Timesizing® - Homepage
[Commentary] © 2002 Philip Hyde, The Timesizing Wire™, Box 622 Cambridge MA 02143 USA (617) 623-8080

---

Bankruptcies, Apr-Jun/2002

6/27/2002  1 bankruptcy, with $258.1m in debt, in NY Times (NYT) & BG -

• Neon Communications files for bankruptcy protection, by Andrew Zipern, NYT, C8.
  ...Operat[or of] a fiber optic network in a dozen eastern states filed for Chapter 11...yesterday in an effort to reduce its debt by about $250m.... In papers filed late Tuesday in US Bankruptcy Court in Delaware, [Westborough MA-based] Neon and its Neon Optica Inc. unit listed $208.4m in assets and $258.1m in liabilities....

• Japan: Airline in bankruptcy, AP via NYT, W1.
  Hokkaido International Airlines...known as Air Do..\..which once drew accolades for challenging Japan's dominant carriers by sharply cutting prices, filed for bankruptcy protection, a Tokyo court official said.... Air Do [is] based in Sapporo on the northernmost Japanese island of Hokkaido..\.. All Nippon Airways, meanwhile, said it was in talks with the airline...on an alliance to improve profit and cut costs....

• Ruling shakes investors in Indonesia, by Jane Perlez, NYT, W1.
  JAKARTA... - The decision by an Indonesian court to declare the local subsidiary of a large Canadian life insurance company bankrupt, over the company's objections and despite the fact that it made money last year, has severely shaken the confidence of foreign investors here, who have grumbled for years about corruption in the judiciary.
  The Commercial Court in Jakarta ruled last week that the Manulife Indonesia unit of the Manulife Financial Corp., one of the two dominant insurance companies in Canada (the other is Sun Life), was bankrupt because it had failed to pay a dividend to shareholders in 1999.
  [Good reason for all foreign firms to leave Indonesia and divest completely.]
  The court was acting on a petition from the receiver supervising a company controlled by Suyanto Gondokusumo, a powerful businessman during the Suharto era and a former joint venture partner of Manulife.
  Manulife Indonesia is the 4th -largest life insurer in Indonesia, with 400,000 policyholders; it reported a net profit of $8.7m in 2001.
  [Guess Gonzokuksumo owned the other three life insurers and cared more about his compulsiveness than his country. ]
  The ruling dropped jaws here. ...Just days before the ruling, senior government officials told major foreign donors that transparency in business dealings was a top priority.
  [Talk is cheap.]
  The court that rendered the ruling...was set up in 1999 with the aid of the IMF to help strengthen the rule of law in business dealings. But its judges are poorly paid and some foreign investors suspect that payoffs may have been involved in the ruling [or 'fooling'] against Manulife....
  [Make that "all foreign investors," not "some," and "knew," not "suspect."]
  Carol Hessler, the president of the American Chamber of Commerce in Jakarta, said the ramifications of the court decision go far beyond one Canadian company.... Foreign executives say it is increasingly difficult to do business in Indonesia because the courts are often a marketplace where the sizes of bribes decide cases. Under Suharto, they say, corruption was at least organized in a fairly predictable hierarchical system; now it is running out of control....
  [Followup]
  Indonesia top court decides insurer isn't really bankrupt, by Benard Simon, 7/09/2002 NYT, W1.

• Adelphia is expected to move by Monday on bankruptcy step, by Geraldine Fabrikant, NYT, C7.
  Adelphia Communications is expected to file for bankruptcy protection by Monday, according to people briefed on the situation. The company has been trying to negotiate financing of about $1.7B to help it through a bankruptcy reorganization, according to debt analysists....
  Adelphia's problems began in March when it disclosed that it had guaranteed loans of $2.3B to the Rigas family, which controlled Adelphia. Since then, the size of the loans has ballooned to $3.1B, and a number of other transactions between the company and the Rigas family have come to light.
  [Followup]
  Adelphia, close to bankruptcy, gets a loan, by Andrew Sorkin, 6/22/2002 NYT, B4.
  ...a $1.5B loan that would allow it to operate while it reorgs under bankruptcy protection, executives close to the company said. The company is planning to file for bankruptcy on Monday, the excutives said....
  [More followup]
  Adelphia bankruptcy delayed, 6/25/2002 NYT, A11.
  ...as representatives of the company and its bankers continued to negotiate over the terms of $1.5B in loans.... One bondholder...said he was not surprised that the negotiations were taking so long. "Nobody trusts anything or anybody," the bondholder said. "Everybody thinks there is more bad news to come."...
  [Followup #3 - "three's a charm"]
  Adelphia files for bankruptcy, by Joseph Treaster, 6/26/2002 NYT, C2.
  ...yesterday [Tues.] in Manhattan....
  [One day later than expected.]
  [Followup #4.]
  Adelphia seeks to shield assets from family, AP via 8/28/2002 NYT, C4.
  ...Adelphia said that the founder, John Rigas, and his familly had a "pattern of using Adelphia's funds to purchase and maintain their real estate assets" and that it was likely that the company owned an interest in "any parcel of real property in which the Rigases claim an interest and seek to liquidate."...
  [No wonder this company couldn't make headway - they had a tapeworm, the Rigases.]

• XO Communications is said to be ready to file a plan for bankruptcy - Two potential backers are backing away, by Andrew Sorkin, NYT, C1.
  ...The telecommunications services provider is expected to file for bankruptcy protection today and present an reorg plan.... XO [is] based in Reston VA.... XO, founded by the mobile-phone pioneer Craig McCaw, piled up more than $5.1B in debt building a telecomms network in the 1990's. As a result...debt payments have simply overwhelmed the company's income....
  [Followup]
  Judge approves XO bankruptcy plan, Bloomberg via 8/27/2002 NYT, C4.
  [and]
  Bankruptcy court approves plan giving Icahn control, Dow Jones via 11/18/2002 WSJ, C10.

• Japan: Bankruptcies decline, Dow Jones/AP via NYT, B3.
  The number of Japanese companies going bankrupt declined last month...1.6% from a year earlier..\..but the amount of corporate debt they left behind climbed 6.2% from a year earlier, a private research firm said. The number of companies that failed in May totaled 1,696...according to the research firm, Teikoku Databank. Failures of manufacturers rose 9.8% from a year earlier and made up 18.5% of all bankruptcies, indicating that Japan's industrial sector continued to struggle in the face of competition overseas.

• Germany: Kirch's collapse, by Edmund Andrews, NYT, W1.
  The collapse of Germany's Kirch Group was completed today when Taurus Holding, the umbrella company that controls its subsidiaries in everything from film and sports rights to television broadcasting, filed for bankruptcy. The move has little operational effect, because all of Kirch's subsidiaries had already filed for bankruptcy and are being carved up, sold off and closed.

• Enron offshoot bankrupt, Reuters via NYT, C11.
  NewPower Holdings, a struggling energy marketer founded by the Enron Corp., filed for bankruptcy protection today, one day after it dropped services to about 80,000 customers in Texas....
  [Does that mean "lights out" for 80,000 people because of Bush, Lay and their fellow slimeballs? Maybe just a hiccup in service -]
  NewPower said on Monday that it had signed agreements to transfer all its Texas customers to units of two of the state's largest utilities, Reliant Energy and the TXU Corp..\.. NewPower, which once sought to become the first nationwide provider of electricity and natural gas to residential and small commercial customers in a deregulated energy market,
  [- there's a scary thought -]
  said in April that it might liquidate its business because of a cash squeeze..\.. NewPower and two subsidiaries, TNPC Holdings and the New Power Co., filed petitions for reorganization under Chapter 11 of the US Bankruptcy Code in the Northern District of Georgia....

1. Desa International Inc., NYT, C4.
   ...Bowling Green, Ky., a maker of space heaters and security equipment, filed for Chapter 11 bankruptcy protection and said it planned to sell the company by late September and continue operating with the same workers.

2. Bankruptcy of a division may signal Adelphia's fall, by Geraldine Fabrikant, NYT, C1.
   ...The Chapter 11 filing [yesterday], by Adelphia's Century Communications unit, was widely seen as a precursor to a bankruptcy filing within days by Adelphia itself [which] is in default on $7B in loans.... Adelphia acquired [Century] for nearly $5B in 1999....
   [Again, the lethal takeover-bankruptcy connection.]

• Halliburton and Honeywell win asbestos claims, Bloomberg via NYT, C4.
  ...More than 250,000 asbestos-related claims...involve the Harbison-Walker Refractories Co. [caught only this unit on 2/16/2002 #2], formerly owned by the Dresser unit of Halliburton, and the North American Refractories Co., a former Honeywell subsidiary. The units, now owned by RHI AG of Austria, sought Chapter 11 bankruptcy protection from creditors in January....
  [Followup - North American's name is linked to three other names in bankruptcy notices in the WSJ (B3) and NYT (C5) on 1/07/2003: Intertec Co., I-Tec Holding Corp., and Tri-Star Refractories Inc.]

1. Birmingham Steel files for Chapter 11 protection, Bloomberg via NYT, C4.
   ...Make[r of] concrete reinforcing bars for the construction industry, sought bankruptcy protection from creditors to complete its sale to the Nucor Corp.
   [Nucor Steel is one of our two major working models of timesizing. Hope this acquisition doesn't damage them like Lincoln Electric's adventuring in South America.]
   Birmingham Steel listed $475.5m in assets and $681.9m in debts in Ch. 11 papers filed in...Wilmington, Del.
   [That means a net debt of $206.4m.]
   The company, which is based in Birmingham, Ala., has had nine consecutive quarterly losses because of low prices caused by falling demand and competition from imports. It is the 8th steel maker to file for bankruptcy protection during the last year.
   [And there were 4700 zillion of 'em busted before that.]

2. Napster files for bankruptcy, by Matt Richtel, NYT, C9.
   ...Operat[or of] a music file-sharing service that was once among the fastest-growing features on the Internet, filed for Chapter 11 bankruptcy protection yesterday...on the heels of [its] reaching a deal to sell its remaining assets to Bertelsmann, the German media conglomerate. In its filings, Napster said it had $101m in outstanding liabilities.... The record companies have sued Napster, accusing it of copyright infringement....
   [The perfect "new economy" company - make a big splash by selling other people's stuff, ie: stealing, or lying (all of them, especially the auditors) and then crash dramatically. Ah, the once-great US of A takes on more and more earmarks of a big 3rd-world has-been. The concentration of wealth and the income gap go off the charts and everybody thinks, They're crooks and they're rich - why not me? Check out all the stories on sleazebag Kozlowski's ouster today, which we predicted years ago cuz the SOB can't manage, just merge - "Tyco chief out; Inquiry focuses on tax on art," by Alex Berenson, NYT, front page, and "A prime example of anything-goes executive pay - At the top of Tyco, the limit is pushed to the very edge," by David Leonhardt, NYT, C1, and "Well compensated - As CEO of Tyco International, L. Dennis Kozlowski was one of the best-paid executives in the country," chart, NYT, C1. This is the kind of thing that is going to move us along from balancing the fundamental time dimension with timesizing, to applying the 5 phases to the Next Big Thing, income. This degree of income concentration easily gets dangerous. All it takes is an American rich guy who joins the Dark Side - an American Bin Laden with a nice mainstream American WASP name and face. Then maybe we'll realize how stupid it is to restrain laughter at arguments like, "The rich should get the most tax cuts cuz they pay the most taxes."]
   [Followup]
   Judge issues injunction against Madster, by Matt Richtel, 9/05/2002 NYT, C2.
   ...Yesterday, a trustee for Napster filed to convert its bankruptcy to Chapter 7 from Chapter 11; a company liquidates its assets under Chapter 7, while Chapter 11 allows a company to reorganize. The company's demise, meanwhile, appeared to be complete: the website of Napster, once the Internet's fastest-growing service, read only "Napster was here."
   [Followup 2]
   Napster nears sale of assets, avoids Chapter 7 closure, 9/30/2002 WSJ, B6.

1. World Kitchen Inc., NYT, B4.
   ...a housewares company owned by Kohlberg Kravis Roberts & Co., NYC, an investment bank, filed for Chapter 11...after struggling with $800m in debt and said it planned to maintain normal operations during the reorganizing process.

2. Farmland Industries in bankruptcy after rejecting Smithfield Foods bid, Bloomberg via NYT, B4.
   ...The nation's largest farm cooperative filed...under Chapter 11..\..after failing to win a reprieve from lenders and rejecting a takeover bid...and plans to shed jobs, sell assets and reduce debt..\..
   [Unspecified debt.  Strikes us that it must take sustained bad management to bankrupt (A) a farm cooperative in an age of (B) farm subsidies. Maybe the clue is in this sentence -]
   The cooperative, which is based in Kansas City, Mo., has already sold its domestic grain business and closed its international trading unit to cut costs and pay interest on its debt after a 4-year slump in demand for fertilizer, seeds and fuel it sells to its 600,000 members.
   [Never mind a predictable "slump in demand" from its own members - what's up with that "international trading unit"??]
   [Followup -]
   
3. Farmland investors lose bid to form bankruptcy panel, Bloomberg via 9/27/2002 NYT, C2.
   KANSAS CITY, Mo...- Shareholders of Farmland Industries [yester]day lost a bid to form a committee to represent their interests as Farmland, the largest U.S. farm cooperative, reorganizes under bankruptcy protection. Judge Jerry Venters of US Bankruptcy Court rejected the request from the John Hancock Life Insurance Co, the Commerce Indemnity Co, the Erie Insurance Co and others which own preferred and common stock in Farmland, according to an order posted on the court's website. The order did not explain why the request was denied.
   [Probably didn't want to start a trend.]
   Creditors and lenders holding $1.47B in Farmland debt had objected to formation of the committee, saying it would slow the reorg, waste money and reduce funds available to creditors....

• Pollyanna meets Cassandra - Return to center: The politics of world poverty, op ed by Bill Keller, NYT, A25.
  ...It is possible to see some points that might be part of a compromise leading to more help for countries in lethal distress. One new common theme is a large-scale forgiveness of old debts - in effect, allowing the poorest countries to declare bankruptcy....
  The late economist Peter Bauer famously described foreign aid as the phenomenon of taxing poor people in rich countries to support the lifestyles of rich people in poor countries.
  Even liberal aid economists...say that as a general rule, aid should go to foreign governments that are democratic..., that live by the law and that have more or less free markets.
  [Having referred to "free-market zealots" before, he's now praising free markets as a criterion for foreign aid?]
  These are the countries with a hope of turning aid into economic growth, which may ultimately get them off life support.
  [Any supportive case studies??]
  The tricky part is judging which countries qualify and, over time, measuring whether they are making good use of their aid..\..
  [Isn't is curious that they're still at Square One on basic metrics, even when they agree on them?]
  Treasury secretary...Paul O'Neill...talks about "productivity growth" as the litmus test of whether aid is effective, which sounds sensible in theory but a little simplistic. James Wolfensohn, president of the World Bank, notes that Mr. O'Neill seems to be setting a standard of effectiveness we don't even apply to our own government....
  Now the World Bank and its meaner sister, the International Monetary Fund [IMF], are everybody's favorite scapegoats - to the left, handmaidens of rapacious multinationals; to the right, an empire of waste. In fact, the Bank does what the big donors, mainly Washington, tell it to do....
  Rich countries spend $350B a year on farm subsidies - six times what they spend on foreign aid....
  [Probably because it's so much more efficient to tax poor people in rich countries to support the lifestyles of rich people right there in rich countries (agribusiness owners, executives and stockholders).]

• Britain: Bank raises loss estimate, by Suzanne Kapner, NYT, W1.
  Barclays said provisions to cover bad loans in 1Q02 were higher than in 1Q01.... Investors have become increasingly nervous about the number of bad loans banks have as more companies default, file for bankruptcy protection or go out of business.

• Nextel's overseas wireless unit files for bankruptcy, Bloomberg via NYT, B4.
  Nextel Communication's international wireless-phone unit filed...months after missing an $8.3m loan payment amid economic turmoil in Latin America, where it does business. The unit NII Holdings, listed $1.24B in assets and $3.26B in debts in Chapter 11 papers filed in bankruptcy court in Delaware....
  [So 3.26-1.24= $2.02B net debt.]

• KPNQwest is seeking bankruptcy - Dutch-US venture is talking to rivals, by Suzanne Kapner, NYT, W1.
  ...The Dutch provider of data services [will] file for protection from creditors and [is] in talks with rivals that could lead to a takeover of the company. KPNQwest - majority owned by Royal KPN, the Dutch phone company, and Qwest Communications International of Denver - also said that its 5-member supervisory board resigned, signaling that a group of banks had taken greater control of the company.... Reeling from a sharp downturn in demand for telecom services heightened by a glut of capacity from rivals, KPNQwest said last week that it would run out of money this year, after a group of banks led by Citigroup shut off a 525m euro ($484m) line of credit....
  [Followup - "The Netherlands: Fiber optic bankruptcy," by Suzanne Kapner, 6/01/2002 NYT, W1, which states, "KPNQwest, which operates one of Europe's largest fiber optic networks, filed for bankruptcy in a Dutch court after receiving court protection from creditors last week."]

• Fairchild Dornier allowed to shift bankruptcy filing, Bloomberg via NYT, C4.
  ...from Chapter 7, which calls for liquidation, to Chapter 11, which allows for a reorganization. Fairchild Dornier's German parent, Fairchild Dornier GmbH sought protection from creditors in Germany on April 2 [see 4/03/2002 #2 below] after amassing more than $670m in debt. On April 25, 12 former employees filed an involuntary Chapter 7 bankruptcy petition against the company's U.S. unit in Federal Bankruptcy Court in Alexandria, Va.... Judge Stephen Mitchell granted Fairchild Dornier's request to convert...to a voluntary Chapter 11 reorg on Monday.
  [To avoid 6 weeks of messy aggregate bankruptcy debt corrections, we'll just count the parent's debt here with the story on the US subsidiary.]

• Metromedia files for Chapter 11, pointer digest (to C2), NYT, C1.
  Metromedia Fiber Network, the telecommunications company backed by billionaire John Kluge, filed for bankruptcy protection after failing to win enough customers for its plan to sell fast Internet service.
  [followup]
  AboveNet emerges from bankruptcy, Bloomberg via 9/9/2003 NYT, C4.
  ...formerly Metromedia Fiber Networks....

• Online gallery is on the block: Visitors came, but didn't stay, by Matthew Mirapaul, NYT, C6.
  Eyestorm.com [which] was established to sell exclusive artwork to the Internet masses has been declared insolvent and is now itself for sale. ...The company soon learned what most suspected: unlike the online purchasers of books and CD's, art lovers are reluctant to buy works they have not experienced first-hand..\.. David A. Ross, who abruptly left his post as director of the San Francisco Museum of Modern Art and became Eyestorm's chairman last October,
  [- the more fool he! (but maybe he didn't have a choice) -]
  confirmed in an email message Thursday that the company, based in London was being liquidated.... Mr. Ross...referred inquiries to BDO Stoy Hayward, a British accounting firm.... Former employees said staff members who were assigned to attract big-name artists spent lavishly in the pursuit. To offset these costs, the company set high sales goals that, when they were not met, resulted in frequent layoffs and reorganization....
  [Surprising how many CEOs are infected with the virus of "when you don't know what to do, fire people and REORG!" Guess it's sorta like Saddam Hussein clinging to power by scaring people with war, or for that matter, the "evil axis" of Bush-Ashcroft-Rove scaring people with "war."]

• Bankruptcy filings at record levels, AP via BG, E2.
  WASHINGTON - Consumers spent so freely during the recession that record numbers found themselves in heavy debt and filed for bankruptcy. Personal bankruptcy filings rose 15.2% to a total of nearly 1.5 million in the 12 months ended March 31, the Administrative Office of the US Courts reported yesterday.... The strong spending helped make the recession shallow but added to household debt..\..said Samuel Gerdano, exec. dir. of the American Bankruptcy Institute, a group of bankruptcy judges, lawyers and specialists....
  [The recession is not shallow, it's deep. What's shallow is the measures by which we ignore most of our economic dysfunction and dismiss what few warning signs still make it through the rose-colored glasses as "shallow."]
  Most consumer bankruptcy filings are filed under Chapter 7 of the US Bankruptcy Code, which allows people to dissolve their credit card and other debts.... In return for having their debts erased, people in Chapter 7 cases often turn their property over to a bankruptcy trustee, except for basic necessities such as a car, clothing, and work tools. Property with value is sold to pay creditors. Debtors are [also] allowed to keep some personal items and possibly some of the equity in their home..\.. [Ch. 7?] filings during the 12-month period jumped 17.2% to close to 1.1m..\..
  Individual [consumer]s account for about 97% of all bankruptcy filings..\.. Filings by businesses rose 10.7% to 39,845, including Enron's on Dec. 2 [see 12/03/2001].

• Canada: A telecommunications bankruptcy, Reuters via NYT, W1.
  Teleglobe Inc., a unit of BCE Inc., Canada's dominant telecomms company [will] seek bankruptcy protection, lay off half of its 1,600 employees and exit businesses to focus on its core voice operations. Stung by excess capacity in the telecomms industry, Teleglobe said it would quit its Web host and data transmission services. The company named John Brunette as CEO to lead it through the resetructuring, which involves about $2.7B in long-term debt.... BCE, which owns 95% of Teleglobe, said last month that it was writing off about $5B in its investment in the concern.
  [So, total debt prior to this write-off was presumably 2.7+5= $7.7B.]
  [Followup, if related company?? -]
  Bankruptcies... -...District of Delaware - In re: Teleglobe Communications Corp., a Delaware corporation, et al.,, debtors, Chapter 11, jointly administered..., legal notice, 11/11/2002 WSJ, B10.

• Daewoo US unit to file for bankruptcy, AP via BG, D2.
  The US arm of Daewoo Motor Co. will file for bankruptcy within days, according to a company official. "We basically don't have any products we can distribute any more," said Mike Mahoney, general manager of field operations at Daewoo Motor America. Last month, GM said it would buy a stake in a new company that includes the assets of the bankrupt South Korean automaker Daewoo Motor Co., but not Daewoo Motor America. Only 60 employees remain at the company's Compton, Calif. headquarters, Mahoney said. Meanwhile, a federal class-action lawsuit on behalf of about 300 US Daewoo dealers against GM, Daewoo Motor, and the Korea Development Bank will filed "in short order," according to an attorney representing them.

• Polymer Group, a fabric supplier, files for bankruptcy, Reuters via NYT, C4.
  The Polymer Group...yesterday...filed for Chapter 11...after failing to win concessions from creditors.... The company, which is based in North Charleston, SC, makes fabrics for surgical gowns and face masks....

• LifeFX seeks Chap. 11, by Peter Howe, BG, C1.
  ...A Newton MA company that developed animated faces for websites filed...in Nevada under a deal that called for it to sell its main assets to Safeguard Scientifics for $1.7m...a technology conglomerate based in Wayne, Pa.

• Provell, NYT, C4.
  ...Minneapolis, a direct marketing company, filed for Chapter 11...listing $40.5m in assets and more than $82.9m in debts.
  [Giving us 82.9-40.5= $42.4m in net debt.]

• NTL, a British cable operator, files for bankruptcy, Reuters via NYT, C4.
  ...in a Manhattan bankruptcy court as part of a plan to swap $10.6B of bond debt for a controlling equity stake. NTL, whose businesses are in Europe but which is based in New York, piled up debt in an acquisition spree in the 1990's
  [Again, the stupid takeover-bankruptcy slide.]
  The resulting interest payments have threatened what analysts consider to be a viable business.
  [If analysts had kept their big mouths shut in the 1990s, a lot of these weak-brained CEOs would not have embarked on their kamekazi acquisition sprees.]
  The company has 2.8m subscribers. NTL listed $16.8B of assets and $23.4B of debts.
  [Giving us 23.4-16.8= $6.6B of net debt.]
  The company already has clearance from the majority of its bondholders, lending banks and shareholders to push ahead with what is effectively a record corporate bond default.

• Bankruptcies up for public firms - Filings rise 25% in first quarter, Reuters via BG, E4.
  Bankruptcies by publicly traded US companies rose almost 25% in trhe first quarter and are on pace to top last year's record numbers as crippling debt and a widening telecomms slump push more businesses into the red. The surge is bankruptcy filings [was] reported by BankruptcyData.com and Palm Beach Gardens, Fla.-based Weiss Ratings...underscoring the risks of massive debt piled on during the 1990s lending boom, bankruptcy specialists said....
  About 71 publicly traded companies filed for bankruptcy in the first quarter of 2002, up from 57 in the year earlier period, BankruptcyData.com said. If bankruptcies were to continue at that pace, they would top last year's record 257 failures of publicly traded companies.... Bankruptcy specialists [warn about] massive debt, lingering effects from last year's recession, and a business slump in such major sectors as retail technology, telecom, and manufacturing.
  Weiss Ratings, which has been issuing risk ratings on about 7,000 publicly traded companies since last November, has "very weak" ratings assigned to 1,359 companies, indicating a risk of bankruptcy, said Martin Weiss, the agency's chairman.... "It was the mismanagement that was so pervasive during the late 1990s, in addition to the actual debt," he said. "Many of these companies used other high-leverage strategies that made them more vulnerable than the debt alone might imply." Off-balance sheet debt or a company's use of its own stock for aggressive acquisitions put many companies in harm's way, he said.
  More troubling, many companies carried "buy" or "hold" recommendations from major Wall Street firms just before their filings, he said. "There was really no warning issued to [investors] regarding these companies' declining financial stability, let alone their failure," Weiss said.

• Congress panel agrees to limit home shield in bankruptcy, by Philip Shenon, NYT, C1.
  WASHINGTON...- Senate and House negotiators approved a compromise [yester]day that revived a bill sought by banks and credit card companies which are seeking to make it harder for many people to escape their debts by going to bankruptcy court.
  [Reviving that bill to clobber Depression-forged consumer protections for the benefit of banks is a Bad Thing.]
  The negotiators reached a compromise on the issue that many lawmakers have linked to the collapse of Enron: whether debtors who declare bankruptcy should be permitted to keep expensive homes out of the hands of their creditors.
  [That is, whether debtors should be able to keep their homes no matter how much they're worth and no matter how much they shelter. Any law that puts a cap on unlimited concentration of work, income or wealth is a Good Thing. You cannot solve the Chesterton flaw by putting "limts" at the bottom. You need limits at the top. "What about incentives?!" How much of the same type of incentive do people need? After awhile any "incentive" loses its power - that's the burden of the doctrine of marginalism, independently invented at least 5 times between 1850 and 1890. As for supporting an endlessly extending disparity just for the sake of people who want to outdo someone else in the pecking order of unspendably concentrated wealth, after a certain point, that starts concentrating so much unspendable spending power that the consolidation starts suctioning the markets away from its own necessarily huuuuuuuuuge investments. And we're well past that point now. The more concentration, the less circulation. And unlimited concentration (and accompanying de-activation) of spending power is enfeebling circulation over the world.]
  State laws in Florida and in Texas, where Enron is based, allow homeowners to shield the full value of their primary residence in bankruptcy. That currently protects several former Enron executives with multi-million dollar mansions who might eventually be forced into bankruptcy court by shareholder lawsuits or criminal charges.
  Under the deal reached today, Congressional negotiators agreed on a voice vote to limit the so-called homestead exemption to $125,000 for convicted felons or for anyone who owes a debt under federal or state securities laws. They also barred use of the unlimited exemption to anyone who had not lived in a state for at least 40 months. Sen. Herb Kohl, D. Wisc., [was] the leading Senate opponent of the unlimited homestead exemption....
  [Good for him!]

• Exide Technologies files bankruptcy protection, Bloomberg via NYT, C4.
  ...The world's largest maker of automotive batteries filed...amid fears it faced default on more than $2.5B in debt. The company, which is based in Princeton, NJ, listed more than $2B in assets along with the $2.5B in debt in the Chapter 11 petition filed in Bankruptcy Court on Sunday.
  ["Sunday"?! They found a bankruptcy court that's open on Sunday!? Whatever, we'll just put them down for 2B-2.5B= $500m net debt. And why, you wonder, is the world's largest maker of car batteries going bankrupt? How stupid, you ask, would a CEO have to be to run such a money machine into the red? Hyar be dee ansuh -]
  Exide said it had compiled much of that debt through recent acquisitions....
  [Duh. The CEOs and business schools in this land are still following this stupid and near-sighted fad of merging, not managing. Here's a case that's beyond the usual toxic takeover-downsizing connection. This buncha numbnumbs went right for the lethal takeover-insolvency slide. How dumb are takeovers? Funny you should ask. Just today in the World Business section we find "More woes for Europe's cable concerns," by Suzanne Kapner, NYT, W1, which reads, "Many European cable companies, including United Pan-Europe, based in Amsterdam, and NTL and Telewest Communications of Britain, are being crushed by the debts they amassed in the late 1990's, when they borrowed heavily to 'grow' through acquisitions {our quotes -ed.}. The capital markets have since stopped lending to these companies {why did they ever start lending for this bogus growth?!} Almost none of them make a profit." Same old story. Grotesquely gross borrowing for a stupid macho-macho-mon takeover and then...downsizing and flirting with bankruptcy. These management morons go through exactly the same fad cycle every 70 years or so - the famed Kondratieff wave. The last big one was in the 1920s. Check out the sad tale of takeovers before we quit tracking them in Jan.]

1. Paging company set to declare bankruptcy, Bloomberg via NYT, C2.
   Metrocall Inc. [the No. 2] paging-services provider, plans to...file for Chapter 11 bankruptcy protection from creditors later this month, the company said in a regulatory filing. Metrocall lost $612.8m in 2001, according to the company's annual report filed Friday with the SEC. ...Metrocall said it would...close a...number of its 30 stores.
   Metrocall, which serves about 5.4m customers and has not earned a profit since 1992, is the latest victim in an industry losing customers to cellular telephones and other devices.
   [Another rebuttal of the brainless chant of mainstream economists, "Technology creates more jobs than it destroys."]
   The number of one-way pager users in the U.S. fell to about 30m at the end of 2001 from about 50m in 1998, the Cellular Telecoms & Internet Assoc. reported.
   Metrocall's top 2 competitors are already in bankruptcy court.... Arch Wireless Inc., the biggest paging company, filed...in December [caught this one on 12/07/2001 #2], while [oops, didn't catch this one - so see #2 right below.]
   Motorola, which invented the one-way pocket pager five decades ago, said in December that it would stop making the devices this year.
   [Note right beside this article, good news in another recent bankruptcy, "Under fire, Kmart revises chief's pay," NYT, C2, which states, "After objections from a committee representing its scores of creditors...Kmart said that it was eliminating the $4m payment promised to..\..James B. Adamson, the board member who became chairman and CEO earlier this year...if the company emerged from Chapter 11...by July 31 of next year."]

2. Paging company set to declare bankruptcy, Bloomberg via NYT, C2.
   ...WebLink Wireless Inc., the No. 3 [pager] company, filed last May....

1. A filing makes Kirch bankruptcy official, by John Tagliabue, NYT, W1.
   After weeks of teetering on the brink, the core companies of the Kirch Group media empire filed for bankruptcy protection in Germany today, paving the way for banks that hold the bulk of Kirch's debt to reorganize its many activities.... Essentially, Kirch came down because it did not have the $3B it needed to make debt payments from now to October....

2. Mpower Holding files for bankruptcy, Bloomberg via NYT, C8.
   ...An Internet service provider filed for bankruptcy protection from creditors to eliminate $583.4m in debt. The company, based in Pittsford, NY., listed assets of $490m and debts of $627m on its Chapter 11 petition filed in US Bankruptcy Court in Delaware. Mpower's Mpower Communications unit, which provides high-speed Internet access and telephone services to businesses, also sought bankruptcy protection....
   [490 up and 627 down gives us $137m net debt.]

3. China: Toy factory closed, Reuters via NYT, C4.
   ...China Labor Watch, which is based in New York...said 1,500 workers were fired Saturday without their February or March wages \by\ the Shiuhe Electronics factory in Dongguan in the southern province of Guandong.... The factory declared bankruptcy on Saturday.

1. [general]
   US, IMF disagree on bankruptcy policy, AP via BG, C2.
   The Bush administration...prefers a more limited approach to dealing with international debt than the one being pushed by the IMF.... Under current bond provisions, 100% of bondholders must agree to any payback at less than the full value of a bond..\..if a country defaults on its debt.... Under the US proposal, [only] 75% of bondholders could agree to restructuring of a country's debt....
   [Sounds like a less limited approach to us. Maybe the point is, it's a more modest (limited), less interventionist (limiting) approach.]

2. [particular]
   Jet builder announces bankruptcy in Germany, by Petra Kappl, NYT, W1.
   FRANKFURT... - Fairchild Dornier, the No. 3 builder of regional and business jets and the heir to two venerable aviation names, filed for bankruptcy [yester]day...in a district court in Weilheim.... The company's managing director, Thomas Brandt, said..\..it had run out of cash.... Fairchild's only current production model is the 32-seat 328JET..\..
   The company, owned by the German insurer Allianz Capital Partners and the American investment firm Clayton Dubilier & Rice, has been trying for months to line up a strategic partner to help it bring to market a 70-seat jet [the 728JET] it has been developing since 1998.... The talks failed to yield a deal in time to forestall the bankruptcy filing, which was forced on the company by the solvency requirements in German law.
   [Great, maybe they can reshuffle the names to something more euphonious, and wind up with a Capital Allianz of Clayton Fairchild and Dornier, Dubilier & Rice.]
   If Fairchild collapses, it will leave the regional jet business to...Bombardier of Canada and Embraer of Brazil. (The fourth major entrant, BAE Systems of Britain, said last fall that it would exit the market....)
   The company's main operations, with 3,600 workers, are based at Oberpfaffenhofen, Bavaria, near Munich...
   ["Oberpfaffenhofen"?! Whoah, Phil Hyde wishes he had used that one in his big name-calling session with talkshow host Howie Carr during the '96 race against Joe Kennedy. At least he got in "Schnitzelgruber."]
   ...reflecting its descent from Dornier Luftfahrt [how rude!], a German airplace builder bought by Fairchild in 1996 [and it] has 700 workers in the U.S., mainly in San Antonio.... Dornier and Republic Aviation, an American predecessor of Fairchild, built warplanes for opposing sides in World War II, planes that met in combat over Europe..\..
   Hours after Fairchild's filing..., the German economics ministry said it would help keep Fairchild in operation to avoid job losses....
   [Big mistake. The Deutschers should get out of all this low-level life support and just get themselves a shorter nationwide workweek like France, to share the vanishing work and centrifuge the ever-congealing spending power. And they could improve on France's simplistic model by keeping the workweek flexible and automating its response to market forces in the form of unemployment - if unemployment goes up the workweek comes down - if unemployment comes down, the workweek goes back up. And of course, they've got to redesign overtime in terms of automatic training&hiring conversion. Followup -]
   Germany: Loan for plane maker, by Petra Kappl, 4/05/2002 NYT, W1.
   Fairchild Dornier...received a $20m loan from its German creditor banks to ensure the company's liquidity temporarily...reported[ly] the first portion of a $90m loan package provided by the HVB Group, the state-owned Kreditanstalt fuer Wiederaufbau and the semi-state-owned Bayerische Landesbank....
   [Liquidity is good. Liquidation is bad.  Further followup - "Fairfield Dornier allowed to shift bankruptcy filing," Bloomberg via 5/22/2002 (see above) NYT, C4, states, "Fairfield Dornier's German parent, Fairfield Dornier GmbH sought protection from creditors in Germany on April 2 after amassing more than $670m in debt." To avoid 6 weeks of messy corrections, we'll just count this debt along with the 5/22 story.]

• Covanta Energy files for bankruptcy, Reuters via NYT, C4.
  ...The power generation concern..\..said yesterday that it had filed for Chapter 11...and that a financial buyout firm...Kohl Kravis Roberts & Co..\..intended to invest $225m and subsequently buy [it] when it emerges from bankruptcy....
  [We'll "wait for it" on the other possibility today - "Metromedia Fiber [Network] slides toward a bankruptcy filing," by Barnaby Feder, NYT, C4.]

• Nissan Construction to file for bankruptcy, AP via NYT, C5.
  ...protection from its creditors, abandoning plans to rehabilitate itself financially. The company, listed on the Tokyo Stock Exchange, has liabilities amounting to about $863m, Nissan Construction president, Takeshi Fujita, said [yester]day.... The failure is the second in a month by a Japanese construction company. In early March, the builder Sata Kogyo, with debts estimated at $3.76B, filed for court protection [see 3/05 #2 below]..\..
  Nissan Construction, 48% owned by the failed supermarket operator Mycal, has close business relations with the heavy machinery and engineering company Hitachi Zosen as well as Nissan Motor. Mycal, Japan's 4th-biggest supermarket chain, filed for court protection...in September after its main bank cut off financing [see 9/15/2001]. Mycal's failure hit Nissan Construction hard because [Mycal] owed [it] $90m....