February 9, 2004
Consumer Credit Expanded in December
Consumers borrowed at a faster pace in December than they did in
November, aided by lower interest rates on automobiles in the month, a
report from the Federal Reserve on Friday showed, Reuters reported. The
Fed said the consumer debt grew by $6.6 billion in December to $2.002
trillion, led by a $5.0 billion increase in the non-revolving credit
category that includes loans for autos, boats, education expenses and
other purposes. In November, debt outstanding grew at a revised $1.8
billion. That was down from an initial estimate of a $4.1 billion gain.
The December figures were slightly below Wall Street expectations.
Analysts polled by Reuters on average forecast consumer debt grew $7.5
billion. Revolving credit, which tracks borrowing through charge and
credit cards, posted a $1.6 billion increase in December, reported the
newswire.
Lawmakers Preparing For Pension Overhaul
The effort to overhaul the pension rules will pick up soon,
legislators say, CongressDaily reported -- as soon as the new
rate fix is in place. Both chambers have passed the pension legislation
that would exchange a corporate bond rate for the currently used 30-year
Treasury bond rate. That bill is designed to stay in place for two
years, during which Congress is expected to consider a permanent
replacement rate as well as make broader pension policy changes. The
Bush administration is readying its proposal, according to Steve
Kandarian, director of the Pension Benefit Guaranty Corp. (PBGC).
Kandarian said the White House is coordinating its proposal with the
Treasury Department and the PBGC, although he did not specify when the
plan would be finalized. At the moment, the administration is 'modeling'
how proposed rule changes would interact with others, given the
interrelated nature of pension laws, he added, reported the
newswire.
Congress is awaiting the administration's plan, but lawmakers are
already planning to consider changes in how pensions are funded, how
their details are disclosed and what the permanent formula for employer
payments will be. House Education and Workforce Chairman John Boehner
(R-Ohio) said all of the issues would have to be looked at
comprehensively. Boehner plans to hold a series of hearings and thinks
the House may be able to pass legislation this year. 'We just need to do
as much work as possible this year,' he said. A spokesman for Senate
Health, Education, Labor and Pensions Chairman Judd Gregg (R-N.H.) said
the committee would examine the proposal and is likely to hold hearings
as well, reported the newswire.
Panel Advances Changes To Payday Loan Laws
A Georgia House committee last week approved changes in state law that
would crack down on payday lenders, while allowing for a change in the
state's banking industry, CongressDaily reported. The state House
Banking Committee voted to put payday lenders under the Georgia
Industrial Loan Act -- which would require them to get a state license
to do business and to a 60 percent ceiling on interest rates. Currently
payday lenders charge interest rates of 500 percent or more. 'This will
help protect Georgians from these unscrupulous lenders,' said Democratic
state Rep. Johnny Floyd, the panel's chairman, reported the newswire.
Floyd was the primary sponsor of the bill that would regulate payday
lenders the same as industrial loan shops.
Tower Records, Parent Seek Chapter 11
Tower Records Inc. and its parent today filed for chapter 11 bankruptcy
protection, Reuters reported. The chapter 11 filing caps a long period
of financial distress for privately-held Tower, a chain of more than 90
stores that sells music and video entertainment in various formats.
Sources had said money-losing Tower was unable to find a suitable buyer.
The parent, MTS Inc., and 15 affiliates including Tower sought
protection from creditors from the U.S. Bankruptcy Court in Wilmington,
Delaware, a court filing shows. MTS listed more than $100 million of
assets and more than $100 million of debts in its filing.
The CIT Group/Business Credit Inc. and other lenders are providing up to
$100 million of debtor-in-possession financing to keep MTS operating as
it reorganizes, reported the newswire. Tower has been hurt from
competition from such retailers as Wal-Mart Stores Inc. and Best Buy
Co., and high lease costs. Digital downloading and file copying
decreased sales and led to rising losses, the company has said, Reuters
reported.
Enron Gets Bankruptcy Court's Approval to Sell Portland, Ore.,
Utility
Enron gained approval from its bankruptcy court on Thursday to sell its
Portland General Electric utility to a group of Portland businessmen for
$1.25 billion, the Knight-Ridder reported. The business group
will also assume $1.1 billion in debt. U.S. Bankruptcy Judge Arthur
Gonzalez was charged with ensuring that the deal was in the best
interests of Enron's creditors, who will share cash from the sale. After
announcing the proposed sale in November, Enron waited a few months to
see if a higher bid would come from the city of Portland or another
suitor, but none came. The sale ends years of controversy surrounding
the state's largest electric utility, serving 750,000 customers, and
Enron's largest remaining asset. The deal must still be considered by
the Oregon Public Utility Commission to determine whether it is in the
best interests of the state, reported the newswire.
Ormet Files for Bankruptcy
Ormet Aluminum Products and Mill Corp. filed for bankruptcy protection
on Friday, the Jackson Sun reported. 'Right now, everything is
operating as usual,' said Laurie Leonard, corporate communications
director, reported the newspaper. 'As part of our restructuring, we'll
be thoroughly reviewing all of our operations to look at enhancing
operational efficiency and to reduce costs. 'The Jackson plant has 181
employees, Leonard said. Friday's chapter 11 filing was made in the U.S.
Bankruptcy Court for the Southern District of Ohio.
US Airways Narrows Loss, But Carrier Warns on Costs
US Airways Group Inc. narrowed its fourth-quarter loss to $98 million,
but its CEO warned that the company must cut its overall costs by at
least 25 percent if it is going to successfully compete in an industry
increasingly dominated by profitable discount carriers, the Wall
Street Journal reported. CEO David Siegel said the airline has made
no decision to sell any asset despite having engaged Morgan Stanley last
month to identify and value wares to sell and find potential buyers. He
also said US Airways will take all actions necessary to stay in
compliance with the covenants attached to a $1 billion loan that helped
the company step out of bankruptcy-court protection last year.
'The challenges aren't insurmountable,' Siegel said. But he predicted
that the next 12 to 18 months will be tough as the carrier moves to
further reduce its labor costs, cut its cost of distribution and compete
with low-cost airlines. 'Our employees are victims of a reality in the
industry that is difficult to adjust to,' he said, reported the online
newspaper.
Trinity's Pension Plan for Air Canada Faces Hurdle
Air Canada's unions on Friday rejected a plan by its new financial
backer to change the airline's pension schemes, Reuters reported.
Trinity Time Investment, which is providing the money for Canada's
largest airline to resurface from bankruptcy, said it wants to switch
its pension plan to one where employees bear investment risks, instead
of the company. Air Canada currently has a defined benefit scheme, where
employees are guaranteed a specific pension level regardless of market
fluctuations. Trinity wants to switch to a so-called 'defined
contribution plan.' 'It's an insult to all employees,' said Pamela
Sachs, president of the Air Canada component of the Canadian Union of
Public Employees. Sachs said revised collective agreements agreed by the
unions last year included a protection to the pension plans as well as
pay and job cuts. 'They cannot simply overturn our collective
agreements,' she said, reported the newswire.
Laidlaw Stock Will Trade Feb. 10 on NYSE
Laidlaw International Inc., which operates intercity bus line Greyhound
Lines Inc., said on Friday its shares would begin trading on the New
York Stock Exchange on Feb. 10, Reuters reported. The Naperville,
Ill.-based company said the stock will trade under the symbol LI.
Laidlaw also operates school buses, and emerged in June from bankruptcy
protection as a reorganized company. The company has 90,000 employees in
the U.S. and Canada.
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