TOP STORIES -- Sept. 12 - 17
US Airways Files Again for Chapter 11 Protection
The airline industry’s financial crisis deepened as cash-strapped US Airways Group Inc., the nation’s seventh-largest carrier, filed for bankruptcy protection for the second time in two years.
The Arlington, Va.-based airline mainly serves the Eastern U.S., but its service includes 27 daily departures from California, including 11 from Los Angeles and five from San Diego.
The filing under Chapter 11 of the U.S. Bankruptcy Code allows US Airways to continue to operate while restructuring its debt. The company said that customers “should notice no changes to flight operations or customer service” and that its frequent-flier program remained intact.
UAL Corp.’s United Airlines has been in reorganization for 18 months. Third-ranked Delta Air Lines is dangerously close to seeking Chapter 11 as well. All have labor contracts and other costs, along with huge debts, that are too high to be covered by declining ticket prices.
US Airways said the Bankruptcy Court would help it in “reaching new labor agreements.”
Sony Agrees to Tentative Deal to Acquire MGM
Sony Corp. struck a tentative deal to buy Metro-Goldwyn-Mayer Inc. for about $4.8 billion, promising to spell the end of MGM’s 80-year run as a stand-alone movie studio.
The agreement with Sony and three investment partners, which together have offered to pay about $2.9 billion in cash and to assume $1.9 billion in debt, came after five months of negotiations and a bidding war orchestrated by MGM.
Sony and media conglomerate Time Warner Inc. jockeyed for position to acquire MGM and its valuable library of more than 4,000 movies.
Sony’s victory came at the eleventh hour after the Japanese company enlisted cable giant Comcast Corp. in a venture to launch new channels featuring Sony and MGM movies. Sony and Comcast also will team to showcase these films on Comcast’s video-on-demand system.
Pimco Agrees to Pay $20.6-Million Settlement
Ending a second government probe into its business, the Pimco mutual fund group agreed to pay $20.6 million to resolve federal and state allegations that it failed to properly disclose payments made to brokerage firms that sold its funds.
The deal marked the first mutual fund enforcement action brought by California regulators under a state anti-fraud law that took effect this year. After a joint probe, state Atty. Gen. Bill Lockyer and the Securities and Exchange Commission said they found that the Pimco group’s East Coast units failed to disclose to investors certain practices involving revenue-sharing deals with brokers that sold the group’s funds from 2000 to 2003.
The company’s Newport Beach-based bond fund operation, Pacific Investment Management Co., wasn’t implicated.
In both the state and federal cases Pimco did not admit to or deny the charges.
Martha Stewart Asks to Start Prison Sentence
Home-design entrepreneur Martha Stewart asked a federal judge to allow her to begin her sentence right away, saying she wanted to put her prison time behind her so she could get on with her life and career.
Stewart insists she is innocent and is pressing ahead with an appeal of her criminal conviction on obstruction of justice. But the only way to end her “immense agony” and position herself for a potential return to her company, Martha Stewart Living Omnimedia Inc., is to begin her sentence as soon as possible, she said at a Manhattan news conference.
Recent delays in her case mean her appeal won’t be considered until next year, her lawyer said. Stewart said she hoped to be out by March.
U.S. District Judge Miriam Goldman Cedarbaum must grant the request. After that, it would take about two weeks for the Federal Bureau of Prisons to tell Stewart where she would be incarcerated, a bureau spokesman said.
Mondavi Plans to Sell Napa Valley Winery
Robert Mondavi Winery, Napa Valley’s crown jewel, is on the block. Its parent, Robert Mondavi Corp., said it planned to sell not only the winery in Oakville, Calif., but also its high-end wine ventures so it could focus on the relatively inexpensive Woodbridge brand and other lower-end wines.
Mondavi’s other wine interests include part ownership of the Ornellaia winery in Tuscany, Italy, and a 50% stake in the ultra-premium winery Opus One -- both now up for sale.
In a message to employees, Mondavi Chief Executive Greg Evans said high-end wines were better-suited in the hands of a private company that wouldn’t have to satisfy Wall Street’s grinding pressure for ever greater sales and profits.
Mondavi executives declined to say whether they had met with potential buyers.
California Sees Modest Job Gain in August
California employers were cautious about hiring in August, adding only a net 3,100 jobs, while the unemployment rate fell to a three-year low of 5.8%, the state Department of Finance said.
Typically, California accounts for about 12% of nationwide payroll growth; on that basis, more than 17,000 new jobs should have been created in the state.
The figures echoed the mixed employment situation nationally, as monthly payroll job creation has been uneven, raising concerns that the economy is losing steam. The U.S. jobless rate was 5.4% last month, when employers added a net 144,000 jobs.
The state jobless rate -- based on a survey of households, not employers -- was down a full percentage point from 6.8% in August 2003. The rate also was down sharply from a revised 6.2% in July.
Schwarzenegger Names Economic Advisors
California Gov. Arnold Schwarzenegger picked economists Milton Friedman and Arthur Laffer along with five other Reagan administration advisors for an economic panel.
Former Secretary of State George P. Shultz, an advisor to Schwarzenegger during the campaign, will head the 16-member panel that includes Laffer, who advocated tax cuts as a way to spur the economy, and Friedman, a Nobel Prize-winning economist. Nobel laureate Gary Becker also is in the group.
“The people of California elected me to return economic vitality to the Golden State by creating a more competitive economic environment that encourages job creation,” Schwarzenegger said.
Schwarzenegger, a Republican, ran for office promising to make California more friendly to businesses, saying an increase in the pace of economic growth and job creation would help remedy persistent budget deficits that have given California the lowest credit rating of U.S. states.
Gap to Launch Chain Targeting Baby Boomers
Gap Inc. said it planned to launch its first chain in a decade, to target the female baby boomers who helped build its brand.
The San Francisco-based parent of Gap, Old Navy and Banana Republic stores said it would begin testing the concept next year with the opening of as many as 10 stores. Gary Muto, president of the Gap division, has been tapped to develop the unnamed chain.
The new chain will more directly compete with Ann Taylor Stores Corp., Talbots Inc., Chico’s FAS Inc. and others targeting discerning female consumers, born from 1946 to 1964, with plenty of money to spend. These shoppers tend to be determined to look fashionable even as their body shapes shift.
Analysts had been expecting a growth strategy but wonder who the company will tap to run the Gap division.
Slatkin’s Ex-Bankers Agree to Settle Lawsuit
Reed Slatkin’s former bankers agreed to pay $26.5 million to settle a lawsuit contending that they helped him appear to be a legitimate investment advisor while he ran a $593-million Ponzi scheme, lawyers in the case said.
The recovery would be by far the largest yet for investors in what Slatkin, a co-founder of EarthLink Inc., has admitted was a fraud that began in the mid-1980s and was unmasked in 2001. The deal must be approved by U.S. District Judge Margaret Morrow in Los Angeles.
The settling defendants included Union Bank of California and Bank of Orange County. Other defendants were Imperial Management Inc., the former trust division of Imperial Bancorp, an Inglewood bank acquired in 2000 by Comerica Inc., and a former vice president in Imperial’s trust division.
Documents didn’t disclose how much each of the defendants was to provide toward the $26.5 million. None of the defendants admitted wrongdoing.
For a preview of this week’s business news, please see Monday’s Business section.
