Whitehall Jewelers Bankrupt and News on Other Financially Challenged U.S. Companies for June 25

The items below are taken from the Credit Manager’s Weekly Summary of Financially Challenged Companies. A full issue contains information on more than 200 companies. Please visit the insideARM bookstore for information on subscribing to the Summary.

American Axle & Manufacturing Holdings Inc.’s shares slumped on news that companies that it supplies, such as automakers General Motors Corp. and Ford Motor Co., reported ongoing losses. Also, there was word that the two car companies’ ratings could be lowered by Standard & Poor’s.

Caruso Homes Inc. filed Chapter 11 in the U.S. Bankruptcy Court in Maryland. The firm listed assets of between $1 million and $100 million and liabilities of more than $100 million. The case number is 08-18254.

Circuit City Stores Inc.’s shares plummeted 21% amid investor skepticism that Blockbuster Inc. will be able to finalize a $1 billion buyout of the Richmond, Va. consumer electronics retailer. According to one analyst, unless Circuit City finds a buyer it is “slowly dying”.

Citigroup Inc. announced that it will reduce its payroll by 6,500 workers (or about 10% of its investment banking jobs). As of the end of March, the Manhattan, N.Y. banking giant had cut at least 9,000 positions. Citigroup, which has lost $15 billion over the last two quarters, still faces billions of dollars more in writedowns.

Cooper Tire & Rubber Co., the Findlay, Ohio tire manufacturer, reduced production in North America in the second quarter, citing raw-material shortages and weakened demand for its products. The cutbacks will result in extra costs of up to $14 million.

Corn Products International Inc.’s acquisition by Bunge Ltd. of White Plains, N.Y. for $4.5 billion is expected to bolster Bunge’s balance sheet and help the two firms control costs amid escalating demand for sweeteners. Corn Products, a Westchester, Il. maker of corn-based sweetening products, reported Bunge will also assume more than $400 million of its debt. Last year Corn Products International had a positive cash flow of $258 million while Bunge had a negative operating cash flow of $411 million. Also, the two firms expect that by eliminating redundancies they could save between $100 million and $120 million a year.

General Motors Corp., will further reduce auto production at the same time as it introduces incentives on many of its 2008 car models to boost sales. The incentives include 0% loans for as long as seventy-two months. The Detroit firm will shutter facilities in Oshawa, Ontario, Silao, Mexico, Shreveport, La., Arlington, Tx., Janesville, Wisc. and Fort Wayne, Ind. for as long as ten weeks. Meanwhile, GM will raise average prices 3.5% to offset rising steel prices.

Glenndale Builders GB LLC filed Chapter 11 in the U.S. Bankruptcy Court in Maryland. The firm listed assets and liabilities of between $1 million and $100 million each. The case number is 08-18261.

Midwest Air Group Inc., the Oak Creek, Wisc. carrier which will ground all of its MD-80 aircraft, or about a third of its entire fleet, now expects to do so by the end of the summer. The move, which will result in job losses, is in response to a nearly 40% surge in jet-fuel costs.

Modern Continental Construction Co. filed Chapter 11 in the U.S. Bankruptcy Court in Massachusetts. Modern Continental, a contractor for Boston’s infamous Big Dig road project, was hit with liability for allegedly using the wrong epoxy in securing concrete anchors, which led to a ceiling collapse that killed a woman. Reportedly the firm has assets of between $100 million and $500 million and liabilities of between $500 million and $1 billion. The case number of the filing is 08-14558.

Pier 1 Imports Inc.’s shares sank after an analyst with Goldman Sachs reduced the Fort Worth, Tx.-based household goods retailer’s earnings and price targets and expressed pessimism that Pier 1′s bid to acquire Cost Plus Inc. will succeed. The analyst said that Pier 1 will have trouble financing a Cost Plus acquisition, partly because of its low stock price, and should instead focus on turning around its own
business.

United Airlines announced plans to furlough 950 pilot jobs, or 12% of its pilot staff, starting at the end of the summer, as it begins trimming its fleet of aircraft. Layoffs have already started among the carrier’s salaried and management staff, where it intends on cutting up to 1,600 jobs, 21% of its workforce. United is trying to keep its cash reserves above $1 billion by early next year in order to avoid a default on loans and the possibility of a bankruptcy filing.

Whitehall Jewelers Holdings Inc. filed Chapter 11 and is thought likely to sell all or part of its assets. A liquidator is expected to conduct going-out-of-business sales and an auction is scheduled for 7/16. The Chicago-based company, which has struggled amid three years of losses, is waiting for approval from the U.S. Bankruptcy Court for $80 million in debtor-in-possession financing that it lined up with a group of banks. Since 2005, Whitehall has shuttered nearly ninety of its stores, leaving it with more than 370 retail locations in thirty states under the Whitehall, Friedman’s, Crescent and Lundstrom names. In its bankruptcy filing, Whitehall listed assets and liabilities of $207 million and $185 million respectively.