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December 31, 2002
Public Company Bankruptcies Smash Record
U.S. public companies shattered bankruptcy records for a second straight
year as accounting fraud and the last decade's debt spree brought down
corporate giants, and experts are preparing for additional failures,
reported Reuters. According to BankruptcyData.com, 186 public
companies with a staggering $368 billion in assets filed for bankruptcy
in 2002, reported the newswire. That is the largest asset total ever,
sweeping past last year's record $259 billion, reported
Reuters. The record-breaking year included five of the 10
largest bankruptcies ever, led by phone company WorldCom Inc., with $104
billion in assets, according to the newswire.
Bankruptcy experts are bracing for a new crop of failures by
companies that depended on companies that went bust, reported
Reuters. “I don't think we're going to see any dip in
bankruptcy filings,” said Alan Feld, a bankruptcy attorney with
Manatt, Phelps & Phillips in Los Angeles. “I think it's going
to get worse before it gets better,” reported the newswire.
Home Sales Cool, Manufacturing Fragile
Reuters reported that two U.S. economic reports released
yesterday show a housing market cooling from a record pace and
manufacturing expanding though still fragile. Sales of U.S. existing
homes fell 3.5 percent in November, the National Association of Realtors
said in a report showing as surprisingly steep slide, the newswire
reported. A separate report showed business activity in the Midwest
slowing in December from November's level, Reuters reported.
The Chicago purchasing management index showed a continued expansion in
manufacturing but at a still-sluggish pace, the newswire reported.
However, economists said the data, while disappointing, indicated the
recovery was still tottering forward, Reuters reported. Financial
markets were little moved by the numbers with the Dow Jones industrial
average up about 29 points at session close and the technology-heavy
Nasdaq off by about eight points.
Martin Industries Files For Bankruptcy Court
Protection
Florence, Ala.-based Martin Industries Inc. filed for chapter 11
bankruptcy protection and signed a definitive agreement for the
potential sale of substantially all of its operating assets to Monessen
Hearth Systems Co. for $4.4 million, reported Dow Jones. In a
press release yesterday, the company said the potential sale is subject
to bankruptcy court approval by Feb. 21. The maker of gas fireplaces and
home heating appliances filed the voluntary petition in the U.S.
Bankruptcy Court for the Northern District of Alabama in Decatur, Ala.,
reported the newswire.
The $4.4 million purchase price doesn't include Martin's real estate;
however, the company has agreed to lease to Monesser its manufacturing
facility in Athens, Ala., for at least one year, according to Dow
Jones. The company will seek to sell that plant as well as all
other real estate it owns, subject to bankruptcy court approval,
reported the newswire. In addition, Martin Industries reached a
debtor-in-possession financing agreement with its primary bank lender to
fund the company's operations while in bankruptcy, reported Dow
Jones. This agreement is also subject to approval by the bankruptcy
court, which has scheduled a hearing for Dec. 31.
Newcor Wins Confirmation of Chapter 11 Reorganization
Plan
Dow Jones reported that Newcor Inc. yesterday won confirmation
of a reorganization plan that calls for the debtor company to emerge
from chapter 11 bankruptcy as a going concern. More than 94.3 percent of
the debtor company's unsecured creditors—holding 99.9 percent of
the unsecured claims against the estate—voted in favor of
confirmation, Newcor said in court documents, according to the newswire.
Roughly 74.8 percent of the debtor company's common stockholders also
voted for confirmation. Newcor's plan projects a reorganization value of
$44.8 million to $45.8 million, reported Dow Jones. The plan estimates
an equity value of $600,000 to $1.6 million, according to the disclosure
statement.
Network Access Solutions Wins Approval Of $14 Million
Sale
Herndon, Va.-based Network Access Solutions Corp. won authority on
Monday to sell a substantial portion of its assets to DSL.net Inc. in a
deal valued at $14 million, reported Dow Jones. DSL.net's offer
was named the highest and best at a court-authorized auction in
November, beating a bid filed by Covad Communications Inc., said Leon R.
Barson, an attorney with the firm representing Network Access, reported
the newswire.
DSL.net will pay $9 million in cash and issue a $5 million secured
promissory note, according to court documents. The company is purchasing
a substantial portion of Network Access' assets, including customer
contracts, IP addresses, and network assets and equipment supporting
broadband service to customers, the debtor company said in its motion,
according to Dow Jones. Prior to Monday's hearing, Network
Access resolved several sale objections by reaching settlements with
Verizon Communications Inc., General Electric Capital Corp. (GECC) and
Marconi Communications Inc. and Lucent Technologies Inc. The GECC and
Marconi settlement and the Lucent settlement together result in
eliminating $29 million in claims filed against Network Access and
provide the estate with a $500,000 cash recovery, reported the newswire.
Judge Mary F. Walrath of the U.S. Bankruptcy Court in
Wilmington, Del., approved the settlements before approving the sale to
DSL.net. Network Access listed assets of $58.2 million and debts of
$84.9 million in its chapter 11 petition.
Guilford Mills Delays 10-K to Adopt Fresh-start
Reporting
Greensboro, N.C.-based Guilford Mills Inc. said it won't file its annual
report for the fiscal year ended Sept. 29 on time because it has only
recently emerged from chapter 11 bankruptcy proceedings and is
completing its 'fresh-start' reporting, reported Dow Jones.
According to a filing Monday with the Securities and Exchange
Commission, the company plans to file the report by Jan. 15, 2003,
reported the newswire. Guilford Mills and 13 affiliates filed chapter 11
petitions on March 13, with the parent company listing assets of $551
million and debts of $409 million as of Sept. 30, 2001. The company's
reorganization plan took effect on Oct. 4.
Comdisco Delays 10-K To Adopt Fresh-start
Reporting
Comdisco Holding Co. said it delayed filing its Form 10-K annual report
with the Securities and Exchange Commission to resolve how restructuring
transactions contemplated in its plan of reorganization have affected
its financial statements, according to Dow Jones. According to
a non-timely 10-K filed on Monday with the SEC, the company will adopt
fresh-start reporting following its Aug. 12 emergence from chapter 11
bankruptcy under a confirmed plan of reorganization, the newswire
reported. The technology services company left bankruptcy with a plan to
sell off remaining assets over three years. Comdisco and 50 domestic
subsidiaries filed for chapter 11 bankruptcy protection on July 16,
2001, Dow Jones reported.
Gary Winnick Resigns as Chairman of Global
Crossing
Global Crossing Ltd. Chairman Gary Winnick resigned from the bankrupt
fiber-optic network operator, according to Bloomberg. Winnick will
resign effective today, Global Crossing said in a statement, the
newswire reported. A former Drexel Burnham Lambert Inc. official,
Winnick founded Global Crossing in 1997 to build a 100,000-mile fiber-
optic network spanning 27 countries. He sold shares worth $578 million
since the company's initial stock sale in 1998, reported Bloomberg. The
U.S. Securities and Exchange Commission is investigating allegations
that Global Crossing inflated revenue from swaps of network use with
rivals to mask a worsening financial performance.
UAL/UNITED
United Says Significant Layoffs Likely
Soon
Bankrupt United Airlines said yesterday that significant layoffs were
likely in the short term as the bankrupt air carrier moves to slash
costs and satisfy the lenders that provided crucial cash for its
restructuring, reported Reuters. United, a unit of UAL Corp.,
said it would send required notifications to non-union employees, all
California employees and union representatives of the possible job cuts,
the newswire reported. United previously announced that it planned to
cut its workforce to about 74,000 from 83,000 by 2004 as part of an
application for federal loan guarantees that was rejected. It has
already announced some layoffs attributed to a 6 percent reduction in
its flight schedule for 2003, reported Reuters. The carrier is
seeking $2.4 billion per year in labor cost cuts and has announced
tentative agreements on reductions with pilots, flight attendants,
dispatchers and meteorologists.
UAL Employee Plan Can't Sell Shares, Judge
Rules
UAL Corp. preserved as much as $1.4 billion in tax benefits after State
Street Bank & Trust Co., the manager of the company's employee stock
ownership plan, lost a bid to sell shares in the parent of United
Airlines, Bloomberg reported. UAL's largest shareholders were forced to
suspend trading after the airline declared bankruptcy Dec. 9, because
the company said it needed to prevent any shift in ownership that might
affect future tax benefits derived from net operating losses. U.S.
Bankruptcy Judge Eugene Wedoff said he would review the
matter again on Jan. 15 to allow UAL to present more evidence on the
value of UAL's future net operating losses. “It seems to me there
is very little likelihood of injury” to the plan before Jan. 15,
Wedoff said, referring to the Employee Stock Ownership Plan, reported
the newswire.
Also at yesterday's hearing, Wedoff gave final approval to a $1.5
billion loan that UAL said it needed to continue operations through the
bankruptcy process and set a time table for ruling on UAL's request last
week to suspend labor contracts, Bloomberg reported. Judge Wedoff said
he would rule as early as Jan. 9 on whether to accept temporary wage-cut
agreements reached with four UAL unions. UAL also has asked Judge Wedoff
to impose 13 percent wage cuts on the International Association of
Machinists, which hasn't reached an agreement with the world's
second-largest carrier, according to the newswire. The machinists'
union, which includes mechanics and other ground workers, will file an
objection to UAL's request tomorrow, said spokesman Joseph Tiberi, who
had no immediate comment on the stock decision.
DuPont, Other Plastics Makers Become Targets of Asbestos
Suits
DuPont Co. and other plastics manufacturers are targets of new asbestos
lawsuits that broaden legal attacks on the cancer-causing substance
beyond the makers of building materials, reported Bloomberg. The suits
mark a shift in strategy by plaintiffs, who say makers of plastic
industrial products containing asbestos are also to blame for worker
health problems, the newswire reported. Many of the suits have been
filed in Mississippi by attorneys acting before a new state law capping
damage awards takes effect tomorrow, reported Bloomberg. Asbestos suits
already have forced more than 60 companies into bankruptcy since 1982,
including 20 since January 2000, the Rand Institute reported in
September, reported the newswire. Such suits will eventually cost
businesses and insurers more than $200 billion, the policy research
group estimated. With defendants such as bankrupt Owens Corning,
Federal-Mogul Corp. and W.R. Grace & Co., attorneys are turning
their sights on companies better able to pay damage awards and
settlements, an attorney said, Bloomberg reported.
Judge Not Likely to Revive J&L Bankruptcy
Case
Former J&L Structural Inc. employees, hoping to get access to
benefits and 401(k) plans that were frozen when the Aliquippa, Pa.-based
mill closed in August, may have hit a roadblock yesterday in the U.S.
Bankruptcy Court for the Western District of Pennsylvania, according to
the Pittsburgh Tribune Review. Judge Bernard
Markowitz said he was unlikely to approve a petition to reopen
the bankruptcy case, which was dismissed in August, even though J&L
Structural's largest secured creditor agreed to the motion filed by
former employees, the online newspaper reported. Markowitz's formal
ruling is expected later this week.
Under the terms of the proposed deal, Congress Financial —
J&L Structural's largest secured creditor — would have allowed
the bankruptcy case to be reopened and would have paid $100,000 to the
former steelworkers, administrators and mill officials, the
Review reported. But former J&L Structural employees said
the real significance of a favorable ruling yesterday would have been
the ability for a court-appointed trustee to begin sorting out the mess
surrounding company-sponsored benefits, 401(k) plans, severance packages
and health insurance that the employees believe they are owed, according
to the online newspaper. Just six months ago, employees thought they
were about to see the company emerge from the chapter 11 bankruptcy
protection J&L Structural had operated under for two years, reported
the Review. But a last-ditch effort to save the company by the
son of one of J&L Structural's founders fell apart and the mill
abruptly closed on Aug. 8.
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