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September 25, 2003
Oxley Pushed for Passage of FCRA
House Financial Services Chairman Michael Oxley (R-Ohio) yesterday
said he is 'confident' Congress will complete its work this year on
legislation to permanently extend the Fair Credit Reporting Act's (FCRA)
expiring state pre-emption provisions, CongressDaily reported.
'Before the Congress goes home for this session, we need to get that
bill on the president's desk, given the great bipartisan cooperation
we've had in the House and the speed in which the Senate acted,' Oxley
told a National Association of Federal Credit Unions conference. Oxley
called the seven-year-old FCRA pre-emption provisions 'one of the most
successful financial services measures ever passed by any Congress.'
Those pre-emptions are scheduled to expire at the end of this year.
The House approved an extension of those provisions earlier this
month on a 392-30 vote, and the Senate Banking Committee approved its
version of the legislation on Tuesday. Both versions of the legislation
also would provide consumers with stronger federal protections against
identity theft and greater access to their credit report information.
But unlike the House bill, the Senate bill includes an 'affiliate
sharing' provision enabling consumers to 'opt out' of receiving certain
commercial solicitations, reported the newswire.
Bankrupt UAL Posts August Profit, Meets DIP Target
UAL Corp.'s United Airlines said on Wednesday it posted August net
income of $68 million, excluding $114 million in costs related to its
reorganization, Reuters reported. The airline said it had an operating
profit for the month of $105 million. The Elk Grove Village, Ill.-based
carrier filed the largest bankruptcy in aviation history in December,
and has said it hopes to emerge from chapter 11 protection by mid-2004.
United said it continued to generate positive cash flow in August and
met the requirements of its debtor-in-possession financing for the
seventh straight month.
As part of its DIP financing agreements, UAL's lenders required the
company to achieve a cumulative EBITDAR (earnings before interest,
taxes, depreciation, amortization and aircraft rent) loss of no more
than $219 million between Dec. 1 and Aug. 31. United ended August with a
cash balance of $2.4 billion, including $698 million in restricted cash
and up slightly from $2.3 billion at the start of the month. CFO Jake
Brace said United expects to meet its September DIP covenants as well.
He added that bookings are better than expected as the company heads
into the fall and winter seasons, reported the newswire.
Enron Files Court Complaint Against Six of Its Former Banks
Enron Corp. filed a complaint on Wednesday against six of its former
banks and investment banks, the Wall Street Journal reported. In
a 280-page filing yesterday in the U.S. Bankruptcy Court in Manhattan,
the Houston energy company alleged that its banks gave bad financial
advice that contributed to Enron's rapid unraveling in late 2001. Named
in the complaint are Citigroup Inc., J.P. Morgan Chase & Co.,
Merrill Lynch & Co., Deutsche Bank AG, Barclays PLC and Canadian
Imperial Bank of Commerce, and various subsidiaries and affiliates of
those companies, the online newspaper reported.
The complaint alleges that the banks 'bear substantial
responsibility' for Enron's downfall because they participated 'with a
small group of senior officers and managers of Enron in a multiyear
scheme to manipulate and misstate Enron's financial condition.' The
banks helped Enron insiders design structured finance transactions, the
complaint says, 'knowing' that the Enron insiders were improperly
accounting for the transactions. The banks were motivated by 'the
irresistible temptation of enormous fees and other revenue,' the
complaint said, reported the Journal.
MCI Asks Bankruptcy Judge To Hold AT&T in Contempt
MCI on Wednesday filed a motion in bankruptcy court asking Judge Arthur
J. Gonzalez to hold AT&T Corp. in contempt of court, the Wall
Street Journal reported. MCI's motion states that AT&T on Sept.
2 filed a complaint against MCI in the U.S. District Court for the
Eastern District of Virginia 'in direct violation of the automatic
stay,' according to the Journal. In the motion, MCI says AT&T
filed the complaint without permission of the bankruptcy court, 'in
spite of AT&T's prior representation [...] that it would not proceed
to file the complaint' unless the court authorized it to do so. MCI says
in the motion that AT&T's complaint 'appears to be directed more at
generating negative publicity and derailing [MCI's] reorganization.'
AT&T, based in Bedminster, N.J., defended its action in a
statement that says: 'AT&T firmly believes that we did not violate
the automatic stay in the bankruptcy court and that we were well within
our rights to file the Virginia lawsuit.' A hearing on the issue has
been set for Oct. 21, reported the newspaper.
Xcel Energy Delays October Dividend Payments
Xcel Energy Inc. today said it has delayed its October dividend payments
on preferred and common shares, due to a law requiring utilities to have
retained earnings at least equal to their dividend payment, Reuters
reported. It also said it expects to have sufficient retained earnings
by the end of October to declare and pay its preferred dividends. The
Minneapolis-based power and gas utility said its retained earnings are
negative because of charges at its bankrupt NRG Energy unit.
Xcel said it has enough cash on hand to make the payments, but it has
not yet been able to secure a waiver of the Public Utility Holding
Company Act requirement from the Securities and Exchange Commission. If
NRG's bankruptcy plan is accepted in December and earnings for the rest
of the year are as expected, Xcel said it will be able to declare and
pay the October common stock dividend in December and declare the
dividends payable in January 2004, reported the newswire.
Delaware Court Says Sale of GM Building Can Proceed
A Delaware court on Tuesday refused to stop Conseco Inc'.s $1.4 billion
proposed sale of the General Motors Building in New York City, despite a
rival bidder's accusation that the auction was unlawful and unfair, a
lawyer for Conseco said, Reuters reported. Chancellor William Chandler
of the Delaware Court of Chancery declined to halt the sale of the
building to Macklowe Properties on the grounds that rival bidder Solow
Building Corp. failed to show it would have won its suit, Conseco's
lawyer said.
Last week Solow sued Conseco's subsidiaries-Carmel Fifth LLC, 767
Intermediate LLC, and 767 Fifth Ave.-saying the owners and their broker
Eastdil Realty, allowed Macklowe to submit in person a bid for $1.4
billion with a $50 million deposit, instead of by messenger or Federal
Express, in violation of the auction rules.
Chancellor Chandler also ruled on Tuesday that Solow failed to show that
it would have been irreparably harmed if the sale proceeded, Conseco's
lawyer said. 'This was a groundless lawsuit from the moment it was
filed,' said Reed Oslan, a partner at Kirkland & Ellis, which
represented Conseco during the 2-1/2 hour hearing. 'We are moving to
close on the transaction as soon as possible,' Oslan said. The sale,
which is equivalent to $729 per square-foot, according to real estate
research firm Colliers ABR, is scheduled to close on Sept. 26, 2003,
reported the newswire.
Carmel, Ind.-based Conseco, which bought the building in a joint venture
with Donald Trump in 1988, filed for bankruptcy protection in December
2002. Its subsidiaries, Carmel and the 767 companies, did not file for
bankruptcy protection, Reuters reported.
Acterna Facing Objections To Chapter 11 Plan Confirmation
Acterna Corp. faces objections to confirmation of its chapter 11
reorganization plan from suppliers, creditors and the U.S. government.
Objections from SAP America Inc., Dominion Telecom Inc., a trustee for
NETtel Corp. and the U.S. Trustee's Office, as well as a limited
objection from the committee of the company's unsecured creditors, were
filed with the U.S. Bankruptcy Court in Manhattan ahead of Acterna's
confirmation hearing today. If the plan is confirmed, the company would
swap its debt for equity, giving Acterna's secured debt holders 100
percent of the reorganized company.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Court Applies Mirant Creditor Trading Procedures To Equity
Committee
A bankruptcy court on Wednesday granted a request by Mirant Corp. to
establish procedures for equity holders in the company's chapter 11 case
to trade their securities.
Judge D. Michael Lynn of the U.S. Bankruptcy Court in Fort Worth, Texas,
signed an order that approved the motion, which Mirant filed on Tuesday.
The U.S. Trustee acting in the Mirant bankruptcy proceedings appointed
an official committee of equity holders in the case on Thursday.
Provided by Daily Bankruptcy Review (
href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Paris Looks to U.S. on Bankruptcy
The French government wants to loosen up its rigid bankruptcy law to
offer faltering companies better odds of survival, the Wall Street
Journal reported. Unlike the United States, where companies that
stumble often get a second chance under court protection from creditors,
in France it is very hard for them to work their way out of trouble once
bankruptcy proceedings have started. The revision, which reflects
bankruptcy-amendment initiatives elsewhere in Europe and is partly
inspired by chapter 11 of the U.S. Bankruptcy Code, could have deeper
implications for the continent's sluggish economy by changing Europe's
ambivalent attitude toward corporate risk-taking. In Europe, 'there's
still a mind-set that insolvency equals failure,' says Stephen Taylor,
who heads the European bankruptcy-recovery division of
PricewaterhouseCoopers, reported the online newspaper. To read the full
article, point your browser to
href='http://www.wsj.com/'>www.wsj.com (subscription required).
Changes Discussed in Accounting for Pension Fund
Obligations
The board that writes accounting rules for American business discussed
changes yesterday that could wipe out much of the financial incentive
for companies to convert to cash-balance pension plans, the New York
Times reported. The Financial Accounting Standards Board said it was
beginning a study of the way many companies with cash-balance pensions
measure the benefits they will eventually have to pay their employees.
Actuaries said the board's approach could ultimately force these
companies to report a much larger obligation than they now do. In the
past, companies that converted to the plans were able to reduce their
reported pension obligations and cut costs. 'There's no two ways about
it; the higher the liability, the less you're going to want to do it,'
said Eric P. Lofgren, global director of the benefits consulting group
at Watson Wyatt Worldwide, reported the newspaper.
U.S. Income Gap Widening, Study Says
The gap between rich and poor more than doubled from 1979 to 2000,
an analysis of government data shows, the New York Times
reported. The gulf is such that the richest 1 percent of Americans in
2000 had more money to spend after taxes than the bottom 40 percent. In
1979, the wealthiest 1 percent had just under half the after-tax income
of the poorest 40 percent of Americans, analysis of new data from the
Congressional Budget Office shows. The figures show 2000 as the year of
the greatest economic disparity between rich and poor for any year since
1979, the year the budget office began collecting this data, according
to the Center for Budget and Policy Priorities that released its
analysis on Tuesday. The richest 2.8 million Americans had $950 billion
after taxes, or 15.5 percent, of the $6.2 trillion economic pie in 2000,
Isaac Shapiro, a senior fellow at the center, said. The poorest 110
million Americans had less, sharing 14.4 percent of all after-tax money,
reported the Times.
Air Canada Expects New Equity Investor by November
Air Canada expects to reach a definitive agreement with a new equity
investor by the end of October, the court-appointed monitor in the
airline's bankruptcy protection proceedings said late on Wednesday,
Reuters reported. In its 10th report to the Canadian court where Air
Canada obtained protection from its creditors on April 1, Ernst &
Young said the carrier was expected to shortly narrow the list of
potential equity investors and begin negotiating a definitive pact. Air
Canada is seeking to raise C$700 million ($518.5 million) of new equity
as part of its plan to come out of bankruptcy protection before the end
of this year, with C$1.3 billion of exit financing, reported the
newswire. General Electric Capital Aviation Services has already
provided C$600 million of funding that the Montreal-based carrier plans
to use to buy regional jets.
Cone Mills Files for Chapter 11 Bankruptcy Protection
Cone Mills Corp. said on Wednesday it had filed for chapter 11
bankruptcy protection and accepted a letter of intent from W.L. Ross
& Co to purchase all of its assets in a $90 million transaction,
Reuters reported. The company said in a statement it had filed a
voluntary petition for relief under chapter 11 with the U.S. Bankruptcy
Court in Delaware. The debt-laden company is the latest in a long line
of U.S. textile makers to succumb to harsh foreign competition that has
cost thousands of workers their jobs and decimated a once-flourishing
industry. Cone Mills Chief Executive John Bakane said Washington
appeared to disregard pressures on the U.S. textile industry from Asian
imports, 'with U.S. trade policies continuing to unfairly favor these
overseas competitors,' reported the newswire.
Denton Plant Files for Bankruptcy
Councill Craftsmen Inc., a furniture manufacturer with offices and
plants in Denton, filed for a chapter 11 reorganization proceeding on
Tuesday with the U.S. Bankruptcy Court for the Middle District of North
Carolina, the Courier-Tribune News reported. Robert Ginn,
president and CEO of the company, said the purpose of the filing is to
facilitate the sale of the assets of the company to Hancock & Moore
Inc., a manufacturer based in Hickory, for a purchase price of
approximately $5.1 million. Under the proposed transaction Hancock &
Moore will also participate in financing up to $1 million in loans to
Councill Craftsman in order to re-start operations pending the closing
of the sale.
'As we moved forward into 2003, it became apparent that the pressure
of foreign imports in a market that was shrinking due to current
economic conditions was creating a situation in which Councill Craftsmen
would not be able to sustain its own operations without a significant
infusion of outside capital,' Ginn said, reported the newspaper.
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