THE ECONOMYFactory Orders Plungein Nearly Every SectorDurable...
THE ECONOMY
Factory Orders Plunge
in Nearly Every Sector
Durable goods orders posted their largest drop in seven months in June, the government said in a report that raised questions about the strength of the economic recovery, particularly in manufacturing.
Orders fell 3.8% in June, the Commerce Department said. It was the largest drop since a 5.9% fall in November and was far worse than the 0.7% rise analysts had expected. It contrasted with a 0.6% climb in May.
Orders were down in almost all sectors. Machinery tumbled 6.7%, the biggest fall since an 8.1% decline in February 2000. Manufacturing orders, including unfilled orders, dropped 4.5%.
Separately, the Labor Department said the number of workers filing new claims for state unemployment benefits fell by 21,000 to 362,000 last week, the lowest level in 17 months.
Reuters
#S#
REGULATION
Senate Confirms 4 Nominees to SEC
The Senate, acting with unusual speed in the face of a crisis in investor confidence, confirmed four nominees to the Securities and Exchange Commission. The move fills the commission for the first time in more than two years.
The confirmations, following closely the passage of landmark corporate reform legislation, was expected to give the nation’s top markets regulator a needed boost and sufficient manpower to put into action a host of new rules.
Senate action came on a voice vote without any objection, just hours after the Senate Banking Committee approved the nominees.
The new commissioners are Democrats Roel Campos and Harvey Goldschmid and Republicans Cynthia Glassman and Paul Atkins. Glassman had been serving as a temporary commissioner, and Campos will replace a temporary appointee.
Reuters
#S#
FOOD
Major Stockholder Explores Hershey Sale
Hershey Foods Co. said the charitable foundation holding a controlling stake in the largest U.S. candy and chocolate maker is exploring a sale of the company.
The decision to put the company on the block comes after the Milton Hershey School Trust, which owns about a third of Hershey’s stock but controls 77% of the voting power, rejected management’s proposed alternatives to a sale, Hershey said.
Chief Executive Richard Lenny said the Hershey board would have preferred to keep the company independent, but will cooperate with the trust in the effort to find a buyer. The company has hired investment bankers UBS Warburg and the law firm Sullivan & Cromwell to advise it.
Hershey shares soared $15.80 to $78.30 on the New York Stock Exchange.
Reuters
#S#
TECHNOLOGY
Scour Says It Intends
to Repay All Creditors
In an unusual move amid the flood of companies filing for bankruptcy, Scour Inc.--the defunct entertainment dot-com operation once backed by former super-agent Michael Ovitz and supermarket magnate Ronald Burkle--is expected to pay back all of its creditors and investors by July 31.
The Beverly Hills company, which filed for bankruptcy protection in October 2000, was created by a group of UCLA students who developed a search engine that hunted for multimedia files, such as music, video and pictures. The product raised the ire of the entertainment industry, which claimed the company was encouraging the pirating of intellectual property.
Scour’s assets eventually were sold to CenterSpan Communications Corp., a software developer based in Hillsboro, Ore., and bankruptcy attorneys have divvied up the $7-million estate to pay back “every penny on the dollar to hundreds of creditors,” said debtor attorney Paul Brent. “There was about $5 million in creditor debt. Whatever’s left will go to the shareholders. For the shareholders to actually get any money back is rare.”
The final division will happen at the end of this month, when the case is expected to close at Bankruptcy Court in L.A.
P.J. Huffstutter
#S#
TELECOM
Genuity Defaults After Verizon Decision
Shares of Genuity Inc. lost nearly 89% of their value and the company was thrown into debt default as Verizon Communications Inc. ruled out a rescue of the money-losing communications services company.
Genuity shares closed at 29 cents, down $2.30, on Nasdaq. The shares of Verizon, the No. 1 U.S. local telephone company and Genuity’s former corporate parent, lost 25 cents to $27.60 on the NYSE.
“We think Verizon’s move throws Genuity into the abyss and may be a death sentence,” said Kaufman Bros. analyst Vik Grover. He downgraded Genuity shares to “sell” from “hold.”
Verizon said it had decided not to reabsorb Genuity and would not be obligated to make additional loans to the company. Verizon was forced to spin off Genuity as a condition of the merger of Bell Atlantic Corp. and GTE Corp. that created Verizon in 2000.
Reuters
#S#
ENTERTAINMENT
Hispanic Television Files for Bankruptcy
Hispanic Television Network Inc., a Spanish-language broadcaster that last week reached a distribution contract with a unit of Liberty Media Corp., said it filed for Chapter 11 bankruptcy protection.
Hispanic Television said it filed the voluntary petition in Bankruptcy Court in Fort Worth to allow it to continue to operate its business while it prepares a plan of reorganization.
Fort Worth-based Hispanic Television last week announced a 10-year distribution deal with a subsidiary of Liberty Media that expands the network’s reach to more than 130 U.S. cities.
Hispanic Television and Englewood, Colo.-based Liberty Media didn’t immediately returns calls for comment.
Bloomberg News
#S#
EARNINGS
AIG’s Profit Increases
37% on Higher Prices
American International Group Inc.’s net income rose in the second quarter as the world’s biggest insurer increased prices on auto and business policies and sold more life insurance.
Excluding investment gains and losses and accounting changes, American International earned $2.21 billion, or 84 cents a share, up from $2.02 billion, or 76 cents, a year ago. The per-share figure was a penny less than the average forecast of analysts.
Chief Executive Maurice “Hank” Greenberg said earnings were hurt by low interest rates, which pared investment income, and by losses on WorldCom Inc. and the slump in equity markets, which reduced variable annuity sales and fees for managing assets.
Shares fell 27 cents, or 0.5%, to $53.11 on the NYSE.
Bloomberg News
#S#
Reliant Shares Jump on Earnings Report
Reliant Energy Inc. and unregulated subsidiary Reliant Resources said quarterly earnings for each fell by about 25%, but both beat Wall Street expectations and saw their battered shares surge sharply as a result.
Both Houston-based firms said their earnings fell largely due to sluggish wholesale natural gas and power markets and mild weather that reduced electricity demand.
But bargain-hunting investors drove them both up on the NYSE. Reliant Energy shares rose 63%, or $3.40, to $8.80, while Reliant Resources’ gained 52%, or $1.78, to $5.18.
Reliant Energy reported net income of $236 million, or 79 cents a share, far exceeding analysts’ estimates of 51 cents, as revenue slipped nearly 5% to $9.79 billion.
Reuters
#S#
Also
* Bristol-Myers Squibb Co.’s top AAA credit rating was cut two levels, to AA, by Standard & Poor’s, which cited setbacks in developing new drugs.
* J.P. Morgan Chase & Co.’s credit rating outlook was changed to “negative” by Moody’s Investors Service amid concerns that the bank’s dealings with Enron Corp. may damage its reputation and spur losses from legal claims.
* Standard & Poor’s cut Dynegy Inc.’s credit ratings for the second time in four days, saying the energy trader suffers from “tenuous” liquidity and a weakened ability to generate cash.
