U.S. mall operator files for bankruptcy April 17, 2009
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The second-largest mall operator in the United States filed for bankruptcy protection early Thursday, indicating it hasn’t been able to refinance its debt.
General Growth Properties Inc., which operates more than 200 properties in the U.S., said it hasn’t been able to persuade its debt holders to give it more time to refinance debt racked up during the housing boom.
The company had about $29.6 billion in assets and more than $27 billion in liabilities as of Dec. 31, according to documents filed with the U.S. Bankruptcy Court in the Southern District of New York.
“While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11,” said chief executive Adam Metz said in a written statement.
Under Chapter 11 bankruptcy protection, the Chicago-based company said it will continue to operate its shopping centres as it develops a financial reorganization plan.
The reorganization will aim to cut corporate debt and to extend the terms of its mortgage maturities, General Growth said.
“This will establish a sustainable, long-term capital structure for the company,” General Growth said in a press release.
The company has received a $375 million financing commitment from Pershing Square Capital Management LP, which it will use to operate during the process.
“Our restructuring will be invisible to the customers who visit our properties every day,” Thomas H. Nolan Jr., president and chief operating officer.
In February, the company reported lower-than-expected fourth-quarter funds from operations and a dip in revenue amid weaker retail rents.
The company has suspended its dividend, halted all development projects, sold some of its non-mall assets and reduced its workforce by 20 per cent.
General Growth has properties in 44 states and has seen its fortunes sour amid the financial crisis in the U.S. economy and frozen credit markets. The company has been hard-pressed to refinance the billions in debt it took on during an aggressive expansion effort that included the $7 billion purchase of a competitor in 2004.
Last month, General Growth got lenders to waive default on a $2.58 billion credit agreement until the end of the year.
But its Rouse Co. subsidiary failed to convince enough holders of unsecured notes worth $2.25 billion as of Dec. 31 to accept a proposal that would let the unit avoid penalties for being behind on its debt payments and give it some time to refinance its debt load.
With files from the Associated Press (more…)
Conquest Vacations shuts down tour operations April 17, 2009
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A tourist enjoys the sun at a resort in Bavaro, Dominican Republic. Conquest Vacations, which set up tours to Canada, the United States, the Caribbean, Mexico and Europe, is shutting down after 37 years.(Eduardo Munoz/Reuters)
Conquest Vacations said Wednesday it is shutting down its tour operations effective immediately.
What you can do if your tour operator goes out of business:Customers who booked their vacation using a credit card should contact their credit card company for a refund for services not rendered.Travellers who opted for travel insurance should check if the coverage includes “operator default,” which provides reimbursement should a tour operator or air carrier go out of business.The Canadian Transportation Agency accepts complaints from consumers dissatisfied with the air portion of a travel package. Complaints about the land portion of the trip must be dealt with by provincial and territorial authorities dealing with travel.
In a statement published on its website, the Toronto-based company blamed several factors for the decision.
“Unfortunately, this has been a result of overcapacity and price [wars] among the major tour operators, unrealistic and unreasonable demands by the credit card processing companies, credit squeeze and economic turmoil in recent months making it impossible for companies like Conquest to continue in business even after weathering many storms over the past 37 years,” the company said.
Customers who booked and paid using cash or a cheque through a travel agency are being directed to contact their agency about refunds or claims.
The company said travellers who booked directly with Conquest Vacations will be contacted. They can also email the company with a booking reference number.
Customers who paid for their future travel using a credit card should contact their credit card institution for a refund.
In business since 1972, Conquest served destinations in Canada, the United States, the Caribbean, Mexico and Europe.
David McCaig, the president of the Association of Canadian Agencies, called it “a very sad day for a very reputable company.”
McCaig pointed out that Conquest’s closing is a different situation from some past bankruptcies in the travel business, which left travellers stranded.
“A closing means that they are able to protect all their customers in destination, and they’ll be able to bring their customers home, and that’s a very important thing to compare to other bankruptcies of tour operators that have happened in the past.”
Randolph de Gooyer of Maritime Travel of Halifax said at least one couple from Sydney, N.S., is stranded by the move.
“This is early hours yet, but our understanding is that Conquest has made arrangements to bring those people back to Canada, and we’re trying to confirm that. If that’s not the case, then we’ll make alternate arrangements for them,” he said.
Few vacationers from Nova Scotia are affected, since Conquest pulled out of Halifax a few years ago.
Lesley Keyter of Calgary’s The Travel Lady Agency said it was inevitable that one of Canada’s discount agencies would close. She said the prices of seats that some vacation companies have been offering created an unrealistic market for travellers and companies to sustain.
She said the industry will come out “because you have the strong players that emerge from this unscathed because they’ve got the depth and the customer loyalty.”
Harley profit hits Wisconsin tax bump April 17, 2009
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Harley-Davidson’s U.S. retail sales fell 9.7 per cent in the first quarter, the company said.(Chuck Burton/Associated Press)
Retail sales of Harley-Davidson motorcycles fell in the first quarter, but that was expected, the company said Thursday. What it didn’t expect was a tax charge that cut its already weakened profit.
Worldwide retail sales of the iconic bikes fell 12 per cent and U.S. retail sales declined 9.7 per cent from the 2008 first quarter. Revenue fell to $1.29 billion US from $1.31 billion in the quarter a year earlier.
But profit tumbled to $117.3 million (50 cents a diluted share), compared with $187.6 million (79 cents) in 2008.
The company said the drop was caused by nearly $35 million in pre-tax restructuring charges and “a one-time $22.5 million tax charge related to a change in Wisconsin tax law enacted mid-quarter without public hearings and which applied retroactively to Jan. 1, 2009.”
The restructuring charges followed plans announced in January to cut output and 1,100 jobs, including about 800 hourly production jobs by 2010. Now, the company has raised the estimated production job losses by 300 to 400.
President and CEO Jim Ziemer said the company was “mildly encouraged” by the fact that U.S. retail sales fell less in the first quarter than in the previous two quarters, but added 2009 is going to be “an extremely challenging business environment.”
Harley confirmed plans to ship between 264,000 and 273,000 motorcycles to dealers worldwide in 2009, down 10 to 13 per cent from 2008.
Harley stock closed up 98 cents to $18.11 in New York trading. U.S. websites said the shares rose because the first-quarter profit beat analysts’ expectations.
Petro-Canada to shed 200 Alberta jobs April 16, 2009
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Petro-Canada is laying off 200 people in its oilsands division, most of them related to the company’s stalled Fort Hills project.
The Calgary-based company said the layoffs have nothing to do with its merger with energy giant Suncor last month.
“This was a tough decision that we were probably going to have to make in oilsands with or without the merger,” said Petro-Canada spokeswoman Kelli Stevens. “We’re in a situation where we have more people than we have work for them to do.”
Stevens said it’s a challenging time to be in the energy industry.
“It’s been really difficult to see how things have changed,” she said. “I mean, even a year ago or less, we were trying to hire as many qualified people from everywhere we could get them from, and the gears have really switched, and it’s been hard on all of us.”
The layoff notices to the 200 people in Calgary and Fort McMurray will be handed out over the next few days.
Costs for the Fort Hills project, which includes a mine north of Fort McMurray as well as an upgrader in Sturgeon County, have skyrocketed to more than $21 billion, 50 per cent more than the original $14.1 billion price tag that was estimated in June 2007.
Tax cuts impact quality of life: study April 16, 2009
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Tax cuts could diminish the standard of living for the vast majority of Canadians who enjoy the public services that they fund, according to a study by the Canadian Centre for Policy Alternatives released on Wednesday.
The majority of Canadian households enjoy a higher quality of life because of the public services their taxes fund, the study argues.
According to the report, Canada’s Quiet Bargain: The Benefits of Public Spending, the cost of the public services that a typical Canadian household uses annually is the equivalent of about 50 per cent of its annual income.
“What passes for a tax cut debate in Canada is really only half the debate,” said study co-author Hugh Mackenzie, an economist.
Taxes pay for services that hold a value in the daily lives of Canadians, Mackenzie said.
“The suggestion we often hear, that taxes are a burden, hides the reality that our taxes fund public services that make Canada’s standard of living among the very best,” he said.
The study uses Statistics Canada data on government revenues and expenditures to compare public spending in categories including health care, education, social services, old-age security benefits and employment insurance. It also looks at data from the Canadian Institute of Health Information and government figures regarding labour and household incomes.
Using the statistics, the report finds that the average per capita benefit from public services in Canada in 2006 was about $16,952.
Mackenzie and company also argue that about 80 per cent of Canadians would have a higher standard of living if the GST hadn’t been cut, and that 75 per cent of Canadians would be better off if their provincial governments invested in public services, such as health care and education, rather than income tax cuts.
“The overall impact of tax cuts ? and the cuts in public services that accompany them ? has not been addressed in any substantive way,” the study states.
“Tax cuts are always made to sound like they’re free money to middle income Canadians. They are anything but,” Mackenzie said. “We’re far better off with the public services our taxes fund than we are with tax cuts.”
Any reduction in income tax results in an equivalent constraint on public spending, the study says, and about three in four Canadians suffer from cuts to public spending.
Households with incomes under $110,000 would have been better off if the federal government had not cut the GST by two percentage points and had transferred the money to local governments, according to the paper.
For households with incomes between $110,000 and $200,000, the net gain of the GST cut does not exceed $50 per year, after factoring in the loss of publicly funded services, the study finds.
Overall, the tax cuts implemented in Canada in the last 15 years have had the net effect of reducing the living standards of most Canadians, the reports says.
The study also finds that the number of public services used by Canadians appears to increase as household income and size increase. This is particularly true for households that have children who are accessing publicly funded elementary and secondary schools and seniors who are more likely to use the public health-care system.
“Families with young children will tend to benefit relatively more from the health-care system, whereas families with older children will tend to benefit from the public education system to a greater extent than other types of families,” the study states.
Home sales show more strength in March April 16, 2009
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National sales of existing homes increased for the second month in a row in March 2009, coming at a seasonally adjusted 31,135 units, the Canadian Real Estate Association said Wednesday.
Although still off 20 per cent from March 2008, last month’s sales via the Multiple Listing Service (MLS) were up seven per cent from February and 18 per cent ahead of the decade-low hit in January.
“Housing markets are starting to show signs of buyer interest because of lower prices and interest rates,” said Dale Ripplinger, president of the Canadian Real Estate Association.
“We expect April sales activity will feel some effects from the federal government incentives announced in the last budget, including the increase in the maximum withdrawal allowed under the home buyers’ plan, and the first-time buyer tax credit,” Ripplinger said.
Factoring out seasonality, the actual number of home sales transactions numbered 35,225 units in March 2009. While that was 13.7 per cent below levels reported in March 2008, it was also the smallest year-over-year decline in six months.
Across the country, the average price for home sales via the MLS in March was down 7.7 per cent from a year ago. The MLS average residential price for homes sold in March 2009 was $288,641, compared with $312,852 in March 2008.
CREA said that was the smallest year-over-year decline in prices in six months.
Winnipeg’s proposed inland port gets $212M boost April 15, 2009
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Manitoba’s plan for an inland port was given a big boost toward reality on Tuesday with Prime Minister Steven Harper committing more than $100 million in federal funds.
Harper was in the province to observe flooded areas of southern Manitoba and announce federal stimulus funding for the port concept.
He took a helicopter tour of the Red River Valley with Premier Gary Doer then landed at Winnipeg’s James Richardson International Airport at 2 p.m. for a joint announcement with Doer about CentrePort Canada Way.
The premier announced the provincial government would contribute the other half of the funding, plus donate land near the airport, for a total project cost of $212 million.
The CentrePort plan calls for 20,000 acres northwest of the airport to be turned into a massive trucking and rail depot linked to runways with aircraft coming and going from all over the globe. The idea builds on Winnipeg’s reputation as the geographic centre of North America.
Portions of the funding announced Tuesday will help develop a four-lane expressway linking the inland port to the airport. A high-speed corridor will connect Inkster Boulevard and the airport and the CP Rail Weston yards to the Perimeter Highway near Saskatchewan Ave.
Canada Post is already building a new mail distribution plant on 11 hectares of land east of the airport and a new Greyhound bus depot is under construction adjacent to the airport.
Barry Prentice, professor at the I.H. Asper School of Business, said the CentrePort “might be attractive to firms to settle here who want to take advantage of those transportation units. But in the main, what it means is employment and investment.”
U.S. retail sales drop curbs recovery optimism April 15, 2009
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U.S. store sales took a surprising dive in March, figures released Monday show, with even retailing behemoth Wal-Mart Stores Inc. posting lower-than-expected numbers for the month.
Retail sales fell 1.1 per cent, according to the U.S. Commerce Department. Economists were expecting a modest 0.3 per cent gain for March.
The slide marked the first month in 2009 in which retail sales fell. The revised February figure showed an increase of 0.3 per cent; the preliminary results for that month had initially indicated a decline of one-tenth of a percentage point.
In recent weeks, some positive economic indicators had given analysts a sense that the U.S. economy might be stabilizing.
“Unfortunately, the March U.S. retail sales number came along and stomped all over such optimism with gusto,” said Jennifer Lee, an economist with BMO Economics.
Compared with the same month a year earlier, retail sales for March 2009 were off 9.4 per cent.
Retail sales for the January-to-March period were down 8.8 per cent versus the same three months in 2008.
Across-the-board crumble
The retail weakness wasn’t just centered in one area.
For the past year, for example, the sales of cars and car parts have been weak. Forecasters had predicted a four-per-cent sales gain in March. Instead, the numbers showed a decline in unit sales of 2.5 per cent .
“In hindsight, it likely reflected a recovery of fleet sales rather than sales to households,” Paul Ferley, assistant chief economist for RBC Economic, said in a morning commentary.
Excluding the automotive sector, retail revenue fell by 0.9 per cent, a surprisingly steep decline.
Wal-Mart’s wall
One of the big culprits in the U.S. figures was a weaker than hoped month for Wal-Mart. The Arkansas-based firm posted what for many companies would have been a banner month, a sales increase of 1.4 per cent.
But, analysts had thought the world’s biggest retailer would gain 3.2 per cent on its sales line for the month.
Still, Ferley estimated that consumer spending for the first quarter of 2009 will rise 1.1 per cent.
“This represents a vast improvement from the 4.3 per cent plunge recorded in the fourth quarter of last year,” he said.
No danger to public in oil well blowout, energy regulator says April 15, 2009
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An oil well blowout that released fluids into a muskeg northeast of Edmonton posed no danger to the public, Alberta’s energy regulator said.
The EnCana well released about 20,000 barrels of fluids ? mostly salt water, polymers and “trace amounts of oil,” the Energy Resources Conservation Board said Tuesday.
The blowout happened Friday night about 56 kilometres northeast of the hamlet of Wabasca and was capped about 36 hours later, on Sunday morning.
“There was no fire and no danger to public safety. No gas was vented. No water has entered any creeks or rivers,” the conservation board said in a news release.
The board said it’s monitoring cleanup efforts by EnCana and that its inspectors are on site investigating the incident.
Construction starts on Vale Inco plant in southern Newfoundland April 15, 2009
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Despite the global economic chill, mining giant Vale Inco is pushing ahead with a $2.2-billion plan to build a nickel processing plant in southern Newfoundland.
Work on the Long Harbour site formally started Monday, launching a four-year construction plan that will need a peak of 1,600 workers by 2011.
Even though nickel prices are in a slump, Vale Inco said Monday that proceeding at full steam with the hydromettalurgical plant, which will use water, oxygen and acid to separate metals from concentrate shipped from the Voisey’s Bay mine in northern Labrador.
Crews moved on to the site on the weekend.
“I think that marks a pretty important milestone for us, as we move forward with the project in Long Harbour,” said Vale Inco corporate affairs manager Bob Carter.
Nonetheless, Carter acknowledged that the project, which Vale Inco promised to build following completion of a test hydromet facility in nearby Argentia, is proceeding under gloomy economic clouds.
“Anybody involved in business is looking very closely at what’s going on. Our industry has been affected by changes that are occurring globally,” Carter said.
The project is enormous by most standards. When completed, the plant will have a footprint 40 times the size of the Mile One stadium in downtown St. John’s.
Company will look for skilled workers
To pull off the project, Vale Inco will be recruiting for scores of skilled trades workers, and is anticipating shortages, in particular, with pipefitters and electricians.
The economic crisis, though, may actually help Vale Inco with its recruitment. Because of the sudden downturn in the Alberta oilsands, hundreds of workers from Newfoundland and Labrador who would ordinarily be away are now home, and have been calling for work.
“That should be a benefit for us as we move forward looking for the trades that we need,” Carter said.
Vale Inco will award 45 major construction contracts during the construction of the processing plant, and some construction and service contracts have already gone to local comapnies.
The immediate goals for crews are demolition of the old port site at Long Harbour and the ensuing cleanup.
