Thursday PM March 27th, 2008
by: Ed Mayberry, March 27, 2008 5:03:00 pm
American Airlines says it's found seats for most passengers stranded by 132 cancellations of its estimated 2,300 scheduled flights. That's about six percent of its American's schedule after the Fort Worth-based airline canceled 325 flights Wednesday. American and Delta Air Lines canceled flights as they continue their inspections of wiring bundles on their MD-80 aircraft. Delta says it's canceled 275 flights today, or about three percent of its overall schedule. Delta is expecting heavy volume at its hub at Hartsfield-Jackson Atlanta International Airport. The Atlanta-based carrier said it began voluntarily re-inspecting wiring on 117 MD-88 aircraft on Wednesday night. More than 400 flights are expected to be canceled through early tomorrow morning. Both Delta and the Transportation Security Administration are bringing in extra staff to handle the crowd of travelers. The largest number of cancellations came at Dallas-Fort Worth International Airport, where 42 departures were taken off the board. Another 22 American departures were scrubbed at Chicago O'Hare International Airport. Some airports, such as the Miami hub, were barely affected. American began its inspections after an audit of the carrier by a joint team of inspectors from the Federal Aviation Administration and the airline. American spokesman Tim Wagner says the airline has completed inspections on 243 aircraft, and about 45 aircraft "are still being worked on.'' He says American expects all but a few of the jets to be back in service by Friday. The inspections focus on proper spacing between two bundles of wires in the plane's auxiliary hydraulic system, and those wires must be installed exactly according to an FAA directive.
A Texas judge has issued a temporary restraining order barring banks from interfering with or thwarting the closing of the proposed $19.5 billion buyout of Clear Channel Communications. The order was issued just hours after Clear Channel and the private equity buyers filed suit in Texas and New York to force the banks to lend money promised in the deal first proposed 18 months ago. They accused the banks of reneging and putting unreasonable terms on the loan in an effort to bust the deal, violating the commitments they made earlier. If the deal closes, the banks could take billions of dollars in write-downs. The lenders include Citigroup, Morgan Stanley, Credit Suisse Group, Royal Bank of Scotland, Deutsche Bank and Wachovia. They signed commitments when the deal was inked 18 months ago saying they'd bear all the risk in changes to the debt market. The firms contend the banks are trying to kill the deal by putting unreasonable terms on the loan. The buyers group agreed to pay $39.20 a share for the nation's largest radio station operator. Its shares price has fallen sharply on worries the deal won't go through. The Texas judge found there was evidence Clear Channel and the equity firms will prevail in their case, and found that "harm is imminent and immediate.'' The private equity firms face an estimated $500 million to $600 million in breakup fees if the deal does not go through. Clear Channel hopes to complete the deal by Monday.
Mortgage rates were showing little change this week. According to mortgage giant Freddie Mac, the average for the 30-year fixed-rate loan fell to 5.85 percent from 5.87 percent last week. A year ago, it stood at 6.16 percent. The 15-year fixed-rate mortgage, often used in refinancing, stands at 5.34 percent--up seven basis points from a week earlier. A year ago at this time, the 15-year loan averaged 5.86 percent. Freddie Mac Vice President and Chief Economist Frank Nothaft says that's not surprising, given that the latest economic indicators came in much as expected.
The housing crunch continues to take a toll on the homebuilding industry. Lennar, which turned a profit a year ago, says it lost 56 cents a share in the first quarter as sales of new homes sank and average selling prices declined. Company CEO Stuart Miller says increased foreclosures and lower consumer confidence have "quieted demand'' among potential buyers. Lennar's sales fell 62 percent to $1.06 billion from $2.79 billion in the year-ago period, while the average selling price fell eight percent.
A court examiner says bankrupt mortgage lender New Century Financial used improper accounting practices while making risky loans, creating "a ticking time bomb'' that led to the company's rapid downfall. The observation is in a report released Wednesday. Examiner Michael J. Missal concluded that New Century engaged in at least seven improper accounting practices that led the California-based company to report incorrect financial information to Wall Street for fiscal 2005 and the first nine months of 2006. Missal also found that senior management failed to take appropriate steps to manage rising risks caused by the company's aggressive approach to originating loans, often to borrowers who couldn't afford them. The report also said the accounting also led to higher bonuses for key executives.
CVS Caremark will overhaul its information security system and pay Texas $315,000 to settle an identification-related lawsuit. The suit accused the drugstore operator of dumping credit card numbers, medical information and other material from more than 1,000 customers into a garbage container. The agreement was announced by Texas Attorney General Greg Abbott, who sued CVS in April. CVS Caremark was accused of failing to protect its customers from identity theft at a store in liberty. CVS says the files--all in a secured bag--were dumped during the Liberty store's relocation to a new site. But CVS says the improper disposal of the information was a violation of the company's record retention and privacy policies. CVS has said the store manager was fired.