February 2, 2004
Consumer Spending Up 0.4 Percent in December
Consumers spending increased 0.4 percent in December, the Associated
Press reported. The over-the-month increase reported by the Commerce
Department today followed a brisk 0.5 percent rise in consumer spending
for November. Americans' incomes, meanwhile, rose by modest 0.2 percent
in December, following a 0.3 percent rise the month before. Consumers,
whose spending accounts for roughly two-thirds of all economic activity
in the United States, have been buying at a sufficient pace to continue
the economic recovery, reported the newswire. The economy grew at a 4
percent annual rate in the October-to-December quarter, although it was
a slowdown from the 8.2 percent rate registered in the previous quarter.
That marked the strongest performance in nearly two decades.
Analysts were predicting a slowdown in economic growth -- and consumer
spending -- in the fourth quarter as the stimulative impact of tax cuts
and a refinance frenzy faded with the onset of winter. Economists are
optimistic that consumer spending -- helped by tax refunds -- is picking
up in the current quarter and will help the economy expand at a rate of
more than 4 percent, AP reported.
Senate to Hold Hearings on Predatory Lending, Corporate
Governance
The Senate Banking Committee plans to hold a hearing on Thursday on the
Office of the Comptroller of the Currency's controversial final rule
exempting national banks from many state consumer protection laws,
CongressDaily reported. The rule, issued last month, also would
establish new federal anti-predatory lending standards for national
banks and restrict state agencies' authority to take actions against
those banks. Supporters have said the regulations would create a uniform
federal standard and override a patchwork of conflicting state laws, but
critics contend they would undermine the nation's dual system of
national and state-chartered banks. The House Financial Services Capital
Markets Subcommittee has scheduled a hearing on Wednesday on the role of
attorneys in corporate governance.
The Role of Small Business in the Economic Recovery
(Fortune)
In 2000 privately held companies-smaller businesses mostly-accounted for
less than half of the country's total operating profits. Today that
number is closer to two-thirds, according to Fortune. Small businesses
weathered the downturn much better than their larger counterparts, and
they are leading the way into the budding expansion. Now it's up to
policy-makers to design economic policies that recognize that role, the
magazine reported. To read the full article, point your browser to
href='http://www.fortune.com/fortune/smallbusiness/articles/0,15114,577401,00…'>http://www.fortune.com/fortune/smallbusiness/articles/0,15114,577401,00….
Kaiser Seeks to Nullify 4 Alumina Supply Deals
Kaiser Aluminum Corp. said on Friday it has filed motions in U.S
Bankruptcy Court seeking to reject or nullify alumina supply agreements
covering at least 800,000 tons annually, Reuters reported. The deals
include a pact with Swiss trading house, Trafigura AG; two agreements
with Unistar Holdings Inc., a distributor to Chinese aluminum producers;
and one with Pechiney Trading Co., a unit of Canada's Alcan Inc. Alcan
said on Thursday it would contest Kaiser's attempt to cancel their
agreement for the supply of 300,000 tons of alumina a year between
January 2002 and the end of 2006.
Kaiser, which is trying to emerge from chapter 11 bankruptcy protection,
asked the bankruptcy court in Delaware in the last two weeks to
invalidate the supply deals, saying that would enable it to sell its
alumina elsewhere at much higher prices, helping to speed its financial
turnaround. A hearing on the motions in bankruptcy court is scheduled
for Feb. 23, reported the newswire.
Delta Shares Fall After CSFB Downgrade
Delta Air Lines shares slipped 10.5 percent on Friday as Credit Suisse
First Boston (CSFB) downgraded the shares after the company's pilots'
union said it was losing hope for a deal on mid-contract concessions,
Reuters reported. Analyst James Higgins lowered his rating on Delta
shares to 'underperform' from 'neutral' and reduced his target share
price to $6.
The head of Delta's unit of the Air Line Pilots Association said on
Thursday that his optimism for a mid-contract agreement was fading after
the company presented its latest proposal. There is still a wide gap
between management's proposed 30-percent pay cuts and the union's
proposed givebacks of 9 percent plus this year's 4.5-percent raise. 'We
now think the level of complication and concern investors will have to
endure in Delta shares is rising, its duration is increasing, and the
period of financial bleeding is growing,' Higgins wrote in a research
note, reported the newswire.
ATA Gets Federal Approval for Crucial Debt Swap
ATA Holdings Corp., parent of low-cost carrier ATA Airlines, on Friday
said it had obtained federal approval for a $300 million debt swap that
will help it alleviate a cash crunch, Reuters reported. The deal will
help the Indianapolis-based ATA to continue building its network and
avoid becoming the first major low-cost carrier to file for chapter 11
bankruptcy protection. ATA said approval from the Air Transportation
Stabilization Board was the last hurdle to a deal with bondholders under
which it will exchange new notes and cash for old debt. ATA plans to
exchange $300 million of old debt, due in 2004 and 2005, and will be
able to push back the majority of its bond payments to 2009 and 2010.
The company announced the exchange offer in August and has extended it
several times after initially failing to attract enough interest from
debt holders. The deal, expected to close later in the day, will also
allow the carrier to restructure its aircraft payments, reported the
newswire.
Ormet Files for Chapter 11 Protection
Aluminum producer Ormet Corp. said on Friday it and its U.S.
subsidiaries filed for chapter 11 bankruptcy protection so it could
complete its financial reorganization, Reuters reported. The privately
held Wheeling, W.V.-based company filed in the U.S. Bankruptcy Court for
the Southern District of Ohio. Ormet employs about 2,600 people at
manufacturing plants in Ohio, Indiana, Louisiana, Tennessee and West
Virginia. Ormet said that for the past four years it was hurt by lower
prices, weak demand, high energy costs and overcapacity in flat-rolled
products in the aluminum industry. It also cited rising medical benefit
costs as another barrier to its ability to service its debt. While
aluminum prices have climbed recently, those gains are not enough to
offset the effects of a depressed market, the company said, reported the
newswire.
Hawaiian Workers Await Details on Concession Request
Hawaiian Airlines employees aren't sure how the new business plan
introduced by the carrier's trustee will impact them, The
Honolulu Advertiser reported. The trustee is seeking between $10 million
to $12 million in labor concessions, according to a person familiar with
the proposal. The proposal also freezes the pilots' pension plan and
calls for renegotiating aircraft leases.Trustee Josh Gotbaum revealed
his plan to the creditors' committee and unions on Tuesday in Los
Angeles, where the airline's attorneys are based. Gotbaum said the
givebacks are necessary for the airline's reorganization. It filed for
chapter 11 bankruptcy protection in March. Gotbaum wants Hawaiian to be
out of bankruptcy by the Labor Day weekend, reported the newspaper.
Bankruptcy Judge Approves Bonuses for Remaining Enron Workers
Enron received court permission on Thursday to pay $36.2 million in
bonuses to several hundred of its remaining workers, Knight-Ridder
reported. The company says these retention bonuses are necessary because
many of the employees are working themselves out of jobs as they
liquidate what remains of Enron. There were no objections to the plan to
pay the bonuses, which would keep about 390 workers on the job through
this year and 190 around through 2005. U.S. Bankruptcy Judge Arthur
Gonzalez approved the plan, but added that no employee should receive an
amount far greater than others. 'I do think a cap needs to be
established,' Gonzalez told Enron's lawyers. 'This is to ensure that
there are no inordinate levels being paid to any individual.' The round
of bonuses approved Thursday is the third such package Gonzalez has
granted since the bankruptcy, reported the newswire.
Wickes Inc. Receives Court Approval of Significant Bankruptcy
Motions
Wickes Inc., a distributor of building materials and manufacturer of
value-added building components, reported on Friday in a press release
that it has made progress in its reorganization, including receiving
interim court approval for a $100 million debtor-in-possession (DIP)
credit facility to fund its operations. The company also received
approval of a number of important motions from the U.S. Bankruptcy Court
for the Northern District of Illinois.
On Jan. 20, 2004, Wickes filed a voluntary petition for reorganization
under chapter 11 of the U.S. Bankruptcy Code. Since then, the bankruptcy
court has approved a number of the company's motions that are intended
to support the company's employees, customers and vendors, and provide
other forms of operational and financial support as Wickes proceeds with
its reorganization. With respect to employees, orders entered by the
bankruptcy court authorize payment of pre-petition and continuation of
post-petition compensation and benefits.
Owner of U-Haul International Seeks Bankruptcy-court Approval
Amerco, owner of U-Haul International Inc., said it will seek
bankruptcy-court approval for its restructuring plan, which creditors
approved on Friday, the Wall Street Journal reported. A hearing
in the bankruptcy court here is set to begin today. If the
reorganization meets with the court's approval, Amerco could emerge from
chapter 11 status in 30 days, said Joe Shoen, Amerco's chairman. Most of
the company's subsidiaries, including U-Haul and Oxford Life Insurance
Co., weren't directly affected by the reorganization. But the parent
company's emergence from chapter 11 will still benefit them, Shoen
said.
US Air Weighs Extra Measures To Help Finances
US Airways Group Inc., which already is considering asset sales to avoid
defaulting on a big bank loan this summer, is pursuing other steps to
get its finances in order that could include reducing the number of jets
on order and repaying a portion of its debt early, the Wall Street
Journal reported. The company is exploring the idea of reducing the
number of regional jets it has on firm order and offloading the extra
planes to commuter carriers. Another option under consideration is for
US Airways to pay down early part of the $1 billion financing that
allowed it to exit from bankruptcy-court protection 10 months ago, the
online newspaper reported. By reducing that liability with cash on hand
or proceeds from assets sales, the carrier could restructure the terms
and avoid breaching covenants that are set to be measured June 30.
Atlas Air Files for Chapter 11 Protection
Atlas Air Worldwide Holdings Inc. filed for chapter 11 bankruptcy
protection and received commitments for $50 million worth of loans, the
cargo carrier said on Friday, Reuters reported. The Purchase, N.Y.-based
company, which filed for bankruptcy in Florida, said it would continue
operations while it develops a plan of reorganization. It received
debtor-in-possession and exit financing from CIT Group Inc. and Ableco
Finance LLC, an affiliate of Cerberus Capital Management L.P.
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