LyondellBasell continued talks with creditors today, according to Reuters, two days after a deadline to renegotiate terms of its $26 billion debt load. The world’s third-largest petrochemical maker had said on December 31st that it was looking at all options, including a Chapter 11 bankruptcy filing. The steep downturn in demand for chemicals from a global recession, record energy costs and tightening credit markets have forced chemical companies to trim operations by cutting thousands of jobs and contract positions. LyondellBasell employs about 4,500 in the Houston area. In July 2007, Dutch chemical company Basell International Holdings bought Houston-based Lyondell Chemical in a $20 billion deal that included more than $7 billion in debt. Now facing nearly $30 billion in debt, the business downturn makes it hard to meet basic liquidity needs.
Dow Chemical says it will pursue legal action against a state-owned Kuwaiti company that pulled out of a joint venture agreement a week ago, and is already in talks to revive the deal with another partner. The Midland, Michigan-based company could potentially recoup $2.5 billion from Petrochemical Industries. Kuwait pulled out of the deal following weeks of internal political pressure. Dow had expected to get more than $7 billion in cash from the transaction. “Pursuing legal options is not a decision we take lightly…but (Petrochemical Industries) is in breach of contract, and we must take action to protect the interests of our company and our shareholders,” Chief Executive Andrew Liveris said in a statement.
An appeals court has upheld former Enron CEO Jeff Skilling’s convictions for his role in the energy giant’s collapse but orders that he be resentenced. A three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans denied Skilling’s request that his convictions be overturned because they were based on an incorrect legal theory. But the judges, in their 105-page opinion, ordered that Skilling be resentenced. They said U.S. District Judge Sim Lake erred by applying guidelines that resulted in a 24-year prison term. Skilling was convicted in May 2006 on 19 counts of fraud, conspiracy, insider trading and lying to auditors for his role in the collapse of Enron, once the nation’s seventh-largest company. Skilling is serving his time in a federal prison in Minnesota.
The National Association of Realtors says pending home sales fell to the lowest level on record in November, as the plummeting stock market and faltering economy caused buyers to put their purchases on hold. The trade group said its seasonally adjusted index of pending sales for existing homes fell four per cent to 82.3 from a downwardly revised October reading of 85.7 in October. That’s worse than the reading of 88 that economists expected, according to a survey by Thomson Reuters. The reading, which was down 5.3 per cent from November 2007, was the lowest since in the eight-year history of the index, beating the previous record low of 83 set in March 2008.
The housing slump is even hitting the super-rich. Prices of luxury Park Avenue homes are falling. The median sales price of a luxury apartment slipped nearly four per cent to $4,022,000 between October and December, compared with the same period a year ago. That’s according to Prudential Douglas Eelliman’s quarterly report. The market held up better for the merely somewhat-rich. The median price for all Manhattan apartments–$900,000–gained almost six per cent in the quarter. Another report–from Brown Harris Stevens–says the median sales price rose nearly eight per cent during the quarter. But both reports show a weakening market overall.
The House and Senate have convened for a new Congress that will immediately confront the country’s struggling economy. Nine new Senators and 54 House members are there to start their new lives on Capitol Hill. And they are joined by two freshmen non-voting delegates. Besides the economy, lawmakers also will face considerable early work in reviewing President-elect Barack Obama’s cabinet nominees.
Obama’s proposed stimulus package would provide businesses with billions of dollars in refunds on taxes they paid several years ago. A U.S. Chamber of Commerce official says this idea is “at the top of the list from businesses’ viewpoint.” It could also increase pressure on Republicans to support Obama’s massive stimulus package. The refund provision would enable some companies posting losses last year to get refunds for taxes paid as far back as five years ago. Currently, businesses can use losses to offset profits the two previous years. The government may also give tax cuts to individuals by withholding less from paychecks, making them about $10 larger each week. Companies that hire new workers would also get a one-year tax credit. Obama says he will bar pork-barrel projects from the massive economic stimulus bill. He says that his plan, expected to cost about $775 billion, will not allow lawmakers to insert pet projects, as they sometimes do on spending bills. He told reporters at his transition office in Washington that his package will set a “new higher standard of accountability, transparency and oversight. We are going to ban all earmarks, the process by which individual members insert projects without review.”
The government estimates it will spend $6.5 million by the end of January in salaries and other administrative costs for the $700 billion financial rescue program. The Treasury Department estimate is part of the latest update it’s required to provide Congress on the operation of the largest government bailout effort in history. The government estimates it will spend nearly $1.2 million on salaries through the end of January and more than $5.3 million on other expenses.
The government says it has supplied another $15 billion to seven banks in the latest round of payments from the $700 billion rescue fund. The Treasury Department says the biggest payment in the new round totaled $7.58 billion to Pittsburgh-based PNC Financial Services Group. The latest payments bring the amount the government has committed to buying bank stock as a way of bolstering the financial system to $187.5 billion. Treasury says it has provided support to financial institutions in 41 states and Puerto Rico.
Federal Reserve officials feared the economy would be stuck in a painful rut for some time despite their decision to slash interest rates to a record low and pledge to use other unconventional tools to fight the worst financial crisis since the 1930s. Documents released Tuesday provide insights into the Fed’s historic decision to ratchet down its rate from one per cent to near zero at its December 15th-16th meeting. In the first action of its kind in the Fed’s 95-year history, Fed Chairman Ben Bernanke and his colleagues created a target range for its rate, putting it at zero to 0.25 per cent.
Texas lawmakers will get their first glimpse of how much the national recession has hit Texas next week. That’s when the state comptroller estimates state revenue. The biennial announcement from Comptroller Susan Combs comes as the legislature convenes for its 140-day regular session. She’ll tell state budget writers how much money they have to spend on things like public schools, courts and health care services for the 2010-11 spending cycle. That’ll show for the first time if Texas shoppers have tightened their belts so much that it put a dent in sales tax revenue. The state budget is $167 billion for the current two-year period. The budget bill is the only legislation that legislators are legally required to pass. Combs and Governor Rick Perry already have hinted that the national financial meltdown has begun to seep into the state economy. Both Republicans say Texas so far has weathered it better than most states, but Combs has warned that it “will not go untouched.” Sales tax receipts, which make up about 52 per cent of the state budget, grew at a 12 per cent rate two years ago. But that’s slowed to a troubling five per cent.
A private research group says the U.S. services sector contracted at a slower pace in December as new orders and employment improved. The Institute for Supply Management, a trade group of purchasing executives, said that its services sector index rose to 40.6 in December from 37.3 in November. Wall Street economists surveyed by Thomson Reuters had expected the index to slip slightly to 37.0. The index continues to signal the sector is contracting. A reading below 50 signals contraction, while a reading above 50 indicates growth.
Orders to factories fell for a record fourth straight month in November, reflecting the intensifying effects of the country’s steep recession. The Commerce Department says orders declined by 4.6 per cent in November, nearly double the 2.5 per cent drop economists expected. Orders have been falling since August, including a six per cent plunge in October, the biggest setback in eight years. The weakness in November reflected a big drop in demand for commercial aircraft. Weakness also was seen in autos, primary metals such as steel, and defense communications equipment.
U.S. consumer bankruptcy filings jumped nearly 33 per cent last year. And the recession is expected to lead to higher filings this year as well. Overall consumer filings topped one million last year. That’s up from more than 800,000 in 2007. That’s according to data published by the American Bankruptcy Institute. A recession that began in December 2007 has stretched many consumers who are turning to bankruptcy protection amid job losses, mortgage foreclosures and heavy personal debt. The 2008 rate of increase fell short of the 40 per cent rise recorded in 2007, and the annual total in both those years is still far short of the more than two million recorded in 2005 alone. A law that took effect in October 2005 made personal bankruptcy filings more difficult and sharply curtailed filings in 2006 to about 573,000, the lowest level since 1998.
With consumers turning more to generic drugs, a government report finds spending on health care slowed a bit in 2007. The 6.1 per cent growth rate for all health care spending was the slowest since 1998. Officials say the good news on slowing the increasing costs of health care extended only to prescription drugs. Spending on all other major health sectors, such as hospitals, doctors, nursing homes and home health, grew at the same rate or slightly faster than the year before. Overall, Americans spent $2.2 trillion on health care in 2007. That’s an average of $7,421 a person for the year. The entire report appears in the journal Health Affairs.
A wave of fare sales has spread across the airline industry in the early days of the New Year. The Associated Press reports the weak economy continues to put pressure on carriers to fill seats even after they drastically reduced capacity. Fuel prices have dropped significantly in recent months, plus the weak economy has eroded demand for air travel. Dallas-based Southwest Airlines is running an air fare sale for travel between January 15th and April 30th. Fort Worth-based American Airlines has sales for travel within the U.S. between January 14th and March 4th, and between March 5th and April 30th at slightly higher fares. The matching has already started. American matched both the Airtran and Virgin America initiatives in markets in which they compete.
The Commerce Department says there’s a waiting list for anyone applying for federal coupons to pay for converter boxes ahead of the transition to digital television broadcasts. Those on the list may not get their voucher in time for next month’s switchover. The waiting list started forming Sunday after the $1.34 billion funding limit set by Congress was met. The list already has 103,000 requests for coupons. The agency will send out coupons to those on the list only as unredeemed coupons currently in circulation expire. Meanwhile some lawmakers say more money needs to be freed up to help consumers make the transition. Those with cable or satellite TV or anyone who buys a television set with a digital tuner has nothing to worry about.
The European Union calls the sudden and substantial cuts in Russian gas supplies to some member states “completely unacceptable.” The 27 member states demand that supplies be restored immediately after Romania, Greece and other Balkan nations reported a complete shut off of Russian gas shipped via Ukraine. Ukraine said Russia’s Gazprom state-controlled energy company have blamed each other in the stalemate over gas prices Kiev has to pay. The EU demanded that the two parties resume talks immediately to seek a definitive settlement.
GDF Suez, Europe’s largest natural gas distributor, says deliveries of Russian natural gas via Ukraine to France fell over 70 per cent Tuesday. The drop in deliveries was a result of the contract dispute between Russia and Ukraine which saw Russia shut off gas supplies to six countries and reduce gas deliveries to several others. In a statement, the French gas and electricity giant said Russian deliveries represent about 15 per cent of GDF Suez’s total gas portfolio, which it called “the most diversified in Europe.”
A federal judge has dismissed a challenge to the 1998 master settlement agreement between states and 19 tobacco product makers. U.S. District Judge Jennifer Coffman issued the ruling in Louisville. Coffman said the lawsuit brought by North Carolina-based General Tobacco failed on all fronts because the company couldn’t prove the settlement amounted to anticompetitive behavior by the government. General Tobacco, the sixth-largest tobacco company in the United States, sued 52 attorneys general and the tobacco makers saying the agreement stifled competition by making it more expensive for new entrants to the industry. The company had asked for more than $1 billion.