|
September 30, 2003
U.S. Economy: August Spending Rises, Aided by Tax Cut
U.S. consumer spending rose in August for a fourth month as tax cuts
helped boost purchases at stores and auto dealerships, a government
report showed, Bloomberg News reported. The 0.8 percent increase last
month followed a 0.9 percent rise in July, the Commerce Department said.
Disposable income rose 0.9 percent after increasing 1.5 percent. 'There
seems to be a never-ending ability to consume,'' said Drew Matus, senior
economist at Lehman Brothers Inc., who forecasts growth of 5 percent for
the third quarter. 'The consumer is certainly driving this quarter
ahead, particularly with auto and housing sales,'' reported the
newswire.
The personal savings rate was 3.8 percent in August, up from 3.6 percent
the prior month. The indicator weighs current income from wages,
salaries, businesses and government payments against spending. It
doesn't account for borrowed money, income from investments, or
withdrawals from prior savings. Sales at retailers increased 0.6 percent
during August to $319.2 billion after a revised 1.3 percent increase in
July, the Commerce Department said earlier this month, Bloomberg
reported.
A pickup in business spending and hiring may be needed to help economic
growth accelerate because the benefits of tax cuts and mortgage
refinancing will wane by year-end, economists said. Chris Low, a chief
economist at FTN Financial (New York), said recent increases in orders
and business spending suggest that companies will indeed start to hire
in the next few months, reported the newswire.
SEC Asks Court to Enforce Subpoena Served on Lay
The Securities and Exchange Commission filed a subpoena-enforcement
action against former Enron Corp. Chairman and Chief Executive Kenneth
Lay because he has refused to produce previously subpoenaed documents,
the Wall Street Journal reported. The SEC on Monday asked a
federal judge to force Lay to turn over documents the agency is seeking
in its investigation of the business practices that led to one of the
largest corporate bankruptcy filings in U.S. history. The agency argues
that Lay is wrong in his contention that turning over the documents
would violate his constitutional rights against self-incrimination. 'The
documents being withheld by Lay appear to be corporate records, which
Lay may not withhold from production based on any personal rights he may
have under the Fifth Amendment,' the SEC said in a news release,
reported the online newspaper. The SEC alleges that Lay was at the helm
of Enron during a time when certain fraudulent activities were taking
place. The agency is investigating whether he had knowledge of, or was
involved in, fraudulent activities at Enron, the Journal
reported.
Mosaic Board Resigns
Mosaic Group Inc., the marketing services group which has been in
bankruptcy protection since December, said on Monday its board of
directors resigned as of Sept. 26, Reuters reported. The Ontario
Superior Court of Justice last month extended Mosaic's protection from
creditors to Dec. 15. Shares of the Toronto-based firm were halted on
the Toronto Stock Exchange. The stock, which peaked at C$22.05 in
February 2000, has been almost worthless since Mosaic sought protection
under the Companies' Creditors' Arrangement Act last year after
defaulting on interest payments of C$5.4 million ($4 million). Mosaic's
major clients once included WorldCom and Enron, which collapsed
following high-profile accounting scandals. Falling revenues and a debt
of more than C$300 million subsequently forced Mosaic to seek creditor
protection, reported the newswire.
Impath Files for Bankruptcy Protection
Cancer diagnostic company Impath Inc. said on Monday it has filed for
bankruptcy protection and arranged for $15 million in funding that is
contingent on the sale of the company, Reuters reported. Impath in July
said it was investigating accounting irregularities that could force it
to restate earnings. Several top executives have already resigned.
Impath is seeking $15 million in debtor-in-possession financing to be
provided by Fleet National Bank.
NTL's Knapp to Depart with Options Worth $6.6 Million
Barclay Knapp, the former chief executive of Britain's largest cable
company NTL Inc., will leave the company with share options worth almost
$6.6 million based on Monday's prices, according to a recent filing,
Reuters reported. The options come on top of a $2.1 million cash
pay-off, three times his $700,000 salary. Knapp, the co-founder of NTL
who ran the company for a decade, piled up several billions of dollars
of debt in an acquisition spree spanning the peak of the technology
bubble.
NTL eventually collapsed in one of the largest U.S. bankruptcies last
year, swapping $11 billion in debt for equity and almost wiping out the
investments of holders of its old equity. Knapp stepped down from his
post in August. According to the Securities and Exchange Commission
filing, Knapp will receive 133,333 shares, to be exercised over the next
three years, worth almost $4.4 million at Monday's prices, reported the
newswire.
AIR CANADA
Air Canada Pension Talks with Union Near Impasse
Lawyers for Air Canada unions and non-union pension beneficiaries warned
a bankruptcy court judge on Monday that an arrangement with the
insolvent airline is in jeopardy, the Canadian press reported. At issue
is Air Canada's insistence that pensions could become part of the
overall restructuring claims process. The airline, which sought court
protection from creditors on April 1, has a pension deficit of about
$1.5 billion. Richard Jones, a lawyer for the Air Canada Pilots
Association, said an agreement had been near last week but now is in
doubt.
Counsel for the Canada Auto Workers, Sean Dewart, threatened to withdraw
from the pension talks because protection for pensions was part of the
cost-cutting agreements the unions reached with Air Canada in May and
June. Justice James Farley ordered both sides to continue talks and find
a resolution promptly, though he did not specify a deadline. He also
extended Air Canada's bankruptcy protection, which had been set to
expire this month, to Dec. 20, reported the newswire.
Air Canada Shares Fall as Stock Deemed 'Worthless'
Air Canada shares plunged as much as 22 percent on Monday as analysts
said the market was realizing the stock was essentially worthless as the
airline restructures under bankruptcy protection, Reuters reported.
Shares of Air Canada were down 10 Canadian cents, or 7.6 percent, at
C$1.21 on the Toronto Stock Exchange late Monday morning after falling
as low as C$1.02 earlier in the session.
Along with news that its search for a C$700 million ($518 million)
equity investment had been narrowed down to two firms, Air Canada said
on Friday its current shareholders will receive little, if any,
consideration for their shares. 'The closer we get to the ending of this
restructuring the worse it is for existing shareholders because, at the
end of the day, they are going to end up not getting anything for their
existing investment,' said Cameron Doerksen, an analyst with Dlouhy
Merchant Group, reported the newswire.
Bankruptcy Filings Leave Investors More Cautious
Sioux Falls-based NorthWestern Corp.'s problems, along with corporate
scandals around the country, have left many area investors wondering
where to put their money, the Associated Press reported. The utility
company has been struggling with a $2.2 billion debt and filed for
bankruptcy on Sept. 14. NorthWestern Corp., the parent company of
Northwestern Energy, has also been sued by a number of its investors,
who claim they were misled by company financial statements. Morningstar
Inc. was one of the first analyst firms to warn investors that
NorthWestern was headed toward financial trouble.
After years of Enron and WorldCom being in the news for allegations of
mismanagement, it is not surprising that investors are wary, the
newswire reported. 'It's put a lot of fear into some investors,' said
Ken Janke, chairman of the National Association of Investors
Corporation. But still, he said, such allegations are rare and make up a
small percentage of companies, reported AP.
Halliburton to End Request for Asbestos Stay
Halliburton Co. said on Monday it would cease trying to extend a
bankruptcy court order blocking more than 200,000 asbestos injury claims
against one of its units, Reuters reported. The company said it is now
in a position to make a prepackaged chapter 11 bankruptcy filing in
November for its subsidiaries -- DII Industries, Kellogg Brown &
Root and others involved in asbestos litigation. Once filed, the
bankruptcy plan automatically blocks any further asbestos claims, even
if the court's stay has expired. The stay involved DII and was due to
expire on Sept. 30. It had been extended several times since February
2002, allowing Halliburton to negotiate a settlement with asbestos
claimants, the company said, according to Reuters. Last week, the
oilfield services company said it began seeking the approval of
claimants for asbestos and silica settlements. The Houston-based company
has mailed proposed terms of the settlement to claimants. Halliburton
estimated the cash portion of the deal could be as high as $3.05
billion, or 9.8 percent higher than previous forecasts, reported the
newswire.
S&P Cuts Atlas Air Equipment Trust Certificates
Ratings
Standard & Poor's Ratings Services announced in a press release
yesterday that it lowered its ratings on selected enhanced equipment
trust certificates of Atlas Air Inc., a wholly owned subsidiary of Atlas
Air Worldwide Holdings Inc. Ratings on pass-through certificates series
1999-1A-2 were lowered to 'B-' from 'BB-'; series 1999-1B to 'CCC+' from
'B-'; and series 2000-1B to 'CCC+' from 'B'. Atlas Air Worldwide and its
subsidiary are both rated 'D'.
Atlas announced on Sept. 12 that the companies plan to enter a
'pre-negotiated' chapter 11 bankruptcy in December 2003 to implement a
planned financial restructuring. 'The rating actions are based on
Standard & Poor's analysis of default and recovery prospects for the
certificate holders under the proposed restructuring,' said Standard
& Poor's credit analyst Philip Baggaley.
Thanks for visiting
Today's Bankruptcy Headlines. New articles are posted here each business
day.
|
