Daily Archives: June 9, 2006

Ripples from the Grimsley Affair

Posted on by
1

pujols-action-01-sm.jpgGet used to it because the ripples from the Jason Grimsley Affair are already starting and may turn into pretty tasty waves soon.
It looks as if Grimsely has fingered Chris Mihlfeld, a Kansas City-based ìstrength and conditioning guruî (and the former Strength And Conditioning Coordinator for the Kansas City Royals baseball club) as referring Grimsley to a source from whom Grimsley obtained “amphetamines, anabolic steroids and human growth hormone.” Mihlfeld has been Cardinals star Albert Pujolsí personal trainer since before Pujols was drafted by the Cardinals in the 13th round of the 1999 draft.
Meanwhile, as speculated in this previous post from over a year ago, this NY Times article reports that the perjury investigation into Barry Bonds is continuing to fester.
This is going to get very ugly. Quickly.
Update: Mihlfeld is denying that his name is connected to the drug probe that has ensnared Grimsley or that Pujols was involved in taking performance-enhancing drugs.

Ford and that pesky “B” word

Posted on by
Reply

fordlogo1928.jpgAlthough somewhat lower on the radar screen than General Motors’ more well-publicized troubles, Ford Motor Co. is reeling today after Fitch Ratings downgraded the company’s credit rating (see also here) two notches to the highly-speculative single-B-plus level while analyzing how creditors might fare in a corporate reorganization of Ford under chapter 11. Despite the downgrade, Ford’s rating is still higher than GM’s credit rating, which is B3 by Moody’s Investors Service and single-B by Standard & Poor’s and Fitch.
Inasmuch as Ford (as with GM) continues to have a strong liquidity position (about $24 billion in cash and securities as of the end of the first quarter), a bankruptcy filing is probably not imminent even though Ford estimates that it will burn through about $5-6 billion of that cash in 2006. At the close of yesterday’s New York Stock Exchange composite trading, Ford shares were down 2% to $6.66 while on the debt side, Ford’s 7.45% bonds due in 2031 fell 3.5% to about 70 cents on the dollar, which translates into a yield of 11% that is slightly below the yield on GM’s 8.375% bonds that mature in 2033.
In its analysis, Fitch reminds investors that companies with a single-B-plus rating end up in bankruptcy about 24% of the time within five years. In a hypothetical Ford bankruptcy case, Fitch estimated debt holders would get back 50% to 70% of their investment from Ford and 70% to 90% of their investment in Ford Credit Company.

Disney-Ovitz decision upheld

Posted on by
Reply

disney7.JPGProfessor Ribstein — who was prescient in predicting the outcome of the corporate case of the decade — can rest easy.
In a ruling issued yesterday afternoon, the Delaware Supreme Court upheld the Delaware Chancellory Court’s decision dismissing the civil lawsuit brought by certain Disney shareholders against the board of Walt Disney Co. for approving the rather generous $140 million severance package paid to former Disney executive Michael Ovitz after Ovitz was effectively fired by his longtime friend and former Disney CEO Michael Eisner for essentially doing nothing during Ovitz’s year as president Disney. A copy of the decision is here, and here are initial comments from corporate law scholars Professor Ribstein, Professor Bainbridge and Professor Smith.
Steven Schulman, the former Milberg Weiss partner who has bigger problems now than the loss in the Disney-Ovitz case, pursued the case on behalf of certain Disney shareholders and contended that the Disney board’s decision-making process amounted to a series of sham “jam sessions” in which the board abrogated its responsibilities to Disney shareholders by rubberstamping the Eisner-supported severance deal for Ovitz. However, the Delaware Supreme Court upheld the Chancellory Court’s decision that was critical of the Disney board, but concluded that Eisner and the other Disney directors acted in good faith in approving Ovitz’s termination without cause and thus, were immunized from liability to shareholders regardless of whether approving the generous severance may have been a bad decision.

Scheduling conference today in the sad case of Jamie Olis

Posted on by
2

Jamie Olis6A.jpgOn the heels of the Fifth Circuit ordering the release from prison yesterday of two other business executives who have been subjected to the Justice Department’s demonization of business in the post-Enron era, U.S. District Judge Sim Lake will conduct a scheduling conference this afternoon in Houston in the sad case of Jamie Olis in an effort to kick-start the resentencing of Olis that the Fifth Circuit ordered seven months ago after throwing out Judge Lake’s original 24-year sentence of Olis.
Judge Lake, who has been preoccupied with a rather long trial in another case over the past several months, is not the type of judge to allow pending matters to linger on his docket, so expect him to use today’s hearing to schedule a final resentencing hearing in the near future. The key issue in the resentencing is the amount of market loss attributable to the transaction on which Olis’ conviction is based, and the prosecution has been dragging its feet since the resentencing was ordered in an apparent effort to buttress its untenable market loss theory upon which Judge Lake based the original sentence of Olis. Judge Lake has not yet tipped his hand on how he intends to view the market loss issue on the resentencing of Olis, so today’s hearing may provide a forum for the judge to give the parties some direction for preparing the evidence on that key issue for the final resentencing hearing.