February 122007

February 12, 2007

Wisconsin Bankruptcies Drop Dramatically in 2006

While a big drop-off in bankruptcies was expected in 2006 because of the new bankruptcy law, it's not clear whether the 70 percent decrease in bankruptcies in Wisconsin between 2005 and 2006 was entirely the result of fears about the new law, the Milwaukee Journal Sentinel reported yesterday. In Wisconsin, the total number of filings plunged to 11,257 in 2006 from the record of 38,240 in 2005. Lawyers say that people with overwhelming debt might be deterred by the increased cost of declaring bankruptcy, which has risen 50 percent or more because of new procedures and requirements for consumers and attorneys. The banking industry, however, said the new standards could be doing what they were meant to do in discouraging abuses of the bankruptcy system. Although national statistics for the full year haven't been tabulated yet, a similar slide occurred across the United States, said ABI Resident Scholar Lois R. Lupica. Read more.

Comair Delays Pilots' Concessions

Comair delayed its plan to implement wage cuts and other concessions on its pilots Friday after receiving a new contract proposal from the pilots' union, the Associated Press reported on Saturday. Comair was poised to impose $15.8 million in cuts on the 1,500 pilots at 11:59 p.m. Friday. Union spokesman Paul Denke would not discuss details of the union's plan, except to say that it was presented by phone and that a financial expert helped the group repackage its proposal. Comair spokeswoman Kate Marx said the cuts would be postponed until at least 11:59 p.m. today. The Delta Air Lines Inc. subsidiary has said concessions were necessary as part of its restructuring plan to save $70 million annually. Read more.

Despite Bankruptcy Hardships, Iowa Diocese Looks to Move Forward

Despite the hardship that the Roman Catholic Diocese of Davenport, Iowa, is undergoing with its bankruptcy proceedings, it is looking to move forward after the abuse claims that bankrupted it, the Associated Press reported on Friday.  Bishop William Franklin said that the Davenport Diocese's filing was the best way for it to compensate victims and allow the church to continue its mission. By becoming the fourth U.S. diocese to file for bankruptcy — joining Portland, Ore., Spokane, Wash., and Tucson, Ariz. — the diocese can settle all pending sex abuse claims at once and spread settlement dollars equally. The Tucson Diocese has emerged from bankruptcy; proposed settlements in Spokane and Portland are awaiting approval. Read more.

New York Hospital to Exit Bankruptcy

Nineteen months after entering bankruptcy amid heavy losses, St. Vincent Catholic Medical Centers appears to have made a striking turnaround, poised to emerge from court protection as a much smaller, profitable company, the New York Times reported today. St. Vincent and its creditors filed a reorganization plan on Friday that calls for paying creditors more than 80 percent of what is owed right away, and paying the rest over a period of several years. After years of losses, including more than $140 million in 2004 and about $17 million in 2006, St. Vincent actually operated in the black in recent months, officials said. They project a $60 million profit this year. St. Vincent owes about $190 million to unsecured creditors, and the reorganization plan calls for paying them more than 80 cents on the dollar immediately with various arrangements designed to make up the rest over several years. Read more.

Autos

Unions Try to Stall Sale of Dana Unit

Unions representing Dana Corp. workers want a bankruptcy judge to put the brakes on the sale of the company's engine hard-parts business because the buyer won't honor retiree benefits, the Detroit Free Press reported today. In December, Dana said it had reached an agreement to sell the business to German supplier Mahle GmbH for $157 million in an effort to further its emergence from chapter 11. Under the deal, Mahle, an automotive-parts supplier based in Stuttgart, Germany, would pay $98 million in cash and assume certain liabilities for various Dana production sites that make up the engine business. Dana said it expects the sale to close in the first quarter this year.  However, the UAW and the United Steelworkers of America asked Judge Burton Lifland in a joint objection submitted last week to the U.S. Bankruptcy Court in Manhattan to withhold approval of the sale until talks are held with Mahle regarding the continuation of health benefits for Dana retirees.

Delphi Chief Reassures Workers that Pensions are a Priority

Delphi Corp.'s Executive Chairman Robert S. Miller said preserving established commitments to its workers is a top priority in the auto parts supplier's bankruptcy restructuring, the Sagniaw (Mich.) News reported yesterday. 'It's been my objective to preserve the pension entitlements,' Miller said. However, Miller also said that Delphi and U.S. automakers can't continue to make generous promises to future workers as nonunion domestic rivals and foreign companies can charge less for the same components. The United Auto Workers union complained earlier this month that Delphi and the investors have dragged their feet on negotiating wages, benefits and other issues with the UAW. Read more.

Lear Accepts Bid from Icahn Affiliate

Auto parts supplier Lear Corp. said Friday that it has agreed to a buyout offer by a group affiliated with billionaire investor activist Carl Icahn for about $2.8 billion, but left the door open for a better offer, the Associated Press reported on Friday. At least one major shareholder said he would try to get others who own stock to oppose the deal. Under the agreement, Icahn-controlled American Real Estate Partners LP is paying $36 a share, and a Lear spokesman said that amounts to about $2.8 billion. It also includes the assumption of about $2.5 billion in debt. Read more.

Creditors Request Involuntary Bankruptcy for New Jersey Real Estate Magnate

PNC Bank and two other creditors have filed papers to force real estate magnate Solomon Dwek into an involuntary bankruptcy, which would abruptly end the efforts of a local judge to sell Dwek's sprawling assets himself, the Asbury Park (N.J.) Press reported yesterday. The move would mark another chapter in Dwek's 14-year venture in real estate, during which he built an empire of 350 properties worth some $400 million in seven states. It also upstages nine months of work by Superior Court Judge Alexander D. Lehrer to liquidate Dwek's holdings to pay some 80 creditors who claim Dwek owes them $340 million. Dwek’s business collapsed last spring after he bounced a $25 million check at a PNC Bank branch drive-through window and endured an onslaught of fraud accusations from his investors and criminal charges from the FBI. Read more.

Country Singer Files for Bankruptcy

Sammy Kershaw, who hit No. 1 in 1993 with 'She Don't Know She's Beautiful,' has filed for bankruptcy in U.S. Bankruptcy Court in Nashville, CMT.com reported on Friday. The singer listed liabilities between $100,001 and $1 million in the chapter 13 filing submitted to the court on Feb. 6 and lists his assets in the same range. Kershaw, who married singer Lorrie Morgan in 2001, enjoyed a string of No. 1 singles in the '90s, including 'Cadillac Style' and 'National Working Woman's Holiday.' Kershaw's last charted single, 'Tennessee Girl,' peaked at No. 43 in 2006. Read more.

TROUBLED COMPANIES IN THE NEWS

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Eddie Bauer Holdings Inc.'s shareholders rebuffed a $286 million buyout offer from a holding company that includes affiliates of Sun Capital Partners Inc. of Boca Raton, Fl. and Golden Gate Capital of San Francisco, Ca.  The buyout group had also offered to assume $328 million of the Redmond, Wa. retailer's debt.

EGL Inc.'s stock price sank sharply after General Atlantic LLC withdrew from a plan to take part in a management-led takeover. EGL, a Houston, Tx. freight-forwarding concern, warned that fourth quarter results will be hurt by a decline in revenue and higher operating expenses. The warning spooked General Atlantic into withdrawing its support as equity sponsor of the proposed $1.5 billion takeover bid.

Gymboree Corp.'s stock price sank 16% after the Burlingame, Calif.-based retailer of children's apparel reported flat same-store sales for January and warned that it would have to take additional charges related to Janeville store closings.

Journal Register Co., a Yardley, Pa. newspaper publisher, wrapped up the sale of three of its Rhode Island daily newspapers to RISN Operations Inc. for $8.3 million.  Journal Register will use proceeds for debt reduction and for general working-capital purposes. Journal Register, now with two dozen dailies and more than 350 nondaily publications, recently reported a fourth quarter net loss of $25.1 million on a 1% increase in revenue--to $142 million.

Maximus Inc., a Reston, Va. management and administrative outsourcing firm, reported a first quarter net loss of $10.4 million while sales slid 1%--to $161 million. The results included a litigation charge of $3 million and a $684,000 gain from a business sale.

Multimedia Games Inc., an Austin, Texas provider of electronic bingo games and systems for the gaming industry, reported a first quarter net loss of $2.8 million. Sales fell 15%--to $29.1 million.

Orleans Homebuilders Inc., a Bensalem, Pa. homebuilder, reported a second quarter net loss of $7.5 million. Revenue declined 30%--to $157 million.

Toll Brothers Inc., a Horsham, Pa. luxury homebuilder, said that it will take writedowns of as much as $160 million for its first quarter. The firm added that first quarter revenue could fall by as much as 19%.