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October 28, 2002
U.S. Bankruptcy Foes Lose Ally in Senator Wellstone's Death
Consumer groups lost a powerful ally with the untimely death on Friday
of Sen. Paul Wellstone (D-Minn.), who has almost single-handedly held up
passage of new bankruptcy laws over the last several years, Dow Jones
reported. 'The entire Senate voted with the banking industry, but Paul
was always true,' said Ed Mierzwinski, consumer advocate for the U.S.
Public Interest Research Group, or U.S. PIRG. 'He's basically held this
thing off for six years single-handedly.' The Minnesota Democrat was the
loudest and most frequent critic in the Senate of legislation designed
to make it more difficult for individuals to erase their bills through
bankruptcy protection. 'Paul Wellstone loved politics and never shied
away from a fight for what he believed,' said Sen. Charles Grassley
(R-Iowa), the main sponsor of the bankruptcy legislation. Wellstone
opposed the bill on principle, saying it 'punishes the vulnerable and
rewards the big banks and credit card companies for their own poor
practices.' He was an ardent supporter of the underdog, often finding
himself in opposition to just about everyone else in the Senate on
consumer issues.
He was the sole lawmaker in a 97-1 vote to oppose the bankruptcy bill
when it first passed the Senate in 1998. The bill didn't make it into
law during that session of Congress. But it might have won final
approval during the next congressional session if it weren't for
Wellstone's tireless objections - even against his own party leaders.
The legislation, though controversial, has passed both chambers of
Congress with bipartisan, veto-proof majorities during the last three,
two-year sessions of Congress. The bill, however, is poised to become
law this year, perhaps as early as next month. While the legislation
still has strong bipartisan support, Wellstone succeeded in winning over
a few converts and in diminishing its support through the years. Even
when passage seemed inevitable, Wellstone never once relented. White
House leaders hope to pass the bill during the lame duck session, it
faces new opposition from a block of conservative Republicans who object
to a provision related to abortion clinic protests. To read the full
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Adelphia Gets 4-Month Extension of Reorganization Plan
Deadline
Adelphia Communications Corp. won a four-month extension to file a
chapter 11 reorganization plan without facing competing proposals,
Bloomberg News reported. U.S. Bankruptcy Judge Robert Gerber
granted the extension to Adelphia, the sixth-largest U.S. cable
television operator. Adelphia sought the extension, saying it was in the
early stages of developing a long-term business plan. Adelphia
originally sought a six-month extension and shortened the request after
negotiating with its unsecured creditors committee. There were no other
objections.
Adelphia Communications Corp. posted a net loss of $17.4 million, or
7 cents a share, for September, compared with a net loss of $28.6
million, or 11 cents a share, in August, according to a monthly
operating report filed Friday with the U.S. Bankruptcy Court in
Manhattan, Dow Jones reported. Revenue for the embattled cable company
increased slightly to $279.4 million in September, from $272.4 million
in August, the report said. Operating income rose to $18.5 million in
September, compared with $8.4 million during the previous month.
Dow Corning Cost Cuts Help 3rd Quarter
Dow Corning Corp.'s third-quarter results surged in comparison to the
year-earlier period, thanks primarily to restructuring and cost-cutting
efforts, Dow Jones reported. Dow Corning, a joint venture of Dow
Chemical Co. and Corning Inc. on Friday reported net income of $45
million, or $18 a share, compared to break-even results a year earlier.
Excluding restructuring costs of $1.8 million, the company said it
earned $46.8 million, or $18.71 a share. The 2001 quarter reflected a
restructuring charge of $14.4 million. Dow Corning is operating under
chapter 11 bankruptcy protection because of thousands of claims by women
alleging the company's silicone-gel breast implants caused a slew of
health problems. Items the company recorded included restructuring costs
in both years, implant insurance settlements in 2001 and chapter 11
interest expense adjustments, also in 2001. Dow Corning said the
successful restructuring has reduced operating costs, while the recent
acquisition of polymer compounder Miltibase S.A. improved revenue.
ENRON
Judge Approves Enron's Hiring of Restructuring Experts
Enron Corp. can add up to 15 more restructuring experts to its top
bankruptcy team at an annual salary of $864,000 each, a judge has ruled,
Dow Jones reported. U.S. Bankruptcy Judge Arthur Gonzalez on
Thursday approved Enron's request to hire more restructuring experts
from Zolfo Cooper, interim Chief Executive Stephen Cooper's New
York-based turnaround firm. The bankrupt energy giant hired Cooper and
15 of his employees in late January to guide it through its massive
bankruptcy case. Cooper said earlier this month he expects the
energy-trading giant to remain in bankruptcy until late next year. Enron
lawyers told the judge the company needs the extra restructuring experts
to focus on lawsuits stemming from Enron's collapse last fall, the first
in a series of high-profile corporate failures in the country.
Enron Wind-power Partnerships Being Probed by U.S.
Regulators
Former Enron Corp. executive Andrew Fastow may have skirted U.S.
electric-utility
rules by putting three wind-power plants into partnerships secretly
controlled by the company, Bloomberg News reported. The Federal Energy
Regulatory Commission's (FERC) investigation of Enron stems from
allegations in court documents filed by U.S.
prosecutors in a criminal probe of Fastow. A commission judge will hold
a meeting within 15 days to schedule hearings on the matter. 'Certainly
we'll cooperate with (the FERC investigation) as we have with all the
others,'' Enron spokesman Eric Thode said.
'Enron still owns the facilities.' Earlier this month Fastow was charged
with fraud related to Enron's bankruptcy in December.
SBC Affiliates File Objection to WorldCom Retention Plan
A group of telephone companies filed an objection to WorldCom Inc.'s
proposed $25 million retention plan, which aims to encourage employees
WorldCom deems critical to its operations to stay with the company
during its time in chapter 11 bankruptcy, Dow Jones reported. The
objectors, which are affiliates of SBC Communications Inc., argue the
plan should be denied by the U.S. Bankruptcy Court in Manhattan because
WorldCom hasn't provided the names of the employees who will be eligible
to receive bonuses under the plan. The objectors also said WorldCom
needs to provide evidence that supports the need for the plan. A hearing
to consider the matter is scheduled for Tuesday morning. WorldCom has
said its ability to stabilize and preserve its business operations and
assets 'will be substantially hindered' if it is unable to retain the
services of the key employees. The proposed plan would benefit 329
employees, according to court documents. The objectors argue that
WorldCom has failed to demonstrate why the plan is necessary.
If a plan is approved, the SBC affiliates, which are owed roughly $325
million, asked the court to deny WorldCom the exclusive right to select
the key employees, deny WorldCom the exclusive right to decide how the
employees should be compensated, provide creditors and other parties in
interest the names of the key employees and prohibit the debtor from
using its debtor-in-possession loan to fund payments under the plan.
Frisby Technologies Still Seeks Funding
Frisby Technologies Inc. said it needs additional financing to continue
its operating plan after early December and may have to file for chapter
11 bankruptcy protection if the funding can't be secured, Dow Jones
reported. In a press release on Friday, Frisby said it is continuing to
pursue financing, but to date hasn't been successful in securing the
additional capital needed. Frisby said it has received a proposal from
an unnamed institutional investor to provide up to $1 million in
financing, subject to further negotiation and the company satisfying a
number of prescribed conditions. In addition, Frisby said it is
considering the possibility of a merger and/or the potential sale of
some or all of its assets, although the company can't assure it will be
able to identify a buyer or an acceptable merger partner or be able to
complete such a transaction. If the company is unable to complete any of
the proposed transactions or otherwise secure enough financing, it may
voluntarily seek protection from its creditors under federal bankruptcy
laws, which the company said would have a 'material adverse effect' on
its business, financial condition and prospects.
Sealed Air Announces Dec. 2 Trial Date
Sealed Air Corp. said Dec. 2 has been set as the new trial date for the
fraudulent-transfer lawsuit filed against Sealed Air by asbestos
plaintiffs, Dow Jones reported. The plaintiffs want billions of dollars
transferred back into the estate of W.R. Grace & Co. to pay off
claimants and other creditors. Sealed Air merged with a former W.R.
Grace unit in 1998. Grace, a supplier of specialty chemicals and
building materials, filed for chapter 11 protection in April 2001
following a sharp rise in asbestos claims. In a press release on Friday,
Sealed Air said the court has ordered all parties as originally
configured, with the claims asserted against Sealed Air by creditors
committees in the Grace bankruptcy proceeding. As reported, the case has
been postponed since a Sept. 20 ruling by an appeals court that held a
creditor or creditors committee may not assert a fraudulent transfer
claim in a bankruptcy proceeding and that only a debtor-in-possession or
an appointed trustee may bring such actions.
Borden Chemicals Gets OK of Environmental Settlement
Borden Chemicals & Plastics Operating L.P. earlier this week won
approval of a settlement with government agencies that resolves
environmental claims against the debtor's chapter 11 estate, Dow Jones
reported. The order, signed by Chief Judge Peter J. Walsh of the
U.S. Bankruptcy Court in Wilmington, allows Borden Chemicals &
Plastics Operating to avoid litigating the matter at what the debtor
company said could be a substantial cost to its estate. The
Environmental Protection Agency and the Louisiana Dept. of Environmental
Quality had asserted claims against Borden Chemicals & Plastics
Operating relating to the company's use of chemicals in its Geismar
facility and the impact those chemicals may have had on the groundwater.
Financial terms of the deal weren't disclosed, but the debtor said it
favored the settlement over litigation. As part of the settlement,
Borden Chemicals & Plastics Operating's Borden Chemical Inc.
affiliate will investigate and remediate contamination of soil or
groundwater that may be present at its solid waste management units. The
debtor will be responsible for closing certain solid waste management
units and tanks.
Also this week, Judge Walsh authorized Borden Chemicals & Plastics
Operating to increase and extend its debtor-in-possession loan with BCP
Management Inc., a general partner of the debtor company. Availability
under the DIP loan was increased to $7.5 million from $4.5 million, and
the term of the loan was extended through Dec. 31. The loan was set to
expire this month. Borden Chemicals & Plastics Operating is 99
percent owned by Borden Chemicals & Plastics L.P., which didn't file
for chapter 11 bankruptcy protection. Borden Chemicals and Plastics
Operating filed for bankruptcy protection on April 3, 2001, listing
assets and debts of more than $100 million each.
United Works to Extend November Debt Payment
United Airlines is working to extend a debt payment owed to the German
development bank KfW as its near-term future hinges on whether it can
make several critical loan installments in the next two months, Reuters
reported. KfW is the German state-owned bank based in Frankfurt to which
United owes $300 million on Nov. 17. The date is critical because United
may be forced into a chapter 11 bankruptcy filing if it cannot make the
payment. Several sources familiar with the matter said the bank may be
willing to give the No. 2. U.S. carrier about a month or more extension,
particularly if it looks to be making progress on labor talks and
securing a U.S. government-backed loan. Negotiations with KfW are
ongoing, the newswire reported. United, the No. 2 U.S. carrier and a
unit of UAL Corp., has warned it might have to file for bankruptcy this
autumn if it cannot cut costs.
Viasystems Group Wins Final Court OK for $37.5 Million DIP
Loan
Viasystems Group Inc. won final approval of its $37.5 million
debtor-in-possession credit facility after a hearing on Friday before
the U.S. Bankruptcy Court in Manhattan, Dow Jones reported. The order,
signed by Judge Allan L. Gropper on Friday, also gives the maker
of printed circuit board and backpanel assemblies final approval to use
the cash collateral of its lenders, who are owed more than $525.2
million. Viasystems Group, which filed for chapter 11 protection on Oct.
2, said in court papers that the funds are 'critical' to demonstrate it
has enough liquidity to operate during its reorganization case, maintain
operations and bring about a restructuring under its prepackaged plan.
The one-year loan, from a group of pre-petition lenders led by J.P.
Morgan Chase Bank, has a letter of credit subfacility of up to $10
million. As reported, under the company's proposed recapitalization,
$740 million of debt will be exchanged into common and preferred stock,
dropping its debt load to $380 million from $1.1 billion. The company's
existing common stock, options and warrants will be canceled and holders
won't receive any distribution in the restructuring. The companies
listed $1.6 billion in total assets and just more than $1 billion in
total debts in its chapter 11 petition.
Genuity Gets Two-week Extension Pact with Lenders
Genuity Inc. received a two-week extension from its lenders on its
standstill credit agreement, as debt-restructuring talks continue, Dow
Jones reported. In a press release on Friday, Genuity said the newest
extension, which runs through Nov. 12, requires the company to make a
$12.5 million payment. Genuity has been in default of a $2 billion bank
credit agreement and a $1.15 billion loan from Verizon Communications
since July 24, when Verizon announced that it wouldn't acquire a
controlling interest in the company. The Internet networking company
received $723 million in funding from the banks, and has repaid about
$200 million of the outstanding debt. The bank group and Verizon have
given Genuity several extensions since the company went into default.
Genuity has said it may be forced to file for bankruptcy if the
creditors demand payment.
Living.com Creditor Trustee Files Suit Against Amazon.com
The trustee for the creditors' trust for Living.com filed a suit against
a subsidiary of Amazon.com Inc. in the U.S. Bankruptcy Court for the
Western District of Texas, Dow Jones reported. The trustee alleged in
the suit, filed on Aug. 28, that Living.com's creditors are entitled to
a contractual recovery of about $58 million in fees that Living.com paid
to Amazon.com in 2000. Amazon.com said the trustee claims the fees were
paid primarily through the issuance of Living.com stock to Amazon.com.
Amazon.com said it disputes the allegations and intends to vigorously
defend itself. As reported, Living.com filed for bankruptcy protection
in August 2000.
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