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August 2, 2005
Krispy Kreme Reaches Compensation Deal with Turnaround Company
Krispy Kreme Doughnuts Inc. agreed yesterday to the terms of a
“success fee” for the turnaround specialists brought in to
return the struggling snack maker to profitability, the Associated Press
reported. Consultant Kroll Zolfo Cooper LLC (KZC) will get a warrant for
1.2 million shares at $7.75 a share for its work,
Winston-Salem–based Krispy Kreme said in a prepared statement. The
warrant allows KZC to purchase the shares and can be exercised on either
Jan. 29, 2006, or 30 days following the naming of a chief executive to
succeed Stephen Cooper, whichever is later, the company said.
Allied Holdings Files for Chapter 11
Automotive logistics company Allied Holdings Inc. filed for chapter
11 bankruptcy protection on Sunday, following its battle with rising
fuel costs, a decline in new vehicle production and increasing wage and
benefit obligations, the Atlanta Business Chronicle
reported yesterday. Allied said that it has secured debtor-in-possession
financing of up to $230 million from GE Commercial Finance, Morgan
Stanley Senior Funding Inc. and Marathon Asset Management, and that it
will use the funds to continue operations. Allied Holdings Inc. reported
a net loss of $33.4 million on $238.8 million in revenue in 2004,
following $36 million in non-cash charges related to accounting changes
and other issues. Allied Holdings’ revenue increased in the first
quarter of 2005, but its loss deepened due in part to higher pension and
workers’ compensation expenses.
Consumer Spending Up 0.8 Percent in June
U.S. consumer spending advanced 0.8 percent in June as shoppers took
to auto showrooms to enjoy sales incentives that helped keep inflation
in check, a government report showed today. Income in June rose 0.5
percent, the Commerce Department said, a touch stronger than the 0.4
percent gain analysts on Wall Street had expected. The increase in
spending, which was already reflected in a report on second-quarter
economic growth released on Friday, was as expected, Reuters reported.
An inflation index contained in the spending and income report showed
prices steady, both overall and excluding volatile food and energy
costs. Economists had expected the non-food and energy gauge to edge up
0.1 percent.
Delta, Northwest Eyeing Bankruptcy?
Delta Air Lines and Northwest Airlines could be filing for bankruptcy
protections in September in order to be covered by an existing
bankruptcy law rather than more restrictive legislation that will take
effect in October, according to a published report. The Washington
Post, citing bankruptcy experts and airline insiders, reported
today that a filing by both companies is likely in mid-September. It
reported that the airlines are expected to delay any action until after
the Labor Day weekend to avoid distressing employees during the busy
summer travel period.
In other news, Delta Air Lines
launched a redesigned web site yesterday as part of its effort to
improve efficiency and customer service, the Associated Press reported.
Delta has been trying to encourage more customers to buy tickets on
Delta.com, even offering 1,000 bonus miles to members of its frequent
flier program who do so. The airline said that the new site gives
customers more control over online ticket changes, seat assignments and
check in; the ability to cancel certain tickets within 24 hours; the
ability to calculate award mileage; more international award travel
booking capability; and the ability to check in when connecting from
Delta to certain other airlines.
Tower Struggles to Regain Profitability
Tower Automotive Inc., the world’s largest vehicle frame
supplier, is
href='http://www.detnews.com/2005/autosinsider/0508/02/C06-266361.htm'>making
progress with its turnaround after filing for bankruptcy protection
in February, the Detroit News reported today. But the
hardest part may still be ahead. The Novi, Mich.–based supplier is
on schedule to submit a reorganization plan this fall. If approved by
the courts, the plan could bring big changes to the size and scope of
Tower’s business. The company hopes to emerge from bankruptcy in
12 to 18 months. The need for a turnaround was highlighted Monday when
the supplier reported a $124 million loss in June for its North American
operations. While under the supervision of the bankruptcy court, Tower
is required to make monthly financial reports. Last week, the supplier
reported a wider loss of $533.9 million for 2004, compared to a $124.7
million loss a year earlier.
href='http://www.detnews.com/2005/autosinsider/0508/02/C06-266361.htm'>Read
the full report.
Archbishop Levada Deposition Postponed until January
A federal bankruptcy judge has agreed to postpone the deposition of
Roman Catholic Archbishop William Levada in the Portland, Ore.
Archdiocese sex abuse bankruptcy case until January, the Associated
Press reported yesterday. Levada was the Archbishop of Portland from
1986–1995. U.S. Bankruptcy Judge Elizabeth Perris, in an
order signed last Friday, agreed to allow Levada to give a deposition in
Portland Jan. 12, 2006, rather than this month. Court papers stipulate
that Levada agree to acknowledge the jurisdiction of the court and to
waive any diplomatic immunity he may have or acquire because of his
elevated status in the Vatican, a sovereign state. The court filings
also state that Levada will let the scope of his testimony and the
validity of any privileges he may claim be decided by the court.
Former MCA Vice President Pleads Guilty
A former MCA Financial Corp. executive pleaded guilty Monday in
federal court to concealing a $250 million scheme to defraud investors
and lenders, the Associated Press reported yesterday. John P.
O’Leary, MCA’s former senior vice president for corporate
finance, pleaded guilty before U.S. District Judge Nancy G. Edmunds to
one felony-related count, the U.S. Attorney’s office said.
O’Leary, 52, was with the mortgage lender from 1994 until fall
1998 and was also on MCA’s Financial Management Committee. In
January 1999, state regulators seized MCA after the company shut down
its operations and laid off about 900 employees. The following month,
the state filed a bankruptcy petition for MCA.
Group Examines Reasons for Credit Card Interest Rate Hikes
A consumer advocacy group found that penalties allow card companies
to raise interest rates for almost any reason, the New Orleans
Channel.com reported yesterday. The group, Consumer Action, surveyed 150
credit card companies and uncovered the top reasons that creditors
impose higher penalty rates. Consumer Credit Counseling Services
spokesman Tom Collens said that creditors are closely measuring consumer
risks, which means a person’s interest rate could go up if their
credit score gets worse or if they’re late paying a mortgage, a
car loan or other credit obligation.
A Spatial Model of the Impact of State Bankruptcy Exemptions on
Entrepreneurship
The
href='http://hawaiireporter.com/story.aspx?812e173d-b2fe-4c2b-bf8d-d981db1fe3…'>actions
of state policy-makers directly affect business starts and closures,
according to a study released yesterday by the Office of Advocacy of the
U.S. Small Business Administration (SBA), the Hawaii
Reporter reported. Using sophisticated spatial modeling, the
report finds that entrepreneurs make decisions about starting and
closing businesses based not only on conditions in their current
location, but on conditions in neighboring states. The result is that
states with conditions more favorable to small business see an increase
in entrepreneurial activity.
href='http://hawaiireporter.com/story.aspx?812e173d-b2fe-4c2b-bf8d-d981db1fe3…'>Read
the full article.
Battle Looms over Georgia Water Rights
Who owns Georgia’s water? Until recently, the answer was
straightforward: the state of Georgia does, on behalf of its residents.
But
href='http://www.gainesvilletimes.com/news/stories/20050801/localnews/1419.sh…'>a
controversial court ruling could allow private ownership of water,
jeopardizing the resource throughout the state, the Gainesville
Times reported yesterday. In May, a federal bankruptcy court in
Brunswick ruled that the defunct Durango Georgia Paper Co. in St. Marys,
which was trying to dispose of its assets, could sell its water
withdrawal permit to the highest bidder. The decision resurrected an
issue that environmentalists thought had been settled. In 2003, advocacy
groups lobbied against state legislation that would have allowed water
rights to be sold or traded. The bill was defeated. But now the Durango
court case has opened a Pandora’s box.
href='http://www.gainesvilletimes.com/news/stories/20050801/localnews/1419.sh…'>Read
the full story.
PacifiCare Execs’ Deal Is Detailed
href='http://www.latimes.com/business/la-fi-pacificare2aug02,1,6240975.story?…'>Top
executives of PacifiCare Health Systems Inc. would earn nearly $230
million if it was acquired by industry giant UnitedHealth Group Inc. by
Feb. 1, according to documents filed with the state yesterday, the
Los Angeles Times reported. In their filings, the
companies, which announced the $8.1 billion deal last month, said that
most of that money would come through accelerated vesting of
now-lucrative PacifiCare stock options that the company granted its top
officers years ago, when it was on the verge of filing for bankruptcy
and needed to attract and retain talent.
href='http://www.latimes.com/business/la-fi-pacificare2aug02,1,6240975.story?…'>Read
the full story.
RCN to Sell Debt
RCN Corp. registered for the public sale of up to $125 million of
convertible debt held by investors who helped finance RCN’s exit
from chapter 11 bankruptcy last year, the Washington Post
reported yesterday. RCN provides bundled cable TV, telephone and
Internet service. It owns systems in Boston, New York; eastern
Pennsylvania; Chicago; San Francisco; Washington, D.C. and Los Angeles.
The company emerged from chapter 11 in December as a publicly traded
company.