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December 2, 2002
Holiday Sales in the U.S. Get Off to a Strong
Start
After months of muted sales projections and weeks of frantic
pre-Thanksgiving discounts, the weekend's holiday sales came in better
than expected, the Wall Street Journal reported. Retail sales for
Friday were an estimated $7.4 billion, a robust 12.3 percent increase
from last year, according to one early report from a Chicago retail
tracking and consulting firm, the Journal reported. Estimated
Saturday sales rang in at $5.2 billion, a 9 percent increase from 2001.
Last year, the survey detected a 2.7 percent rise in Friday sales, and a
4.1 percent increase for Saturday. The ShopperTrak RCT survey, whose
estimates are based on U.S. Commerce Department statistics and
point-of-sale data from more than 30,000 retail outlets, found average
sales for the two-day period up most sharply in the South (12 percent),
followed by the West (11.5 percent), Midwest (11 percent) and Northeast
(8 percent), according to the Journal. Still, retail veterans
warned against drawing broad conclusions from a single weekend,
especially one that is among the year's busiest. To read the full story,
point your browser to
href='http://online.wsj.com/article/0,,SB1038589243138318708,00.html?mod=%3Cb…'>
color='#000080'>http://online.wsj.com/article/0,,SB1038589243138318708,00.html?mod=
home_whats_news_us (subscription required).
Kmart's Discounts, Long Hours Draw Post-Thanksgiving
Shoppers
Kmart Corp. is keeping stores open for 65 straight hours and cutting
some prices by more than 50 percent in hopes that the kickoff of the
holiday shopping season will help speed its exit from bankruptcy,
Bloomberg News reported. A turnaround in sales this holiday season will
help reassure suppliers and creditors as Kmart prepares to file a
reorganization plan by Feb. 28, analysts said. 'It's very encouraging to
hear that Kmart's major Thanksgiving promotion is working,'' said
Richard Hastings, an analyst with Cyber Business Credit LLC. 'It's going
to take more than just a good day after Thanksgiving to soothe
suppliers' nerves, but this is very encouraging.''
Boston Archdiocese Preparing for Bankruptcy
The Roman Catholic Archdiocese of Boston is preparing to file for
bankruptcy rather than face a costly legal battle that could drag on for
years, according to a published report, the Associated Press reported. A
spokeswoman for the archdiocese called the report 'speculative and
premature.' Senior advisers to Cardinal Bernard Law favor filing for
bankruptcy and any decision must be approved by the cardinal, according
to The Boston Globe, citing an unnamed senior church official and
two unnamed sources close to the archdiocese, the newswire reported. An
archdiocese spokeswoman said on Sunday that a decision on bankruptcy had
not been made, but that every option is being considered. If the
archdiocese does file for chapter 11 bankruptcy action in all civil
lawsuits against the archdiocese would be suspended and it would be
protected from new suits, according to the story. To read the Boston
Globe article, point your browser to
href='http://www.boston.com/dailyglobe2/335/nation/Archdiocese_weighs_bankrup…'>
color='#000080'>http://www.boston.com/dailyglobe2/335/nation/Archdiocese_weighs_bankrup….
Sealed Air, Fresenius Advance; Shares of Most Retailers
Fall
Sealed Air and Fresenius Medical Care surged on Friday after reaching
agreements to settle asbestos-related lawsuits, the Wall Street
Journal reported. Many retail issues declined as Friday marked the
start of what is expected to be a sluggish holiday-shopping season,
reported the online newspaper. Among decliners, retail issues traded
lower as the official holiday-shopping season began. Retailers are
pushing discounts early this year, fearing that the slow economy and a
shorter shopping season will mean sluggish sales. Wal-Mart Stores
retreated 68 cents, or 1.2 percent, to 54.16, Target shed 52 cents, or
1.5 percent, to 34.78, J.C. Penney declined 24 cents to 23.73, and
Federated Department Stores was off seven cents at 32.68, according to
the Journal.
Asbestos Pacts Bring Hope Companies Can Settle, Survive
Tentative settlement pacts regarding asbestos-related claims against
Sealed Air Corp. and German dialysis provider Fresenius Medical Care AG
give hope that other companies with outstanding claims will reach deals,
allowing them to survive and return their focus to business, analysts
said Friday, Dow Jones reported. Salomon Smith Barney analyst George
Staphos boosted his rating on Sealed Air's stock to outperform from
in-line following the packaging company's announcement of an agreement
in principle to resolve current and future claims and a pending claim of
fraudulent conveyance related to its purchase of W.R. Grace & Co.'s
Cryovac packaging business.
Deutsche Bank Securities analyst Daniel Khoshaba said the settlements
announced on Friday, as well as the likelihood a Republican-controlled
Congress could pass national legislation reining in liability payouts,
are creating a better environment for other companies facing asbestos
complaints, such as Crown Cork & Seal Inc. and Owens-Illinois Inc.,
according to the newswire.
S&P Says UAL Bankruptcy Is 'Virtually Inevitable'
Standard & Poor's slashed its credit rating on United Airlines
parent UAL Corp. and said a crippling labor vote setback likely will
force the company into bankruptcy, the Wall Street Journal
reported. The airline's shares lost more than a quarter of their value
on Friday. S&P's move followed the rejection on Wednesday by
United's mechanics of a multibillion-dollar financial recovery plan.
'The mechanics' vote makes bankruptcy virtually inevitable for United
and UAL,' S&P credit analyst Philip Baggaley said, the newswire
reported. United, still trying to carry out its restructuring without
going to bankruptcy court, has said it will continue flying its normal
schedule if it is forced to resort to that action. Another major
airline, U.S. Airways Group, has been operating normally since filing
for bankruptcy in August.
Allegiance Telecom Seeks Sharp Cut in Its Debt Load
Allegiance Telecom Inc. said it needs to cut its $1.2 billion debt
nearly in half by the end of April as it seeks to renegotiate a $500
million secured credit agreement with its banks, the Wall Street
Journal reported. Allegiance is one of the largest survivors among
local phone and data companies that sprang up in the late 1990s to
compete with regional phone-service providers. Many of those companies,
including Teligent Inc. and Winstar Communications Inc., have filed for
bankruptcy protection or liquidated as the telecommunications industry
faltered and investors lost interest in speculative companies that don't
make money, reported the Journal.
Allegiance said it has reached an agreement with its banks that suspends
previous financial covenants of its credit until April 30, when it hopes
to have a new credit agreement in place. The company, which said it has
$305 million in cash on hand, will retain access to the credit as it
renegotiates with the GE Capital Corp. unit of General Electric Co. and
Morgan Stanley of the United States, France's Credit Lyonnais SA and
other lenders, the newspaper reported.
NTL Sees Pact Among All Parties to Exit Chapter 11
NTL Inc. expects to complete final terms of its reorganization plan and
emerge from chapter 11 bankruptcy protection in 'the very near future,'
Dow Jones reported In a press release on Friday, the U.K. cable operator
also said its debtor-in-possession facility has been extended. As
reported, the company's DIP funding totals $630 million. NTL said on
Nov. 14 that bondholders would supply a $500-million cash infusion under
the reorganization plan, the newswire reported. The company also said at
the time it plans to cut 250 jobs and take a 20 million (GBP)
restructuring charge in the fourth quarter. NTL entered bankruptcy
protection in May after reaching agreement with creditors to exchange
bonds worth $10.6 billion for control of the company.
J.P. Morgan, Insurers Ready for $1 Billion Enron Trial
J.P. Morgan Chase & Co. Inc. heads to court on Monday to try to
recoup about $1 billion from a group of insurers over complex deals it
struck with Enron Corp., Reuters reported. The case is only the second
Enron-related trial after accountant Andersen was found guilty of
obstructing the government's investigation into the bankrupt energy
trader, and it may shed precious light on the inner workings of Enron.
The trial revolves around surety bonds that the insurers issued to Enron
to guarantee gas deliveries -- or cash equivalents -- to a J.P.
Morgan-related entity called Mahonia, reported Reuters. The deal worked
well for all involved, including the insurers, until Enron filed for
bankruptcy last December.
Both sides are expected to lay out opening arguments before Manhattan
federal Judge Jed Rakoff on Monday, and a jury will be chosen. In March,
Judge Rakoff denied J.P. Morgan's request for immediate payment from the
insurers. The trial, which has attracted far more attention than most
mundane insurance disputes, is likely to reveal how Enron interacted
with its financiers, which some blame for keeping Enron afloat, the
newswire reported.
National Century May Miss Interest Payment, Analysts Say
National Century Financial Enterprises Inc. may default on an $8.3
million-interest payment today after the company failed to provide
Moody's Investors Service with revenue information, Bloomberg News
reported. Bondholders were waiting for the monthly report a week after
the health-care finance company filed for bankruptcy protection to see
whether it had collected enough money in insurance reimbursements to
keep making bond payments. The Dublin, Ohio-based company filed for
chapter 11
bankruptcy last week after the Federal Bureau of Investigation raided
its offices and Moody's slashed its credit ratings 12 levels to below
investment-grade, prompting investors to stop extending credit. Founded
in 1991, National Century bought medical bills from health-care
providers, packaged them into so-called asset-backed bonds and sold them
to investors. By backing the bonds with assets, the company sought to
ensure payment even in a bankruptcy -- like ContiFinancial Corp., a
mortgage lender, which kept paying its asset-backed debt after going
bankrupt in 2000, the newswire reported.
United Airlines Moves Closer to Bankruptcy Filing
United Airlines may seek bankruptcy protection after its mechanics
rejected wage cuts
intended to help gain a U.S. loan guarantee before $375 million in debt
comes due Monday, analysts said, Bloomberg News reported. The world's
second-biggest airline has a 10-day grace period to repay the debt.
Chief Financial Officer Jake Brace declined to comment on whether the
company will make the payment. Shares of parent company UAL Corp.
dropped 23 percent. 'The mechanics' vote makes bankruptcy virtually
inevitable,'' Standard & Poor's credit analyst Philip Baggaley said
after the long-term credit ratings on UAL and United were cut to CCC-,
three steps above default.
Enron Creditors Still Chasing Their Debts
Enron creditors are now worried that the sheer cost of the complex
bankruptcy -- particularly the fees paid to myriad advisers -- will
erode the value of the company's underlying assets, the Financial
Times.com reported. Enron's own lawyers, Weil Gotshal & Manges,
in a court filing in September, estimated that legal and
bankruptcy-related services would have cost $306m by the end of this
year, nearly twice as much the amount the group is likely to spend on
general corporate overheads. Indeed, while all other overheads have been
shrinking, professional fees were projected to increase in the second
half of this year. Some creditors estimate that about $1m a day is being
drained from the Enron estate.
More than 8,000 separate motions, notices, orders, statements and
affidavits have been filed into the court of Judge Arthur
Gonzalez, the New York bankruptcy judge who is also handling the
WorldCom case. Yet it is still not clear when Enron will emerge from
bankruptcy, and, if so, in what form. Mark Palmer, the energy company's
spokesman, says the group expects a decision by middle to late January
next year on whether Enron will be more valuable as a going concern or
if its assets will be sold piecemeal, the online newspaper reported.
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