February 17, 2004
Martha Stewart Living Is Sued By Kmart Over Royalties Pact
Escalating a dispute between two strained partners, Kmart Holding
Corp. sued Martha Stewart's company, accusing it of demanding excessive
royalties on sales at Kmart stores, the Wall Street Journal
reported. Kmart claims that a subsidiary of Martha Stewart Living
Omnimedia Inc. is overstating the royalties it should collect from sales
of Martha Stewart-brand merchandise. The discount retailer alleges the
division of Martha Stewart Living has breached an implied agreement to
deal with Kmart 'in good faith.' Kmart did not specify the damages it is
seeking in its suit, which it filed on Wednesday in the U.S. Bankruptcy
Court in Chicago.
U.S. Judge Freezes Assets of Correo Argentino
A U.S. court has frozen the assets of Correo Argentino S.A., a mail
delivery company that owes money to the Argentine government, in an
action initiated by an investor trying to collect money lost in the
country's 2002 bond default, a lawyer in the case said, Reuters
reported. 'We asked the judge to hold money in the New York accounts of
Correo Argentino until it is determined to whom those funds belong,'
said Guillermo Gleizer, lawyer for Macrotecnic International, an
Uruguayan company that holds $550,000 in defaulted Argentine bonds. U.S.
District Judge Thomas Griesa on Friday issued an order freezing the
assets of Correo Argentino, Gleizer said. Griesa will hold a conference
today to determine whether Macrotecnic has a right to seize the assets.
This is the third time a U.S. court has ordered the freeze of Argentine
assets on behalf of bond holders. Last week U.S. courts froze Argentine
state properties in Washington, D.C. and Maryland. Investors hope the
rulings will pressure Argentina into softening its stance on the debt
restructuring. Argentina has said it will appeal these cases, reported
the newswire.
Eurotunnel Seen Swapping Debt for Equity
Debt-saddled Eurotunnel may swap almost four billion of its six billion
pounds of debt for equity, analysts said on Monday, Reuters reported.
Eurotunnel declined to comment, reiterating last week's announcement
that it needed to restructure its debt to implement planned reductions
in tunnel access charges, after a full-year loss of 1.9 billion euros
($2.42 billion). The Anglo-French Channel Tunnel operator is no stranger
to restructurings after pulling back from the brink of bankruptcy in
1995 when it stopped interest payments and sought the help of France and
Britain. A debt rescheduling deal took until 1997 to be approved. 'Our
expectation is that significant amounts of debt will have to be
converted into equity,' said a credit analyst on Monday.
The company was in discussions last week with the British government and
the financier of a new rail link from the tunnel to London, London &
Continental Railways Ltd. If Eurotunnel succeeded in negotiating a cash
injection, this could increase the value of the company's shares and
increase the palatability of a debt-for-equity swap, the analyst said,
Reuters reported.
ENRON
Royal Bank to Take $74-Million Earnings Hit on Rabobank Enron Swap
Dispute
A dispute over an Enron-related derivative agreement will cost the Royal
Bank of Canada $74 million, the Associated Press reported. Canada's
largest bank disclosed on Monday that it has reached a settlement with
Cooperative Centrale Raiffeisen Boerenleenbank (Rabobank). The
18-month-old dispute arose over Rabobank's refusal to honor a
$517-million U.S. swap transaction signed in January 2001. Royal Bank
gave no details of the settlement, beyond saying it will 'result in a
reduction to net income after tax of $74 million Cdn for the first
quarter of 2004.' Paul Wilson, a spokesman for RBC Capital Markets, said
the settlement 'will allow us to put this matter behind us without the
further expense and distraction of continued litigation.'
Enron Ex-Official Skilling Might Be Indicted This
Week
The expected indictment of former Enron Corp. President Jeffrey
Skilling, might come as early as this week, the Wall Street Journal
reported. Any charges against Skilling would likely be similar to some
of those that have already been leveled against former colleagues at the
energy company that collapsed into bankruptcy proceedings in December
2001. People familiar with the investigation say federal officials have
been looking at Skilling in connection with Enron's complex financial
and accounting practices. The company created a myriad of
off-balance-sheet entities that the government has contended improperly
created large amounts of reported income and hid like amounts of debt,
reported the online newspaper.
XO to Acquire Allegiance
XO Communications Inc. plans to acquire Allegiance Telecom Inc. for $310
million and 45.4 million common shares after winning a bankruptcy
auction, the Wall Street Journal reported. Based on XO's price of
$6.99 in late over-the-counter trading on Friday, the stock portion of
the deal is valued at $317.3 million. Allegiance filed for chapter 11
bankruptcy-court protection in May after failing to restructure $1.2
billion in debt. XO will acquire all Allegiance assets, excluding its
customer premise equipment sales and maintenance business, its managed
modem business and some other operations. XO said it hopes to submit the
deal by Feb. 19 for approval by the U.S. Bankruptcy Court for the
Southern District of New York. However, one of Allegiance's largest
customers has said it opposes the proposed sale, which it believes would
lead to a breach of its service contract with Allegiance, reported the
online newspaper.
At Two Airlines, Management and Unions Focus on Cuts
Unions and management at two troubled airlines are facing off over cuts
that executives say are critical to their companies' survival, the
New York Times reported. At United Airlines, the battle is over
reductions in health care benefits for 35,000 retired workers.
Executives say the savings are necessary for the airline to secure
federal loan guarantees and emerge from bankruptcy protection as planned
later this year.
Meanwhile, US Airways wants a third round of concessions from its
unions, on top of two granted while it was in bankruptcy. It sees the
wage and benefit cuts as a major component in its drive to reduce its
costs to the level of low-fare carriers.
At United, flight attendants are leading a charge to stop the airline
from carrying out its plans, laid out in a bankruptcy court motion last
month, to have retirees pay more for medical coverage. United, which
hopes to exit chapter 11 protection by June 30, said in the court filing
that it hoped to negotiate any reductions with its labor groups. The
union, however, said it would ask a bankruptcy court judge on Friday to
appoint an examiner to investigate the situation. Read the
href='http://www.nytimes.com/2004/02/17/business/17air.html?pagewanted=all'>full
article.
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