March 18, 2004
OCC Exemption Rules Opponents Take Wait-and-see Approach
Congressional opponents of the Office of the Comptroller of the
Currency's (OCC) controversial new rule exempting national banks from
many state consumer protection laws are hoping the OCC will address
their concerns by meeting, 'on a regular basis,' with state officials
and House Financial Services Committee members, Financial Services
ranking member Barney Frank (D-Mass.) said yesterday,
CongressDaily reported. But if those meetings do not occur or
fail to address lawmakers' concerns, Frank said legislators would
introduce a resolution of disapproval to overturn the new rule. 'We are
prepared to work this out, but we cannot accept and leave alone this
sweeping decision by federal regulators with no congressional vote to
substantially diminish the role that state elected and appointed
officials have in protecting their economy and their consumers and their
investors,' Frank said during a National Association of Attorneys
General conference. Frank said lawmakers have until mid-May to decide
whether to introduce a resolution of disapproval, the newswire
reported.
The new OCC pre-emption rule, which took effect last month, exempts
national banks from most of the state laws from which nationally
chartered thrift institutions already are exempt under Office of Thrift
Supervision rules. Those pre-empted state laws pertain to real estate
lending, other types of lending and deposit taking. The rule also would
establish new federal anti-predatory lending standards for national
banks and restrict state agencies' authority to take actions against
those banks.
UAL Faces Delay in Chapter 11 Exit
The bankruptcy proceedings of United Airlines parent UAL Corp. have
encountered problems that are setting back the company's schedule for
emerging from court protection by June 30, according to people familiar
with the matter, the Wall Street Journal reported. Lawyers for
the airline are expected to tell U.S. Bankruptcy Court Judge Eugene
Wedoff at a hearing tomorrow in Chicago that UAL won't be able to step
out of chapter 11 until later in the summer. The carrier also is
expected to ask the judge to extend for 30 or 60 days UAL's right to
field a reorganization plan without competition from other groups, said
people with knowledge of the case. Currently, that period of exclusivity
ends April 8, after which creditors could introduce their own plan to
reorganize the company, the online newspaper reported.
States Seek to Bar KPMG as Auditor for WorldCom
A request by 14 state governments to disqualify KPMG LLP as WorldCom
Inc.'s independent auditor arose as the latest obstacle in the
telecommunications company's effort to emerge from bankruptcy-court
protection, the Wall Street Journal reported. The request, led by
Massachusetts Commissioner of Revenue Alan LeBovidge, came yesterday in
a court filing with the U.S. Bankruptcy Court for the Southern District
of New York. Pointing to a tax shelter that KPMG sold to WorldCom during
the 1990s, the states contend that the accounting firm isn't
sufficiently disinterested to act as WorldCom's external auditor or tax
adviser. The states further asked that KPMG be forced to disgorge all
fees that it has charged the company. According to yesterday's filing,
KPMG has received or applied for more than $146 million in total fees,
the online newspaper reported.
Italian Prosecutors Formally Ask For Indictments in Parmalat
Case
Italian prosecutors formally requested the indictment of 29 suspects in
the Parmalat fraud case today, the Associated Press reported. An
official in the offices of Milan prosecutors said 29 people were named
in the indictment request, which was formally deposited at the
courthouse today. The Italian news agency ANSA said among those
prosecutors want to indict are Parmalat's founder Calisto Tanzi, former
members of the company's board of directors as well as three former
officials at Bank of America. The indictment request also targeted two
companies that audited Parmalat books, Grant Thornton SpA and Deloitte
& Touche SpA, ANSA and two other Italian news agencies, AGI and
Apcom. Both Deloitte & Touche and Bank of America said they had no
immediate information about the indictment request, the newswire
reported.
Air Canada May Lose Trinity Time Investment
Hong Kong billionaire Victor Li has threatened to 'walk away' from a
planned $488 million investment in Air Canada, citing refusals by the
airline's unions to discuss changes to the bankrupt company's pension
plan, the Associated Press reported. In a statement released on
Wednesday, Li's Trinity Time Investments -- whose deal for restructuring
Air Canada has received court approval -- said it's now reconsidering
its entire investment in the airline. Air Canada has slashed thousands
of jobs in an effort to emerge from bankruptcy protection by the end of
April. The announcement increases the pressure on Air Canada's unions to
agree to changes to the pension plan that Trinity Time has demanded to
make it cheaper. The pension fund has a $1.15 billion deficit. Trinity
also said it will revisit cost concessions agreed to by the unions in
negotiations with the airline last summer in a move to lower the
carrier's operating costs, the newswire reported.
Kmart Posts First Post-bankruptcy Profit
Kmart Holding Corp. today posted its first quarterly profit since
emerging from bankruptcy, and built up a surprisingly large amount of
cash as it cut costs and spruced up its stores, Reuters reported. The
Troy, Mich.-based retailer said it earned $276 million, or $2.78 per
share, in the fourth quarter ended Jan. 28, compared with a loss of $1.1
billion a year earlier. Kmart filed for chapter 11 bankruptcy protection
in January 2002 after a poor holiday shopping season compounded its
financial woes. It emerged in May 2003 with a new management team, 600
fewer stores and much lower debt. The retailer had said in January that
it recorded a profit in November and December, which could put it on
track to post its first quarterly profit since exiting bankruptcy. Total
sales dropped 25.8 percent to $6.3 billion, in part because of store
closings. Sales at stores open at least a year -- a key retail measure
known as same-store sales -- dropped 13.5 percent. Kmart has been
holding back on price cuts to preserve profits. The retailer listed
about $2.1 billion in cash and cash equivalents as of Jan. 28, more than
expected.
In His Own Defense: Was the Enron Inquiry Worth $90
Million?
Neal Batson's 18-month probe of Enron produced a four-volume report, the
online Wall Street Journal reported. More than 200 people worked
on the Enron examination, including more than 150 attorneys at the
Atlanta law firm of Alston & Bird, where Batson is a longtime
partner. Critics have contended, however, that the Batson team increased
its bills by sending as many as 15 people to a given meeting, and as
many as five people to question a single witness. They also argue that
much of what the examination turned up about Enron's financial
machinations already was known through probes by Congress, government
agencies, private attorneys and the company itself. Read the article at
www.wsj.com (subscription
required).
No Longer on the Brink, American Air Is Still in Peril
American Airlines has pulled back from the brink-- now it has to figure
out how to stay on top of the brutally competitive airline industry, the
New York Times reported. In the last year American has wrung $2
billion in concessions from its unions and surprised Wall Street by
cutting its costs to 9.5 cents a seat-mile in the fourth quarter. But it
is still a long way from profitability. While its operating costs are
the lowest among the major airlines, they are still significantly above
the 5.9 cents a seat-mile at JetBlue Airways, the industry leader.
American is also saddled with a crushing $21 billion debt, as well as
ballooning pension and health care costs that it has few options to
address, the newspaper reported.
Witness: Adelphia Paid for Rigas' Bill
Adelphia Communications Corp. paid for Rigas family purchases that
ranged from beauty services to naming rights at a university and
mortgage payments on a multimillion-dollar condominium, an
accounts-payable manager at the company testified on Wednesday, the
Associated Press reported. But after jurors left the courtroom, the
judge in the fraud trial said that some of the Adelphia payments listed
on Wednesday ultimately were charged to the Rigas family. When asked,
prosecutors told Judge Leonard Sand that the witness questioned
throughout Wednesday's proceedings does not know which charges were
later billed to the Rigases, but that future witnesses will testify on
the matter.
The company's founder and former chairman John Rigas, his sons
Timothy and Michael Rigas, and former executive Michael Mulcahey are on
trial in federal court in Manhattan on charges of conspiracy and fraud.
Each has pleaded not guilty. Prosecutors say they misled creditors,
investors and the public as they plunged the nation's fifth-largest
cable company into bankruptcy reorganization, the newswire reported.
Ross Combines Burlington and Cone Mills
Denim maker Cone Mills, acquired out of bankruptcy by WL Ross &
Co. last week, will be combined with Burlington Industries to form
International Textile Group (ITG), the company's new owner said on
Wednesday, the Associated Press reported. Both Greensboro companies were
bought from bankruptcy proceedings in recent months by WL Ross &
Co., which is owned by New York financier Wilbur Ross. The Cone Mills
sale closed last week for $90 million in cash and assumed liabilities.
Ross will serve as chairman of the new company, which has its
headquarters in Greensboro and annual revenues of $900 million. Joe
Gorga, CEO of Burlington Industries, has been named CEO of International
Textile while John Bakane will keep his title as CEO of Cone Mills. As
part of the new corporate structure, Cone Mills assumes responsibility
for Burlington's Burlmex denim plant in Mexico. ITG also takes majority
ownership of Burlington unit Nano-Tex, a high-tech company, the newswire
reported.
Keystone Receives Final Court Approval of Debtor in Possession
Financing Agreements
Keystone Consolidated Industries, Inc. announced in a press release
yesterday that on March 15, 2004, the U.S. Bankruptcy Court for the
Eastern District of Wisconsin in Milwaukee gave its final approval of
the company's previously announced $60 million Debtor in Possession
(DIP) financing agreements. The funds, together with the interim relief
granted for certain retiree medical benefit obligations and cost savings
resulting from the interim relief previously granted by the courti, is
anticipated to provide sufficient liquidity for the company to continue
to operate under the protection of chapter 11 of the U.S. Bankruptcy
Code while the company works to develop a comprehensive plan of
reorganization.
Loral Hopes to Emerge From Chapter 11
Despite strained talks with creditors, satellite-maker Loral Space
& Communications Ltd. hopes to emerge from chapter 11 bankruptcy
protection by the end of the year, the company's chairman and CEO
Bernard Schwartz said on Wednesday, the Associated Press reported. The
New York-based company reached a milestone in its reorganization on
Tuesday when the U.S. Bankruptcy Court in Manhattan gave final approval
to amendments to the company's sale of its North American satellite
operations to Intelsat Ltd. The bankruptcy court on Tuesday also granted
Loral an extension of its exclusive period to file a turnaround plan
through July 12, as it had requested, the newswire reported.
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