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States Prepare To Lobby Congress Over Credit Reporting
With hearings under way in the House and the Senate on the Fair Credit
Reporting Act (FCRA), state governments and their public interest allies
plan to lobby lawmakers heavily to let the federal pre-emption of state
credit reporting laws expire, reported CongressDaily. The states
and their allies are counting on the support of key lawmakers,
especially in the Senate, and believe that a variety of local laws on
credit reporting will not interrupt timely credit decisions or raise
interest rates, but may even have the opposite effect, the newswire
reported. California, Massachusetts and Vermont had their state consumer
reporting laws grandfathered in under the 1996 FCRA amendments, and U.S.
census and bankruptcy data show that these states have since fared
better than the national average. Testifying before the House Financial
Services Committee earlier this month, Joel Reidenberg of Fordham
University Law School noted that Vermont has the lowest rate of consumer
bankruptcies in the nation and Massachusetts the second lowest,
CongressDaily reported.
These states also have home mortgage rates below the national median,
Reidenberg said, with California the lowest at 6.25 percent for 2002. By
comparison, Alabama, without a stronger law, is ranked fifth nationally
in the number of bankruptcies and had an effective home mortgage rate of
6.65 percent. 'While these statistics leave out important elements for a
thorough assessment of the impact of stronger state laws, such as a
correlation with state unemployment data for bankruptcy filings and
non-interest transaction costs for home mortgage loans, the data does
show that the horror stories circulating about the pre-emption
provisions make good theater, but reflect poor research,' he said,
reported the newswire. Meanwhile, the House Financial Services Committee
is expected to announce new FCRA hearings, according to sources,
reported the newswire.
Retail Sales Improve for 7th Week
U.S. chain stores last week chalked up sales gains for the seventh week
in a row, two reports said on Wednesday, broadly lifting retailers'
shares, Reuters reported. Sales for the week ended on Saturday rose 3.1
percent from a year earlier, the Bank of Tokyo-Mitsubishi and UBS
Warburg said in a joint report, the newswire reported. Separately,
Instinet's Redbook report showed a 1.5 percent increase in sales at
stores open at least a year, a key measure of retail performance.
Many retailers have struggled this spring as adverse weather in the
eastern half of the country and worries about the U.S. economy have kept
consumers from spending freely on seasonal goods. Some analysts and
retailers expect demand to pick up as the weather improves, and there
are indications that consumer confidence is gaining traction as well.
'Industry executives seem optimistic that sales will improve during the
second half, just in time for the fourth quarter and the crucial holiday
season,' Tracy Mullin, president of the National Retail Federation trade
association, said in a press release. But analysts expect retailers to
rely on increased discounting through July to move a nearly
industry-wide glut of inventory, reported the newswire.
U.S. Economy: Durable Goods Orders Fell 2.4 Percent in
April
Orders placed with U.S. factories for durable goods fell in April by the
most in seven months on fewer bookings for automobiles and business
equipment, a government report showed, reported Bloomberg News. The 2.4
percent decrease to $168.9 billion in orders for items made to last at
least three years followed an increase of 1.4 percent in March, the
Commerce Department said in Washington, D.C., the newswire reported.
Excluding vehicles and other transportation equipment, bookings fell 1.2
percent, erasing March's 1.1 percent rise. The statistics do little to
support Federal Reserve Chairman Alan Greenspan's recent comment that
business spending may be starting to pick up, as suggested by increasing
backlogs of business equipment. Backlogs of capital equipment ordered
yet not delivered fell 0.1 percent in April after a 1.9 percent
increase, the newswire reported.
Separately, the Associated Press reported that the U.S. economy
performed a little bit better in the first three months of 2003 than
first thought, growing at an annual rate of 1.9 percent. But even with
the improvement, the pace of economic growth was still below normal.
Facing a Fraud Judgment? Bankruptcy Court Can Help
Corporate directors facing crushing judgments for leading their
companies down the path to ruin can still find shelter in bankruptcy
court, the 9th U.S. Circuit Court of Appeals ruled on Wednesday, law.com
reported. Though most liens are dischargeable under bankruptcy law,
those incurred as a fiduciary trustee are not. But in a unanimous ruling
that interpreted California law, the court held that Gregory Cantrell, a
former executive at Cal Micro Inc., isn't subject to that exception and
wiped clean $1.3 million in debt. 'While Cantrell in his capacity as an
officer exercised some control over corporate assets of Cal-Micro, it
does not follow that Cantrell was a fiduciary within the meaning of' the
Bankruptcy Code, wrote Judge Diarmuid O'Scannlain. To read the full
article, point your browser to
href='http://www.law.com/jsp/article.jsp?id=1052440804188'>http://www.law.com/jsp/article.jsp?id=1052440804188.
National Equipment to Miss Payment, May File For Bankruptcy
National Equipment Services Inc., one of the largest U.S. construction
equipment rental companies, said its lenders have blocked interest
payments on $275 million of
bonds and the company may file for bankruptcy, Bloomberg News reported.
Banks led by Wachovia Bank NA, which agreed not to enforce terms of more
than $495 million in loans to National Equipment, exercised their right
to block interest payments due as early as Friday on two series of
senior subordinated notes, the company said in a regulatory filing.
Failure to pay within 30 days would be a default, giving holders the
right to demand immediate payment of their principal, the company said.
'In light of the company's current condition, the company may seek
protection from its creditors under chapter 11,'' Evanston, Ill.-based
National Equipment said in the filing with the Securities and Exchange
Commission, Bloomberg reported.
An industry slowdown and increased competition have hurt equipment
rental company earnings. Fort Lauderdale, Fla.-based NationsRent Inc.
sought chapter 11 protection in December 2001, after it couldn't cope
with more than $1.19 billion in debt. National Equipment has reported a
$29.6 million loss for the quarter ended March 31, the ninth straight
quarterly loss, reported the newswire.
Air Canada Flight Attendants Agree to Concessions
Air Canada said its 8,300 flight attendants agreed to concessions aimed
at helping the carrier emerge from bankruptcy court, leaving pilots as
the last major union without an agreement, Bloomberg News reported. Bill
Trbovich of the Canadian Union of Public Employees, which represents the
flight attendants, said a tentative agreement was reached early this
morning.
Excluding the latest concessions, Montreal-based Air Canada has
secured C$440 million ($317 million) of the C$770 million in annual
labor cost savings that it's seeking. Pay cuts and firings of managers
would contribute C$100 million more. The airline already had agreements
with the Canadian Auto Workers union, which represents 7,000 sales
agents, schedulers and technicians; the International Association of
Machinists and Aerospace Workers, which has 11,000 mechanics and other
ground workers; and workers at its Jazz short-haul unit, which accounts
for 5 percent of capacity, reported the newswire.
Airline Bankruptcies Pushing Yields Higher on Airport
Bonds
Airport bond yields are soaring a half-percentage point above similarly
rated securities because of investors' concern that bankrupt carriers
such as UAL Corp.'s United Airlines will leave airports with empty gates
and fewer passengers, Bloomberg News reported. Yields, or the prices
airports pay to borrow, are rising because bankruptcies at UAL and US
Airways Group Inc. and the threat of bankruptcy at AMR Corp. have made
airport bonds riskier, said Wai-man Seto, managing director of Financial
Security Assurance Inc., a bond insurer. At the same time airports
haven't hesitated to pay the extra costs as they lock in some of the
municipal bond market's lowest interest rates in 30 years, reported the
newswire.
FERC to Reconsider Powerex California Collateral Issue
The Federal Energy Regulatory Commission (FERC) said it will take
another look at Powerex's request to get back a $67 million letter of
credit held by the bankrupt California Power Exchange, Reuters reported.
Powerex, the trading arm of Canada's B.C. Hydro, is one of several firms
asking FERC to free collateral held by the entity that once ran
California's wholesale electricity market. FERC commissioners said in
March that Powerex could not have its collateral returned until the
agency had determined how much the company might have to refund to
California for alleged overcharges during the power crisis of 2000-01,
according to Reuters. In a brief order issued late Tuesday, FERC said it
will issue a new decision by June 30, reported the newswire. The
California Power Exchange filed for bankruptcy two years ago. It still
holds a total of about $1 billion in letters of credit, surety bonds and
cash collateral posted by traders as a requirement to buy and sell in
the market.
Adelphia Reaches Accord With Lenders for $1.5 Billion
Greenwood Village, Colo.-based Adelphia Communications Corp., the
cable-television company operating under bankruptcy protection, reached
an agreement with bank lenders to gain access to $1.5 billion in
financing, Bloomberg News reported. The company plans to draw on the
credit line to resume upgrading its cable systems, according to a
statement. Adelphia, the fifth-largest U.S. cable operator, lags the
industry in improving its systems to offer more channels and services,
according to the newswire. Satellite-TV providers are taking advantage
of this weakness to gain market share, analysts and investors have said.
Adelphia halted spending on improvements in June when it filed for
bankruptcy protection. The company has told investors that 68 percent of
its systems have been upgraded to offer newer services such as digital
cable. That compares with more than 90 percent for operators like
Comcast Corp. and Cox Communications Inc.
UAL Has $375 Million Net Loss in April, Meets Lending
Terms
UAL Corp., the parent of United Airlines, had a $375 million net loss in
April and said it met bankruptcy loan terms for the month, helped by
labor cost reductions, according to Bloomberg News. UAL, the world's
second-largest airline company, said it met the loan terms that its loss
not exceed $849 million before interest, taxes, depreciation,
amortization and aircraft rent from Dec. 1 through April 30. The
Chicago-based company said in a statement that it also expects to meet
the terms for May. UAL Chief Executive Glenn Tilton told employees
earlier this week that the company may be able to emerge from bankruptcy
protection sooner than expected because it's making progress in reducing
costs, the newswire reported. UAL, which filed for protection in
December, had said it would take until mid-2004 to exit bankruptcy. The
company also said in its monthly report to the bankruptcy court that its
cash balance rose $150 million in April to $1.7 billion, mainly because
of a $365 million tax refund, Bloomberg reported.
SK Global Creditors to Seek Receivership for Company
SK Global Co. creditors said they may seek to place the South Korean
trading company into court receivership after rejecting a bailout plan
for a business that has 4.39 trillion won ($3.7 billion) more debt than
assets, Bloomberg News reported. The steering committee's decision will
be proposed to other SK Global creditors, said Kwon In Kee, a spokesman
at creditor Hana Bank. Should it pass, creditors will let a court decide
whether to liquidate SK Global or reorganize its debt, Hana Bank said.
SK Group said in a statement that it 'hopes creditors will reconsider.''
SK Global's local lenders threatened to liquidate the company unless the
group agreed to swap 1.5 trillion won of debt for shares in the company,
reported the newswire.
Agway Gets Extension from Bankruptcy Court
Agway Inc. has been granted another four months to prepare its plan for
emerging from chapter 11 bankruptcy protection, according to the
Syracuse Post Standard. Agway's request for the extension faced no
objection and was approved Tuesday in U.S. Bankruptcy Court in Utica,
N.Y.. The DeWitt cooperative has until Sept. 27 to file its
reorganization plan and until Nov. 27 for it to be approved. Agway,
along with its official unsecured creditors' committee, said it needs
time to evaluate the possible sale of its businesses and consider
options. The cooperative also is studying how best to disburse the
overfunded portion of its pension plan.
Peregrine Systems Takes Step Toward Bankruptcy
Reorganization
San Diego-based Peregrine Systems Inc., a business-management software
maker, moved a step closer toward exiting bankruptcy court protection,
reported Bloomberg News. U.S. Bankruptcy Judge Judith Fitzgerald
in Pittsburgh said she will give the company the go-ahead tomorrow to
seek approval from creditors for a recovery plan. She scheduled a July 8
hearing to consider final approval of the plan, which would pay some
creditors over four years, the newswire reported. Peregrine filed for
chapter 11 protection in September to help resolve $607 million in debt
and accounting problems that led to investigations by the U.S.
Securities and Exchange Commission and the Justice Department. In
February, Peregrine reduced its revenue for April 1, 1999, through Dec.
31, 2001, by $509 million.
Under the latest plan, holders of $270 million in Peregrine's 5 1/2
percent notes would be paid 30 percent of their claims in cash, 20
percent in new notes and the rest in stock, according to court papers.
Unsecured creditors could choose either 60 percent of their claims in
cash when the plan is approved plus 10 percent over four years, or full
repayment over four years. Shareholders would get new stock in the
reorganized company. The value of the new shares will be determined next
month by Fitzgerald. She is reviewing estimates ranging from $110
million to $360 million for the reorganized company, according to court
papers.
Portland General Gets $150 Million Credit Line From Bank
One
Portland General Electric Co., an Oregon utility that energy trader
Enron Corp. is trying to sell, arranged a $150 million credit line with
banks led by Bank One Corp., Bloomberg News reported. The Portland,
Ore.-based company can borrow the money any time until May 25, 2004.
Portland General will pay 1.25 percentage point over the London
interbank offered rate if it draws on the loan. At today's rates, the
company would pay about $4 million if it borrowed the money for a year,
the newswire reported. Enron, which filed for bankruptcy protection in
December 2001, is holding an auction to sell Portland General, a utility
it bought in 1996 for $3.2 billion. Enron tried to sell Portland General
once before, to Sierra Pacific Resources in 1999. That transaction fell
through in March 2001.
HQ Global Workplaces Files Plan of Reorganization
HQ Global Workplaces has filed its initial reorganization plan and
disclosure statement with the U.S. Bankruptcy Court, the Business Wire
reported. Commenting on the news, CEO Jon Halpern said, 'After a
challenging 14 months, characterized by hard work and enormous
sacrifices, we have filed a plan to emerge from chapter 11 with a more
resourceful, efficient and client-focused organization. HQ dramatically
reduced operating costs and closed redundant business centers in various
markets. We now have a strong portfolio of more than 200 business
centers across the country producing in excess of $250 million in
revenues. Our plan will allow us to emerge with positive operating cash
flow and the opportunity for long-term financial stability. Under the
proposed plan, preferred and common stock will be issued to creditors,
and some of the company's existing bank lenders will provide a new
credit facility of at least $20 million. In addition, the proposed plan
contemplates that the company will undertake a series of restructuring
transactions designed to simplify its corporate structure.
Trump Must Sell His Stake in GM Tower to Conseco, Panel
Says
Real estate executive Donald Trump's bid to buy Manhattan's General
Motors building from Conseco Inc. was rejected by an arbitration panel
that said he must sell his
stake in the building to the insurance company for $15.6 million,
Bloomberg News reported. Trump claimed his offer to buy the building for
$295 million and the assumption of a $700 million mortgage was disrupted
by the Sept. 11 terrorist attacks. Conseco, which filed the
third-largest U.S. bankruptcy in December, wants to sell the 50-story
building for $500 million, plus the mortgage. The panel by a 2-1 vote
accepted Conseco's argument that Trump had to close the proposed $1
billion sale by Sept. 15, 2001. Trump protested that this was four days
after the Sept. 11 terrorist attacks and that his bankers at Deutsche
Bank had their New York offices destroyed and couldn't finish the deal
on time, Bloomberg reported.
Conseco is seeking to emerge from bankruptcy protection as early as
July. Its reorganization plan, if approved after hearings next month,
may reduce the company's debt and other obligations by more than $5
billion, reported the newswire.
Enron and Banks Must Mediate Holder Suits, Judges Say
Enron Corp., J.P. Morgan Chase & Co., Citigroup Inc. and other banks
must enter mediation with investors seeking $30 billion over the
collapse of the Houston-based energy company, two U.S. judges said,
Bloomberg News reported. U.S. Bankruptcy Judge Arthur Gonzalez and U.S.
District Judge Melinda Harmon said in a joint hearing held
simultaneously in Manhattan and Houston that the cases should be
settled. Harmon said attempts to settle legal claims against Enron and
the banks 'would benefit through the mediation process at this time,''
reported the newswire.
3DO Files for Bankruptcy Protection, Seeks Buyer for
Company
Videogame maker 3DO Co. said it filed for bankruptcy protection and
seeks a buyer for its business, Bloomberg News reported. The Redwood
City, Calif.-based company told some of its workers earlier this month
that they would be fired. The company
had 362 full-time employees as of March 31, 2002. Officials at 3DO
couldn't be reached to comment. 'While we hope that this news will
generate additional new opportunities, at this point we are focused on
pursuing either a sale of the entire company or the sale of its
assets,'' said Chief Executive Trip Hawkins in a statement released by
PR Newswire. The company filed for chapter 11 protection in U.S.
Bankruptcy Court in San Francisco, reported the newswire.
Leap Wireless International Sees Swing To Profitability By
2005
Leap Wireless International Inc. estimated in a bankruptcy court
filing that the loss-making company and its subsidiaries will swing to
full-year profitability by 2005, posting net income of roughly $50.5
million in that year. The financial projections, attached to the
disclosure statement to Leap Wireless International's reorganization
plan, are based on the plan's taking effect by Sept. 30 as well as 'no
significant downturn in the specific markets' in which the company
operates. The reorganization plan and disclosure statement were filed
with the court Friday. The company, which has been operating under
chapter 11 bankruptcy protection since last month, said it expects a net
loss of about $16 million for the fourth quarter of 2003, the first
period to be included in the projections for the court. Leap Wireless
International estimates a net loss of roughly $9.8 million for 2004,
according to the court papers.
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