February 16,
2004
Wal-Mart Sees February Sales at High End
Wal-Mart Stores Inc. today said February same-store sales were near
the high end of its expectations with Valentine's Day items and
outerwear among the strongest categories, Reuters reported. The retailer
expects a 3 percent to 5 percent increase in February same-store sales.
On a recording updating sales through Feb. 13, Wal-Mart said food,
girl's and men's apparel and pharmacy items were also among the
best-selling categories, reported the newswire.
Kmart Sues Martha Stewart Living Over Royalties
Kmart Holding Corp. on Friday said it had sued Martha Stewart Living
Omnimedia Inc., claiming the home furnishings maker 'double-counted' the
royalties it is owed for sales of its merchandise in Kmart stores,
Reuters reported. But Martha Stewart Living, whose namesake founder is
currently on trial on obstruction of justice charges related to a
questionable stock trade, countered in a statement that Kmart was trying
to reduce its royalty payments. At issue is $4.5 million in disputed
royalties and up to $2 million in advertising spending stemming from a
seven-year deal the companies signed in 2001 to sell Martha Stewart
Everyday brand home decorating, garden products and housewares in Kmart
stores. Kmart filed for bankruptcy protection seven months after the
deal and has since closed 600 of its 2,100 stores, leaving fewer outlets
for the Martha Stewart Everyday merchandise. Despite this, the retailer
has said repeatedly that the brand was selling well.
In the complaint, filed with the U.S. Bankruptcy Court in Chicago on
Wednesday, Kmart acknowledged that it fell short of several royalty
targets for the year ended Jan. 31, 2004, but said Martha Stewart Living
was 'double-counting' payments and demanding too much money, reported
the newswire.
FCC Clears Cingular Bid to Buy Nextwave Licenses
U.S. regulators have approved a $1.4 billion bid by Cingular Wireless to
buy wireless licenses covering 34 markets from NextWave Telecom Inc.,
Reuters reported. The Federal Communications Commission said late on
Thursday it had approved the transfer of the licenses, which cover about
83 million potential customers. The purchase will boost the wireless
holdings of Cingular, a joint venture of BellSouth Corp. and SBC
Communications Inc., in markets such as San Francisco, Los Angeles,
Boston and Chicago. Hawthorne, N.Y.-based NextWave filed for bankruptcy
in 1998 after paying only $500 million out of the $4.7 billion it owed
for scores of licenses it won at auctions held by the FCC. The sale got
approval from bankruptcy court in September. 'The proceeds of the deal
will enable us to satisfy a significant portion of our obligations to
the government and to other creditors,' Allen Salmasi, NextWave's
chairman and CEO, said in a statement, reported the newswire.
Charges Being Prepared Against Enron's
Skilling
U.S. prosecutors are preparing to bring criminal charges against former
Enron Corp. CEO Jeff Skilling, possibly by the end of next week, sources
familiar with the investigation said on Friday, Reuters reported.
Justice Department prosecutors are focusing on Skilling as the next
former Enron top executive to face charges in the two-year-old
investigation, the sources said. One source said an Enron-related
announcement could come as early as next week, most likely on Thursday,
but another source cautioned that the expected charges against Skilling
could end up being delayed at the last minute. Enron collapsed into
bankruptcy in December 2001 amid revelations that the company had hidden
billions of dollars in debt and inflated profits to boost its stock
price, Reuters reported.
Allegiance Telecom to Sell Most of Business to
XO
Allegiance Telecom, which sought chapter 11 bankruptcy protection last
May, on Friday said XO Communications Inc. agreed to buy substantially
all of its assets for $311 million in cash and about 45.38 million
shares of common stock, Reuters reported. Allegiance said XO was the
winning bidder for the assets, which exclude its Shared Technologies
equipment sales and maintenance business and its managed modem business.
Allegiance said the parties expect to enter a definitive agreement for
the sale within the next several days. It said they expect to submit the
agreement on Thursday for approval by Judge Robert Drain of the U.S.
Bankruptcy Court in Manhattan.
Enterprise Act will 'De-stigmatise'
Bankruptcy
The chief executive of one of the UK's largest credit card issuers
has slammed changes to personal bankruptcy rules due to come into force
this April, AccountancyAge.com reported. General Charles Krulak, CEO of
MBNA Europe, warned that measures due to be implemented under the
Enterprise Act would de-stigmatise bankruptcy and encourage people to
escape their debts. From April, the current three-year wait to be
discharged from bankruptcy will be reduced to 12 months or less. Krulak
told the Financial Times that Britain could see the kind of leap in
bankruptcy experienced in America when it relaxed its laws. 'I am
telling you right now there will be unintended consequences,' he said.
'It is going to de-stigmatise totally the concept of bankruptcy.'
Federal Agency Will Pay Fleming Pensions
The federal Pension Benefit Guaranty Corp. (PBGC) has taken over
pensions for more than 17,600 workers and retirees of bankrupt grocery
distributor Fleming Cos., the agency said on Thursday, the Associated
Press reported. The failed pension plan has $270 million in assets and
$644 million in liabilities, according to the government agency. The
PBGC said retirees would continue to receive monthly benefit checks up
to limits guaranteed by the federal government, which are $44,386 per
year for people who retire at 65, but less for early retirees.
Fleming filed to drop its largest pension plan on Nov. 4, arguing that
it could not complete a financial reorganization without dropping the
obligations, said Jeffrey Speicher, a spokesman for the pension agency.
Lewisville, Texas-based Fleming filed for bankruptcy protection in April
in Wilmington, Del., after losing the business of its biggest customer,
Kmart Corp.
UNITED AIRLINES
Low-cost Ted May Help United Fly Out of Bankruptcy
Ted, United Airlines' new low-cost airline is a cornerstone of the
bankrupt carrier's plan to survive, Reuters reported. Elk Grove Village,
Ill.-based United, the primary unit of UAL Corp., hopes Ted will
recapture passengers and market share from low-cost rivals. Ted is
operating four planes now and will fly 45 by year's end, or about 12
percent of the total network.
United has been operating in bankruptcy for more
than a year. High costs and a huge debt load left it unable to pay bills
and searching for a new strategy to compete. Ted fares will be capped at
$299 each way. Initially the airline will fly from United's Denver hub
to leisure markets like Las Vegas, Fort Lauderdale, Phoenix and New
Orleans. In April, service will begin from Washington's Dulles airport.
Also on the list for possible Ted expansion is Chicago, Sean Donohue,
vice president for Ted, told Reuters.
United Airlines Ordered to pay $36.5 Million
to Settle Sex-discrimination Lawsuit
A judge ordered United Airlines to pay $36.5 million to settle a sex
discrimination lawsuit brought by 13 former flight attendants over the
airline's weight policy, the Associated Press reported. The original
settlement in the case was suspended in 2002 when United filed for
bankruptcy. A judge reinstated the settlement on Wednesday. In 2000, an
appeals court had found that the weight policy for flight attendants, in
place from 1980 to 1994, discriminated against women. The airline
imposed weight limits on flight attendants of both genders but set
stricter standards for women, who were required to weigh between 14 and
27 pounds less than male colleagues of the same height and age. All 13
plaintiffs, who sued in 1992, were disciplined or fired by United for
violating the weight policy. 'We're glad to have resolved this issue,'
United spokesman Jason Schechter said, noting that the litigation
concerned a company policy discontinued in 1994.
US Lawmakers Object To United Plan For Health
Cuts
More than 100 members of Congress on Friday urged United Airlines to
drop its proposal to boost health care costs for retired flight
attendants as part of its bankruptcy restructuring, Reuters reported.
The overwhelmingly Democratic group of lawmakers from the House of
Representatives said in a letter to United Chairman Glenn Tilton that
the proposed health care cuts would place another burden on employees
who can least afford it. The flight attendants claim United is violating
an agreement on bankruptcy concessions and last week asked a bankruptcy
judge in Chicago to intervene. A decision is expected next week. United
responded that it is not singling out these workers but is trying to
craft the most effective restructuring plan. 'We've been very clear from
the moment we filed for bankruptcy that this was a possibility. While we
regret it, it's a necessary part of restructuring,' said United
spokeswoman Jean Medina, reported the newswire. Medina said the company
would try to negotiate a deal with the union, the Association of Flight
Attendants, before asking the court to impose new terms.
Lawmakers said the airline has already cut a deal with attendants that
protect retired workers from increased out-of-pocket health care costs.
Cost and coverage incentives in the agreement prompted more than 2,500
flight attendants to retire from the company as of July 2003. 'To now
suggest that the retirees take additional cuts, especially after
Congress has made every effort to provide the airline industry with
financial assistance through retiree health benefit subsidies, pension
contribution relief, and federally subsidized loans is unconscionable,'
the House members said, Reuters reported.
House-Senate negotiators must still finalize a pension bill that
provides relief for many industries but also proposes extra help for
airlines. This will help United in its bid to resolve pension
underfunding problems, which it must do before the administration will
sign off on a $1.6 billion loan guarantee the airline is counting on for
exiting bankruptcy.
RCN Reaches Forbearance Agreement With Lenders
RCN said it entered into a forbearance pact with lenders and noteholders
under which they have agreed not to declare default by the company for
not making the 10-1/8-percent senior note payment before the end of the
30-day grace period, Reuters reported. The forbearance agreements will
expire on March 1, 2004, it said. The Princeton, N.J.-based company said
it was 'encouraged' at the prospect of reaching a restructuring
agreement during the forbearance period, but if the talks extend beyond
that period and acceleration of its senior credit facilities and 10-1/8
percent notes occur, it will not have sufficient cash.
It said its holding company, RCN Corp., expects any restructuring to be
done through chapter 11 bankruptcy, and that a filing would not have any
adverse effect on customers and vendors. RCN said it did not expect its
market operating units to be included in a chapter 11 filing, reported
the newswire.
Bankruptcy Marks New Beginning for Tower
Records
Tower Records' bankruptcy proceedings are being viewed by many in the
industry as a new start for the chain, Reuters reported. Tower's
management made a prepackaged chapter 11 filing on Feb. 9 in bankruptcy
court in Wilmington, Del. The following day, the court approved most of
Tower's first-day motions, including setting a confirmation hearing of
the reorganization plan on March 15, just 35 days after the filing.
Tower's plan calls for the $110 million owed to Tower's bondholders to
be converted to an 85 percent equity stake and to be issued $30 million
in new notes due in five years. Existing shareholder, the Russ Solomon
family, will retain the remaining 15 percent in equity.
In a highly unusual move in bankruptcy court, the judge approved a
motion that gives the chain the ability to pay pre- and post-petition
trade debt. In addition, the judge approved a $100 million
debtor-in-possession financing from the bank group led by CIT
Group/Business Credit, which gives Tower more credit availability than
it had from its previous revolving credit facility. And the court is
allowing the chain to use cash collateral, reported the newswire.
Air Canada In Key Talks On C$1.4 Billion Pension Issue
Air Canada and its unions appeared close to reaching a deal on Friday
over the funding of a C$1.4 billion ($1.1 billion) shortfall in the
pension plans, but the question of who will assume future deficits
threatened to derail the restructuring of the airline, Reuters reported.
Last week the airline's new financial backer asked to change the pension
plans to shift investment risks to employees instead of the company. The
unions rejected the proposal, saying they had agreed to C$1.1 billion in
labor concessions in exchange for guarantees that pensions benefits
would be kept intact.
Air Canada, the unions and Trinity Time Investments Inc. resumed pension
talks on Friday after being ordered by the bankruptcy judge overseeing
the airline restructuring. 'We are very close to a deal on spreading the
funding of the deficit over 10 years instead of five,' said Captain
Jean-Marc Lamoureux, spokesman for the Air Canada Pilots Association.
'But there will be no changes to the nature of our pension plans,' he
said. Air Canada currently has a defined benefit scheme, in which
employees are guaranteed a specific pension level regardless of market
fluctuations, reported the newswire.
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