Communications is the
former corporate parent of Adelphia Business Solutions.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Peter J. Ainsworth Appointed as Chief of Criminal Enforcement Unit
for U.S. Trustee Program
Peter J. Ainsworth has been appointed as Chief of the U.S. Trustee
Program's Criminal Enforcement Unit, Lawrence Friedman, Director of the
Executive Office for U.S.
Trustees announced in a press release on Friday. Ainsworth will begin
working in the Executive Office on July 7, 2003.
Ainsworth is a career prosecutor who has spent the past 12 years
handling white collar fraud cases. Immediately before his appointment,
he served for six years as a trial attorney for the Justice Department's
Public Integrity Section, where he investigated and prosecuted
violations of federal criminal laws by federal, state, and local
government officials nationwide. From 1990 to 1997, Ainsworth was a
trial attorney in the Department's Office of Consumer Litigation,
directing investigations and handling complex white collar criminal
cases and civil enforcement actions involving consumer fraud and food
and drug violations. Before joining the Justice Department, he was an
assistant district attorney in Philadelphia and an assistant state
attorney in Dade County, Fla.
Revenues at Law Firms Rise 8.5 Percent, Aided by Diversification
and Cuts
Revenues at law firms continue to climb despite the economic downturn,
the Wall Street Journal reported. Gross revenues at the 100
biggest law firms rose 8.5 percent to $38 billion in 2002, helped by
diversified-practice groups, cost cutting and higher billing rates,
according to American Lawyer magazine's annual survey. Average profit
per equity partner was up 6.9 percent to about $847,350, said the poll,
which is published in the magazine's July issue. Bankruptcy and
restructuring work and the increase in litigation helped offset the
decline in mergers-and-acquisitions and corporate-finance areas. The
rise in gross revenues comes as the number of lawyers rose just 4.2
percent, down from 11 percent in 2001, the survey said, reported the
Journal.
Global Crossing Wants to Hold on to Singapore Deal
Bankrupt telephone company Global Crossing Ltd. on Friday made a final
plea to preserve an exclusive pact to sell a majority stake to Singapore
Technologies Telemedia (STT), saying it was too risky to weigh rival
offers, Reuters reported. Global Crossing sought an extension on its
exclusive agreement to sell a 61.5 percent majority stake to STT, the
newswire reported. The four-month extension would give the two companies
more time to win U.S. approval for the deal.
Rival suitors and Global Crossing's lenders, however, objected to the
request for an extension, saying the deal faces uncertain approval due
to potential concerns about foreign ownership of strategic
telecommunications assets. Judge Robert Gerber of the U.S.
Bankruptcy Court for the Southern District of New York heard closing
arguments on Friday in the escalating battle to buy the bankrupt
telephone company. A ruling could come as early as today, lawyers
involved in the case said, reported the newswire.
National Equipment Services Files for Chapter 11
National Equipment Services Inc., an equipment rental business, said on
Friday it filed for chapter 11 bankruptcy protection to reduce its debt
load and 'strengthen its competitive position,' Reuters reported.
Chicago-based National Equipment is restructuring its credit facility,
which extends the maturity of bank debt up to four years. Its senior
subordinated debts due 2004 will be converted into substantially all the
outstanding equity, National Equipment said in a statement.
The company has been in discussions with a committee of senior
subordinated note holders that will continue after the filing. A
reorganization plan is expected to be filed in the next few weeks that
would allow trade vendors to be paid in full after the bankruptcy
proceedings, reported the newswire.
U-Haul Parent Amerco Asks for More Time to File Report
Amerco Inc., the parent of U-Haul International Inc., on Friday
requested a 15-day extension to submit its annual report for the year
ended March 31 to the U.S. Securities and Exchange Commission, Reuters
reported. The Reno, Nev.-based company cited its need to internally
verify financial data, delays resulting from its June 20 bankruptcy
filing, and the reaudit of its two prior fiscal years' financial results
in seeking the additional time. Amerco sought chapter 11 protection from
creditors to help it restructure $884 million of debt. U-Haul did not
file for bankruptcy protection, reported the newswire.
Mirant Says Bondholders Support Out-of-Court Refinancing
Plan
Mirant Corp., an Atlanta-based power producer trying to avert
bankruptcy, said two-thirds of its bondholders have indicated support
for a debt-exchange offer and a
back-up plan for prepackaged bankruptcy, Bloomberg News reported. The
company has 10 more days to win backing from 85 percent of the
bondholders involved, Mirant said in a statement. Approval from bank
creditors, which hold $3.1 billion of debt, also is required for the
exchange offer, reported the newswire.
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