Detroit is closer to figuring out how to address a hole in pension funding that is far larger than it had anticipated when it exited from bankruptcy, the Detroit Free Press reported yesterday. In March, the city requested proposals from national firms with expertise in public pension plans to advise the city on how best to address a $195-million payment to the city's two pension plans that comes due in 2024, under terms of the city's exit from the nation's largest chapter 9 municipal bankruptcy. John Naglick, the city's deputy chief financial officer and finance director, said that a committee of top officials in the Duggan administration reduced a pool of proposals to three and recently recommended one firm to the city's CFO, who approved the suggestion. Naglick didn't name the firm, saying that it would be revealed later this month when a contract is presented to the city council. It's the next step in addressing what's become a significant risk to the city's recovery from insolvency.
Walter Energy Inc. defeated an attempt by union workers to salvage job contracts and keep retiree benefits after a judge upheld a lower court ruling allowing the bankrupt coal producer to reject labor agreements, Reuters reported yesterday. U.S. District Judge David Proctor rejected an appeal by an affiliate of the United Mine Workers of America, saying that a U.S. bankruptcy judge's decision in December to allow Walter Energy to end its labor agreements was "valid." Alabama-based Walter Energy, which filed for bankruptcy protection in July, had said that it needed to end its collective bargaining agreements and retiree benefits in order to sell its core operations, given the industry's dire straits. The sale to Warrior Met Coal, an entity formed by Walter Energy's lenders, was approved by the U.S. Bankruptcy Court in January.
Bankruptcy Judge Kevin R. Huennekens has ruled that Alpha Natural Resources can break its contract with the United Mine Workers union and modify its retiree health care plan, the Charleston (W.Va.) Gazette-Mail reported yesterday. Judge Huennekens granted Alpha’s motion on the UMW contract and retiree health care benefits after a hearing in Richmond on Monday. UMW President Cecil Roberts said that the union is still trying to work out some sort of deal with Alpha, but suggested UMW members might walk off the job if acceptable terms aren’t reached. “We are trying to reach an agreement with the company to resolve this issue, but if we are unable to do that we will have to examine our options,” Roberts said. Bankrupt Alpha had asked the court in March to relieve it of its contract with the mine workers and its obligation to pay UMW retiree benefits. The company said that it needs to slash costs to survive what it called “the historic collapse of the domestic coal industry,” citing “a confluence of macroeconomic headwinds, regulatory obstacles and competitive pressures” that have forced numerous bankruptcies and cost thousands of miners their jobs. Read more.
In related news, federal officials are objecting to a coal company's plan to restructure and emerge from bankruptcy, because, they say, it looks a lot more like a plan to liquidate, WyomingPublicMedia.org reported yesterday. The U.S. Trustee Program is skeptical of the reorganization plan that Alpha Natural Resources filed in March. In court documents, the U.S. Trustee writes that although the plan was presented as a reorganization, the fact that Alpha is planning to sell off its most valuable assets, including its mines in Wyoming, makes the plan look more like a liquidation. Alpha does not explain how the company will operate once it sells off these core assets, and the U.S. Trustee says that there is no information about how the company that remains will generate income. Read more.
Experts are set to discuss labor issues in coal cases on a FREE abiLIVE webinar on June 2. Click here to register!
The growing push to raise the minimum wage to as much as $15 an hour is creating new issues in the workplace: While some of America’s lowest-paid workers will get fatter paychecks, their veteran colleagues may feel underpaid, the Wall Street Journal reported today. Wage compression poses a financial and management challenge for employers, who say wage increases have rankled some staff unhappy that less experienced co-workers now earn the same wages they spent months or years striving to achieve. Some companies have raised pay for veteran workers, and others plan to offer extra fringe benefits, fearing that valuable workers might otherwise jump ship. Dozens of cities have passed wage increases in the past four years, and New York and California recently approved increases to $15 an hour. Cities considering similar measures include Flagstaff, Ariz.; Minneapolis; Washington, D.C.; Olympia, Wash. and others.
Bankruptcy Judge Sean Lane approved a deal between bankrupt Republic Airways Holdings Inc. and Delta Air Lines Inc. that will increase the regional carrier’s rates for ferrying Delta passengers and provide it with $75 million in financing, Bloomberg News reported yesterday. Judge Lane cleared the deal, which becomes effective on May 6, Republic said in a statement Tuesday. Delta had sued last year, accusing Republic of failing to complete some scheduled flights for regional unit Delta Connection. Republic, which ferries passengers from smaller cities to hub airports for Delta, American Airlines Group Inc., and United Continental Holdings Inc., filed for bankruptcy protection in February after struggling with a shortage of pilots. The carrier had agreed to a new contract with the workers late last year but was unable to negotiate new deals with the three bigger airlines to help cover the costs of higher pay, leading to the filing. The agreement announced Tuesday will allow Republic to stop flying 50-seat aircraft, which have fallen out of favor in the industry, and move exclusively to more profitable 70- to 88-seat aircraft. Delta will provide Republic with $75 million in debtor-in-possession financing, according to the statement.
President Barack Obama thinks Americans don’t properly appreciate the benefits of his economic policies — a view he most recently expressed in an interview with The New York Times, according to an opinion yesterday by Bloomberg View Columnist Prof. Narayan Kocherlakota, who is the Lionel W. McKenzie Professor of Economics at the University of Rochester. Isolating the effects of any president’s policies is close to impossible. That said, it’s not hard to see why many people are disappointed with the performance of the economy during Obama’s time in office. In January 2009, at the beginning of Obama’s first term, the nonpartisan Congressional Budget Office issued a 10-year forecast for the U.S. economy, including such indicators as unemployment, gross domestic product, the budget deficit, government debt and interest rates. The unemployment rate has come closest to expectations. Although it remained very high through much of the Obama presidency, it had fallen to near historical averages by 2015. Elsewhere, the story is less positive. Total income growth in the U.S. has fallen well short of expectations, in both nominal and inflation-adjusted terms. And although Obama expressed pride in the recent decline in the federal budget deficit, it’s still much larger than the CBO forecast in 2009 — as is the ratio of government debt to GDP. Should policymakers be satisfied, as though this were the best that America can do? At times in his <em>Times</em> interview, Obama seemed to suggest that he thought so, but in his commentary, Kocherlakota strongly disagrees.
