January 26, 2006
Senate's First Two Bills May Not Win Passage
The Senate opens its 2006 legislative session next week with two measures stalled at the starting gate: renewing the anti-terror USA Patriot Act and establishing a fund to compensate asbestos disease sufferers and stop their lawsuits against American businesses, the Associated Press reported today. The Patriot Act is set to expire Feb. 3. Lacking the votes to renew many of the anti-terrorism law's provisions permanently and others for four years, Republican leaders are looking at a simple extension into March. The other measure is a bill to compensate asbestos disease sufferers and halt suits the Bush administration says have cost businesses $80 billion. The measure is in such bad shape that one senator predicted it will only pass with help from a higher power. Both bills are products of the Senate Judiciary Committee and are being managed by its chairman, Sen. Arlen Specter (R-Pa.). Specter also is directing the Senate's handling of Samuel Alito's Supreme Court nomination. Read more.
Bush “Reluctant” to Bail Out Automakers
President Bush is offering no encouragement to any U.S. automobile companies that might be thinking about turning to the federal government for a financial bailout, the Associated Press reported today. ''I think it's very important for the market to function,'' he said in an interview in the Thursday editions of The Wall Street Journal. He said companies need to manufacture ''a product that's relevant'' and that his administration has discussed new fuel technologies with the nation's top two auto makers. ''As these automobile manufacturers compete for market share and use technology to try to get consumers to buy their product, they also will be helping America become less dependent on foreign sources of oil,'' Bush said. Together, the two companies plan to cut about 60,000 jobs over the next few years and there is concern on Wall Street that one or both could wind up seeking bankruptcy protection. That, in turn, has raised the prospect of one or both seeking government assistance as Chrysler did in 1979 when it won $1.5 billion in loan guarantees. ''I have been very reluctant,'' Bush said. ''I'm mindful of the past where at one point in time, a predecessor of mine was faced with that same dilemma. I would hope I wouldn't be asked to make that decision.'' Bush suggested his sympathies are more with the workers than the corporations, saying his administration would focus on retraining laid-off employees. Read more.
Union: Delta Actions May Jeopardize Deal
Delta Air Lines Inc.'s refusal to budge on its demand for $325 million in permanent pay and benefit cuts from its pilots could jeopardize the two sides' efforts to hammer out a comprehensive agreement by a March 1 deadline, a top union official said yesterday, the Associated Press reported yesterday. If a tentative agreement on permanent cuts isn't reached by then, a three-person arbitration panel would decide whether to grant the Atlanta-based company's request to void the pilot contract. If the contract is rejected, Delta has warned that it will impose the cuts it is seeking unilaterally. The chairman of the pilot union's executive committee, Lee Moak, said that if the contract is set aside, a pilot strike remains an option. A Delta spokesman, John Kennedy, said the company's need for $325 million in concessions is important, and added that it was the union that wanted to hold off negotiations until after its internal meetings this week. Last month, the nation's No. 3 airline, which filed for bankruptcy in September, reached a tentative agreement with its 6,000 pilots on interim pay cuts of 14 percent in wages and other cuts equal to an additional 1 percent wage reduction. In the talks on a permanent agreement, Moak said the union is currently offering about $115 million in average annual concessions over four years. But he said the company is refusing to come down from $325 million. ''If one party will not negotiate, it's hard to characterize it as a negotiation,'' Moak said. Read more.
Wet Seal to Acquire Assets of G+G Retail Out of Bankruptcy
The Wet Seal, Inc., a leading specialty retailer to young women, announced yesterday that it has entered into an asset purchase agreement to acquire substantially all of the assets of G+G Retail, Inc. in a transaction to be effected in G+G's chapter 11 bankruptcy proceeding, which commenced yesterday, according to a company press release. In connection with the transaction and in an effort to facilitate the asset acquisition, an affiliate of Prentice Capital Management, LP, a principal investor in the company, has made a commitment to provide G+G with debtor-in-possession financing that will enable G+G to continue as a going concern through the anticipated closing date of the company's asset acquisition. The company's offer for the assets being acquired is $15.2 million. Read more.
Trustee Called Threat to Plan for Adelphia
In a decision released yesterday in the chapter 11 bankruptcy of cable company Adelphia Communications, the presiding judge said the motions by which one group of creditors sought the appointment of a trustee to oversee disputes and the disqualification of chief Adelphia bankruptcy counsel Willkie Farr & Gallagher constituted a "nuclear war button" threatening obliteration of a crucial $17.6 billion deal, the New York Law Journal reported today. Southern District of New York Bankruptcy Judge Robert Gerber's strongly worded 113-page decision, In re Adelphia, 02-41729, previously filed under seal, clarified his order issued earlier in the week denying the appointment of a trustee but granting the disqualification of Willkie lawyers from participating in the disputes at issue. Willkie remains bankruptcy counsel to Adelphia. Those disputes, which the requested trustee would have overseen, are between different groups of debt holders, all seeking to maximize their own claims on the bankruptcy estate, most of the assets of which are slated to be sold to rival cable companies Time Warner and Comcast for $17.6 billion. Gerber said the disqualification and trustee motions, brought in November by noteholders of Arahova, a subsidiary through which Adelphia issued some $540 million in debt, seemed designed to "purposefully" imperil that sale as part of a "scorched earth litigation strategy" aimed at extracting a larger distribution by threatening dire consequences for all. Read more (free registration required).
Judge Considers Request from Doyle Family
A bankruptcy judge in Eugene, Ore., is considering whether to allow former state Representative Dan Doyle and his wife to shed $130,000 the state is seeking from them, the Associated Press reported today. This, in civil penalties for election-law violations. A judge heard testimony yesterday about the bankruptcy plan the Doyles submitted in federal court. The state has objected to the plan, which would free the Salem couple from most debts and block the state from collecting the penalties. Yesterday marked Dan Doyle's first public appearance since he went to jail three months ago. Doyle, a Republican, is serving a ten-month sentence in the Marion County jail for falsifying campaign-finance reports in his 2002 and 2004 races for the state House.
Car Delivery Firm seeks Chapter 11
Wayne, Mich.-based Performance Transportation Services Inc. (PTS), which hauls new cars and trucks to dealerships around the country, filed for chapter 11 bankruptcy protection yesterday, citing lower vehicle output at Detroit automakers, increased diesel fuel prices and escalating labor costs, the Detroit Auto News reported today. The company, with 1,900 hourly workers and 220 salaried, joins a growing list of automotive sector companies that have been forced to reorganize in court because of severe industry challenges. The private company has posted quarterly losses of $1.3 million to $7.2 million in recent years, according to a bankruptcy petition filed in the Western District of New York. PTS plans to use bankruptcy proceedings to reduce debt and streamline operations. PTS did not signal any plans to reduce worker pay and benefits. Read more.
Refco Asks Court to Allow Christie's to Auction Art Collection
Refco Inc. said in a press release today that it has chosen New York-based Christie's to auction its prized art collection, comprising more than 500 photographs by contemporary artists such as Cindy Sherman, Charles Ray, Diane Arbus and Andy Warhol, as well as paintings, sculptures and prints. In a motion filed today, the company has asked the U.S. Bankruptcy Court of the Southern District of New York for authorization for Christie's to conduct a series of sales of the highly sought-after collection, with proposed auction dates of April 25, May 5 and 10 and June 2006. The court hearing on the motion is tentatively scheduled for Feb. 14. As requested in the motion, Refco intends to auction the collection in several sales starting in the spring of 2006. The auctions would take place at Christie's New York located at Rockefeller Center and where the pre-sale viewings as well as the sales will be open to the press and the public. Read more.
Court OKs Calpine’s DIP Financing
Bankrupt power producer Calpine Corp. said it received final approval on Wednesday for its $2 billion debtor-in-possession financing package after a lengthy hearing dealt with all the objections to the plan, Reuters reported yesterday. A total of 19 objections were overruled or withdrawn during a 4-hour-plus hearing in U.S. Bankruptcy Court in Manhattan before Judge Burton Lifland. The financing package was led by Deutsche Bank and Credit Suisse. Witnesses for Calpine at the hearing indicated the company was unlikely to use more than $1.6 billion to $1.7 billion of the financing. The facility is secured by Calpine's prize asset, the Geysers geothermal power plant in northern California. In court, Calpine indicated it had received a letter from a major investment bank offering $2.5 billion to $3 billion cash to purchase the Geysers, although it did not express any intention to actually sell it. Calpine also said it has not received any higher or better proposals for the DIP financing than the package in place. Read more.
Amercian Samoa Medical Center Fending Off Bankruptcy
When the new board of directors for the LBJ Medical Center took over the governing of the hospital last year, the facility was “on the verge of bankruptcy,” according to board member Dr. Fred J. Uhrle, Pacific Magazine reported today. Dr. Uhrle wrote to the Senate in a Jan. 21st letter, raising some issues that the new board has dealt with since its appointment by the governor were confirmed by the Senate last April. The Senate has raised concerns over various decisions by the board, such as the implementation of facility fee hikes on Nov. 1, the proposed reduction in workforce and the continued financial woes faced by the hospital. For American Samoa, Uhrle said government subsidies have not kept up with the rising costs of healthcare and an exploding population. He said any attempts to do so will likely be at the expense of other necessary social programs. Read more.
Pa. Hospital Files for Bankruptcy
The Philipsburg, Pa., Area Hospital filed for bankruptcy this morning, but hospital officials said patients won't see any changes in the services available to them, the Central Daily Times reported yesterday. CEO Michael Loomis said the filing will loosen the hospital's cash flow to enable needed changes. He said the hospital currently does not have a timetable about when it could emerge from bankruptcy. The hospital has been facing operating at a deficit in recent years. At the end of December, four jobs were cut in the operating room and the hours of operation for the OR were reduced.
International
Chinese Securities Firm Enters Bankruptcy
Dapeng Securities, once one of China's leading private securities firms, has become the first broker to announce its bankruptcy, China Daily reported today. Huge losses and the embezzlement of clients' money caused the firm to go under. Unable to cover 2.7 billion yuan (U.S. $333 million) in debts, the firm was finally declared bankrupt by Shenzhen Intermediate People's Court yesterday. The bankruptcy announcement comes a year after the securities authorities barred the firm from doing business. After completing liquidation, the firm had paid its employees their unpaid salaries and had returned deposits to individual clients. Under Chinese rules, corporate clients are the last group to get their money back. Currently, China has no specific provisions that detail how a securities firm should apply for bankruptcy. Read more.
Estonia’s Galvex Files for Bankruptcy
Galvex, a state-of-the-art steel galvanizing plant in the Muugu port of Estonia, has filed for bankruptcy after a major creditor refused to restructure the company’s outstanding debt, the Baltic Times reported today. Galvex filed the application after failing to make a loan payment to creditor SPCP Group.
On Jan. 24, Russia’s Severstal offered $160 million for the troubled galvanization plant. Galvex owes the investment fund SPCP Group LLC roughly $150 million in operating credit and a long-term loan and has run into trouble with repayment, reports said. Galvex is also claiming that SPCP has sought to appoint a new CEO without board consultation and attempted to wrest control of the company’s assets and equity. Read more.