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U.S. Consumer Credit Rises $7.34 Billion in May, Fed
Reports
U.S. consumer debt rose in May as consumers rang up more charges on
their credit cards, according to Federal Reserve statistics released in
Washington, D.C., Bloomberg News reported. Consumers took out $7.34
billion more in debt such as auto loans and credit-card balances during
the month, a 5 percent gain, following a revised increase of $7.83
billion in April, the Fed said. That brought total consumer credit,
excluding real estate loans to $1.76 trillion in May.
With the U.S. unemployment rate at a nine-year high of 6.4 percent in
June and consumer spending rising at half the average rate of the
1992-2000 economic expansion, some economists question whether the rate
of borrowing can be sustained. 'The current pace of credit suggests that
the consumer isn't alarmed by the skittish economic recovery,'' said
Rich Yamarone, an economist at Argus Research Corp. in New York, before
the report. 'Despite lackluster job creation, consumers continue to
spend at a reasonably robust pace. This could prove worrisome if
unemployment continues to creep higher,'' he said, reported the
newswire.
U.S. Opposes House Plan on Bankruptcy Advisers
Wall Street firms' efforts to persuade Congress to let them earn
fees advising the same companies in bankruptcy that they counseled in
better days have met with opposition from the Securities and Exchange
Commission (SEC), the New York Times reported. William H.
Donaldson, chairman of the SEC, has written a letter expressing his
agency's opposition to a proposed change in the bankruptcy law passed by
the House in March. A provision in the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2003 would allow investment bankers that have
done business with a company to advise it even after the company has
filed for bankruptcy. The objections of the SEC to the provision, which
has been backed recently by lobbyists for the securities industry, may
well doom its chances of inclusion in the bankruptcy bill, which is now
before the Senate, reported the Times. To read the full article, point
your browser to
href='http://www.nytimes.com/2003/07/09/business/09PLAC.html'>http://www.nytimes.com/2003/07/09/business/09PLAC.html.
Leahy Says Senators 'Close' on Asbestos Reform
Senate Judiciary Committee members are narrowing differences on
reforming the asbestos liability system, the panel's top Democrat said
on Tuesday, two days before the panel resumes work on the bill, Reuters
reported. Sen. Patrick Leahy (D-Vt.), who has been involved in efforts
to overhaul asbestos litigation, said informal talks were continuing
among senators and staffers on Capitol Hill. 'I think we're getting
along, slowly,' he told reporters outside the Senate chamber. 'It's
close enough that we could (get agreement on the bill), but it's going
to take a little more giving,' reported the newswire.
The Judiciary Committee is due to hold on Thursday its third working
session on a proposal by Sen. Orrin Hatch (R-Utah) to take asbestos
lawsuits out of courts and set up a $108 billion fund, supported by
business and insurers, to pay victims instead.
Asbestos Trust Would Save 11 Companies $15 Billion, Study
Says
Halliburton Co., Honeywell International Inc. and nine other companies
seeking to resolve asbestos-exposure claims would save about $15 billion
if Congress enacts a nationwide trust fund, an economist hired by a
trial lawyers group says, Bloomberg News reported. The companies would
pay almost $21 billion under proposed bankruptcy reorganization plans
and settlements with victims compared with about $6.1 billion under the
congressional proposal, economist Mark Peterson estimated. He has
consulted for both victims and companies and testified in March before
the Senate panel considering the legislation.
The legislation 'is giving a pass to the owners of these companies that
did all of this damage,'' said Elihu Inselbuch, a New York lawyer who
represents beneficiaries of the Manville Trust for asbestos victims.
Bondholders and stockholders who 'bought in at cents on the dollar''
have the most to gain from the congressional plan, he said, reported the
newswire.
PG&E Corp.'s National Energy Group Seeks Bankruptcy
Protection
PG&E National Energy Group Inc., PG&E Corp.'s wholesale power
and energy trading unit, became the utility holding company's second
major unit to file for bankruptcy in the past 26 months, Bloomberg News
reported. Decreasing power prices amid rising debts and a drop in demand
have hurt National Energy and other wholesale power companies. The
Bethesda, Md.-based company's losses increased and the value of its
assets dropped as it tried to cope with more than $9 billion in debt
racked up building and buying power plants. The company filed for
chapter 11 protection in Greenbelt, Md.
San Francisco-based PG&E's largest unit, Pacific Gas & Electric,
which accumulated $13 billion in debt during California's energy crisis,
has been in bankruptcy since April 2001. PG&E posted a $354 million
first-quarter loss on the restructuring of National Energy, higher
generation costs, and the bankruptcy of Pacific Gas, reported the
newswire.
Wachner Must Defend Suit by Warnaco Investors, U.S. Court
Says
Linda Wachner, the former chief executive officer of clothing maker
Warnaco Group Inc., must defend a lawsuit accusing her and other
officers of defrauding investors, a U.S. Appeals Court ruled, Bloomberg
News reported. The investors withdrew their claims against Warnaco after
the New York-based company filed for bankruptcy last year. Warnaco
exited bankruptcy in February after repaying creditors with new shares
and shedding debt.
The case was dismissed by a federal judge, who said the shareholders
waited too long to file suit. The judge said they had notice of problems
at Warnaco in 1998, when the company filed a regulatory report, and
should have sued by 1999. The Second U.S. Circuit Court of Appeals
disagreed and revived the lawsuit. In the 1998 report, 'there was no
indication of flaws with Warnaco's forecasting, inventory cost control
system or any other fraud that led to the writedowns,'' a three-judge
panel said in its ruling on Monday in New York, reported the
newswire.
GLOBAL CROSSING
Pentagon to Oppose STT-Global Crossing Deal
The Pentagon plans to oppose a deal by Singapore Technologies Telemedia
(STT) to buy a majority stake in bankrupt telecommunications company
Global Crossing Ltd., a U.S. official familiar with the situation said
on Tuesday, Reuters reported. U.S. Defense Department officials cited
national security concerns in a memorandum opposing the acquisition of
the 61.5 percent stake by STT, which is owned by an arm of the Singapore
government, said the official, reported the newswire. Global Crossing
must win approval from a committee made up of U.S. national security and
economic officials, and the Pentagon's opposition could make it more
difficult for the deal to win ultimate approval, according to the
newswire.
Global Crossing Seeks Documents From Carl Icahn, XO
Executives
Global Crossing Ltd. asked a federal judge to force financier Carl Icahn
to surrender documents about his bid to block the bankrupt fiber-network
operator's from selling a majority stake to Singapore Technologies
Telemedia Pte., Bloomberg News reported. Global Crossing asked that
Icahn's XO Communications Inc. be ordered to produce documents about
XO's attempts to influence U.S. regulators who must approve the
transaction. Hamilton, Bermuda-based Global Crossing also seeks
documents about XO CEO Carl J. Grivner, who was hired by XO in May. He
quit as Global Crossing's chief operating officer in April, reported the
newswire.
'Examination could reveal additional information regarding [Icahn's and
XO's] attempts to derail the debtors' purchase agreement with ST
Telemedia to the detriment of the debtors' creditors and estates,''
Global Crossing said in the request to U.S. Bankruptcy Judge Robert
E. Gerber in Manhattan. Icahn said his company hasn't lobbied U.S.
officials, Bloomberg reported. A hearing on Global Crossing's document
request is scheduled for July 30, court papers show, reported the
newswire.
Fleming to Sell Wholesale Business for $400 Million
Bankrupt food distributor Fleming Companies Inc. on Tuesday said it will
sell its wholesale grocery business to C&S Wholesale Grocers Inc.
for $400 million, Reuters reported. Fleming's wholesale grocery business
was one of two major units left after it filed for bankruptcy in April,
following the loss of a contract with key customer Kmart Holding
Corp.
Dallas-based Fleming moved to sell the wholesale grocery operation after
recently losing another contract when retailer Target chose rival
distributor Supervalu in early June to supply its discount stores that
sell groceries. Supervalu itself expressed interest in buying assets of
Fleming after the company filed for bankruptcy. Fleming's Core-Mark
convenience store business will not be affected by the action, Fleming
executives said, reported the newswire.
Judge in ABB Case May not Rule Until Thursday
A U.S. judge may not rule until Thursday on engineering firm ABB Ltd.'s
proposed $1.3 billion asbestos settlement, ABB trust appointee David
Austern told Reuters. Last month, U.S. Bankruptcy Court Judge Judith
Fitzgerald tentatively approved a deal, but asked for additional
evidence. At the time, Fitzgerald gave ABB 10 days to provide additional
information about whether certain creditors had received proper
notification.
The Swiss engineering firm's stock rose as much as 5.2 percent on hopes
of a favorable ruling, and shares of U.S. companies with asbestos
liabilites, including oilfield services company Halliburton Co. and
McDermott International Inc., also rallied. The ruling, if approved by a
district judge, is seen as a turning point for ABB, paving the way for a
key asset sale needed under terms of a deal reached with creditor banks
after the company almost collapsed last year, reported the newswire.
TCE Sues Texas Power Companies for Alleged Manipulation
Texas Commercial Energy (TCE) said on Monday it filed a lawsuit against
TXU Corp., Reliant Resources Inc., American Electric Power (AEP) and
Mirant Corp. for allegedly manipulating Texas wholesale power markets
earlier this year, Reuters reported. Plano-based TCE, which is currently
in bankruptcy protection, said it had been the victim of market abuses
by the larger players and was seeking more than $500 million in damages
and punitive claims. 'This is all about big business abusing power and
purposefully manipulating markets to help themselves, while hurting
smaller Texas companies and consumers,' TCE President Mike Shirley said,
reported the newswire. The case could force Texas energy regulators to
draw up more specific rules to govern trading practices in the state's
wholesale electricity market, reported Reuters.
Chart Industries Files For Bankruptcy With Lenders' Backing
Chart Industries Inc., a maker of industrial cooling equipment, filed
for bankruptcy protection after reaching agreement with its lenders on a
recovery plan, Bloomberg News reported. Officials of Cleveland-based
Chart Industries listed $268 million in assets and $361.2 million in
debts in a chapter 11 petition filed in the U.S. Bankruptcy Court in
Wilmington, Del.
The company announced in a press release that it and certain of its U.S.
subsidiaries have filed voluntary petitions for reorganization under
chapter 11 to implement a previously announced restructuring through a
pre-packaged plan of reorganization that has received strong support
from the company's senior lenders. In conjunction with the pre-packaged
chapter 11 filing, the company's senior lenders have committed to
providing $40 million in debtor-in-possession financing to fund the
company's operations during the chapter 11 proceedings, including
working capital and letter of credit requirements.
Focal Communications Completes Financial Restructuring, Emerges
From Chapter 11
Focal Communications Corporation yesterday announced in a press release
distributed by PR Newswire that its financial restructuring is complete
and that it has emerged from chapter 11 protection. The company's second
amended joint plan of reorganization was approved on June 19, 2003 by a
U.S. Bankruptcy Court. Focal said its strategy for future success
includes increasing revenue per line. The company's objective is to
increase the efficiency of the network and improve gross margins through
expanded product penetration into the existing customer base. Layering
additional services such as long distance, toll free, and conference
calling onto customers' existing connections enables Focal to meet
customers' diverse communications needs in a capital efficient manner,
the company said in the press release.
United Reports Decline in Air Traffic
United Airlines on Tuesday reported a 9.8 percent decline in June
traffic, the fourth consecutive monthly decline, the Associated Press
reported. The airline said it flew 9.08 billion revenue passenger miles,
compared with 10.07 billion a year ago. The June load factor, or
percentage of seats filled, was 82 percent, compared with 78 percent
last year. United said traffic fell 6.5 percent in the first half of the
year, reported the newswire.
SSG Capital Advisors Closes Sale of CB Technologies Inc. to ViPS
Inc.
SSG Capital Advisors L.P. announced in a press release yesterday the
recent sale of CB Technologies, Inc., which develops and markets
information technology solutions for life science companies, to ViPS
Inc., a portfolio company of Cornerstone Equity Investors.
CB Technologies filed for protection under chapter 11 of the U.S.
Bankruptcy Code in February 2003, following a series C venture
fundraising in November 2002 that was hindered by the state of the
venture markets. Operating as a debtor-in-possession, the company
retained SSG to assist in pursuing strategic alternatives. On June 25,
2003, the sale of CB Technologies to ViPS was approved under Section 363
of the U.S. Bankruptcy Code.
Wealthy Share Debt Woes
Collections and Credit Risk reported that debt is a problem not just for
the lower and middle classes, but also for people with incomes of
$75,000 or higher. According to Consumer Financial Decisions (CFD),
credit card debt among the wealthy increased 177 percent from 1992 to
2000. And incidences of debt for 2002 represented little change over
2000's data, according to Larry Cohen, director of CFD, reported the
magazine.
For the three most common types of debt - credit cards, vehicle
loans, and secondary debt on primary home-wealthy individuals had
significant levels of debt continuing into 2002. From 1992 to 2002,
incidences of debt on credit cards jumped from 34 percent to 57 percent,
vehicle loans rose from 35 percent to 50 percent and secondary debt on
the primary home increased from 29 percent to 32 percent, reported the
magazine.
Personal Bankruptcies Refuse to Slow
Personal bankruptcy filings in the United States through June 21, 2003,
were up 9.7 percent from the same period one year earlier. A chart of
the trend, based on statistics compiled from courthouse records by the
National Bankruptcy Research Center, can be viewed at
href='http://www.nbkrc.com/'>www.NBKRC.com (subscription required).
Chargeoff rates in credit card portfolios will continue to reflect this
trend, reported the American Financial Services Association.
Junk-Bond Default Rate Declines for 15th Month in June to 6.1
Percent
Defaults by high-risk corporate borrowers fell for a 15th month in June
to 6.1 percent, down from a high of 10.9 percent in January 2002,
Moody's Investors Service said in a report, Bloomberg News reported.
WestPoint Stevens Inc. was the biggest defaulter among six junk-rated
corporate bond issuers worldwide that failed to make payments on a total
of $2.1 billion of debt in June. The West Point, Ga.-based maker of
towels and bedding defaulted on $1 billion of debt.
Defaults for issuers rated Ba1 or lower will probably remain about
the same in the coming year because companies under review for a rating
cut outnumber those under review for an increase by a margin of
three-to-one and economic growth hasn't improved enough. 'Even though
aggregate credit conditions have improved since last year, the data
still suggest an above-average global default rate,'' David Hamilton,
Moody's director of default research, said in the report. 'If economic
and credit conditions continue to show modest improvement, it's possible
that the default rate may end up somewhat below the forecasted level,''
reported the newswire.
PEREGRINE SYSTEMS
Peregrine Reports Progress on Bankruptcy Reorganization
Talks
Lawyers for Peregrine Systems Inc. reported progress in negotiations
with debt holders that may set the stage for court approval on Friday of
the business-management software maker's plan to pay creditors and exit
bankruptcy, Bloomberg News reported. U.S. Bankruptcy Judge Judith
Fitzgerald in Pittsburgh continued until Friday a hearing to
consider final approval of the plan. CEO Gary Greenfield said
Peregrine's plan to exit bankruptcy by year-end with about $70 million
in debt would make it the first software company to complete a chapter
11 reorganization.
SEC Won't Seek Financial Penalties from Peregrine
The Securities and Exchange Commission (SEC) will not seek fines against
Peregrine Systems Inc. over an accounting scandal that led it to restate
three years of results, the software company said on Tuesday, Reuters
reported. Peregrine said the SEC announced its decision to withdraw its
request for financial penalties during a scheduled chapter 11 court
hearing in the U.S. Bankruptcy Court in Pittsburgh. Securities
regulators filed civil charges against the San Diego-based company on
June 30, alleging financial fraud at the maker of software designed to
help companies manage technology. Peregrine partially settled the
charges without admitting or denying the allegations. At the time, the
SEC had said it would decide later whether to seek monetary penalties
and disgorgement from the company. Tom McNamara, a San Diego-based
lawyer for Peregrine, said the decision by the SEC reflected Peregrine's
efforts to ensure that stock investors would retain some interest in the
company as it emerged from bankruptcy, reported the newswire.
Touch America Holdings Creditors Oppose Asset Sale Procedures
Touch America Holdings Inc.'s committee of unsecured creditors
opposed the company's bidding procedures for its proposed sale to
360Networks Inc., saying the procedures appear to create a hurried and
secretive process. According to an objection filed in a bankruptcy court
Monday, the committee said the proposed sale process is 'aimed at
completing a bargain-basement sale' of nearly all of Touch America
Holdings' revenue-producing assets. In the objection, the creditors
asked the court to deny the company's motion and extend the schedule for
the asset sale. The U.S. Bankruptcy Court in Wilmington, Del., which is
overseeing the Touch America Holdings case, is slated to consider the
bid procedures at a hearing at 2 p.m. EDT on Wednesday.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Foster Wheeler Says Liquidity Problems Possible
Foster Wheeler Ltd. on Tuesday said accessing cash 'will become more
challenging in the fourth quarter,' but said it is taking steps to boost
liquidity, Reuters reported. The comments from the Bermuda-registered
company came in response to a credit rating downgrade earlier in the day
by rating agency Standard & Poor's. S&P noted that Foster
Wheeler had about $1.2 billion in debt securities outstanding on March
28 and said a lack of access to capital markets and other factors 'may
force the company to pursue a financial restructuring or file for
bankruptcy protection,' reported the newswire.
Foster Wheeler in May reported a first-quarter net loss of $19.8
million, down from a year-earlier loss of $176.1 million. Revenue for
the period came in at $810.9 million. 'We believe that our current
liquidity is adequate and while liquidity will become more challenging
in the fourth quarter, we have plans in place and believe we are taking
appropriate steps to deal with our liquidity issues going forward,' Ken
Hiltz, Foster Wheeler's recently installed CFO, said in a statement,
reported Reuters.
Dress Barn Says $32 Million Awarded in Lawsuit
Women's apparel retailer Dress Barn Inc. on Tuesday said a Connecticut
trial court entered a $32 million final judgment against the company,
but denied punitive damages, in a case involving a business takeover
that was never completed, Reuters reported. The $32 million award,
entered on Monday, includes $30 million of compensatory damages plus
expenses, Dress Barn said. A Stamford jury awarded the compensatory
damages in April. Dress Barn said it 'continues to strongly believe' the
jury verdict lacks merit and 'will vigorously pursue an appeal.'
Dress Barn has said in securities filings the award relates to a lawsuit
brought in May 2000 by Alan Glazer, GLZR Acquisition Corp. and Bedford
Fair Industries Ltd. The plaintiffs accused Dress Barn of unfair trade
practices and breach of contract related to its proposed takeover of
Bedford Fair, before that company sought chapter 11 bankruptcy
protection, Dress Barn has said, reported the newswire.
O'Malley Brings in Settlement Specialist
Boston lawyer who has specialized in helping Catholic leaders reach
speedy and amicable agreements with victims of clergy sexual abuse has
been hired by the incoming leader of the Archdiocese of Boston, Bishop
Sean Patrick O'Malley, to help speed the settlement of more than 500
pending lawsuits, the Boston Globe reported. Thomas H. Hannigan
Jr. said that he will attend a closed-door conference between lawyers in
the case and Superior Court Judge Constance M. Sweeney. Hannigan said
that, for now, he will serve in an advisory capacity to O'Malley, who is
set to be installed as archbishop on July 30. To read the full article,
point your browser to
href='http://www.boston.com/globe/'>http://www.boston.com/globe/.
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