December 11, 2003
Auto Sales Help Boost Retail Sales
Heading into the holiday shopping season, U.S. retail sales posted a
better-than-expected 0.9 percent increase in November, boosted by
surging auto and electronics sales, the Commerce Department said
yesterday, Reuters reported. Auto sales rose 2.6 percent in the month,
their best performance since March, and helped the overall sales figure
surpass Wall Street expectations of a 0.7 percent retail sales gain.
Sales outside of the auto sector in November were up a smaller 0.4
percent, however. Sales at electronics and appliance outlets, clothing
stores and gasoline stations posted substantial gains, while purchases
at department stores dipped.
Analysts track retail sales as a major component of consumer
spending, which drives about two-thirds of the U.S. economy. November's
figures, along with an upward revision to October's sales to flat from
the previously reported 0.3 percent decline, may ease worries that
fourth-quarter economic growth could slow dramatically from the strong
pace in the third quarter, reported the newswire.
Business Not Satisfied By Pledges Of January Pension
Action
Business advocates say that the continued uncertainty about pension
legislation is hurting the economy, Congress Daily reported. The
possibility of continued delay and unresolved disagreement are hurdles
to quick passage, lobbyists said. The bill also must wait until the
resolution of the FY04 omnibus spending bill, which is expected to
generate controversy and delays of its own. In the final days of session
this year, senators could not settle differences over the pension bill,
with some pushing for greater relief for the struggling airline industry
and others insisting that such relief would endanger pensions and the
nation's pension insurer. The Senate adjourned on Tuesday without
getting unanimous consent to pass a House-passed version of the
bill.
Backers of a pension fix said they are encouraged by the Senate
agreement that will limit each side of the aisle to three amendments
dealing only with the pension interest rate, waivers from requirements
that companies with particularly underfunded plans make accelerated
pension payments and multi-employer plan relief. A spokesman for the
House Education and the Workforce Committee said House members would
wait to see what kind of bill the Senate produces before determining a
course of action. The House has already passed two pension bills, and
the options include a conference with the Senate version or passage of
the Senate plan, reported the newswire.
Entrepreneur Says Wants to Buy FAO Schwarz Stores
A toy inventor said on Wednesday he was in talks to buy the ailing FAO
Schwarz toy store chain from bankrupt parent FAO Inc., Reuters reported.
FAO, which last week filed for chapter 11 bankruptcy protection for the
second time this year, has until Dec. 15 to find a buyer for both its
FAO Schwarz upscale toy stores and its Right Start stores. Ken Hakuta,
known in the toy industry as 'Dr. Fad,' is an advisor to toy inventors
and created the Wacky WallWalker, a small rubbery octopus-like toy that
walks down walls. He gave no financial details of his bid, which would
be subjected to scrutiny by FAO's creditors and would ultimately have to
pass muster with the bankruptcy court. The Schwarz family would also
have a say in whether a buyer could use the name. Hakuta's announcement
caught industry watchers off guard. 'This certainly is a bizarre and
unusual twist,' said Sean McGowan, an analyst with Harris Nesbitt
Gerard. 'Stranger things have happened, but this wasn't on anyone's list
of likely outcomes,' reported the newswire.
Warnaco to Close Speedo Stores to Save Money
Clothing maker Warnaco Group Inc., which emerged from chapter 11
bankruptcy protection in February, said on Wednesday it would close its
remaining Speedo Authentic Fitness stores and make other moves to cut
costs, Reuters reported. The maker of Speedo swimsuits and Calvin Klein
jeans said it would sell its Honduran production facility and outsource
its North American intimate apparel production after the sale. It also
said it plans to reduce operations in Britain and Europe. The company is
closing its 44 remaining Speedo Authentic Fitness stores and may convert
some to Calvin Klein underwear stores. Warnaco said the store closures
would allow it to focus on expanding its business in the wholesale
sector, which grew about 20 percent in the first nine months of 2003.
The company expects to begin closing the stores in January 2004 and to
complete the process by April 2004, reported the newswire.
Spiegel Seeks Court Nod To Close 30 Eddie Bauer Stores
Spiegel Inc. is seeking bankruptcy court approval to close 30 of its
Eddie Bauer stores and hire a liquidator to hold going-out-of-business
sales at the stores, according to court papers. Closure of the stores is
an important element of Spiegel's efforts to maximize value, the
retailer said in a court filing on Friday.
Spiegel would shutter the stores and have Hilco Merchant Resources LLC
and the Ozer Group LLC or another liquidator begin sales Jan. 9, shortly
after the holiday season ends. Last year, 37 percent of net sales from
the company's Eddie Bauer division occurred in the fourth quarter.
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Aurora Foods Files Bankruptcy, Plans to Merge
Aurora Foods Inc. has filed for chapter 11 bankruptcy protection from
creditors, a move that will allow it to merge next year with Pinnacle
Foods Corp., the St. Louis Post Dispatch reported. Aurora, a food
manufacturer that owns brands like Duncan Hines baking mixes, Celeste
pizza and Lender's bagels, said Tuesday that it expects to operate
normally until it emerges from bankruptcy by March 31. In a statement,
Aurora said it has secured $50 million from its banks to help fund
operations and 'meet its financial obligations in the normal course of
business throughout the restructuring process,' the online newspaper
reported. A spokesman for Aurora said no decision has been made about
the company's headquarters and the roughly 200 employees remaining in
the St. Louis area.
In its last earnings report, Aurora listed assets of $1.2 billion and
liabilities of $1.3 billion. Crunch Equity Holding LLC - owned by J.P.
Morgan Partners LLC, J.W. Childs Equity Partners III LP and C. Dean
Metropoulos & Co. - plans to buy Aurora and merge it with Pinnacle
Foods. Crunch acquired Pinnacle Foods, which makes Vlasic pickles and
Open Pit barbecue sauce, last month. Under the bankruptcy plan, filed
with the bankruptcy court in Wilmington, Del., Aurora said it will fully
pay its senior lenders, including principal and interest. These banks
had lent Aurora $37.6 million with the understanding that Aurora would
raise cash by selling off brands. However, Aurora never found a buyer.
As a result, it will give the banks an additional $15 million.
NRG Energy Emerges from Chapter 11 Bankruptcy
Minneapolis-based NRG Energy Inc. said Friday it has completed its
chapter 11 reorganization, appointed a new board of directors and
emerged from bankruptcy, the Associated Press reported. A bankruptcy
judge in New York approved NRG's reorganization plan on Nov. 24. The
independent power producer said that through the reorganization process,
it eliminated corporate level debt and other claims totaling more than
$6 billion. NRG emerges with $510 million of corporate debt and
approximately $4.4 billion in project level debt.
Under the plan, NRG will issue 100 million shares of common stock in
the reorganized company. Creditors will receive a combination of cash,
common stock and $500 million of newly issued corporate notes. The
company said it expects to announce the timing of the distribution
shortly. NRG said its power marketing unit, NRG Power Marketing, also
emerged from chapter 11 on Friday. NRG expects its NRG Northeast
Generating LLC and South Central Generation Holding LLC subsidiaries to
emerge from chapter 11 after they complete debt refinancing.
Weirton Steel Temporarily Laying Off 250 Workers
Weirton Steel Corp. will temporarily lay off 250 union workers as it
struggles to cut costs and emerge from Chapter 11, company officials
said Wednesday according to an Associated Press article. The cuts are in
addition to the layoffs of 85 workers last week and will begin
immediately. 'Reducing costs is essential,' said chief executive D.
Leonard Wise. 'Layoffs are a disheartening but necessary part of the
process.'
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Global Crossing Exits Bankruptcy
Global Crossing Ltd. emerged from bankruptcy on Tuesday, with plans to
carefully rebuild the company, the Associated Press reported. The
company has a new board of directors and new top executives. It has cut
its workforce in half, moved its main offices from Beverly Hills,
Calif., to Florham Park, N.J., and slashed long-term debt to just $200
million from $11 billion. Global Crossing spent billions during the
telecom and Internet boom building a 100,000-mile network of undersea
cables and fiber-optic lines, but demand failed to materialize as
quickly as the company had hoped. The collapse vaporized about $50
billion of investors' money. In January 2002, Global Crossing filed the
largest telecom bankruptcy in history, though WorldCom Inc. broke that
record only six months later.
Cerberus Takes Final Shot at Air Canada
New York buyout firm Cerberus Capital Management LP came back with a
revised offer on Air Canada's financial rescue on Wednesday, hoping to
dislodge a court-approved proposal from Hong Kong businessman Victor Li,
Reuters reported. The airline is expected to call a board meeting in
coming days to evaluate the new offer, as ordered on Monday by the
Ontario Superior Court judge overseeing the company's restructuring
under bankruptcy protection. If the board decides Cerberus's offer is
superior to the one from Li it accepted last month, Li's Trinity Time
Investments will receive a C$19.5 million break-up fee. Experts have
speculated that Li appeared to be in a better position than Cerberus to
win a leading stake in Air Canada, partly because he is a Canadian
citizen, which frees him from the 25 percent foreign ownership limit,
reported the newswire.
Judge OKs Horsehead Zinc Asset Sale to Sun Capital
Horsehead Industries Inc., the largest U.S. zinc producer, said on
Wednesday that a U.S. bankruptcy judge approved the sale of the company
to investment firm Sun Capital Partners for about $73 million, Reuters
reported. 'Yesterday (Tuesday) they finished the hearing and the judge
approved the sale,' Horsehead spokesman Ali Alavi told Reuters. 'He had
asked for some editorial changes, but the sale was approved. He'll sign
the revised order and we'll proceed to closing.' Alavi said the closing
was expected sometime next week and involved only routine issues. He
added that all outstanding objections to Sun Capital's bid had been
resolved. Horsehead has continued operating its plants normally while it
sought a buyer under a plan to emerge from bankruptcy. Alavi said
operations should continue uninterrupted.
