July 312006

 

Pensions

name='1'>House Approves Legislation to Overhaul Private Pension
System

The House of
Representatives passed legislation overhauling the
w:st='on'>
size='3'>U.S.
size='3'>private pension system and requiring more than 30,000 companies

to fully fund their pension plans, Bloomberg News reported Friday. The
legislation, passed by a vote of 279-131, is designed in part to protect

the Pension Benefit Guaranty Corp. (PBGC), which reported a $22.8
billion deficit this year. The legislation may face opposition in the
Senate next week because the House altered a compromise version by
leaving off $35 billion in popular tax breaks after an earlier agreement

to include them unraveled.  The legislation
passed by the House Friday is identical to a measure the Senate has
previously approved except for the tax breaks and language giving four
airlines extra time to pay off overdue pension payments. 
The Senate version gave the major airlines 20 additional
years to pay off their debts, but the House-passed version gives such
companies only 10 additional years, and for airlines such as American
and Continental that wish to retain their pension plans, it gives
them three additional years along with a two-year immediate break
from making payments. 

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=arCCBu7O9m7k&refer=us'>Read

more.

In related news, the pension
reform legislation headed for a vote in the U.S. Senate this week not
only aims to help bankrupt airlines save their traditional
retirement plans, but also is supported by General Motors Corp. and the
United Auto Workers, Reuters reported yesterday. GM has sent a letter to

House and Senate lawmakers supporting the first major change in
corporate pension funding rules in 30 years. The major auto industry
union said it, also backed the proposal. The bill was approved by
the House of Representatives late on Friday night after months of
negotiations that turned unusually fractious last week. The Senate will
take up the issue this week, but its fate is uncertain due to wrangling
over unrelated tax provisions. The measure requires all companies with
traditional pensions, except major airlines in certain circumstances, to

fully fund pensions within seven years. The rules would take effect in
2008. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2006/07/30/AR2006073000177_pf.html'>Read

more.

The Pension Protection Act of 2006 also contains a section
providing that bankruptcy filings will substitute for the termination
dates of a plan thirty days after enactment of the act. This section is
presently expected to remain in the Senate version of the bill. 

href='http://www.rules.house.gov/109_2nd/text/pensions_cr/HWC_373_xml.pdf'>Click

here to view the text of the House-passed version of H.R.
4.

name='2'>Airline Pensions Vanishing

Only American and Continental
Airlines have active defined-benefit pension plans, according to a June
report by Congress' Government Accountability Office (GAO), the
Associated Press reported on Friday. All other major carriers have
either terminated all or some of their defined-benefit retirement plans
and turned their assets over to the Pension Benefit Guaranty Corp., the
government agency that insures pension benefits, or have frozen their
plans and quit making contributions, the GAO said. Delta Air Lines Inc.
and Northwest Airlines Corp. has frozen all of its pension plans.
United, part of UAL Corp., and US Airways Group Inc. have already turned

their pension plans over to the PBGC after declaring bankruptcy. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2006/07/28/AR2006072801332_pf.html'>Read

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>
name='3'>Study: Bankruptcies May Be Ready to Surge in Hurricane
Battered States

A study of bankruptcy
filing rates after major hurricanes showed those states directly
affected averaged 50 percent more bankruptcies than those not hit,
according to the
size='3'>South
size='3'>Mississippi

size='3'>Herald-Journal. Robert
Lawless, the professor and lawyer at the University of Illinois

College of Law who wrote the study, said the increases in filings were
most dramatic between one and three years after the hurricanes.
'Although (Katrina victims') financial resources were gone, past debts
remained, and new obligations arrived,' Lawless wrote in the study,
published in the Nevada Law Journal. Lawless looked at
18
face='Times New Roman'
size='3'>U.S.
size='3'>hurricanes that came ashore between 1980 and 2004 and caused
more than $1 billion in damages. Among the list of hurricanes analyzed,
Hurricane Elena, which hit
w:st='on'>
size='3'>Mississippi in
September 1985, did the most damage in terms of increasing bankruptcy
filings. Three years after that storm came ashore, 72 percent more
Mississippians filed for bankruptcy than in other states. 'I think from
Katrina you won't see the same bump in bankruptcy numbers from the local

area like I saw in my data,' Lawless said. 'You will see increased
filings but they will be spread out throughout the country because you
have so many displaced people.' 

href='http://www.sunherald.com/mld/thesunherald/business/15156357.htm?template=contentModules/printstory.jsp'>Read

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name='4'>Bankruptcy Professionals Struggle as Filings
Plunge

With chapter 11 filings
drastically down, law firms and restructuring firms are scrambling to
adapt to the lull in corporate bankruptcies, with some floundering while

others manage to hang on,
size='3'>Portfolio Media reported on Friday.
Since 2002, low interest rates, coupled with an increase in liquidity in

the marketplace, have helped lead to the dramatic nose-dive in corporate

bankruptcies. The first six months of 2006 saw a total of 2,473 chapter
11 filings, down 21 percent compared with the corresponding period last
year and 51 percent compared with five years ago. As bankruptcies hit a
drought, law firms whose business depends on chapter 11 filings have
found themselves struggling, according to Tom
Salerno, who heads the bankruptcy and
restructuring practice at Squire, Sanders & Dempsey LLP.

size='3'>Michael Eisenband, senior managing
director and leader of the creditor rights practice at restructuring
firm FTI Consulting Inc., agreed, noting that the current dearth of
chapter 11 filings had forced some large law firms to shift their
restructuring personnel to mergers and acquisition
work.

w:st='on'>
name='5'>Spokane
face='Times













New







Roman'

size='3'> Abuse Victims Consider Suing
Parishes

Sexual abuse victims
in

size='3'>Spokane,
w:st='on'>
size='3'>Wash., are
considering suing parishes and might even explore the legal liability of

individual churchgoers, the
size='3'>Spokane Spokesman-Review reported on
Friday. Such a move could ignite worries among the laity and steer the
bankruptcy case of the Spokane Catholic Diocese in a direction that
alleged abuse victims and parishioners have hoped to avoid since early
on in this case: a direct confrontation.
size='3'>What could be lost in the tangle is about $20 million worth of
insurance money that the diocese stands to collect and distribute to
abuse victims once the bankruptcy case is closed. All sides are
preparing for the case's first substantive mediation beginning Aug. 21.
'Suing the parishes at this time would be an act of bad faith and an
outright attempt to intimidate parishioners,' said
face='Times New Roman' size='3'>Ford Elsaesser
size='3'>, an attorney representing the Association of Parishes. 'It
won't work, so I hope it's not true.' 
href='http://www.spokesmanreview.com/local/story.asp?ID=142188'>Read
more. (Registration required.)

Airlines

name='6'>Mesaba Gets $24 Million DIP Loan and
Extension

A bankruptcy judge
approved $24 million in debtor-in-possession funding for Mesaba Aviation

Inc. and signed off on an order extending its exclusive rights to file
and solicit creditor support for a reorganization plan,
face='Times New Roman' size='3'>Portfolio Media
size='3'>reported Friday. The revolving credit facility, which will come

from Marathon Structured Finance Fund LP, is available for two years, or

until Mesaba exits bankruptcy, whichever comes first, according to
Mesaba spokesperson Jane Berg. Mesaba’s new deadline to file its
chapter 11 plan is Aug. 25, and the new deadline for seeking creditor
support is Oct. 24. The exclusivity periods were slated to expire on
Aug. 10 and Oct. 9, respectively. The recently granted extension will
tide Mesaba over until a hearing scheduled for Aug. 15, at which Mesaba
said it will ask for a six-month extension of the exclusivity deadlines
to propose and seek support for its chapter 11 plan. If Mesaba’s
arguments persuade U.S. Bankruptcy Judge

size='3'>Gregory Kishel, it will retain the
exclusive right to file a chapter 11 plan until Feb. 12,
2007 and the exclusive right to seek confirmation
of the plan until April 12, 2007. The case is
face='Times New Roman' size='3'>Mesaba Aviation Inc
size='3'>., case number 05-39258, in the U.S. Bankruptcy Court for the
District of Minnesota.

name='7'>Delta Retirees Face Pinch

Delta Air Lines
executives said that thousands of retirees could face higher health care

costs as the company continues its drive to restructure in bankruptcy
court, the Atlanta
Journal-Constitution reported Saturday. In the

next few weeks, the Atlanta-based airline will propose raising the
portion of health care premiums that retirees pay, the executives said.
As many as 30,000 people will be affected by the company's negotiations
with committees representing pilot and nonpilot retirees. If no deal is
reached, the matter would go to hearings before Delta's bankruptcy
judge. The percentage of the premium paid varies, depending on the
timing and circumstances of retirement. Some retirees pay nothing, some
pay 10 percent, some 22 percent and others 100 percent. 

href='http://www.ajc.com/services/content/business/delta/stories/0729bizdelta.html'>Read

more.

US

Airways Tested Delta's Interest In Merger Talks

US Airways Group Inc.
Chief Executive Doug Parker, buoyed by a stock price that has more than
doubled since the company's merger with America West Airlines, contacted

Delta Air Lines Chief Executive Gerald Grinstein earlier this summer to
gauge his interest in a possible merger, the Wall Street Journal reported
on Saturday. Grinstein told Parker that Delta wasn't interested in
starting merger talks because the Atlanta-based airline plans to exit
bankruptcy court protection next spring as a stand-alone carrier. No
subsequent discussions have occurred. The overture by Parker, an
outspoken proponent of consolidation as part of the cure for the airline

industry's financial ills, is the strongest signal yet to surface that a

long-predicted consolidation among
w:st='on'>
size='3'>U.S.
size='3'>airlines could finally begin. Grinstein has expressed doubt
that a Delta-US Airways merger would pass antitrust muster because
Delta's
size='3'>Atlanta hub competes for
passengers with US Airways'
w:st='on'>
size='3'>Charlotte
size='3'>hub. 
href='http://online.wsj.com/article/SB115414341170521304.html'>Read
more. (Registration required.)

In a related analysis,
the early success of US Airways Group, the result of a merger last
year, has led to discussions among investors and airline executives that

could lead to more industry consolidation in the months ahead,
the New York
Times reported today. As Northwest Airlines
and Delta Air Lines move through bankruptcy, which both entered last
September, pressure may mount on almost all the major airlines to
explore mergers. The bankruptcy process — allowing reductions in
labor costs and the shedding of airplanes and other assets — can
help otherwise incompatible partners realign their operations for a
merger. US Airways shares have more than doubled since its merger with
America West was completed last September. Last week, US
Airways reported a second-quarter profit of $305 million, second
only to Southwest Airlines, which dominates the industry. 

href='http://www.nytimes.com/2006/07/31/business/31air.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read

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name='9'>Winn-Dixie Picks Up $725 Million Exit Loan

Winn-Dixie Stores Inc.
checked out with a $725 million exit loan on Thursday, putting the
supermarket chain on target to emerge from chapter 11 bankruptcy
protection in October,
size='3'>Portfolio Media reported on Friday.
Judge Jerry Funk of the U.S. Bankruptcy Court for the
Middle District of Florida approved the financing, authorizing
Winn-Dixie to enter into an agreement with Wachovia Bank. The terms of
the deal were set forth in a June 28 commitment letter, which stated
that there will be a $300 million sub-limit for letters of credit.
The exit loan also has a 0.25 percent unused line fee, a 1 percent
letter-of-credit fee and a standby letter-of-credit fee of 1.25 to 2.25
percent. Furthermore, Winn-Dixie can reduce the loan by up to $125
million before it closes in five years or increase the loan by up to
$100 million three times.

In related news,
Winn-Dixie Stores Inc. said Friday that it plans to close
seven Florida
size='3'>stores and lay off more than 570 workers, the
face='Times New








Roman'

size='3'>Orlando Sentinel reported on
Saturday. Company spokeswoman Robin Miller said the store closings are
not part of Winn-Dixie's plan to emerge from bankruptcy, which was filed

in June, but are the result of the company's ongoing evaluation of
individual store performance. The store closings are to be
completed by the end of August. Since filing for chapter 11 protection
in February 2005, Winn-Dixie has shed more than 300 stores and laid off
about 24,000 employees. 

href='http://www.orlandosentinel.com/business/orl-winndixie2906jul29,0,700511,print.story'>Read

more.

name='01'>Ex-WorldCom CEO Ebbers' Conviction Affirmed

A federal appeals court
in New

York on Friday affirmed the conviction

of former WorldCom Inc. Chief Executive Bernard Ebbers for orchestrating

an $11 billion accounting fraud that led to the largest
size='3'>bankruptcy in U.S. history, Reuters reported on Friday. The
ruling by a three-judge panel of the
w:st='on'>
size='3'>U.S.
size='3'>Second Circuit Court of Appeals may clear the way for Ebbers to

begin serving his 25-year prison sentence. Ebbers had been convicted by
a jury in March 2005 of nine counts of conspiracy, securities fraud and
other crimes that led to the telephone company's July 2002 bankruptcy.
He had remained free on bail while pursuing his appeal. The appeals
panel rejected Ebbers' contention that the trial was 'fundamentally
flawed' because he could not defend himself fairly and because the jury
instructions were defective. He also argued that his sentence was
unreasonably long. 

href='http://news.yahoo.com/s/nm/20060728/bs_nm/crime_ebbers_dc_6&printer=1;_ylt=AnXAUnHGV.n.C6HcUOlwoCWb.HQA;_ylu=X3oDMTA3MXN1bHE0BHNlYwN0bWE-'>Read

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name='11'>Ex-Chief of McLeod Telecom in $4.4 Million
Settlement

A former chief executive
of a telecom company has agreed to pay $4.4 million to settle an
investigation into insiders who gained windfalls in initial stock
offerings, according to the state attorney general’s office, the
Associated Press reported yesterday. Clark McLeod, who had been the
chairman and chief executive of McLeodUSA, agreed to turn over $4.4
million in profits he was accused of receiving from directing more than
$77 million of McLeodUSA’s investment banking business to Salomon
Smith Barney. In exchange, the company secretly gave McLeod shares of 34

stocks before its initial public offering, which resulted in a windfall
of $4.8 million on the first day of public trading of the stock,
according to New York Attorney General Eliot Spitzer’s 2002 civil
lawsuit. There was no finding or admission of liability in the
settlement, which dismisses Spitzer’s action against McLeod.
McLeodUSA Inc., a telecommunications company based in
w:st='on'>
size='3'>Cedar Rapids,

size='3'>Iowa, emerged
from chapter 11 bankruptcy protection in January after eliminating more
than $600 million in debt. 

href='http://www.nytimes.com/2006/07/31/business/31spin.html?pagewanted=print'>Read

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International

'>
name='12'>Global Corporate
Insolvencies Expected to Rise

 Law and accountancy
firms, as well as Investment banks investment banks, have been
recruiting heavily for their restructuring teams in anticipation of a
rise in corporate defaults, the London Telegraph reported yesterday.
According to Wilbur Ross, who recently sold his boutique investment
firm, WL Ross, to Amvescap, corporate insolvencies will inevitably start

to rise within the next few months. 'A few weeks ago we submitted a bid
for a company to bring it out of bankruptcy,” Ross said.
“Then a bank - a regular commercial bank - came along with a
competing proposal toward which they were willing to lend more dollars
than we were willing to pay for the whole company. That totally
staggered me. It was a sizeable company, a $700 million
transaction.” In 2002 the average European buyout deal was priced
at nine times earnings, according to research for The Sunday Telegraph
based on Mergermarket data. Last year, that figure crept up to 11.2
times earnings, and in the first six months of this year it nudged up to

12.5. The amount of debt being taken on to support those buyout deals is

rising even faster. In 2001 the total amount of debt in the average
buyout deal was roughly 3.8 times the earnings of the company being
acquired. This figure now stands at 7.8.

href='http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/07/30/ccbp330.xml'>Read

more.

size='3'>Record Number of Koreans Filing for
Bankruptcy

According to the Supreme
Court and Bank of Korea (BOK), a record 49,581 people petitioned for
bankruptcy for the first half of this year, the
face='Times New Roman' size='3'>Korean Donga
size='3'>reported today. That figure is nearly 250 percent greater than
the amount of filings from the same period in 2005, when 13,931 filed
for bankruptcy. While 5,383 people filed in January, the monthly average

of bankruptcy petitioners continued to rise and has surpassed 10,000
since April when the number escalated to 10,247. Escalating interest
rates and inflation are reportedly putting
pressures on households, as the average annual interest rate of loans in

household sector was 5.72 percent in June, which is the highest in 23
months. 

href='http://english.donga.com/srv/service.php3?bicode=020000&biid=2006073167298'>Read

more.

name='14'>Varig to Lay Off 5,500 Workers

w:st='on'>
size='3'>Brazil's

embattled flagship airline Varig will lay off 5,500 employees -- nearly
60 percent of its work force -- as the carrier emerges from bankruptcy
proceedings under new owners, the Associated Press reported Friday.
Viacao Aerea Rio-Grandense SA, or Varig, which was recently sold to its
former subsidiary, VarigLog, said in a statement that only 3,985 of its
9,485 employees would be keeping their jobs. Part of a court-approved
bid to save the airline, the layoffs were widely expected following last

week's sale of Varig in a $500 million deal with VarigLog, controlled by

the investor group Volo do Brasil. Volo had tried to suspend most of the

carrier's national and international routes last week amid heavy debts
and difficult negotiations with plane leasing firms. The National Civil
Aviation Authority nixed that move, however, ordering it to fly a
restricted number of routes. 

href='http://biz.yahoo.com/ap/060728/brazil_varig.html?.v=2&printer=1'>Read

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