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October 1, 2003
Consumer Confidence Falls in September
U.S. consumer confidence plunged to the lowest level since the start
of the Iraq war, the Conference Board reported on Tuesday, Reuters
reported. Economists fear the current growth may slow down once the
impact of the recent round of tax cuts starts to fade, with workers
still losing jobs nearly two years after the recession ended. Analysts
and investors will look closely at Wednesday's report on national
manufacturing from the Institute for Supply Management and the Labor
Department's payrolls report on Friday for confirmation of the souring
outlook.
The news came as the Conference Board's September confidence index fell
to 76.8, from a revised 81.7 in August, weighed down by worries about
jobs. That reading was much worse than economists' forecasts of a slight
rise to 81.8 and was the lowest level since March. 'The lack of
improvement in labor market conditions continues to dampen consumers'
spirits,' said Lynn Franco, director of the Conference Board's Consumer
Research Center, reported the newswire.
High Court To Decide State Bankruptcy Immunity
The U.S. Supreme Court yesterday accepted a new case on whether Congress
has the authority to revoke state sovereign immunity in bankruptcy
proceedings, Reuters reported. The justices agreed to hear an appeal by
Tennessee's student-loan corporation. At issue is whether the
Constitution's bankruptcy clause, which gives Congress the authority to
establish uniform laws on bankruptcies, also gives it the power to
revoke state sovereign immunity in bankruptcy.
The case, In re Hood, involves an adversary proceeding filed by
Pamela Hood in bankruptcy court in Tennessee. She sought an undue
hardship discharge of her student loans, and named the Tennessee Student
Loan Assistance Corporation, a state agency, as defendant. The state
agency moved to dismiss on the ground of state sovereign immunity under
the Eleventh Amendment. The bankruptcy court denied the motion to
dismiss, and both the bankruptcy appellate panel and the Sixth Circuit
Court of Appeals affirmed. The courts all held that Congress had
constitutional authority to limit state sovereign immunity in bankruptcy
and had done so in Bankruptcy Code Section 106. The Sixth Circuit
acknowledged that five other circuit courts have held that Congress has
no such power under the Constitution.
Tennessee appealed to the Supreme Court. It said the case presented an
important issue and that federal appeals courts have split on the issue.
Forty-seven states supported Tennessee's appeal. Tennessee Attorney
General Paul Summers said in the appeal that states would be subjected
'to the indignity of suits without their consent' and warned that 'the
economic costs to states could be overwhelming.' The court term begins
next week. The justices will hear arguments in the case early next year
and will issue a decision by the end of June. The case is Tennessee
Student Assistance Corp. v. Hood, 02-1606.
MIRANT
Mirant Settles Manipulation Case with FERC
Bankrupt energy trader Mirant Corp. said on Tuesday it reached a
deal with Federal Energy Regulatory Commission (FERC) staff to pay
$332,411 to settle charges that it violated trading rules during
California's 2000-01 energy crisis, Reuters reported. The deal would
have to be approved by the three-member commission and a bankruptcy
court before being finalized, Mirant said. The firm did not admit to
guilt as part of the settlement. 'We firmly believe that we have not
violated any tariff provisions, rules or regulations,' Mirant Vice
President Doug Miller said in a statement.
FERC commissioners in June identified Mirant as one of 43 companies that
may have used questionable electricity trading strategies. They have
ordered the firms to 'show cause' why they should not have to repay the
profits gained from such trades. Atlanta-based Mirant, strapped with
$11.4 billion in debt, filed for chapter 11 bankruptcy protection in
July after it failed to restructure its debt in talks with bondholders
and banks, reported the newswire.
Mirant Lays Off More Employees; Further Cuts To
Come
Mirant Corp. is in the midst of laying off more employees, with numerous
traders
let go Friday and more layoffs to come, the company said. The bankrupt
independent power producer declined to say how many marketing and trade
personnel were dismissed, but one former employee said most of the
forward electricity traders were let go. Since declaring bankruptcy in
July, Mirant hasn't been able to execute many forward trades, though it
has been active in the spot market.
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Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Adelphia Communications Sues 3 Insurance Firms; Rigases Over Pa.
Suit
Adelphia Communications Corp. filed a lawsuit in a New York court
against three insurance companies and the company's founding family
seeking to keep the parties from continuing a lawsuit in another court.
Adelphia Communications filed the complaint late Monday with the U.S.
Bankruptcy Court in Manhattan in an effort to stop the insurance
companies' lawsuit pending before the U.S. District Court for the
Eastern District of Pennsylvania. Adelphia said the continued
prosecution of those claims is threatening to interfere with its
reorganization prospects. The complaint, known as an adversary
proceeding, is a type of lawsuit filed in bankruptcy cases.
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href='http://www.djnewsletters.com/dbr2.html'>www.djnewsletters.com/dbr2.html)
Copyright (c) 2003 Dow Jones & Company, Inc. All Rights Reserved
Alliance Capital Suspends Two Executives
Alliance Capital Management Holding LP said on Tuesday it has suspended
two executives after finding conflicts of interest related to mutual
fund trading as a widening government probe hit the largest publicly
traded U.S. fund company, Reuters reported. The suspensions mark the
latest fallout from a regulatory investigation into the practices of the
nearly $7 trillion U.S. mutual fund business.
Securities and Exchange Commission Chairman William Donaldson told
Congress on Tuesday his agency is moving to crack down on improper
trading in mutual fund shares.
In early September, New York Attorney General Eliot Spitzer unveiled a
probe into 'market timing' and 'late trading' of mutual fund shares that
resulted in a $40 million settlement with hedge fund Canary Capital
Partners LLC. Market timing involves trading strategies designed to
profit from temporary pricing imbalances, while late trading relates to
purchases after the stock market closes. Regulators say these practices
could be costing average fund investors billions of dollars.
Court OKs Trans World Acquisition of Wherehouse
Trans World Entertainment Corp., owner of music and video retailers
Coconuts and F.Y.E., said on Tuesday it received bankruptcy court
approval to buy Wherehouse Entertainment Inc. for about $35.6 million,
Reuters reported. Trans World Entertainment also will take on $5 million
of liabilities for the owner and operator of 145 stores. Trans World
expects to keep 111 of the stores and liquidate the rest.
A separate bankruptcy court also approved Trans World's plan to buy the
assets of CD World, which owns and operates 13 music stores in New
Jersey and Missouri, the company said, reported the newswire.
Penn Traffic Losses Adding Up
The Penn Traffic Co. has lost $12.4 million since deciding to
restructure itself under federal bankruptcy court protection in May, the
Associated Press reported. The troubled grocer lost $7.9 million of that
amount during August, the company reported in required legal filings
with the federal bankruptcy court in Westchester County. The
Syracuse-based company, which employs about 16,000 people across its
divisions, had no comment Tuesday about the losses.
Penn Traffic filed for chapter 11 bankruptcy protection on May 30. It
has until Jan. 29 to file a reorganization plan with the court. The plan
must be approved by creditors by March 29. It also has the option of
asking for an extension on that due date.
Bankruptcy Judge Gives Symphony 15-day Extension
A U.S. Bankruptcy Court gave the San Antonio Symphony another 15 days to
work out a new contract with its musicians, Express-News Business
Writer reported. 'I would like to see something that really has a
chance of working,'' U.S. Bankruptcy Judge Leif Clark told the lawyers
for both sides. Clark set Oct. 15 as the new date to consider the
symphony's motion to reject its current collective bargaining agreement
with the American Federation of Musicians, Local 23. At that time, the
two sides hope to have a new contract in place. The biggest disagreement
between the symphony and its musicians concerns health insurance
coverage, which lapses on Oct. 1.
Federal Action Forces Wolford into Bankruptcy
Iowa's largest contract home sales company was forced into liquidation
Monday by a receiver seeking to protect some 200 creditors, the
Register reported. The move means buyers, sellers, investors and
lending companies owed about $4 million by the Wolford Group Inc. will
have to stand in line over the next several months as a bankruptcy
trustee weighs which of the Des Moines firm's debts can be repaid. 'The
Wolford Group could not continue as a business,' said Iowa Attorney
General Tom Miller, who filed a consumer fraud lawsuit against the
company last month. 'What we are trying to do now is help buyers and
sellers come to some sort of resolution.'
Some of the creditors tied up in investments in the beleaguered
company's more than 140 remaining properties could face sizable losses.
The Wolford Group closed its Fleur Drive offices several weeks ago in
the wake of numerous customer complaints and Miller's lawsuit. The
bankruptcy action filed on Monday leaves many of the family-owned
company's customers wondering if they will be able to recover huge sums
they believe were lost by deception, reported the newspaper.
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