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August 8, 2006
Pensions
name='1'>
Public Pension Plans
Face Billions in Shortages
Across the nation, a
number of states, counties and municipalities are examining potential
shortfalls in their public retiree pension plans, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. By one estimate, state and local governments
owe their current and future retirees roughly $375 billion more than
they have committed to their pension funds. Barclays Global Investments
has calculated that if
w:st='on'>
size='3'>America
size='3'>’s state pension plans were required to use the same
methods as corporations, the total value of the benefits they have
promised would grow 22 percent, to $2.5 trillion. Only $1.7 trillion has
been set aside to pay those benefits. Closer examination of public
pension underfunding was brought out in 2003, when a whistle-blower
forced
size='3'>San Diego
reveal that it had been shortchanging its city workers’ pension
fund for years, setting off a wave of lawsuits, investigations and
eventually criminal indictments. Retirees are still being paid, but a
portion of their benefits is in doubt because of continuing legal
challenges. In addition the city, which is scheduled to receive a report
today on the causes of its current predicament, still has to figure out
how to close the $1.4 billion shortfall in its pension fund.
href='http://www.nytimes.com/2006/08/08/business/08pension.html?_r=1&oref=slo…'>Read
more.
name='2'>IBM Ruling
w:st='on'>
Way
A federal appeals court
reversed a lower court's finding that International Business Machines
Corp.'s pension plan discriminated against older workers, the
Wall Street Journal
reported today. The ruling, which involved IBM's move to
change from a traditional pension to a cash-balance pension plan, may
spur more companies to make the switch, employers say, and may have
implications for some of the roughly 400 companies with a total of more
than 1,200 cash-balance plans among them. The computer maker had settled
other aspects of the lawsuit for $320 million and had agreed to pay
additional benefits of $1.4 billion to 140,000 current and former
workers if it lost its appeal on the age-discrimination claim. The
plaintiffs, who are current and former IBM employees, intend to ask the
full appeals court to reconsider the ruling, saying it ignored key legal
distinctions between pension plans and defined-contribution savings
plans. The decision 'disregards the statutory provisions expressly
enacted by Congress to protect older workers from age discrimination,'
said a spokesman for the plaintiffs.
href='http://online.wsj.com/article/SB115496632580928789.html?mod=us_business…'>Read
more. (Registration required.)
Autos
name='3'>Tower Requests 60 More Days to Submit
Plan
Citing the size and
complexity of its chapter 11 case, Tower Automotive Inc. has asked the
bankruptcy court to allow it to retain sole control over its
reorganization for an additional two months,
size='3'>Portfolio Media reported yesterday.
Tower filed an extension request with the U.S. Bankruptcy Court for the
Southern District of New York on Friday, seeking until Oct. 25 to submit
a restructuring plan. Tower also asked for more time to gain creditor
support for the proposal, hopeful that the court will stretch the
solicitation period until Dec. 26. The latest extension plea marks the
company’s sixth such request since filing for bankruptcy in
February 2005. If the court dismisses the appeal, Tower’s
exclusive right to file a plan would expire Aug. 26, with the creditor
solicitation period set to end on Oct. 27. The case is
face='Times New Roman' size='3'>In re Tower Automotive
Inc., case number 05-10578, in the U.S.
Bankruptcy Court for the Southern District of New
York.
name='4'>GM Files Multi-Billion Dollar Claim Against
size='3'>Delphi
Delphi Corp. said that
General Motors Corp. filed a multibillion-dollar claim against Delphi
Corp., the Associated Press reported yesterday. Troy, Mich.-based
that the automaker submitted the claim July 31, the deadline for filing
unsecured claims against the auto parts supplier, which has sought
bankruptcy protection. GM's claim comes at a time when the committee
that represents creditors has asked a bankruptcy judge for permission to
take a bigger role in negotiations between
w:st='on'>
size='3'>Delphi
interests of creditors other than GM. According to court papers, the
committee seeks the right to sue GM and former Delphi executives who
helped transfer those obligations to
face='Times New Roman' size='3'>Delphi
size='3'>from GM. The request by the creditors' committee will be
considered at a hearing Aug. 17.
href='http://www.clarionledger.com/apps/pbcs.dll/article?AID=/20060808/BIZ/60…'>Read
more.
name='5'>Firms Seek Compensation in J.L. French
Bankruptcy
A law firm and a
financial advisor that served in the chapter 11 proceedings of J.L.
French Automotive Castings Inc. are seeking final compensation for
services performed during the auto parts company’s
restructuring, Portfolio
Media reported yesterday. Ashby & Geddes
PA served as
face='Times New Roman' size='3'>Delaware
counsel to the unsecured creditors’ committee and
is seeking compensation for the period from Feb. 22 to June 30, 2006.
Giuliani Capital Advisors LLC served as financial advisor to the
unsecured creditors’ committee and is seeking compensation for the
period from Feb. 22 to June 21, 2006. J.L. French, which has its North
America operations headquartered in
w:st='on'>
size='3'>Sheboygan
w:st='on'>
size='3'>Wis.
chapter 11 bankruptcy protection on Feb. 10, listing assets and
liabilities each in excess of $100 million. The case is
face='Times New Roman' size='3'>J.L. French Automotive Castings
Inc., case number 06-10119-MFW, in the U.S.
Bankruptcy Court for the District of Delaware in
w:st='on'>
size='3'>Wilmington
size='3'>.
name='6'>Northwest Air's Loss Widens on Bankruptcy
Spending
Northwest Airlines Corp.,
the fifth-largest
w:st='on'>
size='3'>U.S.
size='3'>carrier, said its second-quarter loss widened because of
spending related to its bankruptcy, Bloomberg News reported yesterday.
The loss increased to $285 million, or $3.27 a share, from $226 million,
or $2.69 a share, a year earlier, said the Eagan, Minn.-based airline.
Last month, the airline reached its goal of cutting annual labor costs
by $1.4 billion, part of the $2.5 billion in spending reductions
Northwest says it needs to emerge from court supervision as early as
next year. Excluding reorganization costs of $464 million, or $5.31 a
share, Northwest would have had net income of $179 million. Excluding a
gain from a stock sale and write-downs on aircraft values, the
year-earlier loss would have been $288 million.
face='Times New Roman' size='3'>Sales rose 3 percent to $3.29 billion,
as revenue for each seat flown a mile by Northwest and its
commuter-airline partners rose 16 percent. The yield, or average fare
per mile, increased 12 percent.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=ai6TS11WzCXE&refer=…'>Read
more.
In related news, if
Northwest Airlines flight attendants walk off their jobs next Tuesday,
the carrier's own passengers won't be the only ones to suffer, according
to a Washington
Post commentary today. The flight attendants
at the nation's fifth-largest airline have threatened to strike unless a
new contract agreement is reached, which could lead the airline to have
to find seats on other carriers for its displaced passengers. That means
planes already packed at record levels will get even more crowded. Over
the weekend, Northwest flight attendants passed out leaflets at airports
across the country alerting travelers of possible
disruptions.
size='3'>Northwest has asked a bankruptcy judge to block any job action
by its 9,300 flight attendants.
href='http://www.washingtonpost.com/wp-dyn/content/article/2006/08/07/AR20060…'>Read
more.
name='7'>Overhaul of Creditors' Panel Threatens Refco
Deal
Last-minute efforts by
the U.S. Department of Justice to shake up Refco’s
creditors’ committee have threatened to unravel a deal set to
repay Refco Inc.’s creditors at least $2.3 billion,
Portfolio Media
reported yesterday. Marc
Kirschner, the court-appointed administrator
of Refco’s Refco Capital Markets Ltd. subsidiary, is nearing an
Aug. 31 deadline to gain court approval for a settlement that he worked
out with multiple RCM customers and creditors. If Kirschner fails to
make the deadline, he will be required under the settlement to liquidate
RCM. Kirschner criticized the sudden shuffle of Refco’s creditors
for hampering the last phase of negotiations by causing a debate over
potential conflicts of interest, according to documents filed Friday
with the U.S. Bankruptcy Court for the Southern District of New York.
Kirschner asked a bankruptcy judge to allow Refco’s
creditors’ committee to switch back to the earlier nine-member
group for at least 45 more days.
name='8'>Global Crossings Suit Against CIBC to
Proceed
A lawsuit filed by
financially strapped telecommunications company Global Crossings Ltd.
against the Canadian Imperial Commerce Bank will now head to court after
a judge refused to toss the case completely, Portfolio
Media reported yesterday. The case, filed by
five representatives designated to pursue claims on behalf of the
company, alleges that the company’s major shareholders were aware
of misstated financials that inflated GC’s share price. The
shareholders, including the CIBC, financial services company Ullico
Inc., and GC founder Gary Winnick allegedly “exploited GC’s
inflated stock price in a series of self-dealing transactions.”
The complaint cites as an example the approval of a merger with U.S.
West, in which the shareholder defendants, who allegedly controlled
GC’s board of directors, realized almost $1 billion in profits
thanks to the tender offer they negotiated. CIBC has argued against the
allegations, moving to dismiss the case on the grounds that the
fraudulent-transfer claims against the bank were made after the
expiration of the statute of limitations. The case is
face='Times New Roman' size='3'>In re Global Securities et al. v.
Winnick et al., case number 02-cv-00910, in
the U.S. District Court for the Southern District of New
York.
SEC
Decides It Won’t Appeal on Hedge Funds
The Securities and Exchange
Commission said that it would not challenge a federal appeals court
ruling that overturned its new rules for the oversight of hedge funds,
the Associated Press reported yesterday. Because the appellate
court’s decision was based on several grounds and was unanimous,
“further appeal would be futile and would simply delay and
distract from our goal of advancing investor protection,” the
SEC’s chairman, Christopher Cox, said in a statement. However, the
SEC will introduce an anti-fraud rule under the Investment Advisers Act
as early as this week that would require more information on hedge fund
investors. “At my direction,” Cox said, “Commission
staff are also considering whether we should increase the minimum asset
and income requirements for individuals who invest in hedge
funds.”
href='http://www.nytimes.com/2006/08/08/business/08sec.html?pagewanted=print'>Read
more.
International
name='10'>Italian Bank Settles with Parmalat
Banca Popolare Italiana has
become the first Italian bank to settle with formerly bankrupt dairy
giant Parmalat SpA, which is seeking about €7.5 billion from 50
banks worldwide in
claw-back suits,
size='3'>Portfolio Media reported yesterday.
According to Friday’s settlement, BPI will pay Parmalat
€59.5 million, including €10 million in receivables. Both
sides will also drop all legal claims against each other and not file
any new lawsuits. Parmalat had sought €200 million from BPI for
allegedly prolonging the fraud that led to its financial collapse. Under
Italian law, Parmalat can sue its former lenders for any harmful
transactions in the year leading up to its bankruptcy. It now remains to
be seen whether other Italian banks will settle with Parmalat or
continue fighting the claims. In a separate agreement, Parmalat will pay
BPI €15 million to regain control of Sata, a Parmalat unit. As
part of the deal, the bank will forgive all claims against Sata. A third
agreement calls for BPI to pay €12 million to Parmatour, a travel
business formerly owned by the Parmalat group, forgive €27 million
in debt and release €716,000 in frozen funds.