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October 26, 2006
Fed Leaves Rates Unchanged
The Federal Reserve held short-term interest rates steady for its third consecutive meeting as it continued to moderate stance on both inflation and economic growth, the Wall Street Journal reported today. Even as it left rates at 5.25 percent yesterday, the Fed again warned that it is worried about inflation. In its statement, the Fed said growth has slowed in part because of a cooling housing market. "Going forward, the economy seems likely to expand at a moderate pace," it said, a notable addition to its statement released after last month's meeting. Core inflation, which excludes food and energy, remains "elevated" but inflation pressures are likely to moderate thanks to lower energy prices, "contained" inflation expectations, and the impact of previous rate increases, the Fed said. Read more. (Registration required.)
Click here to read the Fed’s press release.
id='2'>Autos
Investors Betting that Auto Parts Makers Are Poised for a Turnaround
With Detroit's auto industry struggling, some big investors are betting billions of dollars that the auto parts sector is poised for a comeback, the Wall Street Journal reported today. A handful of hedge funds and private-equity firms that specialize in struggling or undervalued companies have concluded that they can create big returns as auto-parts makers close plants, shift operations to lower-cost countries and cut retiree benefits.Investors have tried to remake the business without success, but this time they believe that the companies, unions and other participants are so desperate, they are willing to make sacrifices they would have scoffed at in the past. According to some estimates, at least $50 billion in auto-parts businesses in North America are currently for sale. Read more. (Registration required.)
id='3'>Daimler Not Ruling Out Sale or Spinoff of Chrysler after Loss
Executives at Chrysler’s German parent on Wednesday refused to rule out the possibility that the Chrysler Group could be spun off or sold, after Chrysler announced that it lost $1.5 billion in the last three months, the New York Times reported today. Though there are no indications that such a spinoff is imminent, the possibility of such a sale is the latest sign of upheaval in the American auto industry. Such a move would potentially end the eight-year merger that shook the automobile industry when it was announced in 1998. That merger triggered other transnational arrangements, like the alliance between Renault and Nissan, and the now-defunct deal between General Motors and Fiat. Chrysler’s business model, based on mass-market sales of sport utility vehicles and pickup trucks, has not shifted quickly enough to keep it competitive as gas prices have increased. Read more.
id='4'>Creditors’ Committee Named in Air America Case
Less than two weeks after it careened into bankruptcy, a U.S. Trustee has appointed three committee members to represent the unsecured creditors in Air America Radio’s chapter 11 proceedings, Portfolio Media reported yesterday. William Kimball, the executive producer of “The Al Franken Show;” Sacramento, Calif.-based Diamond Broadcasting; and the American Federation of Television and Radio Artists (AFTRA) were named to the unsecured creditors’ committee on Monday by U.S. Trustee Diana G. Adams. According to documents filed with the U.S. Bankruptcy Court in Manhattan, Kimball is owed $84,893 in wage, severance and vacation claims, while Diamond Broadcasting is owed $500,000, though that claim is listed as disputed. AFTRA was not listed among the radio station’s 20 largest unsecured creditors.
id='5'>Bankruptcy Judge Critical of Pittsburgh Brewing Co.’s Reorganization Plan
A bankruptcy judge criticized a bankruptcy reorganization plan by Pittsburgh Brewing Co. as unworkable but delayed a decision on unpaid taxes to give the company more time to secure financing, the Associated Press reported yesterday. Bankruptcy Judge M. Bruce McCullough was critical of the plan, which calls for $7 million in debt and equity to modernize the 145-year-old brewery's facilities and increase marketing. The maker of Iron City and other beers filed the reorganization plan Oct. 16. Judge McCullough made his comments about the plan during a hearing on $814,000 in unpaid federal excise taxes. Judge McCullough agreed to the delay consideration of the plan until Nov. 7 for the company to raise enough money to allow the brewery to continue operating and reach a compromise on unpaid federal excise taxes. Read more.
id='6'>AmeriDebt Founder Accused of Stashing Cash
Andris Pukke, founder of now-defunct debt management firm AmeriDebt Inc., has hidden millions of dollars with his family and friends so his cash stash can’t be used to pay wronged consumers, according to a court-appointed receiver, Portfolio Media reported yesterday. The receiver asked District Judge Peter J. Messitte to hold Pukke in contempt and order him to appear in court to prove he hasn’t violated an April 2005 order freezing his assets. The receiver, Robb Evans & Associates, argued that Pukke’s alleged financial maneuverings violate his agreement with the U.S. Federal Trade Commission, which sued Pukke in November 2003. In January, the U.S. District Court for the District of Maryland approved a settlement in which Pukke agreed to pay $35 million to regulators and former customers.
id='7'>Judge OKs Geneva Steel Bankruptcy Plan
Geneva Steel Corp. will pay creditors little more than a quarter of what they're owed, according to a plan approved by a bankruptcy judge, the Associated Press reported yesterday. Geneva also will pay $3 million in overdue wages and benefits to more than 300 employees by the end of the year, said bankruptcy trustee James Markus. Bankruptcy Court Judge Glen Clark approved the plan Tuesday. Geneva filed for chapter 11 in 1999, only to emerge from that filing to again seek bankruptcy two years later. Read more.
id='8'>International
Eurotunnel Seen Reaching Deal with Creditors
Channel tunnel operator Eurotunnel is expected to announce a £6.2 billion ($11.6 billion) debt restructuring deal within days after reaching an agreement with most of its creditors, Reuters reported yesterday. The announcement is expected on Friday or Monday, and the restructuring will include a debt-for-equity swap. The agreement would end years of negotiations between the company and its junior bondholders and senior creditors, who have been fighting over how much they would keep after the debt restructuring. Eurotunnel filed for protection from creditors in August as it couldn't afford its debt payments. Read more.
id='9'>Unico Files for Bankruptcy Protection with 97 Billion Yen Debt
Unico Corp., a Japanese machinery leasing company, filed for bankruptcy protection with 96.7 billion yen ($811 million) of debt after falling behind in payments to lenders, Bloomberg News reported today. The company, based in the northern prefecture of Hokkaido, on Sept. 22 said it falsified earnings reports in past years, and its liabilities had exceeded its assets in 2004 and 2005. Unico filed for corporate rehabilitation with the Tokyo district court, according to a statement distributed today at the Tokyo Stock Exchange. Read more.
Credit Managers Daily Business News Report
The following articles are taken from the Daily Summary of Troubled & Fast Growing U.S. Companies published by Bastien Financial Publications.Ê For more of the latest business news visit http://dailybusiness.creditmanagers.biz.
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id='10'>Art Technology Group Inc., a Cambridge, Ma. provider of e-commerce application technology, reported a third quarter net loss of $280,000. Revenue declined 4%--to $21.8 million.
id='11'>Bombardier Aerospace, a unit of Montreal, Quebec plane and train manufacturer Bombardier Inc., announced it will reduce its payroll by 1,330 employees at three of its facilities, in Toronto, Ontario, Montreal and Northern Ireland. The firm has been suffering from weak orders for regional jets.
id='12'>Countrywide Financial Corp., a Calabasas, Ca. home-loan company, announced it will reduce its payroll by 2,500 employees (4% of its workforce) in an effort to cut costs by about $500 million, following the recent slowdown in the home-loan market. Also, the company reported that its third quarter net income inched up 2%--to $648 million, on a 4% increase in revenue--to $2.8 billion.
id='13'>Genesis Microchip Inc., Alviso, Ca., reported its second quarter net income tumbled 99%--to $110,000. Revenue declined 8%--to $69 million.
id='14'>Kuhlman Cos. Inc., a Minneapolis, Mn. seller of wholesale apparel through retail stores, was warned by the American Stock Exchange that it's out of compliance with listing requirements. The firm hopes to soon submit a plan to address the issue.
id='15'>Louisiana-Pacific Corp., a Nashville, Tn. forest-products concern, reported its third quarter net income sank 94%--to $9.5 million, including operating income of $9.9 million. Revenue declined 14%--to $535 million.
id='16'>Novelis Inc., an Atlanta, Ga. manufacturer of aluminum products, anticipates that it will lose up to $285 million, pretax, for all of 2006, including estimated capital expenditures of at least $110 million. The firm expects to be profitable next year on a pretax basis. Novelis will also ask its lenders to relax certain covenants of its $1.8 billion credit line.