TOP STORIES -- Nov. 17-22
Asia Global Crossing Files for Chapter 11
Asia Global Crossing Ltd., a key asset of ailing Global Crossing Ltd., filed a Chapter 11 petition to reorganize its debt and sell its assets to a new venture formed by a Chinese telecommunications company.
The long-expected petition, filed in U.S. Bankruptcy Court in New York, would turn over control of 24,200 miles of a sophisticated underwater high-speed, fiber-optic network to Asia Netcom, created by government-owned China Netcom Communications Group Corp., for $120 million. Joining in Asia Netcom are venture firms Newbridge Capital and Softbank Corp.’s Softbank Asia Infrastructure Fund. Asia Netcom would have a $150-million bank line of credit under the deal.
The deal, if approved by the court, would represent the first overseas investment by a Chinese telecom firm and one of the few investments by any government-run enterprise.
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Tenet Says SEC Has Begun Informal Inquiry
Hospital chain Tenet Healthcare Corp., already under federal scrutiny for its Medicare reimbursements, said the Securities and Exchange Commission has begun an informal inquiry into the company, including examining the unusually high volume of Tenet stock trades in the last few weeks.
In an open letter to shareholders, Tenet Chairman and Chief Executive Jeffrey C. Barbakow said executives met with regional SEC representatives. The meeting included questions about Tenet’s Medicare payments and sales of Tenet shares by company insiders.
Barbakow said he did not know whether the SEC intends to launch a formal investigation, but he said the Santa Barbara-based company was cooperating fully. In a formal investigation the SEC typically obtains subpoena powers to gather additional information.
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BMG Unveils Revamped Royalties
Breaking ranks with industry rivals, Bertelsmann Music Group launched what the company called a “fairer, more transparent” accounting system for royalty payments, a move that artist representatives say could ease the controversy over whether performers are being cheated by their labels.
BMG, home to such acts as Carlos Santana, OutKast and Britney Spears, is the first major music company to scrap contract deductions that artists say obfuscate their earnings.
The action came as lawmakers in California and New York have begun to scrutinize complaints from pop stars about questionable accounting practices in the industry.
In the years ahead, BMG plans to introduce a contract model in which the company would control an act’s recording career for fewer years but share in new revenue streams, including concert proceeds and sponsorship and film deals.
None of the four other music giants -- Universal Music Group, Sony Music Entertainment, Warner Music Group and EMI Group -- intends to follow suit anytime soon.
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Trade Pact to Benefit Some California Firms
Some California technology firms will enjoy lower tariffs and streamlined customs processing under a wide-ranging free-trade agreement between the U.S. and Singapore.
The pact, the first for the United States in Asia, is expected to bolster U.S. efforts to create a free-trade zone across the southeast part of the continent, already the third-largest market for U.S. goods.
Expanding U.S. commercial relations in Asia is good news for California. In addition to helping Silicon Valley firms such as Solectron Corp. and Advanced Micro Devices Inc., which use Singapore as a regional base and production platform, the accord expands access to the Asian city-state for banks, insurance companies and law firms.
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L.A. Developer Faces $184-Million Verdict
A jury awarded $184 million in damages to former investors in a series of limited partnerships run by Los Angeles apartment tycoon Alan I. Casden.
The Los Angeles jury awarded $92 million in punitive damages to about 18,000 investors who sold their interests in Casden-run partnerships that owned apartment complexes. The action came four days after the same panel granted $92 million in general damages to the investors after finding Casden and his associates at Casden Properties Inc. guilty of violating federal securities laws and breaching their fiduciary duties.
Casden Properties is owned by Denver-based Apartment Investment & Management Co. Casden is expected to appeal.
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Boeing Launches New Delta IV Rocket
After more than $1.5 billion in development costs and a year of delays and with much of its reputation on the line, Boeing Co. launched its new Delta IV rocket, putting the company back in the race against its archrival Lockheed Martin Corp. for supremacy in space.
Powered by the nation’s first new rocket engine in nearly three decades, the Delta IV took off from Cape Canaveral, Fla., and placed a European communications satellite in orbit, lifting the prospects for Boeing’s hobbled launch business.
More than 5,000 Boeing engineers and designers work on the rocket program in Huntington Beach and Canoga Park. The Delta IV’s success means Boeing can better compete with Lockheed to win more launch contracts from the Air Force, which now is the primary customer given the meltdown of the U.S. telecommunications business and the resulting slump in the commercial satellite industry.
In August, Lockheed successfully launched its new rocket, the Atlas V. A Delta IV failure would have put in jeopardy Boeing’s prospects for launches worth as much as $40 billion over the next 20 years.
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Billionaire Proposes to Buy Vivendi Assets
Billionaire Marvin Davis and a group of investors approached Vivendi Universal with a proposal to buy its entertainment assets, including Universal Studios and its theme parks.
Some Vivendi insiders said the $13-billion offer was too low to be taken seriously, but others said that, depending on how it was structured, it could provide the answer to many of Vivendi’s financial woes -- including nearly $19 billion in media debt.
Resistance is expected from Barry Diller, co-chief executive of Vivendi’s entertainment unit. Diller has been cool about Davis’ overtures, sources said.
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PUC to Probe Gas Market Activity
State regulators ordered an investigation of whether market manipulation figured in natural-gas price spikes that inflated customer bills and power generation costs during the 2000-01 energy crisis.
Without discussion, the California Public Utilities Commission voted 4 to 0 to examine gas trading practices by Sempra Energy -- the parent of Southern California Gas Co. and San Diego Gas & Electric -- and other companies.
The investigation is the latest effort to root out the causes and place blame for the energy crisis that brought major utilities to their knees and thrust the state into the power-buying business.
The probe initially will concentrate on Sempra and its subsidiaries. But it will expand to include Edison International’s Southern California Edison and PG&E; Corp.’s Pacific Gas & Electric Co., their affiliated companies and several gas suppliers. The PUC ordered them to preserve their documentation and tell the commission what they know about gas market activity that may have affected prices.
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Labor Stages Protests at 400 Wal-Mart Stores
Organized labor launched an offensive against Wal-Mart Stores Inc. -- the nation’s largest retailer and an emphatically nonunion employer -- by staging protests outside 400 stores across the country.
The protests, which drew support from feminists, students and religious leaders, were an attempt by labor to stir debate about the giant discounter and to build allies in its long-running campaign to organize Wal-Mart employees. The United Food and Commercial Workers union in particular has poured resources into its attempts to block or organize Wal-Mart, so far with limited success.
Other unions, including those representing garment workers and janitors, have said their members’ jobs and wages are threatened by Wal-Mart’s growth.
The protesters say Wal-Mart’s emphasis on low prices comes at the expense of employee wages and benefits. In addition, the National Organization for Women alleges the corporation discriminates against women, saying they make up a majority of low-paid sales clerks but are rarely placed in management positions. The company denies that allegation.
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Dow Climbs for Seventh Straight Week
Blue-chip stocks notched their seventh straight week of gains, the longest streak in more than four years, as more investors bet that the bear market finally ended in early October.
Some upbeat economic reports help stoke the week’s rally, despite the continuing threat of war between the U.S. and Iraq.
With the market in what has historically been its strongest period of the year -- November through January -- many institutional money managers don’t want to take the chance of missing a substantial rebound, analysts said, even if it doesn’t extend far into 2003.
The Dow Jones industrial average slipped 40.31 points on Friday to 8,804.84 amid mild profit taking, but for the week the index rose 2.6%.
The Standard & Poor’s 500 index gained 2.3% for the week, while the Nasdaq composite surged 4.1%, closing Friday at 1,468.74, its highest since June 19. Nasdaq is benefiting as battered technology stocks continue to revive from their dramatic collapse since 2000.
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For a preview of this week’s business news, please see Monday’s Business section.
