STATE

S & P HAS CONCERNS ABOUT N.Y. BUDGET GAP

A projected $6.1 billion hole in the New York state budget for the fiscal year that begins April 1, 2005, is troubling and could provoke a credit downgrade depending on how it is plugged, the Wall Street bond-rating firm Standard & Poor’s said.

With S &P already rating the state’s outlook “negative,” future ratings “actions” by the firm may occur, analysts said. Over the next two-year period, that action could only mean a downgrade for a state like New York with a negative outlook, S &P analyst Robin Prunty said yesterday.

A downgrade would cause higher interest costs for taxpayers when the state borrows by selling general obligation and appropriation bonds.

The analysis was contained in an S &P analysis of states’ fiscal health. In general, analysts found states getting stronger financially after years of struggle caused by the recession and the economic fallout from the September 11 terrorist attacks.

“As the economy improves, state revenue collections are picking up and reserves are starting to be rebuilt,” the analysis concluded.

But analysts said New York is suffering from several of the fiscal ills that are still confronting states, including court-ordered changes in education funding, an inability to significantly scale back Medicaid spending, and depleted reserve funds.

Following the 2003-04 state budget, S &P lowered the credit outlook for the state from “stable” to “negative.” At that time, the firm’s analysts also said they were worried about projected future-year budget gaps. S &P continued the state’s credit rating of “AA,” the same as most states.

New York, Alabama, Illinois, and Kansas are the only states with a negative outlook, under S &P’s rating system. Delaware, Georgia, Maryland, Minnesota, Missouri, North Carolina, South Carolina, Utah, and Virginia have the best credit worthiness among the states with “AAA” ratings.

– Associated Press

NATIONAL

HOLLINGER BOARD FILES REPORT WITH COURT IN ILLINOIS

A special committee of newspaper concern Hollinger International’s board of directors filed its final 400-page report in an Illinois court yesterday regarding millions of dollars of inappropriate bonuses allegedly paid to company executives. The report is expected to deliver strong criticism of several directors, and in particular, U.S. Defense Department adviser Richard Perle, the Toronto Globe and Mail reported. “The report filed today is the result of extensive investigation and analysis by the special committee and its advisers,” said Hollinger’s interim chairman and chief executive officer, Gordon Paris, in a statement. “It is an important step forward in our pursuit of restitution for funds and assets inappropriately taken from the company’s coffers and in our efforts to significantly improve corporate governance at Hollinger International,” added Mr. Paris who heads the special committee, which was instrumental in ousting Conrad Black as head of the Chicago-based company. Hollinger International has filed a $1.25 billion lawsuit against Mr. Black and others in the U.S. district court for the Northern District of Illinois. Mr. Black and others paid $32.2 million initially demanded by Hollinger International in November but court battles continue in America and Canada. The company will file the full text of the special committee’s report with the Securities and Exchange Commission today, the statement said. Hollinger International is a minority investor in The New York Sun.

– Staff Reporter of the Sun

MERCK’S ZOCOR FAILS TO REDUCE HEART RISK IN STUDY

Merck & Co.’s Zocor, the no. 2 cholesterol drug, failed to reduce complications in the first four months after a heart attack, according to a study that may give an edge to Pfizer Inc.’s Lipitor medicine.

The Merck-funded study of 4,497 patients compared Zocor to placebo during the initial period and found similar rates of repeat attacks, hospitalizations, stroke

terol-lowering drugs known as statins. Research released in March showed that high doses of the drug beat standard doses of the no. 3 statin, Bristol-Myers Squibb Co.’s Pravachol.

Shares of Whitehouse Station, N.J.-based Merck fell 22 cents to $44.93 as of 4 p.m. in New York Stock Exchange composite trading. Pfizer slipped 36 cents to $32.29. – Bloomberg News

or death. For the rest of the two-year study, researchers compared higher doses of Zocor to a standard dose and found the benefits to aggressive treatment grew over time, although side effects were higher too.

The results suggest Pfizer’s Lipitor, the world’s best-selling medicine, may be the best first choice for some patients, said Steven Nissen a heart doctor at the Cleveland Clinic Foundation. Lipitor quickly helped heart patients in similar studies.

“It is hazardous to assume that similar agents always yield identical results,” Mr. Nissen said in an editorial that will accompany the study in the September 15 Journal of the American Medical Association. The research was presented today at a meeting of the European Society of Cardiology in Munich.

The findings may help New York-based Pfizer take an even bigger lead in the $21 billion market for choles

REGULATORY

NYSE PROPOSES MORE DETAILED DISCLOSURE ON INDEPENDENT DIRECTORS

The New York Stock Exchange proposed tightening its corporate governance rules to make companies provide more information about independent directors.

The proposal, filed earlier this month with the U.S. Securities and Exchange Commission, is an attempt to ensure compliance with a 10-month-old rule requiring companies to have a majority of independent directors on their boards. Independent directors are those without significant business or personal links to the companies they serve.

The NYSE’s proposed rule would require boards to explain in their proxy statements how they’ve determined the independence of directors. The independence rule was put in place last November to ensure that boards act as watchdogs for shareholder interests after breakdowns in oversight that contributed to the collapse of Enron Corp.

“The inconsistent way companies have applied the rule has really left them all over the map, when it comes to determining director independence,” said Patrick McGurn, vice president of Institutional Shareholder Services, the largest proxy adviser to U.S. fund managers.

Companies must “identify which directors are independent and disclose the basis for these determinations,” the NYSE said in its August 3 proposal.

John Nester, a spokesman for the SEC, said the agency is reviewing the proposal. NYSE spokeswoman Diana Desocio declined to comment.

– Bloomberg News

MARTHA STEWART’S FORMER BROKER AGREES TO SEC BAN

Peter Bacanovic, the former stockbroker for homemaking guru Martha Stewart, has been barred from associating with a broker-dealer or an investment adviser. Bacanovic, 42, agreed to the Securities and Exchange Commission ban without admitting or denying wrongdoing. The former Merrill Lynch & Co. Inc. broker may reapply for association at a later date depending in part on whether he has returned “ill-gotten gains” and made payments awarded in arbitration proceedings, the SEC said. The ban helps settle securities fraud charges brought by the SEC in June 2003, alleging that Bacanovic gave Stewart inside information about the stock of Im-Clone Systems Inc. (IMCL). SEC officials weren’t immediately available for further comment.

– Dow Jones Newswires

MARKETS

CRUDE FUTURES TUMBLE BELOW $42 Crude oil futures dropped below $42.00 a barrel yesterday for the first time in four weeks on news that Iraq’s oil exports are running near their more typical level. At the New York Mercantile Exchange, benchmark, light, sweet crude oil futures set for October delivery tumbled as much as $1.88 to a low of $41.30, the lowest level for a front-month contract since July 26, before recovering some ground. The losses came after the October contract broke key support at $42.50 a barrel, a level that marked the start of the bull run that lifted crude futures to a record $49.40 a barrel on August 20. The breach of the key support level triggered pre-placed orders to sell futures, traders said. Petroleum products futures posted bigger losses, with September gasoline futures down 4.19 cents at $1.1350 a gallon and September heating oil 3.26 cents lower at $1.1300 a gallon. September products futures expire Tuesday, the last trading day of the month. London’s International Petroleum Exchange was closed Monday due to a bank holiday.

– Dow Jones Newswires