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March 24, 2005
Consumer Prices Jump, Inflation a Worry
The specter of inflation emerged, stoking interest-rate worries, after the
government on Wednesday reported U.S. consumer prices jumped more than expected
in February, Reuters reported. A separate report showed existing U.S. home
sales slipped just a touch in February, defying forecasts for more of a drop,
while the median home price jumped 11 percent to $191,000. The Labor Department
said the consumer price index, a widely used inflation gauge, rose 0.4 percent
in February after a 0.1 percent gain a month earlier. A hefty 2 percent gain in
energy prices accounted for most of the acceleration, it said. Wall Street
economists had braced for a milder 0.3 percent rise in overall consumer prices
and had expected another 0.2 percent gain outside food and energy. The report
added to financial market inflation jitters and increased speculation that the
Federal Reserve, which raised credit costs on Tuesday, might step up the pace
of its rate rise to keep inflation under wraps.
Delta Expects to Avoid Bankruptcy Filing, CEO says
Delta Air Lines expects to face liquidity issues over the next two years as higher oil prices add up to $1 billion to its costs, but it should still be able to avoid bankruptcy, Chief Executive Gerald Grinstein said on Wednesday, Reuters
reported. The Atlanta-based carrier avoided a chapter 11 filing late last year
when it managed to win $2 billion in wage and benefit concessions from its
unions and $1.1 billion in financing from GE Commercial Aviation Services and
American Express Co. Delta, which has slightly more than $1 billion in cash on
hand, must make $450 million in payments on its pension plans this year and has
$630 million in debt repayments coming due near the end of the year, Grinstein
said.
Adelphia Close to $725 Million SEC Settlement
Adelphia Communications Corp. is close to agreeing to pay about $725 million to the U.S. Justice Department and Securities and Exchange Commission to settle
claims stemming from its accounting and management scandal, The Wall Street
Journal reported on Thursday, citing people familiar with the matter. Such a settlement would be one of the largest penalties of recent times, just below the $750 million settlement that WorldCom Inc. made with the SEC in 2003, the Journal said. Investors lost billions of dollars when the cable company collapsed in 2002 amid claims that the company's founding Rigas family siphoned millions of dollars of Adelphia funds for personal use and misrepresented its financial condition. The scandal forced Adelphia to seek chapter 11 bankruptcy protection in 2002.
Ultimate Electronics to Close Stores, Cut Staff
Electronics retailer Ultimate Electronics Inc. on Wednesday said it will close about half of its stores and cut 965 jobs, or nearly 28 percent of its workforce, as it restructures under bankruptcy protection, Reuters reported. In a filing with the Securities and Exchange Commission, the company said about 900 employees will be affected by the store closings, and 65 central office employees will be terminated. The retailer said it will incur charges related to the restructuring plan but cannot currently estimate the amount. Ultimate, which
sells mainly upscale electronics, filed for protection from creditors under
chapter 11 of the U.S. Bankruptcy Code in January. Ultimate said it expects to
continue operating 32 stores in Arizona, Kansas, Minnesota, St. Louis,
Missouri, Nevada, New Mexico and Oklahoma, but was leaving Iowa, Kansas City,
Missouri, South Dakota, Texas and Utah, the newswire reported.
TRUMP HOTELS AND CASINOS
IRS Opposes Trump Casino Bankruptcy Plan
The Internal Revenue Service and New Jersey's Taxation Division are challenging the chapter 11 filing for Trump Hotels and Casino Resorts, the Associated Press reported. The IRS is seeking nearly $42 million in taxes on the company's riverboat casino in Indiana. It also wants about $120,000 for Trump's Atlantic City casinos. The IRS wants the company to pay taxes in monthly or quarterly installments instead of on a semiannual basis. The state is seeking $11.5 million from Trump's Atlantic City properties. The state wants more than the proposed 4 percent interest the company would add to its semiannual payments for back taxes. A federal bankruptcy judge expects to rule on the company's
reorganization plan in less than two weeks.
Trump Hotels & Casinos Plans Improvements to Gary, Ind., Riverboat Casino
Improvements to Donald Trump's Gary riverboat casino are being planned as parent company Trump Hotels & Casinos' anticipates emerging from bankruptcy, Knight Ridder reported. Close to $4.5 million in new slot machines will be installed over the next few months at the Gary casino, Trump spokeswoman Suzanne Sutherland said. Changes to the casino floor and to a connecting hotel also are planned, according to Jackie Pinner, marketing director at the Gary riverboat. Upgrades to Trump properties, including the Gary casino, stalled after the company declared bankruptcy in November, citing $1.8 billion in debt. A plan to reorganize is pending in U.S. Bankruptcy Court in New Jersey.
Judicial Advisory Committee to Meet on Rules of Bankruptcy Procedure
The Judicial Conference of the United States announced that the Advisory Committee on Rules of Bankruptcy Procedure will hold a two-day meeting, Sept. 29-30, 2005 (8:30 a.m. to 5 p.m.). The meeting will be open to public observation but not participation.
Halliburton to Redeem $500 Million Senior Notes
Oil
and energy services company Halliburton Co. said on Wednesday it would redeem
all of its $500 million floating rate senior notes due Jan. 26, 2007, Reuters
reported. The redemption, as of April 26, 2005, is the initial step in the
company's plan to reduce debt following the completion of an asbestos
settlement, it said. In January, Halliburton said it completed funding its
asbestos liability settlements, marking the end of a long-running legal battle
in the company's history. The Houston-based company's asbestos liabilities had
long been a drag on its share price and forced two of its unitsKellogg Brown & Root and DII Industriesto file for bankruptcy in December 2003, thenewswire reported. The company said in January it completed funding a $4.2 billion settlement to resolve asbestos and silica lawsuits it faces with a
final cash payment of $2.78 billion into trusts for the claimants.
World Series Trophy Could Be Sold at Bankruptcy
The Pittsburgh Pirates' 1979 World Series trophy, now on loan to a sports museum, could be sold at auction because its owner is bankrupt. The Allegheny Club declared bankruptcy in 2002 and its memorabilia collectionincluding the trophycould be sold to pay its debts. An unidentified New York collector has offered $100,000 for the collection. The Pirates and the Western Pennsylvania Sports Museum, where the trophy is displayed, now are considering making their own bids to keep it in Pittsburgh.
Unwelcome Suitor Could Bully Way Into MCI
If MCI Inc. rebuffs the latest acquisition offer from Qwest Communications
International Inc., the long-distance telephone company has few defenses
against a hostile bid or a shareholder group aiming to oust the board, merger
experts said on Wednesday, Reuters reported. MCI has agreed to be bought by
Verizon Communications Inc. for $6.56 billion, but on Wednesday said it would
continue to hold further talks with Qwest about its revised $8.45 billion
takeover bid. Some MCI shareholders have balked at the Verizon price and urged the company to clinch a deal with Qwest. One large investor has suggested MCI's board could be replaced if it failed to see the benefit of the 28-percent higher price offered by Qwest. Read the full article at
href='http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7992825'>http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7992825.
California Counties Continue to Debate Chapter 9
Orange County still feels the tangible, painful impacts of that December day in 1994 when it made national news by filing for bankruptcy. Now, San Diego faces myriad financial problems, and chapter 9 is again being weighed. The prospect of using municipal bankruptcy as a tool to resolve San Diego's fiscal crisis was first pushed off as the wild idea of reformers and political opponents of sitting City Hall leadership. But the concept now is slowly easing its way from the fringe to the mainstream, as powerful downtown groups such as the San Diego Regional Chamber of Commerce contemplate its utility. Read the full article at http://www.voiceofsandiego.org/site/pp.asp?c=euLTJbMUKvH&b=480073.
Morgan Stanley Loses Round in $2.7 Billion Perelman Suit
Morgan Stanley, the second-biggest U.S. securities firm, helped Sunbeam Corp. falsely inflate its finances as the company sought to buy camping-equipment maker Coleman Co. from billionaire financier Ron Perelman, a Florida judge ruled yesterday, Bloomberg reported. Florida Circuit Court Judge Elizabeth Maass granted part of Perelman's request for a judgment against Morgan Stanley without trial, saying the securities firm violated orders to turn over documents. A trial jury still must decide whether Perelman relied on the fake numbers and deserves any damages. Perelman, chairman of cosmetics maker Revlon Inc., is suing Morgan Stanley for about $2.7 billion, claiming the firm helped Sunbeam dupe him into selling Coleman for Sunbeam shares. Morgan Stanley advised Sunbeam and underwrote a $750 million bond issue used to help fund the 1998 buyout. Sunbeam, the biggest U.S. maker of small appliances, sought bankruptcy protection in 2001.
TXU Subpoenaed by U.S. Regulators on European Ops
Energy company TXU Corp. on Wednesday said it received a subpoena from the U.S. Securities and Exchange Commission seeking information on financial problems at its European operations, Reuters reported. The request, which seeks information for the period from Jan. 1, 2001, to March 31, 2003, is part of an ongoing SEC inquiry to determine if there had been any violations of federal securities laws, TXU said. TXU, which is based in Dallas and is the No. 1 Texas power producer, put its TXU Europe unit into bankruptcy in November 2002 after the collapse in energy prices there.
Sears-Kmart Merger Poised for Clearance
Faded retail powers Sears, Roebuck and Co. and Kmart Holding Corp. hope
their $11 billion merger can create a profit powerhouse while helping to
reverse years of lagging sales, the Associated Press reported. The pairing of
longtime industry rivals was poised for final clearance Thursday, four months
after the proposal engineered by Kmart Chairman Edward Lampert was unveiled.
The merger will create the nation's third-biggest retailer behind Wal-Mart Stores Inc. and Home Depot Inc. and bring together Sears' top brands Craftsman and Kenmore with Kmart's successful Martha Stewart and Joe Boxer product lines. It also furthers Sears' strategy of moving away from shopping malls to the more
profitable off-mall sites that Kmart stores typically occupy.
Toledo, Ohio, Firms Try to Manage Asbestos Liability Claims
Asbestos-liability cases have swamped Toledo's three biggest firms, most
notably Owens Corning, which filed bankruptcy more than four years ago because of asbestos claims. But even Owens-Illinois Inc. and Dana Corp., Toledo's other
two Fortune 500 firms, have been hard hit, Knight Ridder reported. Total
asbestos liability of the local firms is pegged at $7.5 billion to $21 billion
or more, according to recent filings with the U.S. Securities and Exchange
Commission, court testimony, and documents filed in U.S. Bankruptcy Court. O-I,
a glass-container maker, disclosed in an SEC filing this month that it has
reserved nearly $2.9 billion since 1993 for its asbestos problem, in addition
to hundreds of millions of dollars paid out by insurance companies. The firm
has taken big accounting hits for asbestos in the last 12 years, from $975
million in 1993 to $550 million in 2000 to $450 million in 2003 to $153 million
in last year's fourth quarter. Read the full article at
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