March 13, 2000
Chapter 11 Increasingly Being Used by Public Companies That Are
Not Insolvent
The recently dismissed chapter 11 of SGL Carbon, a U.S. subsidiary
of a German company, points to a trend in public companies filing
chapter 11 even though they are not insolvent, Business Week
reported. When SGL filed chapter 11 in December 1998 it was 'financially
healthier' and boasted of its 'innovative and creative' move to gain
leverage against the many lawsuits filed against the company as the
Justice Department was investigating price-fixing allegations.
Business Week reported that while overall filings by businesses
in the United States has dropped 30 percent since 1997, because of the
strong economy, the number of public companies filing chapter 11 has
skyrocketed 75 percent in the last two years to 145 in 1999. One reason
for this increase is pressure to meet Wall Street's expectations.
'Companies are using bankruptcy not as a safe haven to restructure their
debts, but as a strategic tool in everything from litigation to merger
negotiations,' G. Larry Engel of San Francisco's Brobeck, Phleger
& Harrison said. 'It's no longer the creditors that are pushing
companies into the tank.' While many companies, such as Filene's
Basement Corp, Just For Feet Inc., Vencor Inc. and Sun Healthcare Group,
have filed for traditional reasons, there is a 'new breed' of executives
who are less concerned about filing for bankruptcy than in the past.
Some bankruptcy judges are not allowing the abuse of chapter 11 to go
forward, and the SGL Carbon dismissal is evidence of that. However, some
companies are using chapter 11 not as a last chapter, but as the
'prelude to a new start.
Premier Laser Systems Files Chapter 11
Premier Laser Systems Inc., Irvine, Calif., has filed a voluntary
chapter 11 petition in Santa Ana, Calif., citing a lack of liquidity,
the overhang of prior obligations and the need to seek protection from
certain creditors' activities, according to a newswire report. Premier
Laser Systems develops, manufactures and markets diagnostic and
therapeutic products for the eye care, dentistry and surgical
markets.
GENICOM Seeks Chapter 11 Protection
Chantilly, Va.-based GENICOM Corp. announced Friday that it filed
for chapter 11 protection in Delaware, according to a newswire report.
The filing was not unexpected, following the company's Feb. 25 notice
from its lender group that it was in default of its credit facility. The
lenders began exercising all of their rights and remedies, including
their right to offset the company's bank accounts and foreclosure on the
collateral. GENICOM and lenders have agreed to the terms of a
debtor-in-possession loan facility of $6.9 million and a cash collateral
order that will be submitted for court approval. GENICOM is a global
provider of integrated network solutions, multi-vendor services and
printer solutions.
Court Approves DIP Financing for Roberds
Roberds Inc., Dayton, Ohio, announced Friday that it has received
final approval from a bankruptcy court for its debtor-in-possession
financing of $25 million. President Robert Wilson said, 'We now have
permanent financing in place that permits us to begin to restore the
normal flow of goods into the business.' In January, the company said it
would close all of its home furnishings stores in Tampa, Fla., and seek
chapter 11 because of stiff competition.
ICO Global's Satellite Launch Results in Failure
A spokesperson for ICO Global Communications said that the first of
12 telecommunications satellites built for the company has been lost in
the Boeing-led international Sea Launch, according to Reuters. The
launch yesterday was part of the multinational Sea Launch project, and
the rocket lifted off successfully on time, but 'it suffered an anomaly
after launch,' Boeing said. ICO Global, established five years ago, is
planning to build a satellite-based mobile phone network; it filed
chapter 11 in August. The ICO Global spokesperson said that the
satellite, built by Hughes Space and Communications Co., was fully
insured, and that the company hopes the crash will have a minimal impact
on its business plan. He also said that ICO needed only 10 of the 12
satellites ordered to operate its network, but that it had two spares
for this sort of problem.
Motorola Tells Customers That Iridium Service May End
Motorola Inc. has notified customers of service from Iridium LLC
that service will end on March 17, Friday, unless a buyer for Iridium
comes forward, according to Reuters. Schaumburg, Ill.-based Motorola,
sent a letter this past week to customers who bought Iridium phones
directly from Motorola. Iridium, which filed for chapter 11 protection
last August, will dismantle its satellite telephone system if a buyer is
not found this week. Iridium had secured a $3 million loan from lenders
to keep it in business until Friday.
Ousted Arizona Governor to Face Civil Lawsuit
Ousted Arizona Gov. Fife Symington will be defending himself in U.S.
bankruptcy court against accusations that he defrauded blue-collar
workers' pension funds, according to the Associated Press. Symington was
convicted in 1997 on six counts of bank and wire fraud, and the
convictions were later overturned on appeal, but prosecutors have asked
for a rehearing. The bankruptcy case dates to 1990, when the six union
pension funds loaned Symington $10 million, on his personal guarantee of
repayment, to finance the Mercado, a retail office complex in downtown
Phoenix. Low sales and low occupancy rates were a problem, and Symington
was forced into default. In 1995, he filed for bankruptcy and refused to
repay the loan, which has swelled to $18 million with interest. While
still governor, he spent four months facing prosecutors'
accusations.
Credit Card Turns 50
The first credit card is said to have appeared in February 1950 when
Frank McNamara, a businessman, discovered that he had left left his
wallet in a different suit pocket when dining out. His wife paid, but
McNamara wondered if a solution could be found. At a later meal at the
same restaurant, he tried paying with a small cardboard card bearing his
signature, which he dubbed a diner's club card. It worked, and credit
cards now provide financial convenience for some 157 million Americans,
the Associated Press reported. It's an invention, however, blamed for
sending many over-zealous spenders into debt and bankruptcy, but the
credit card endures as a symbol of convenience. Credit cards originally
were paper, like library cards, and did not become plastic until 1959.
American Express implemented this change to make them less vulnerable to
fraud and easier to process. Initially, all charge cards had to be paid
in full each month, but bank credit cards, as we know them now, were
introduced in 1951 by Franklin National Bank in New York.
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