Archive for March, 2011

Tribune creditors propose revised bankruptcy plan

Monday, March 28th, 2011 | Finance News

NEW YORK (Reuters) – Tribune Co bondholders led by hedge fund Aurelius Capital Management on Monday filed a revised bankruptcy reorganization plan for the media company, hoping to overcome objections by senior creditors.

The revised plan calls for lower sums to be set aside to address litigation stemming from Tribune's $8.2 billion leveraged buyout in 2007, which was led by real estate developer Sam Zell.

Some senior creditors had complained that too much of the equity in a reorganized Tribune would be tied up while the litigation, which could last for years, proceeds.

Tribune owns newspapers including the Chicago Tribune and Los Angeles Times, and has other media properties including the WGN television superstation. It filed for Chapter 11 protection from creditors in December 2008.

U.S. Bankruptcy Judge Kevin Carey this month described Tribune's bankruptcy case as deadlocked, as the two creditor groups remained unable to agree on how to split the company's assets, according to the Chicago Tribune.

Tribune has backed a reorganization proposed by senior creditors led by JPMorgan Chase & Co, Oaktree Capital Management and Angelo, Gordon & Co. Bondholders including Aurelius oppose this plan.

The senior lenders had argued that putting too much of the company's value in a litigation trust would hold the company and many smaller creditors hostage to years of court battles, the Tribune said.

Under the bondholders' revised plan, about 20 percent to 29.5 percent of Tribune's value would be held in the litigation trust, down from 50 percent to 65.4 percent in their earlier plan.

The company backs the senior lenders' plan under which competing claims would be settled by the bankruptcy court, avoiding future litigation.

Senior lenders that financed the leveraged buyout would compensate bondholders and other unsecured creditors for some of their losses and control the company when it exits bankruptcy.

Carey had said on March 7 he might reject both proposals.

James Sottile, a Zuckerman Spaeder lawyer who has argued for the senior creditor group's plan, was not immediately available for comment.

The case is In re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No 08-13141.

(Reporting by Dena Aubin; Additional reporting by Jonathan Stempel)

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IMF skeptical of Iraq oil targets

Monday, March 28th, 2011 | Finance News

WASHINGTON (AFP) – The International Monetary Fund Monday expressed doubts over Iraq's ability to meet its long-term targets for oil production, currently the source of nearly 90 percent of government income.

The IMF said infrastructure constraints were likely to prevent Iraq from boosting production from 2.5 million barrels now to its goal of 13 million barrels by 2017 -- more than oil king Saudi Arabia's current production.

"While these production goals could be feasible in the longer term, the main risks in the coming years will be bottlenecks in the export infrastructure that will need to be addressed," the IMF said, in a review of its $3.7 billion support program.

Based on more conservative assumptions for the time it will take to expand Iraq's export capacity, oil production could still increase to over five million barrels a day by 2017.

The IMF cited the need for huge investments in port facilities, pipelines, desalination plants (for water to be injected into oil fields) and storage facilities.

In the very best case scenario, it said, Iraq could reach 12.2 million barrels a day by then.

It forecast production would rise to 2.75 million barrels a day, this year.

Last year production constraints held back exports to 1.85 million barrels a day from the planned 2.1 million.

But higher market prices still garnered Baghdad $50 billion, four percent more than it expected.

The IMF also reported that the government's deficit was running "well below" forecast.

But it warned about joblessness especially among Iraqi youth, and referred to the violent demonstrations elsewhere in the Middle East in that context.

"Although reliable data are lacking, unemployment was estimated at about 12 percent in 2008," the IMF said.

"Actual unemployment, particularly among the younger generation, is likely to be higher, however, as a large part of the adult population has not entered the labor force."

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Fed should not curtail bond buys: officials

Monday, March 28th, 2011 | Finance News

COLUMBIA, South Carolina (Reuters) – The U.S. economy still needs support from the Federal Reserve's full $600 billion planned bond purchases, despite signs its recovery is becoming self sustaining, two top Fed officials said on Monday.

Recent spikes in gas and food price are likely to be short-lived and probably will not trigger a broad rise in costs that would force the U.S. central bank to reverse its ultra-loose monetary policy stance, Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart suggested.

The Fed, which has kept short-term rates near zero since December 2008, has been buying U.S. Treasuries since November to push down longer-term borrowing costs and keep the U.S. recovery on track. The program is slated to end in June.

"It could be that 600 is just about the right number," Chicago Fed President Charles Evans told reporters at the University of South Carolina, where he taught economics before becoming a central banker. "I won't be surprised if that is in fact the decision. I still think it's a high hurdle to stop short of 600 -- so far I haven't seen it."

Atlanta Federal Reserve President Dennis Lockhart, speaking in Atlanta struck a similar tone.

"I remain satisfied that the current stance of monetary policy is appropriately calibrated to the current and projected state of the economy," Lockhart said in remarks that largely resembled a speech he gave in Florida on Friday. "My working assumption continues to be that (the bond-buying program) will be completed as it was originally designed on the same time frame."

Those views were at odds with St. Louis Fed President James Bullard, who said over the weekend that policymakers should consider curtailing the program. Fed policymakers next meet in late April, possibly the last chance they would have to adjust their bond-buying program before its planned end in June.

Both Lockhart and Evans said they were not worried about the threat of inflation at the moment, in part because growth in wages, a big part of business costs, has remained so tame.

"While short-term measures of inflation have accelerated in the last few months, I hold to the view that this trajectory will not continue," Lockhart said.

Inflation fears have risen recently on a spike in oil and commodities costs, driven in part by political upheaval in the Middle East and North Africa. In the last three months U.S. energy prices have risen at an annual pace of 29 percent, while food is up 14 percent.

Evans, who is a voter this year on the Fed's policy-setting panel, and Lockhart, who is not, both said the Fed would closely monitor measures of consumer price expectations for signs that an inflationary psychology is taking hold.

They also said the Fed would reverse policy if it saw any such signs.

"If unforeseen price increases alter inflation expectations and these expectations for higher prices boost longer-run underlying inflation, then it may become appropriate to adjust policy," Evans said. But historical evidence suggests such a scenario is unlikely, he said.

For some economists on Wall Street, inflation is already taking hold.

The personal consumption expenditures price index outside food and energy, closely watched by Fed officials, rose just 0.9 percent in the year to February, still far below policymakers' presumed target of 2 percent or a bit below.

"I am prepared to support a change in policy if evidence accumulates that the low and stable inflation objective is at risk," Lockhart said.

The U.S. economy expanded at a 3.1 percent annualized clip in the fourth quarter. The jobless rate, for its part, has come down rapidly in recent months, falling to 8.9 percent in February from as high as 9.8 percent late last year.

However, Lockhart said not all of the drop is encouraging, since part of it could be traced to discouraged workers dropping out of the labor force. Evans said the decline stems more from a decrease in layoffs than vigorous hiring by firms.

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