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April 29, 2008

Manufacturing activity declines in March

Filed under: economics — Tags: , , — Snowman @ 9:33 pm

Orders to factories for big-ticket manufactured goods fell for a third straight month in March, the longest string of declines since the 2001 recession.

The Commerce Department said Thursday that demand for durable goods dropped by 0.3% last month, a worse-than-expected performance that underscored the problems manufacturers are facing from a severe economic slowdown. The last time orders fell for three consecutive months was from February to April of 2001, when the country was sliding into the last recession.

President Bush on Tuesday said the economy was not in a recession but a period of slower growth. However, economists who believe the country has fallen into a recession will point to the string of declines in manufacturing orders to support their view.

In other economic news, newly laid-off workers filing claims for unemployment benefits posted a sharp decline last week.

The Labor Department reported Thursday that claims for unemployment benefits fell by 33,000 last week to 342,000. Economists had been expecting that claims would rise by 3,000. The four-week moving average for claims fell by 7,250 to 369,500.

Even with the improvements, analysts are still worried that the weak economy is putting greater pressures on the labor market. The unemployment rate climbed to 5.1% in March as businesses laid off the largest number of workers in five years.

The weakness in manufacturing orders was led by a 4.6% drop in orders for autos, a sector that has been hard hit by soaring gasoline prices and the weakening economy, which have cut sharply into car sales instant cash advance. Orders in the category that includes home appliances fell by 6.6%. This industry has been hurt by the two-year slump in home sales.

Economic growth slowed to a near-standstill at the end of last year as the economy was battered by the prolonged slump in housing and a severe credit crunch that has resulted in billions of dollars of losses at many of the nation’s largest financial institutions and has made it harder for consumers and businesses to get loans.

Consumer sentiment has plunged to recessionary lows as Americans have also watched gasoline prices soar to an average price above $3.50 per gallon nationally.

The 0.3% drop in orders for durable goods, items expected to last at least three years, followed even bigger declines of 0.9% in February and 4.4% in January.

Orders for all transportation products fell by 4.6%, reflecting the big drop in demand for autos. Orders for commercial aircraft actually rose by 5.5% while demand for defense aircraft surged by 29.4%. Many defense industries have seen big increases reflecting the wars in Iraq and Afghanistan.

A key category that is viewed as a proxy for business investment plans showed no increase in March after a big 2% drop in February. Businesses have cut back on their plans to expand and modernize as the economy has softened. 

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April 28, 2008

German GfK Consumer Optimism Unexpectedly Increases

Filed under: marketing — Tags: , , — Snowman @ 9:33 am

German consumer confidence unexpectedly increased to a seven-month high as rising incomes encouraged spending.

GfK AG's index for May, based on a survey of about 2,000 people, increased to 5.9 from 4.8 in April, the Nuremberg-based market-research company said in a statement today. Economists predicted the gauge would fall to 4.5, according to the median of 28 estimates in a Bloomberg News survey.

Rising wages and the lowest unemployment in 16 years are cushioning the impact on consumers of faster inflation and slowing economic growth. While industrial production unexpectedly rose in February and manufacturing growth accelerated last month, business confidence fell more than economists forecast this month amid a global credit squeeze.

“Despite continuing turbulence in international financial markets and higher food and energy prices, German consumers are becoming more optimistic,'' GfK said in the report. “Conditions have improved for consumption to pick up this year,'' it said, citing “the upswing on the job market and recent wage agreements.''

The euro pared gained after the report, rising as high as $1.5682 from $1.5630 on April 26. The currency for 15 European countries traded at $1.5650 as of 9:44 a.m paydayloans. in Frankfurt.

A sub-index measuring income expectations jumped to 10.5 from 1.5 and a gauge of consumers' propensity to spend rose to minus 4.7 from minus 10.2. A measure of economic expectations increased to 23.3 from 15.

The jobless rate fell to 7.8 percent in March, the lowest level since August 1992. Workers are achieving bigger pay settlements. The IG Metall union won a 5.2 percent wage increase for about 85,000 steelworkers and German public-sector workers secured a pay increase that unions say is worth 8.9 percent over two years.

Medion AG, the German electronics distributor, said last week that first-quarter earnings rose 60 percent.

Still, faster inflation is eroding purchasing power. The annual rate of price gains matched a 12-year high in March and oil prices climbed to a record above $119 a barrel this month.

“Inflation must weaken in the next few months if consumer confidence is to continue its positive developments,'' GfK said.

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April 26, 2008

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Filed under: money — Tags: , , — Snowman @ 8:31 pm

When the city of Youngstown, Ohio, proposed incentives to move people out of declining neighborhoods, it sounded like a good idea - in theory.

The city hoped to lure holdouts living on nearly empty blocks and relocate them to more lively areas, as part of its plan to remake itself in the wake of the steel industry’s departure and the foreclosure crisis. It’s already cleared some lots for things like playgrounds.

Now Youngstown wants to close entire streets and bulldoze abandoned properties so it can shut down city services like street lighting, police patrols and garbage pick-ups that it can no longer afford to maintain.

To do this on a large scale, the city needs to get about 100 residents to relocate. Each is eligible for $50,000 in incentives - plenty, in this town, to buy a new home and move. The hitch: Youngstowners don’t seem to want to leave their homes, no matter how blighted or abandoned the neighborhood may be.

"I’m East Side born and East Side bred and when I die, I’ll be East Side dead," said Rufus Hudson, a director of work force development at Youngstown State University. "We love our side of town. The same people who watched me grow are watching my children grow."

Only one of the half dozen residents who have been contacted by the program since June agreed to relocate, according to Bill D’Avignon, the city’s community development director. And in interviews with CNNMoney.com, another seven residents vowed that they too would stay on their deserted blocks.

The woman who did agree to move lived on a block filled with burned out homes, and a street that could easily be closed without disturbing traffic patterns. But she fell ill, and the move is now on hold.

D’Avignon, who has been surprised by the resistance, said the city may have to up the ante to overcome the resistance, which seems to stem, in part, from community loyalty.

A quiet neighborhood

Marie Rodriguez lives on the city’s gritty South Side, next to a big empty lot on her right and vacant houses behind her. "That bothers me a little," she admitted.

There are only eight occupied homes left on her street, but she still likes living there. "It’s pretty good, nice and quiet," said the retired cook. "I wouldn’t move even if I was the last one on the block."

People are understandably attached to homes that they’ve cared for, and which hold fond memories.

"I put a lot of money in the house, and I raised seven kids here," said Rodriguez.

Another South Sider, Anna Maria Gay, has lived in Youngstown for 47 years and also won’t be persuaded to move from her block. "I like the people here; I would never move away," she said. "It’s very homey, not high class but not quaint either."

Youngstown’s East Side was slated for development back in the 1950’s, when the city’s population was about 200,000.

But the neighborhood withered as Youngstown’s population dwindled to about 80,000. Many of the houses that were built have been demolished, roads have gone un-repaired and others have been closed. Large wooded areas and fields - and even a 10-acre farm - lie within a 10-minute drive of downtown.

Arlette Gatewood, an 80-year-old retired steelworker and union official, has lived on the East Side since its heyday, and he too intends to stay in his home credit scores.

"Turning these mostly empty blocks into green spaces would be better for the neighborhood and cheaper for the city," he said. "But it’s not my intention to ever move."

The area has too many memories for him to give up.

"I worked in the steel mills for 32 years, five months and 28 days," said Gatewood. "I came up at a time, graduating from high school in 1947, when the opportunities for young black men were limited."

But the mills were hiring. "We made good money," he said. "The work was hard; it was dirty."

Going home to the East Side after a tough day was pleasant, though. He remembers beer gardens, grocery stores and other retailers. These are gone. Now Youngstowners drive to the suburbs to shop.

Patient city planners

The desire to stay put leads to some odd juxtapositions.

Take Meadow Street, which is near downtown. It’s just a block long and the southern half of it will soon close when Fireline Inc., a ceramic molding manufacturer, takes possession. The company already owns most of the block.

But there’s one holdout - a modest, wood-frame house a third of the way down the street. The Fireline plant, which employs 102 people, nearly surrounds this sliver of land where Nathaniel and Lulu Byrd live.

The company would like to take over the entire street, but for the Byrds.

According to Fireline, the couple has no intention of moving. "We’ve offered [the Byrds] ten times their home’s valuation," said Gloria Jones, who founded the company with her husband.

But Nathaniel Byrd’s mother gave him this house as a wedding gift. "They have a great deal of affection for the house," said Jones. "They want to stay."

So far city planners have been patient. Relocations are strictly voluntary, and the city intends to keep it that way - there are no plans to invoke eminent domain.

Meanwhile, the city has crafted plans for over 170 neighborhoods. In the Idora Park area, for example, near where an amusement park once stood, there are just a few occupied houses where the "entire swath of land should be open greenery," said community development director D’Avignon.

To make that happen, city planners may sweeten the deal - possibly offering to pay off small mortgage balances of $20,00 or $30,000.

They may have to, if they want any Youngstowners to move.

Issue #1 - America’s Money: All this week at noon ET, CNN explains how the weakening economy affects you. Full coverage.

Under the government’s economic stimulus plan, 130 million people will receive tax rebate checks for $300 and up, starting April 28. What do you plan to do with your check? How do you think the stimulus plan will affect the economy? Send us your photos and videos, or email us and tell us what you think. 

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April 25, 2008

Pepsi profit rises 5% on overseas sales

Filed under: marketing — Tags: , — Snowman @ 3:13 pm

PepsiCo Inc., the world’s second-largest soft drink maker, said Thursday a big rise in international revenue helped offset higher commodity costs and boost its first-quarter profit by 5%.

For the quarter ended March 22, net income jumped to $1.15 billion, or 70 cents per share, from $1.10 billion, or 65 cents per share, in the prior-year quarter.

The result matched analysts’ profit estimates, according to a poll by Thomson Financial.

The company also affirmed its 2008 profit guidance of at least $3.72 per share - about 1 cent per share shy of analysts’ predictions - but added commodity costs will likely rise more than it initially expected.

PepsiCo (PEP, Fortune 500) said it is now expecting commodity inflation of 9% to 10% in 2008. Earlier this year, the company predicted 6% inflation.

On a conference call with investors, Chief Financial Officer Richard Goodman said the company had expected commodity costs to decline this year, but instead grain prices spiked in the first quarter.

"We were assuming it would reverse," he said. "Clearly that didn’t happen."

Chief Executive Indra K. Nooyi added that the company needed some time to adjust its pricing models to an inflationary environment.

"It’s taken us a quarter or two to catch up," she said.

Nooyi said the company will raise prices on much of its portfolio to try to offset the costs.

Goldman Sachs (GS, Fortune 500) analyst Judy E. Hong said in a note to investors she is concerned that a price hike "could have negative implications for volume growth."

Most food and beverage companies have raised retail prices as part of a struggle to combat far higher commodity costs, which have started eating into margins and profits across the sector.

Goodman said the company has been affected by higher prices for cooking oil, oats, wheat, corn and energy.

Corn and wheat both reached record-high levels in the past year due to overseas demand, bad weather and supply issues freecreditreport. Corn has also skyrocketed due to demand for the alternative fuel ethanol, which is made with the grain.

International Business

So far, Purchase, N.Y.-based PepsiCo has been able to grow its profit despite the higher costs, mainly due to its international business.

Revenue overall climbed 13% to $8.33 billion from $7.35 billion. The revenue beat analysts’ predictions of $7.97 billion.

Revenue in the international division grew the most, rising 27%. Volume, or the number of products sold directly or indirectly to consumers, grew 11% in the beverage unit and 15% in the snacks business.

Volume was particularly strong in China, South Africa, the Middle East and India.

The Americas Beverages unit did not fare as well, with revenue growing 6% and volume declining slightly.

The company said carbonated soft drinks volume fell 3%. PepsiCo, like most soft drink makers, has seen consumers move away from carbonated soft drinks to non-carbonated options like water and juices.

Non-carbonated drinks volume was even with the prior year. New Gatorade drinks, including a lower-calorie version called "G2," offset volume declines in juices and the company’s Aquafina water business.

In the Americas Foods division, which includes Frito Lay, Quaker Oats and the Latin America Foods business, revenue rose 13%, largely due to higher prices. Volume rose 3%, helped by sales of Lays, Cheetos and cereals like Quaker Oatmeal.

PepsiCo it expects volume growth of 3% to 5% in 2008 and high-single-digit revenue growth.

The company said some of that growth will come from the company’s $1.4 billion acquisition of Russia’s biggest juice company, JSC Lebedyansky.

That deal is expected to close in the third quarter.

Shares fell 87 cents to $68.33 in afternoon trading. 

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April 24, 2008

DuPont beats estimates, backs outlook

Filed under: economics — Tags: , , — Snowman @ 5:22 am

Chemicals company DuPont said profits increased 26% in the first quarter, boosted by higher selling prices and the weak dollar.

Wilmington, Del.-based DuPont said it earned $1.19 billion, or $1.31 per share, on revenue of $8.77 billion. That compares to a profit of $945 million, or $1.01 per share, on revenue of $8.16 billion last year.

Thomson Financial said analysts had expected earnings of $1.28 per share on revenue of $8.61 billion.

DuPont (DD, Fortune 500) also said it stands by its 2008 earnings outlook for $3.40 to $3.55 per share payday loan. But it said for the rest of 2008, slowing U.S. demand will offset growth outside the country. 

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April 20, 2008

Citigroup lops off $14 billion in investments during quarter

Filed under: economics — Tags: , , — Snowman @ 5:14 pm

NEW YORK — Citigroup Inc. said Friday that it will eliminate about 9,000 more jobs, after loan defaults and the tumultuous credit markets lopped $14 billion in value from its investments during the first quarter.

That write-down, plus more than $3 billion in costs related to consumers’ credit problems, led Citigroup to a quarterly loss of $5.1 billion.

Citigroup has announced 13,200 job cuts since last summer, when the credit crisis began to slam the banking industry. The bank announced 4,200 cuts in January.

In March, the company said it would lay off 159 employees at its home equity loan group in O’Fallon, Mo. CitiMortgage employs more than 3,500 people in O’Fallon.

On Friday, the company did not provide specifics about where jobs would be cut. However, more are expected companywide.

"We’re very, very focused on efficiency," Chief Executive Vikram Pandit said.

The most recent quarterly shortfall at the nation’s biggest bank by assets was not as large as the nearly $10 billion loss it suffered in last year’s fourth quarter.

Citigroup shares gained nearly 4.5 percent, or $1.08, to $25.11 in trading Friday, as many investors had anticipated even more dismal results. Citigroup’s stock is down 12 percent since the beginning of the year.

Citigroup essentially lost in the first three months of the year, $1.02 a share, what it made in the same period in 2007 — $5 billion, or $1.01 a share. Analysts, on average, expected the New York bank to lose 95 cents a share, according to a Thomson Financial survey.

"We’re not happy with our financial results this quarter, although they’re not completely unexpected, given the assets we hold," Pandit said payday advance lender.

With its significant exposure to problematic mortgages and leveraged loans, Citigroup remains at risk for further write-downs. As a result, Fitch Ratings downgraded the bank’s credit rating, while Moody’s Investors Services and Standard & Poor’s Ratings Services took actions that indicated Citigroup might be downgraded in the future.

"There’s always the prospect that you’ll have additional marks," said Citi’s chief financial officer, Gary Crittenden.

Still, the $14.1 billion in write-downs were smaller than the $18.1 billion it marked down after the fourth quarter.

And in another positive sign, total revenue came to $13.2 billion — about half what the bank pulled in during the first quarter of 2007, but more than the average analyst forecast for $12.8 billion. The bank’s revenue was padded by its global consumer segment and its global wealth management business.

The bank ousted CEO Chuck Prince late last year and promoted Pandit, a former Morgan Stanley investment banker, as it scrambled for cash. In December and January, Citi raised more than $30 billion through sales of assets and stock to outside investors. It also has slashed costs and reorganized the bank’s mortgage business and wealth management unit.

Like other banks, Citigroup still faces a deteriorating environment for consumer lending: Charge-off rates are climbing for mortgages, credit cards, auto loans and other types of loans.

JERRI STROUD OF THE POST-DISPATCH CONTRIBUTED TO THIS REPORT.

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April 19, 2008

Coca-Cola backs Olympic torch relay

Filed under: economics — Tags: , , — Snowman @ 3:20 am

The Coca-Cola Co. believes the torch relay as part of the run-up to the Summer Olympics in Beijing should continue and it stands by its sponsorship of the event, Chief Executive Neville Isdell told shareholders Wednesday amid concerns about China’s human rights record.

The torch relay has been disrupted in Greece, Istanbul, London and Paris by protesters opposed to China’s policies in Tibet.

Atlanta-based Coca-Cola (KO, Fortune 500) is a corporate sponsor of the torch relay.

At the company’s annual meeting in Wilmington, Del., a shareholder asked Isdell how Coca-Cola planned to address the concerns raised. Another said the relay should not go through Tibet because it could cause bloodshed.

"I don’t believe that stopping the torch run is in any way over the long-run going to be the right thing to do," Isdell said.

He said Coca-Cola supports the torch relay and the Olympic Games.

"It has symbolized openness. It has symbolized hope," Isdell said of the torch relay.

The IOC has said it will review plans for the remainder of the Beijing Olympic torch relay and consider scrapping the international portion of the event for future games.

International Olympic Committee officials have expressed concern about the disruption caused by anti-Chinese protests during the relay.

The IOC has said there are no plans for canceling the rest of the relay, which has been a magnet for protests since the flame embarked March 24 on its 85,000-mile journey from Ancient Olympia in Greece as part of its 21-stop, six-continent tour.

The torch relay is expected to end in mainland China on May 4. The Beijing Olympics start Aug. 8.

Other protests

At Coke’s annual meeting, Isdell was interrupted several times by several shareholders who questioned the company’s business practices in India and Colombia. The company has been accused of depleting water resources in India and not protecting workers in Colombia. Coke has denied the allegations.

Isdell said Coca-Cola has supported independent inquiries on the issues and those inquiries have shown no evidence to support the allegations.

Outside the hotel where Coke’s annual meeting was being held, protesters standing on a sidewalk across the street represented groups called Corporate Accountability International (CAI), Reporters Without Borders and the Zionists Organization of America (ZOA).

CAI is challenging Coke’s marketing of Dasani bottled water, saying it’s no better than tap water and is less regulated than tap water but sold at thousands of times the price.

The ZOA is challenging Coke’s refusal to compensate a Jewish Egyptian refugee, Rafael Bigio, whose property was confiscated by Egyptian government in the 1960s bad credit payday loans. He had a bottling plant leased to Coca-Cola. According to the group, the government seized the property and expelled the Jews, and Coke purchased an interest in the property.

Leonard Getz of Marion, Pa., said: "I’m saying the company has benefited from a campaign of anti-Semitism. … All we’re asking for is a reasonable compensation for them." He said Coke has refused to negotiate in good faith with the Bigio family.

Reporters Without Borders is asking Coke to sign a "declaration of responsibility" as a sponsor of the 2008 Beijing Olympic Games.

"China is a big market to them," said Clothilde Lecoz, 25, from Paris. "We want them to be aware that there are some problems." The group wants Coke to respect the freedom of expression and human rights in China.

Corporate Accountability International offered taste tests to passers-by, pitting Dasani against tap water. A group of students from the University of Delaware helped conduct the taste tests, wearing waitress uniforms and holding platters with plastic cups of water.

Protesters carried signs reading "Corporate control of water," "Thou Shalt not Steal" and "Please ask the real thing to do the right thing."

At the meeting, shareholders were asked to vote on the election of 14 directors, ratification of Ernst & Young LLP’s appointment as Coca-Cola’s independent auditors, approval of a stock option plan and three shareholder proposals.

The shareholder proposals included one that sought to allow shareholders an advisory vote on the compensation of several senior executives. Isdell received total compensation valued at $21.6 million in 2007, a more than 3 percent increase from the year before. President and Chief Operating Officer Muhtar Kent has been named to succeed Isdell as CEO on July 1. Isdell will remain as chairman until Coke’s annual meeting in April 2009.

Coca-Cola reported earlier Wednesday that first-quarter profit rose 19% because of acquisitions and overseas growth, offsetting unimpressive results in North America.

The results beat Wall Street expectations, and its shares edged up 16 cents to $61.09 per share in midday trading.

The world’s biggest beverage company said its profit was $1.50 billion, or 64 cents a share, in the three-month period ended March 28.  

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April 17, 2008

Paulson unveils hedge fund guidelines

Filed under: finance — Tags: , , — Snowman @ 3:41 pm

Two advisory groups assembled by Treasury Secretary Henry Paulson proposed new "best practices" Tuesday for the hedge fund industry, designed to improve and clarify the operations of the giant pools of capital.

The guidelines call on hedge fund managers to improve their operating procedures in such areas as disclosure, valuation of their assets, risk management and guarding against conflicts of interest.

One set of the recommendations was prepared by hedge fund managers and the other set was put together by investors who use the funds no teletrak payday loans. Paulson said the recommendations would send "a strong message that heightened vigilance is necessary and appropriate and that all stakeholders have an important role to play." 

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April 15, 2008

Obama targets executive pay

Filed under: online — Tags: , , — Snowman @ 4:03 pm

Democratic presidential candidate Barack Obama is demanding that company shareholders have a say in how much executives get paid as he pushes his populist message.

Obama, in remarks he planned to make to reporters Friday morning, wants Congress to pass legislation he has sponsored that would require corporations to have a nonbinding vote by shareholders on executive compensation packages.

Under Obama’s legislation, shareholders could not veto a compensation package offered to an executive and would not place limits on pay. Rather, they would have a means to publicly express their position.

A similar bill passed the House last year.

On the campaign trail. The Illinois senator’s comments come as he embarks on the third day of a four day-swing through Indiana, which holds its primary May 6. Obama and Sen. Hillary Rodham Clinton are running even in the state and have both been making economic pitches to voters.

"This isn’t just about expressing outrage," Obama says in prepared remarks. "It’s about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they’re acting in a way that’s good for their company, good for our economy, and good for America, not just good for themselves."

Income inequality is a hot-button issue with audiences, particularly the blue-collar workers that Obama is trying to peel away from Clinton in the more economically distressed regions of Indiana and Pennsylvania, which holds its primary April 22.

The high cost of chief executive pay has drawn criticism in recent years as salaries rose, stock options paid off like lottery jackpots, and perks like chauffeured cars and private jets spread.

Rolling in dough. USA Today reported this week that the median compensation for chief executives at the 50 largest companies in the United States was $15.7 million last year, even though some of the companies were not performing well.

Investor advocates, union pension funds and shareholder groups have supported the legislation americashadvance. Republican critics worry it would give activist investors an inroad to change a company’s policies.

Even President Bush last year questioned the extravagant pay of some company managers and directors, but said it was not a matter for government involvement. 

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April 13, 2008

Tyco to pay bondholders $250 mln to settle suit

Filed under: economics — Tags: , , — Snowman @ 2:13 pm

Tyco International (TYC.N: Quote, Profile, Research) said on Friday it has agreed to pay bondholders $250 million under a preliminary settlement of a widely watched dispute over its restructuring into three separate entities last year.

Debtholders have agreed to dismiss their lawsuit and waive any alleged default, Tyco said in a statement.

Some analysts saw the settlement as setting a bad precedent in the corporate bond market.

“It may appear a (bondholder) win, but in terms of relative economics, it is a loss since it sends a message that bondholders will blink and the process of organizing investment-grade bondholders to fight is simply too cumbersome,” said Glenn Reynolds, senior analyst and chief executive of independent research firm CreditSights, in an e-mailed message.

“Basically, bad behavior was rewarded,” he said electronic check payday advance.

The lawsuit was widely watched, because it highlighted that investors may not be as protected as they think against corporate restructurings that can hurt the value of bonds.

The Bank of New York (BK.N: Quote, Profile, Research) — the trustee for Tyco’s bonds — and a group of bondholders had sued Tyco, arguing that the company broke terms and conditions of its debt by spinning off its electronics and health-care divisions last year into independent companies.

The plaintiffs said the company did not get the proper approvals before the spin-off, which harmed debtholders because the majority of the assets supporting their debt was transferred to new entities. 

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