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September 16, 2002
Bankruptcy Reform Remains in Limbo
As Congress nears the end of another session, it has become increasingly
clear that supporters of the bankruptcy reform legislation may be no
closer to their goal of agreeing on a conference report,
CongressDaily reported. The legislation's fate rests largely on
the House GOP leadership's political calculation of whether it is
worthwhile to try and run roughshod over the 20 or 30 Republicans who
believe the bill singles out abortion clinic protestors for unfair
treatment in bankruptcy court, the newswire reported. Although sources
say there are ample votes for passage, House Republican leaders made it
clear this week that they are unwilling to muscle the vote through that
opposition. According to the newswire, the problem is that House
Republicans are not convinced the conference report they pass would ever
make it through the Senate, as they harbor doubts about the veracity of
Senate Majority Leader Tom Daschle (D-S.D.) and most other Senate
Democrats when it comes to their pledges of support for the bill.
Business leaders, who are despairing over the prospect of again seeing
the bankruptcy measure stopped at the one-yard line, are sure to cry
foul if the House does not at least make an attempt. However,
Congress Daily reported, House leaders could deflect the blame by
simply reinforcing the idea that they would have easily passed the
bill-as they have done many times before-had it not been for Senate
Democrats' insistence on the clinic protest language that is at issue.
Regardless of Senate Democrats' innermost feelings about the
legislation, observers noted that the bankruptcy measure does not jibe
with Democrats' election-year theme of people versus powerful
corporations. Moreover, the AFL-CIO has launched an unprecedented
lobbying effort against the bill. 'Why would they [Democrats] give
corporate America this gift?' asked one veteran observer. Moreover, the
longer the House takes to transmit the bill means that much less
culpability would be assigned to Senate Democrats for its demise,
sources said.
Fannie, Freddie, Others Decry Sen. Durbin Bankruptcy Bill
Fannie Mae, Freddie Mac and other housing-related entities told Sen.
David Durbin (D-Ill.) that a bankruptcy bill he introduced recently
poses a significant risk of destabilizing the secondary mortgage and
mortgage-backed securities markets and causing an immediate and
substantially adverse effect on the economy, reported Dow Jones. Fannie
Mae and Freddie Mac and others including Countrywise Home Loans, Cendant
Mortgage Corp., the National Association of Realtors, the Mortgage
Bankers Association, Consumer Mortgage Coalition and National
Association of Homebuilders, said two sections of the bill 'would create
substantial uncertainty as to the treatment of conventional mortgage
loan securitizations in bankruptcy,' the newswire reported.
In a joint letter sent to Sen. Durbin this week, the firms and groups
said the two sections in question 'would significantly curtail or
altogether eliminate the ability to use securitization as a proven
technique for reducing mortgage lenders' financing costs, increasing
liquidity in the secondary market and enhancing reasonably-priced credit
availability to homebuyers,' Dow Jones reported. What's more, they said
that because the proposal would apply to existing securitization
transactions, the legislation sections at issue 'also are likely to
impair the value of existing mortgage-backed securities, many of which
we note are held by pension plans, mutual funds, or in individual 401(k)
accounts.'
Global Crossing to File Chapter 11 Reorganization Plan Today
Bermuda-based Global Crossing Ltd. will file a consensual chapter 11
reorganization plan and disclosure statement today with the U.S.
Bankruptcy Court in Manhattan, Dow Jones reported. According to papers
filed with the court Friday, Global Crossing has negotiated and formed a
reorganization plan in consultation with its unsecured creditors'
committee, its pre-petition lenders and its two Asian investors. The
company said there is a hearing on its disclosure statement set for Oct.
21 before U.S. Bankruptcy Judge Robert E. Gerber. Global Crossing
said it was 'confident that the plan will be adopted by the requisite
number of creditors and approved by the court.' Global Crossing is
planning on emerging from chapter 11 protection early in the first
quarter of 2003. Hong Kong's Hutchison Whampoa Ltd. and Singapore
Technologies Telemedia Pte. Ltd. last month bought the company's assets
for $250 million, a fraction of the $22.4 billion in assets the company
declared when it filed for chapter 11 in January. The company filed for
chapter 11 bankruptcy protection on Jan. 28, listing assets of $22.4
billion and debts of $12.4 billion.
Court Grants Newcor More Time to File Reorganization Plan
A bankruptcy court has given Bloomfield Hills, Mich.-based Newcor Inc.
more time to file a reorganization plan and lobby creditors for its
support, Dow Jones reported. In a ruling by the U.S. Bankruptcy Court in
Wilmington, Del., on Wednesday, Newcor was given until Oct. 25 to file a
plan and until Dec. 24 to ask creditors to approve it. Newcor filed for
chapter 11 protection on Feb. 25, listing assets of $141 million and
debts of $181 million as of Dec. 31, 2001. Nine affiliates--Deco
International Inc., Deco Technologies Inc., ENC Corp., Grand Machining
Co., Newcor Foreign Sales Corp., Newcor M-T-L Inc., Plastrons Plus Inc.,
Rochester Gear Inc. and Turn-Matic Inc.--also filed for chapter 11.
Coram Healthcare Will Pay $1.14 Million Under Incentive Plan
Denver-based Coram Healthcare Corp. won court approval to make payments
totaling $1.1 million to 47 key employees under a management incentive
plan, Dow Jones reported. There were no objections to the incentive plan
at a hearing Sept. 6 before Judge Mary F. Walrath of the U.S. Bankruptcy
Court in Wilmington, Del. Under the management incentive plan, created
by Coram's board in 2001, bonuses are payable based on the achievement
of earnings before interest, taxes, depreciation and amortization goals
as well as individual performance targets and objectives. The company's
continued financial recovery is largely attributable to the incentive
plan participants, the trustee said. They include senior officers,
executives, vice presidents, directors and others in management. The
Denver company filed for chapter 11 protection on Aug. 8, 2000.
US Diagnostic Inc. Announces Sale of Business
US Diagnostic Inc. and certain of its non-operating units filed for
chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the
Southern District of Florida and agreed to sell its diagnostic imaging
business to DVI Financial Services Inc., the company's primary senior
lender, Dow Jones reported. In a press release Friday, the provider of
outpatient radiology services said the sale will be for about $14
million cash, a waiver of distribution in the bankruptcy case on account
of DVI's unsecured claims arising under about $30 million of debt owed
by US Diagnostic to DVI, and the assumption of contractual
liabilities.
US Diagnostic also filed a reorganization plan under which unsecured
creditors would receive partial payments from the proceeds of the sale
to DVI Financial Services, and US Diagnostic's remaining assets would be
liquidated, reported the newswire. Under the plan, unsecured creditors
of US Diagnostic would receive 100 percent of the equity in the
reorganized company, and current equity holders of US Diagnostic would
not receive any distribution in respect of their equity interests, Dow
Jones reported.
Exide Tech, Credit Panel Fight Bid for Equity Panel
Exide Technologies and the committee of its unsecured creditors are
fighting the State of Wisconsin Investment Board's bid to have an
official committee appointed to represent equity security holders in the
chapter 11 case, Dow Jones reported. In court papers filed Monday, Exide
said that an equity committee isn't necessary in the case because it's
'hopelessly insolvent.' While the company listed assets of $2.07 billion
and debts of $2.52 billion in its bankruptcy petition filed April 14,
the investment board said that the actual value of foreign subsidiaries
is scheduled as 'undetermined.' The investment board said it believes
the foreign subsidiaries are 'an extremely valuable asset, worth
substantially more than book value,' the newswire reported.
PurchasePro Files for Bankruptcy, Settles with SEC
PurchasePro.com Inc. on Thursday said it filed for bankruptcy protection
and agreed to sell its assets to privately held Perfect Commerce,
Reuters reported. The online marketplace company, whose shares closed at
22 cents on the Nasdaq on Thursday, also said it reached an agreement
with the Securities and Exchange Commission to settle the regulators'
investigation into the company and its dealings with other technology
firms. PurchasePro said it would continue to operate during the
reorganization process and that it had the option of obtaining up to
$750,000 in debtor-in-possession financing.
Teligent Emerges from Bankruptcy
Telecommunications company Teligent Inc. said on Thursday it emerged
from chapter 11 bankruptcy as a privately held company with no debt,
Reuters reported. Teligent, which uses radio signals rather than copper
wires or fiber optic cables to transmit voice and data services, filed
for bankruptcy in May 2001, with $1.65 billion in debt. The restructured
company, which has wireless spectrum licenses in 74 U.S. markets, now
will be privately held with its former senior secured lenders-including
JP Morgan Chase, Bank of America and Toronto Dominion-owning all of its
stock. The existing management team, which has been in place since its
bankruptcy and in charge of cutting costs and guiding the company
through the chapter 11 process, will be responsible for executing the
new business plan. The company will provide services such as
transmission services for other carriers and dedicated Internet
connections to businesses.
MPTV's Lake Trop LLC Files Chapter 11
Dow Jones reported that Lake Trop LLC, a unit of developer MPTV Inc.,
filed for chapter 11 bankruptcy protection. The company said the filing
was a result of delayed funding for the first phase of construction of
its principal asset, the Lake Tropicana timeshare resort property in Las
Vegas. In a press release Friday, the company said the filing was made
at the suggestion of a prospective investor. MPTV Chief Executive and
Lake Trop Managing Director Hurley Reed said in Friday's statement, 'We
were operating on the understanding that we had reached an agreement
with our lender on a favorable timeframe and mechanism to satisfy the
outstanding mortgage debt. The delay in funding Phase I and recent
actions by our lender left us no alternative but to take this step to
protect our principal asset.'
WORLDCOM
WorldCom Plans to Sell MCI Virginia Real Estate for $101
Million
Bankrupt WorldCom Inc. is seeking court permission to sell real estate
assets of its MCI WorldCom Network Services Inc. unit for $101 million
to real estate firm TST/Pentagon City LLC, an affiliate of Tishman
Speyer Properties, Dow Jones reported. The deal consists of a
two-building office complex located in Arlington, Va. Court papers said
that in the months prior to its chapter 11 petition, WorldCom reduced
its workforce in the Washington, D.C., metropolitan area and started to
consolidate its office space. A hearing on the issue is scheduled for
Oct. 29 in the U.S Bankruptcy Court in Manhattan and objections are due
Oct. 24.
WorldCom Fully Funds European Business Plan
Bankrupt WorldCom Inc. plans to cut its workforce in Europe, the Middle
East and Africa by about 2,000 to 6,000 people as part of a new business
plan for the region, Dow Jones reported. In a press release Monday, the
global communications provider said the plan emphasizes profitability
over revenue growth, consolidates the European network around its
existing geographical footprint, and offers streamlined voice, data and
Internet services. In August, the Financial Times reported that
sales at WorldCom's European operation, WorldCom International, plunged
50 percent after its U.S. parent filed for chapter 11, increasing the
likelihood the unit could be put up for sale.
Judge OKs National Airlines' Bankruptcy Financing
National Airlines has moved a step closer to emerging from chapter 11
bankruptcy protection, with a judge giving tentative approval to a $112
million financing package, reported the Associated Press. The Las
Vegas-based airline expected to gain approval for the plan from major
creditors in the case and submit confirmation on Friday to U.S.
Bankruptcy Court Judge Linda Riegle, National spokesman Dik
Shimizu said, the newswire reported. Riegle said during a hearing on
Thursday that she would sign an order once lawyers for company creditors
reviewed the language of the plan.
Approval from the judge would give National access to $11.6 million
in debtor-in-possession financing from Foothill Capital Corp., a
subsidiary of Wells Fargo Bank, according to AP. Foothill has committed
to lending another $12.4 million once the airline emerges from
bankruptcy, the newswire reported. National has been operating under
chapter 11 protection since December 2000. The next scheduled hearing is
Oct. 8 in Las Vegas.
Daewoo Restructuring Plan Wins Backing from Court
Daewoo Motor Co.'s restructuring plan was tentatively approved by a
South Korean court, opening the way for General Motors Corp. to start a
joint venture taking over Daewoo Motor's major operations by
mid-October, the Wall Street Journal reported. The plan approved
on Friday includes debt rescheduling, repayment measures and the
splitting of operations. Creditors are scheduled to hold a meeting on
Sept. 30 to decide on the plan. If they agree to it, the court's final
approval will follow immediately, the court said.
GM signed a final agreement in April to form a joint venture with its
business partners and Daewoo Motor's creditors to buy major passenger
car manufacturing operations of Daewoo Motor. The venture, called GM
Daewoo Automotive & Technology Co., was expected to launch in early
September. The auto maker will repay 7.8 percent of debt owed to its
midsize and small suppliers with cash over the next nine years. A total
of 36.4 percent of debt owed to those suppliers will be converted into
equity. Meanwhile, GM Daewoo will assume 24.8 percent of Daewoo Motor's
debt to these suppliers, according to the Journal.
Andersen/Baptist Settlement: Appeal Could Delay Payout
An Arizona judge on Friday gave his final approval to the $238 million
settlement of claims against Arthur Andersen LLP and a Phoenix law firm
connected with work they did for the failed Baptist Foundation of
Arizona, Dow Jones reported. 'I am well aware that time is running out,'
said Maricopa County Superior Court Judge Edward Burke. 'These cases
were not slam-dunk winners for the plaintiffs.' Burke on Friday
scheduled a hearing on the allocation of the settlement funds for Nov.
25. Attorneys for the trust and the investors in the class action will
mail out notices, along with their proposals for dividing up the funds,
on Oct. 4 to involved parties. There also is an appeal pending before a
U.S. District Court Judge of Bankruptcy Court Judge George
Nielsen's July 12 decision that the settlement is fair and
equitable. That appeal was filed by former Baptist Foundation Director
Lawrence Dwain Hoover.
Geneva Steel Holdings Commences Chapter 11 Proceeding
Geneva Steel Holdings Corp. and five of its direct and indirect
subsidiaries filed voluntary petitions under chapter 11 of the U.S.
Bankruptcy Code on Friday, Dow Jones reported. In a press release
Friday, Geneva Steel Holdings said the chapter 11 filings, in the U.S.
Bankruptcy Court for Utah, Central Division, are intended to provide the
company with the necessary time to stabilize its finances. Last month,
Geneva Steel Holdings said it would not be able to file its quarterly
report for the second quarter on time, although it projected a $93.3
million drop in sales for the quarter.
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