January 102002

January 10, 2002

Robert J. Faris Appointed Bankruptcy Judge For District of
Hawaii

Chief Judge Mary M. Schroeder of the U.S. Court of Appeals for the Ninth
Circuit on Tuesday announced that Robert J. Faris was appointed to the
U.S. Bankruptcy Court for the District of Hawaii, filling the vacancy
left by Judge Lloyd King’s retirement, according to a Ninth
Judicial Circuit release.  Faris will begin his 14-year term on
Feb. 14 and will maintain chambers in Honolulu.  Faris is currently
a director and vice president of the Honolulu law firm of Gelber,
Gelber, Ingersoll, Klevansky & Faris.  He received his juris
doctorate from Boalt Hall School of Law at the University of California
at Berkeley and his bachelor’s degree from Reed College in
Portland, Ore.



U.S. Set for $1 Trillion of Internet Writeoffs

U.S. companies could be forced to write off a total of $1 trillion in
the first three months of this year to cover the cost of acquisitions
made at the peak of the Internet boom, analysts said yesterday, The
Times reported.  Under new accounting rules that have already
forced AOL Time Warner to write off up to $60 billion, U.S. companies
will have to give details of the amount they overpaid for acquisitions
during the boom of the late 1990s and early 2000.  The write-offs
will be unprecedented in stock market history and will result in U.S.
businesses reporting losses of a magnitude never seen before. 
Alfred King, vice-chairman of Valuation Research, and other analysts
believe the total could reach $1 trillion.



The new accounting rules, introduced by the Financial Accounting
Standards Board (FASB) on Jan. 1, force U.S. companies to declare any
fall in the value of “goodwill” they paid for
acquisitions.  Goodwill is the premium paid for an acquisition over
and above what accountants call the “fair value” of its
assets.  The fall in the stock market value of high-tech companies
since early 2000 has resulted in hundreds of billions of dollars of this
goodwill being wiped out. But before the new accounting rules were
introduced U.S. companies could spread goodwill charges over a period of
up to 40 years, effectively making it irrelevant.  Now companies
have to report changes to goodwill annually.



Other companies expected to make big write-offs include media group
Viacom and telecom companies AT&T and Qwest Communications. 
According to recent filings with the Securities and Exchange Commission,
Viacom has about $72 billion of goodwill on its books, while AT&T
has $25 billion and Qwest has $ 34 billion.

Court Sets Jan. 31 Hearing On Sale of Greate Bay Unit

The U.S. Bankruptcy Court in Wilmington, Del., on Monday set a hearing
date of Jan. 31 to consider Greate Bay Casino Corp.’s proposed
sale of a non-debtor subsidiary to a unit of Bally Gaming Inc. for $14.6
million, according to a Greate Bay attorney, Dow Jones reported. 
Dallas-based Greate Bay, which filed for bankruptcy on Dec. 28, is
seeking to sell the stock of wholly owned subsidiary Advanced Casino
Systems Corp. in a private sale, and assume a stock purchase related to
the unit’s interests.  In a sale motion, Greate Bay said it
believes HWCC-Holdings Inc., a wholly owned unit of Hollywood Casino
Corp., is the only significant creditor affected by the bankruptcy
case.

Greate Bay has reached an agreement with Hollywood Casino on a plan
to resolve $63.5 million of debt that Greate Bay owes Hollywood
Casino.  Greate Bay said the plan included the sale of its primary
asset, Advanced Casino Systems, to a unit of Alliance Gaming Corp. for
$14.6 million, subject to post-closing adjustments.  Greate Bay has
also filed an alternative motion, through which the company proposes
overbid procedures for Advanced Casino Systems as well as a breakup fee
for ACSC Acquisitions if it isn’t ultimately the winning
bidder.

Washington Group Gets $350 Million Revolving Credit Facility

Washington Group International Inc. (WGI) has secured a $350 million,
30-month revolving credit facility, essentially completing the
company’s financial restructuring, Dow Jones reported.  The
engineering and construction company expects its reorganization plan,
which was confirmed on Nov. 20, will become effective by the end of this
month.  WGI said the credit line, which is subject to court review
and final documentation, would be used for working capital needs and
general corporate purposes.  WGI filed for chapter 11 bankruptcy
protection on May 14 in the U.S. Bankruptcy Court in Reno, Nev., listing
assets of $3.7 billion and liabilities of $3.3 billion.

NationsRent Seeks Approval of $8.5 Million Employee Retention
Plan

Bankrupt construction supplier NationsRent Inc. is seeking court
permission to enact an $8.5 million retention and severance plan to keep
its workforce intact during its chapter 11 proceedings, according to Dow
Jones.  The company’s retention plan would cover 380
employees that NationsRent considers vital to its financial
restructuring. A hearing on the retention and severance plan is
scheduled for Jan. 18 in the U.S. Bankruptcy Court in Wilmington,
Del.  Court documents said the retention plan is needed to
forestall worker defections in the wake of its chapter 11
proceedings.  Employees covered under the retention plan would
receive bonuses based on their level of responsibility and role in the
organization.

Fort Lauderdale, Fla.-based NationsRent also wants to establish a
severance plan that would provide benefits for 120 employees if their
employment is terminated without cause.  NationsRent filed for
chapter 11 bankruptcy protection on Dec. 17, listing $1.58 billion in
assets and $1.19 billion in debts.

Play By Play Toys Receives Interim Court Approval of Retention
Plan

Play By Play Toys & Novelties Inc. announced that it received
partial approval of an employee retention plan after some parties
expressed concern that they needed more time to evaluate the
company’s motion, according to Dow Jones.  U.S. Bankruptcy
Judge Ronald B. King of the U.S. Bankruptcy Court in San Antonio decided
the plan should be approved in part, but that a final hearing would be
held on Friday to allow the parties more time to evaluate the
motion.  King signed an interim order on Monday that authorizes
Play By Play Toys to pay bonuses to eligible employees, but limits the
bonuses to one month for management and two weeks for other
workers.  

San Antonio, Texas-based Play By Play Toys said it was seeking the
plan’s approval to keep remaining employees through the
company’s ongoing liquidation.  The company and its units
filed for chapter 11 bankruptcy protection on Oct. 31, listing total
assets of about $36.8 million and total liabilities of nearly $46.6
million as of Sept. 20.



ENRON UPDATE

Enron’s Creditors Ask Bankruptcy Judge to Postpone Sale of Its
Trading Business

As the auction of bankrupt Enron Corp.’s trading business
approaches, creditors are lining up to oppose the sale, Dow Jones
reported.  Creditors are concerned about how Enron will allocate
money from that auction to its bankrupt units, and are asking federal
Bankruptcy Judge Arthur J. Gonzalez to withhold approval of the
sale, which could come as early as tomorrow.  More than 15
companies have filed motions asking the U.S. Bankruptcy Court for the
Southern District of New York to delay the approval of any offer for
Enron’s power-trading business.  The companies want time to
figure out which assets are up for sale, which of the more than 3,000
Enron affiliates and other entities will benefit from the sale and how
various creditors will be affected.

Democrats Get Information on Enron,
Cheney      

Because of Enron Corp.’s sudden bankruptcy, congressional
Democrats have won their first victory in a nine-month effort to squeeze
information from the Bush White House on its ties to the energy
industry, reported the Associated Press.  For the first time, the
White House is acknowledging that Enron representatives met six times
with Vice President Dick Cheney or his aides on energy issues last year,
most recently in mid-October just before the investing public realized
the company was heading for disaster.  Since last April, Cheney had
fended off congressional requests for the identities of business
executives and lobbyists who met with the White House as the
administration formulated its pro-industry energy plan.

The picture changed when Rep. Henry Waxman (D-Calif.) began pressing
the White House about last month’s Enron crash, whose CEO Ken Lay
is among President Bush’s biggest political supporters. 
“It is appropriate to ask whether Enron communicated to you or
others affiliated with your task force information about its precarious
financial position,” Waxman wrote to the vice president. 
“This is especially important since this information was
apparently hidden from investors and the public until quite
recently.” The vice president’s office said the last Enron
meeting with a Cheney aide was on Oct. 10, just six days before the
first in a series of public admissions by the company about its true
financial condition that sent it careening into bankruptcy court. 
Enron’s financial position wasn't discussed in any of the
meetings, vice presidential counsel David Addington insisted in a
letter. 

Congressional Panel to Issue 51 Subpoenas on Enron

The Senate’s Permanent Subcommittee on Investigations will issue
51 subpoenas seeking documents on the collapse of Enron Corp. on Friday,
the committee told Reuters yesterday.  The document subpoenas were
thought to be the first to come out of Congress, although federal agents
have already invoked their subpoena power to compel testimony on
Enron.

Subpoenas will be served on Enron and its auditor, the accounting
firm Arthur Andersen, as well as 49 individual officers, employees, and
members of Enron’s board of directors, a committee spokesperson
said.  Robert Bennett, a lawyer representing Enron on Capitol Hill,
said he was aware of the subpoena plan and that Enron iss “fully
cooperating” with the subcommittee.  Last week, the
subcommittee joined four other congressional panels, the Securities and
Exchange Commission, and the departments of Justice and Labor in probing
Enron.   

Judge Says Enron Funds Could Be Frozen

A federal judge says she has the authority to freeze proceeds of more
than $1 billion allegedly gained by top Enron Corp. officials who sold
millions of shares before the energy giant collapsed, according to the
Associated Press.  But U.S. District Judge Lee Rosenthal in Houston
also said in a ruling issued on Wednesday that lawyers for Amalgamated
Bank and other plaintiffs need to present a stronger argument to
convince her to freeze those proceeds.



Rosenthal’s ruling emerged from a lawsuit filed last month on
behalf of Amalgamated and other Enron investors against 29 current and
former Enron executives and board members who sold huge chunks of stock
before the company imploded late last year.  The suit alleges that
the defendants — including Chairman Ken Lay and Sen. Phil
Gramm’s (R-Texas) wife, Enron board member Wendy Gramm —
engaged in a three-year pattern of fraud and deception that caused Enron
shares to fall from a high of about $80 a year ago to less than a
dollar.  Amalgamated Bank claims it lost more than $10 million in
the meltdown, and the suit is seeking $25 billion in damages. 
Plaintiffs want stock sale proceeds from October 1998 through last
November frozen so their allegations can be investigated further. 
They also want to prevent any defendants from dissipating or concealing
those profits.

Justice Department Begins Enron Probe

The Justice Department has begun a criminal investigation of Enron
Corp., the bankrupt energy company whose collapse caused many employees
to lose their life savings, the Associated Press reported.  Robert
Bennett, a Washington attorney representing the Houston-based company,
welcomed the inquiry, the latest in a series of governmental probes into
the company’s demise, saying the investigation would “bring
light to the facts.”



The Justice Department is forming a national task force to look into the
company’s dealings. The group will be headed by lawyers at the
department’s criminal division and include prosecutors in Houston,
San Francisco, New York and several other cities, according to a Justice
Department official.  The official declined to say when the
investigation began. Enron faces civil investigations by the Labor
Department and the Securities and Exchange Commission and subpoenas from
congressional committees.  All are looking into the energy trading
company’s collapse, the largest bankruptcy filing in U.S.
history.

McDermott Wins Asbestos Insurance Ruling

McDermott International Inc. and its Babcock & Wilcox Co. unit were
granted motions for summary judgment against a group of London
underwriters in an asbestos claims case, Dow Jones reported.  
The New Orleans-based energy services company said the U.S. District
Court for the Eastern District of Louisiana dismissed the declaratory
judgment action filed by the insurers.  Lloyd’s of London
underwriters and London-based Turegum Insurance Co. charged that
McDermott breached a long-standing coverage agreement by pursuing a
chapter 11 reorganization plan for Babcock as a way of dealing with
rising asbestos claims against the engineering unit. The underwriters
had sought to annul the agreement that acknowledges coverage for Babcock
& Wilcox’s asbestos exposure and sets forth the agreements of
the insurers to pay claims within that coverage.  Judge Sarah S.
Vance concluded that the underwriters’ claims lacked a factual or
legal basis. Babcock & Wilcox, which purchased rather than
manufactured asbestos for its asbestos-insulated commercial boiler
systems, faced about 45,000 claims and 18,000 lawsuits when it filed for
chapter 11 bankruptcy protection on Feb. 22, 2001.

Bankrupt Spinnaker Delisted From Stock Exchange

Adhesive label stock manufacturer Spinnaker Industries Inc., which has
filed for bankruptcy protection, yesterday announced that its common and
Class A common stocks were delisted from the American Stock Exchange,
effective on Dec. 28, 2001, Reuters reported.  The Troy,
Mich.-based company also said it applied to the Securities and Exchange
Commission to terminate its obligation to file periodic financial
reports.  

California Court to Hear Chromium Lawsuits Against
PG&E

The judge in the Pacific Gas & Electric (PG&E) bankruptcy case
ruled that 1,250 claims of chromium poisoning against the utility should
be heard in a California state court rather than in the bankruptcy
court, reported Reuters.  The claims seeking $500 million for
alleged cancers and other illnesses from the PG&E Corp. subsidiary
have links to a 1993 environmental case that inspired the 2000 Academy
Award-winning movie “Erin Brockovich.”  U.S. Bankruptcy
Court Judge Dennis Montali said the claims belong in state court
because they involve state law and there is no legal reason to transfer
them to federal court, where PG&E wanted them dismissed. 

California PUC Approves SoCal Edison, QF Contract
Amendments

California regulators yesterday approved contract amendments between
Edison International unit Southern California Edison (SoCal Edison) and
small alternative generators who are owed about $1.1 billion for past
power deliveries, reported Dow Jones.  The generators — known
as qualifying facilities or QFs — will be paid for past deliveries
after insolvent SoCal Edison secures bridge financing to repay its
creditors. The company plans to repay all creditors by the end of March,
said spokesman Gil Alexander.  All but one or two QFs have signed
the contract amendments which the California Public Utilities Commission
approved, he said. 

House of Lloyd Lays Off Remaining Employees

Hundreds of people were laid off on Tuesday, and the company holding
House of Lloyd is filing for bankruptcy protection, KMBC 9 News
reported.  The remaining 238 people working at the House of Lloyd
were told late Tuesday afternoon that they had 30 minutes to collect
their things and leave the company’s Grandview, Mo.,
headquarters.  Tuesday’s layoffs were apparently the last of
five previous rounds of layoffs.  For more than 30 years, House of
Lloyd has sold a variety of gifts, home accents, and
kitchenware—most of it imported—employing a network of
20,000 independent salespeople. 

Three Washingon, D.C.-area Tech Companies Plan Liquidation


Three more Washington area technology firms — Dulles, Va.-based
IPOptical Inc., Reston, Va.-based PowerTrust.com Inc. and Landover,
Md.-based BroadPoint Communications Inc. — have filed for chapter
7 liquidation, according to bankruptcy court documents, reported The
Washington Post.  IPOptical, which was developing technology to
speed data transfers on the Internet, announced plans to close last July
after it laid off its 90 employees and sought unsuccessfully a lead
investor to assemble the $15 million needed to continue operating.
IPOptical listed assets of $973,000 and liabilities of $6.7
million.  The company said it had 16 to 49 creditors, with Agilent
Technologies Inc. as the largest unsecured creditor, with a $6 million
loan.

PowerTrust.com, which sold electricity over the Internet, listed
assets of $1 million to $10 million, and debts at $10 million to $50
million.  The company said it had 50 to 99 creditors. 
PowerTrust.com affiliates PowerTrust Energy Services Inc. and
Southeastern States Energy Inc. also filed for voluntary chapter 7
liquidation.

E.spire Sells Subsidiaries

E.spire Communications, a Herndon, Va.-based Internet and telephone
carrier, sold two web-hosting subsidiaries for $22.8 million to George
F. Schmitt, the company’s chairman, after he outbid Interland,
reported The Washington Post.  The sale occurred as a part
of bankruptcy proceedings the company has been involved in since last
March. Proceeds will be used to repay some creditors.

Companies Saw Bankrupt Dot-com Buying Binge in 2001 (Yahoo!
Finance)

Established companies spent almost $40 billion last year to scoop up
bankrupt dot-com companies, taking advantage of bargain prices left by
the Internet shake-out to bolster their online assets, according to a
study released on yesterday, Reuters reported.  About $39.7 billion
was spent in 2001 for 1,289 Internet companies after a market downturn
forced scores of web start-ups into bankruptcy sales, said
Webmergers.com, a San Francisco-based online marketplace for Internet
companies. Altogether, they spent about $19.9 billion for 575 companies
that provide software, network tools and other infrastructure technology
allowing commerce over the Internet.  To read the entire story,
point your browser to
href='http://biz.yahoo.com/rf/020109/n09197574_2.html'>http://biz.yahoo.com/rf/020109/n09197574_2.html.

Laidlaw Reaches Settlement On Fraud Class-action Suit

Laidlaw Inc. said all parties have reached an agreement in principle to
settle the securities fraud class-action litigation filed by some of
Laidlaw’s bondholders, Dow Jones reported. The company said the
bondholders involved in this action are those who purchased securities
of Laidlaw during the period between Sept. 24, 1997 and March 13,
2000.  The company said the lawsuit alleged that, during that
period, Laidlaw and the other defendants “disseminated to the
investing public false and misleading financial statements and press
releases concerning the relative priority of certain of Laidlaw’s
debentures and the company’s financial condition.” 
Laidlaw and the other defendants denied all liability.



The settlement is subject to the execution of a definitive settlement
agreement and the approval of the U.S. District Court for the District
of South Carolina, as well as the approval of the U.S. Bankruptcy Court
for the Western District of New York, where Laidlaw’s chapter 11
case is pending, and of the court in Canada that is presiding over
Laidlaw’s reorganization.  Burlington, Ontario-based Laidlaw
provides school and intercity bus transportation and ambulance
services.



Boca Pops Sold at Bankruptcy Auction

After a half-century as a cultural icon on the South Florida arts scene,
the Boca Pops is gone — its entire collection of music,
instruments and office equipment sold off on Tuesday piece by piece to
the highest bidder, The South Florida Sun-Sentinel
reported.  Problems began spreading in November, when the orchestra
announced it could not overcome a $1 million deficit out of $2.1 million
budget.  Pleas to the community for help a month earlier had gone
unheard, and a local economy reeling from the Sept. 11 terrorist attacks
only hastened the Pops’ demise.  The Boca Raton, Fla.-based
orchestra then filed for chapter 7 bankruptcy protection. Bankruptcy
Trustee Robert C. Furr said he hoped to get “a couple hundred
thousand dollars” after liquidating assets by the end of the
auction but the three-hour auction resulted in a preliminary total of
$98,000.

More Bankruptcy Headlines

For more bankruptcy stories, point your browser to ABI’s
‘Bankruptcy Thursday’ at
href='/bankruptcythursday/index.html'>http://www.abiworld.org/bankruptcythursday/index.html.