June 30, 2004
Consumers Confident, But
Spending Still Cool
U.S. consumers felt more confident about the economy
this month than at any time in the last two years, but retail sales have
cooled significantly, with major stores blaming unseasonable weather and
slow Father's Day sales, Reuters reported. The Conference Board said its
index of consumer confidence rose to 101.9 in June from 93.1 in May, way
above analysts' expectations of a reading of 95.0 this month and the
highest since June 2002. 'These numbers in confidence are very good if
they are translated into retail sales numbers,' said Lynn Reaser, chief
economist at Banc of America Capital Management in St. Louis.
However, chain store reports on Tuesday predicted weak
sales in June and followed lower sales forecasts from retailers Wal-Mart
and Target because of cool, wet weather. In addition, a warning from
General Motors hinted at a broader spending slowdown, the newswire
reported.
Banks Let Deadline Pass Without WorldCom
Settlement
The major investment banks that underwrote bond offerings for the
former WorldCom Inc. have let a deadline pass without settling an
investor lawsuit, setting up a possible court showdown, according to a
spokesman for the lead plaintiff, Reuters reported. In May, Citigroup
Inc. said it would pay $2.65 billion to WorldCom investors who had
accused it of participating in financial fraud through its relationship
with the telecommunications company. In April, the former WorldCom
emerged from the largest bankruptcy in history under the new name MCI
Inc. The 17 other bank defendants, including Bank of America Corp., J.P.
Morgan Chase & Co. and Deutsche Bank AG, were given until this past
Monday to settle the lawsuit under the same general framework as
Citigroup. A trial has been scheduled for January, but the failure to
reach a settlement under similar terms to Citigroup's does not rule out
the possibility that a settlement could eventually be reached with the
remaining banks.
United Airlines Unions
Fear More Cuts After Federal Aid Failure
Employees at UAL Corp.'s United
Airlines are bracing for the prospect of new concessions after the
failure of the carrier's nearly two-year quest for federal assistance,
according to an Associated Press article. Further cuts in United's
bankruptcy restructuring would be especially painful for a workforce
already hit by heavy wage and benefit reductions that have enabled the
company to reduce annual labor costs by $2.5 billion annually. Fair or
not, experts say they may be inevitable as United scrambles to redo its
finances after being rejected for a third and final time Monday in its
attempt to secure a government loan guarantee.
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Qwest Faces $3 Billion Action
Over KPNQwest Bankruptcy
European network operator
KPNQwest NV, which went into bankruptcy in 2002, has demanded up to $3
billion in damages from its former major shareholder Qwest
Communications International Inc., Reuters reported. Trustees of the
defunct company have filed a complaint in the U.S. District Court of New
Jersey seeking relief under the U.S. Racketeer Influenced and Corrupt
Organization Act and for mismanagement and breach of duty. They are
seeking compensation for damages suffered by KPNQwest and its creditors,
the newswire reported.
Seven Nursing Homes File Chapter 11 Bankruptcy; Layoffs
Planned
Seven nursing homes in New York
state have filed for chapter 11 bankruptcy and plan to lay off about 160
employees Saturday as they reorganize, Newsday reported. The homes, in
Danbury, Darien, Milford, Newington, Stamford, Westport and
Wethersfield, are owned by Hackensack, N.J.-based Care Realty. The
company hopes to reorganize the homes' finances and emerge stronger,
company spokeswoman Ann Collette said Monday. The homes have been losing
money under the state's Medicaid and Medicare reimbursement system and
because of the cost of union contracts, Collette said,
Newsday reported.
Connecticut Wraps Up Case
Against Forstmann Little
Connecticut state attorneys on Tuesday delivered
closing arguments in a $125 million breach-of-contract lawsuit against
buyout firm Forstmann Little & Co., clearing the way for a jury to
begin its deliberations in the closely watched trial, Reuters reported.
The case, which experts say could affect relations between private
equity firms and their pension fund investors, was brought by
Connecticut after it lost some $125 million in Forstmann-led investments
in two telecom start-ups.
Connecticut claimed the investments into XO
Communications and McLeodUSA fell far outside the Forstmann investment
mandate, and the state is demanding its money back. But Forstmann
lawyers argued that the contract gave it wide latitude to invest as it
saw fit in pursuit of the lucrative returns that have been the hallmark
of many established buyout funds like Forstmann, the newswire
reported.
Bankruptcy Court OKs Chi-Chi's $2 Million in
Hepatitis Settlements
The bankruptcy court overseeing the chapter 11 case of Chi-Chi's
Inc. authorized the restaurant chain to pay more than $2 million in
settlements to customers who suffered from an outbreak of hepatitis A at
a restaurant in Pittsburgh, the Associated Press reported. The order,
signed last week by Judge Charles G.
Case of the U.S. Bankruptcy Court in Wilmington, Del., and made
available yesterday, authorizes the Tex-Mex eatery to pay 60 claims
totaling $2.18 million, the newswire reported. The settlements stem from
the largest outbreak of hepatitis A in U.S. history.
Sears to Buy Up to 54 Kmart Stores
Kmart Holding Corp., which is shedding properties to slash costs
after emerging from bankruptcy last year, agreed to sell up to 54 stores
to Sears, Roebuck and Co. for $621 million, the companies said on
Wednesday, Reuters reported. The move comes less than a month after
Kmart agreed to sell as many as 24 stores to Home Depot Inc.
ADELPHIA
COMMUNICATIONS
Adelphia Jury Asks to
Review More Exhibits
Jurors deliberating at the
fraud trial of four former Adelphia
Communications executives
requested two dozen exhibits yesterday related to accusations that the
family had looted and bankrupted the company, Bloomberg News reported.
Jurors did not reach a verdict in their second day of deliberations on
charges that the Rigases hid $2.3 billion in debt, stole hundreds of
millions of dollars, and lied about revenue and operations at Adelphia,
the cable television operator. Jurors have requested 41 documents and 12
excerpts of testimony since they started deliberating on Monday, the
newswire reported.
Adelphia Communications
Again Amends $8.8 Billion Exit Loan Terms
Adelphia Communications Corp.
and its lenders agreed to amend the terms of an $8.8 billion exit loan
to allow the lenders to reduce their commitments if certain terms aren't
met, said an 8-K filing with the Securities and Exchange Commission
Tuesday. Adelphia said it gave notice of the changes to the loan
commitment letter and fee letter on Monday to the U.S. Bankruptcy Court
in Manhattan, which is overseeing the cable company's chapter 11 case.
In the SEC filing, which mirrored the court documents, the company said
that changes to the commitment letter were made with respect to what
will happen if Adelphia doesn't pledge the assets of joint ventures that
it has with Comcast Corp. to secure the loan.
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Rising Health Care Costs Hit Home
One in seven American families has
problems paying medical bills, forcing trade-offs between medical, food
and housing expenses, according to a new study, the Wall Street Journal
reported. The report by the Center for Studying Health System Change, a
Washington think tank, said that though uninsured families have the
biggest problems affording health care, insured families have difficulty
paying their medical bills, especially since rapidly rising
health-insurance costs are often shifted to consumers in the form of
higher deductibles, co-payments and co-insurance. According to the
study, 68 percent of families with medical-bill problems have insurance.
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