March 20, 2000
House and Senate Leaders to Meet This Week on Bankruptcy
Reform
House and Senate leaders are likely to meet this week to work
toward freeing H.R. 833 from the legislative maze concerning the minimum
wage increase and tax breaks that has prevented the bill from moving
forward, CQ Daily Monitor reported. David Hoppe, chief of staff
to Senate Majority Leader Trent Lott (R-Miss.) said a proposal to split
the issues may be on the table. He said this could be possible since the
House passed a combined wage-and-tax measure (H.R. 3081) on March 9.
Aides for Lott and Senate Majority Whip Don Nickles (R-Okla.) have
drafted a memo to outline the scenarios for the leaders to consider. In
its current form, the bankruptcy bill would be ruled out of order if the
House tried to send it to conference with the Senate because the
Constitution requires that tax legislation originate in the House. The
Senate attached the minimum wage increase and tax cuts to the
House-passed bankruptcy measure last month. Some Republicans want to
split off the wage and tax provisions and move forward with a conference
on bankruptcy reform. Banks, credit card companies and businesses are
urging Republicans to complete the bankruptcy legislation because of the
high number of filings in recent years. Senate Democrats, meanwhile,
oppose the Republican-drafted wage and tax provisions attached to the
bankruptcy bill, but they have not said whether they will support
separating the issues. In a Feb. 1 letter, all 45 Democrats urged
potential conferees to include their version to raise the wage by $1
over a two-year period.
One option Senate Republicans are considering is the issuance of an
informal promise that if House members allow the bankruptcy bill to go
to conference, then the Senate conferees will strip the tax and wage
provisions from the bankruptcy bill. This scenario would require Speaker
J. Dennis Hastert (R-Ill.) to ensure that no members raise a point of
order. A spokesperson for Sen. Charles E. Grassley (R-Iowa), a
co-sponsor of S. 625, said, 'Presumably, the Speaker would be
persuasive.'
Small Business Owners Say Tax Cuts Will Not Help
Many small businesses that would be affected by a proposed
increase in the minimum wage say that the tax cuts Congress has added to
the minimum wage increase provision will not help offset the costs,
The Washington Times reported. Spokesmen for business
policy-research groups, including the National Restaurant Association,
called the cuts 'poorly targeted' and said that they will not help their
members. Lee Culpepper, senior vice president of government affairs and
public policy for the restaurant group, said the Small Business Tax
Fairness Act is 'poorly targeted in that many of the benefits flow to
businesses who don't have employees at the entry-level wage.' Culpepper,
who said that tax relief attached to minimum wage legislation should
benefit those affected by the legislation. He praised the Senate's
version of the tax package, which includes an extension of the
work-opportunity tax credit, which helps employers hire people from
disadvantaged backgrounds and could soften the blow of a wage increase.
The National Federation of Independent Businesses, a 300,000-member
group that represents small businesses, strongly supported the
legislation, and said that the estate tax cuts, in particular, are
vital.
Iridium Terminates Commercial Service
Iridium LLC announced that as of 11:59 p.m. on Friday, it has
terminated the provision of commercial service and that the Bankruptcy
Court for the Southern District of New York has approved the company's
use of its secured lenders' cash collateral to begin winding down its
operations and selling its assets, according to a newswire report.
Iridium, which became the world's first global satellite phone and
paging company on Nov. 1, 1998, filed chapter 11 in August and has
sought a buyer since then. Attorney William J.
Perlstein of Wilmer, Cutler & Pickering in Washington told
Bankruptcy Judge Arthur Gonzalez that 'We do not have a qualified bid.'
More than 80 parties had been contacted in a search for new investors he
said. Judge Gonzalez then gave Iridium permission to halt service and
'de-orbit' its 66 satellites worth $5 billion. Until the de-orbiting
plan is finalized, the satellites will keep running and will continue in
North America and possibly other regions of the world. Motorola Corp.,
Iridium's lead investor, said that it will be up to the independent
Iridium affiliate for each region to continue to offer temporary
service. Judge Gonzalez gave Iridium approval to spend $8.3 million to
start winding down its business, including paying severance to its
employees. This does not include an estimated $30 million to $50 million
it will cost to destroy the satellites and prevent them from crashing
into other objects orbiting Earth. Perlstein said that pulling down the
satellites may take up to two years. They would be moved four at a time
into a lower orbit, where they would ultimately burn up in the
atmosphere.
Daewoo International Files Chapter 11 in New York
Daewoo International (America) Corp. announced last week that
it filed for chapter 11 protection in the Southern District of New York,
according to a newswire report. President H.K. Jhun said, 'We have been
engaged in global restructuring efforts involving various Daewoo
companies since last fall. The vast majority of our creditors support
these efforts...Two small bank creditors, however, have chosen to take
legal action to secure preferential treatment that is fundamentally
inconsistent with a global restructuring. The chapter 11 filing was
commenced to preserve the integrity of the the global restructuring
through protection afforded by the Bankruptcy Code and to confirm a
reorganization plan.' The filing is not expected to have any significant
impact on business operations. In late January, the company announced
that it had reached a non-binding agreement in principle with the
Steering Committee of Foreign Lenders of Daewoo Group of Companies
(comprised of nine banks) under which an offer will be made to purchase
for cash certain outstanding indebtedness of Daewoo companies, including
Daewoo International (America), held by non-Korean lenders. The company
is a wholly owned subsidiary of parent Daewoo Corp. By the middle of
last year the parent and its major affiliates owned more than $44
billion in funded debt to creditors inside and outside of Korea. Togut,
Segal & Segal, New York City, filed the chapter 11 on behalf of the
company.
Loehmann's to File Proposed Plan
Loehmann's Inc. announced Friday that it intends to file a
reorganization plan with the Bankruptcy Court for the District of
Delaware within the next week, according to a newswire report.
Loehmann's, a leading specialty retailer of designer women's and men's
fashions at discounted prices, also will close an additional 11 stores
as part of its reorganization. Those stores are located in Westbury,
N.Y.; Greenbrook, N.J.; North Atlanta; Virginia Beach and Richmond, Va.;
San Antonio; St. Louis; Downers Grove, Ill.; Brookfield, Wis.; and
Fullerton and Palm Springs, Calif. The reorganized company will operate
44 stores in 16 states.
TransTexas Gas Emerges from Chapter 11
TransTexas Gas Corp. announced Friday that it has emerged from
bankruptcy protection and that it has amended its existing
debtor-in-possession credit agreement and revolving accounts receivable
credit facility, cancelled existing securities and issued new
securities, according to a newswire report. The company explores,
produces and transports natural gas and oil, primarily in South
Texas
National Energy Group Announces Filing of Joint Statement and
Plan
National Energy Group Inc., Dallas, announced that it filed a
joint disclosure statement and plan of reorganization on March 14 in the
Northern District of Texas, according to a newswire report. In February,
the company and its subsidiary, Boomer Marketing Co., filed chapter 11.
A hearing on the disclosure statement is scheduled for April 20.
University Hospitals Files Objection to Sale of PHS Assets to
Cleveland Clinic
University Hospitals Health System (UHHS) filed an objection
Friday in bankruptcy court to the planned sale of PHS assets to the
Cleveland Clinic, according to a newswire report. Claiming that PHS and
the clinic have 'entered into an unholy alliance to discourage
competitive bidding' for the hospitals that are part of PHS, University
Hospitals has asked the court to open the bidding process and put an
immediate halt to any action that would strip St. Michael Hospital and
Mt. Sinai-East of their current value. UHHS has offered $10 million for
the purchase of the two hospitals as long as they are fully
operational.
Leasing Solutions' Exclusive Plan Filing Period Extended
Leasing Solutions Inc. (LSN) on Tuesday won a 21-day extension of its
exclusive period for filing a chapter 11 plan. According to Robert
Greenfield of Stutman Treister & Glatt PC, counsel for the company,
the U.S. Bankruptcy Court in San Jose extended the period during which
the company has the exclusive right to file a plan through April 7. The
court continued Tuesday's exclusivity hearing to April 4, at which time
it will consider the company's request filed Feb. 23 for a two-month
extension of the exclusive periods in which to file and solicit
acceptances to a plan. The requested extension would extend the
exclusive plan filing period from March 14 to May 15, and the exclusive
period for soliciting votes to the plan from May 14 to July 13.
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