KRAFT HEINZ TO MOVE OSCAR MAYER HQ TO CHICAGO

Original Story: chicagotribune.com

Kraft Heinz announced Wednesday that it will move Oscar Mayer and the company's U.S. meats business from Madison, Wis., to Chicago — a move that will add 250 jobs to Chicago's Aon Center.

The company also announced plans to consolidate its production facilities during the next two years, which will result in the shutdown of seven North American manufacturing facilities: Fullerton, Calif.; San Leandro, Calif.; Federalsburg, Md.; St. Mary's, Canada; Campbell, N.Y.; Lehigh Valley, Pa., and the one in Madison.

The closings will result in the loss of about 2,600 manufacturing jobs at the company, including 700 in Madison. About 50 non-manufacturing positions in Madison also will be cut and not moved to Chicago. A Nashville labor lawyer is reviewing the details of this story.

Kraft Heinz also plans to transfer part of its cheese production in Champaign to other factories in its network, a move that could mean the loss of some of the 1,400 jobs at the plant, which will still produce sauces and dry goods like mayonnaise, Miracle Whip and pourable salad dressings.

The massive consolidation plan "is a critical step in our plan to eliminate excess capacity and reduce operational redundancies for the new combined company," Kraft Heinz spokesman Michael Mullen said in a statement.

He added, "We have reached this difficult but necessary decision after thoroughly exploring extensive alternatives and options."

The announcement continues to confirm the fears of major cost-cutting and job reductions that surfaced soon after H.J. Heinz announced plans in March to acquire Northfield-based Kraft Foods Group, creating the third-largest food and beverage company in North America. The company aims to slash $1.5 billion in costs by the end of 2017. A Hartford employment attorney provides experienced advocacy in many matters of employment law.

The deal closed in early July and two weeks later, Kraft Heinz announced it would relocate its Northfield headquarters to Aon Center in early 2016, occupying 170,000 square feet over five floors in the city's third-tallest building. It is also maintaining offices in Pittsburgh.

In August, the company said it would lay off 700 of its Northfield employees as part of a broader plan to cut 2,500 salaried jobs in the U.S. and Canada. Most of those cuts have already occurred, Mullen said.

Before those layoffs, about 2,000 people were employed in Northfield.

Kraft traces its start to Chicago, where J.L. Kraft began selling cheese to local merchants in 1903. Oscar Mayer has been in Madison since 1919, and its exit from the community will be felt far beyond the factory floor, said Mayor Paul Soglin.

"When you take the payroll, the production, the packaging materials and all that goes into the operation at Oscar Mayer, which has been going on for over 100 years, and then extend that to the dry cleaners, the retailers, the supermarkets, the neighborhood groceries, the local dining spots, kids sporting activities, (the impact) is very significant," Soglin said at a news conference after the announcement. A Memphis business lawyer assists clients in several aspects of safeguarding the continuity of their business.

"Keep in mind when General Motors closed the GM plant. The ripple effect throughout the state was extensive. It's not just limited to the plant site itself."

In Chicago, Mayor Rahm Emanuel lauded the 250 Kraft Heinz jobs as another example of the city staking its position as a center for food company headquarters. Just last month, ConAgra Foods announced its plans to move its headquarters from Omaha to Chicago, locating 700 jobs in the Merchandise Mart.

"This builds on Chicago performing in that space in a very strong way," Emanuel said in an interview.

Young Transplant Patient Kidnapped

Story first appeared in the Chicago Sun-Times.
A 5-year-old Missouri boy taken from a hospital where he was on a transplant waiting list has been found safe in suburban Alsip.

St. Louis police have issued arrest warrants for the father and paternal grandmother.

The department issued a statement Wednesday saying it had issued felony warrants for kidnapping, interfering with custody and endangering the welfare of a child against 33-year-old father and his mother. A St. Louis Criminal Lawyer states that the man and his mother face some very serious charges, and their negligence could have killed the boy.

Authorities accuse the child's father of abducting his son from St. Louis Children’s Hospital on Tuesday. The hospital warned that the boy only had about a day’s worth of medication left in a portable IV when taken.

St. Louis police say Illinois State Police found the boy, his father and grandmother in Alsip, near Chicago, early Wednesday and that Porter seemed fine but was taken to a hospital.


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McCormick Place in Chicago Tries to Cut Debt Costs

First appeared in Bloomberg

The Chicago-based operator of North America’s biggest exhibition and meeting center borrowed $1.12 billion in the week’s second-largest municipal bond sale to cut costs and win back its spot as the top trade-show destination.

The Metropolitan Pier and Exposition Authority’s McCormick Place convention center, which has been losing trade shows to Las Vegas and Orlando, Florida, borrowed to reduce expenses by restructuring debt and extending maturities, and to expand a Hyatt hotel. Yesterday’s sale, backed by a state sales tax and local taxes, was the authority’s largest since a $1.5 billion issue in June 2002. This is where companies would bring their Trade Show Displays.

“By restructuring, we don’t have to draw from the state and can save it money,” said Richard Oldshue, chief financial officer, in an interview. “It relieves pressure from the state’s sales-tax revenues.”

McCormick Place generates $8 billion in economic activity, including 62,000 jobs and $250 million in state and local tax revenue, according to offering documents. Chicago faces a $654.7 million deficit in a $3.39 billion budget for 2011. The authority also operates Navy Pier, a 50-acre entertainment complex with shops, restaurants, parks and other venues on Lake Michigan that is the state’s top tourist attraction. Many companies needed Chicago Trade Show Displays.

U.S. state and local governments are poised to borrow $13 billion this week, the most since the period ended Dec. 11, according to data compiled by Bloomberg. The borrowing cost on 10-year top-rated municipal bonds fell by 5 basis points yesterday to 2.64 percent, according to data from Municipal Market Advisors. A basis point is 0.01 percentage point.

Union Labor

McCormick Place has lost major trade shows in recent years because of its lease rates and the cost of union labor, said Laurence Geller, chief executive officer of Chicago-based Strategic Hotels & Resorts Inc., a real estate investment trust that owns and manages luxury hotels including the Fairmont and InterContinental in Chicago. Companies can Rent Displays which has allowed for more travel.

With legislation passed earlier this year, the state, which runs McCormick Place with the city, put in new leadership, relaxed rules requiring union workers at trade shows and provided additional sales-tax backing for new bonds to restructure debt to help the center lure more conventions.

“Without those reforms, Chicago can’t compete directly with Las Vegas and Orlando,” said Thomas Spalding, vice president at Nuveen Investments Inc. in Chicago, where he manages $60 billion of municipal bonds. “It’s one of those economic engines of the area.”

By selling bonds the authority is trying to bring its debt- service schedule in line with tax revenue, which has fallen amid the worst recession since the 1930s, and the loss of conventions to more competitive cities, Standard & Poor’s said in a Sept. 28 report.

Maturities Extended

Maturities on $918 million of debt will be extended to an average of 37 years from 10 years, Moody’s Investors Service said. About $200 million will be used to finance a 450-room expansion of a Hyatt Regency hotel next to McCormick Place.

Declining revenue prompted the authority to turn to the state for a subsidy to help cover debt payments during the past three years. The authority will repay $57.2 million borrowed from the state, according to bond-offering documents.

The bonds are secured by local taxes on hotel stays, restaurant meals and car rentals, along with revenue from the facilities. The new bonds will come with an additional state sales-tax pledge, subject to appropriation by lawmakers.

S&P awarded the new issue its top AAA rating, citing the debt’s state backing. It won AA- from Fitch Ratings, its fourth- highest grade, and A2 from Moody’s Investors Service, the sixth- highest level.

“Based on the environment we’re in, investors look at an issue more like an A2 bond than a AAA bond and that’s why spreads are wider,” said Tom Boylen, managing director and municipal bond trader at BMO Capital Markets in Chicago.

The authority cut its borrowing costs by pushing down yields, said Oldshue. The 40-year maturities yielded 4.98 percent to 5.23 percent, which is 65 basis points to 90 basis points over the 4.33 rate for top-rated 40-year bonds.

Following are descriptions of pending sales of municipal debt in the U.S.:

CITY OF LOS ANGELES wastewater system, which serves more than 4 million people, will borrow $450.7 million next week, including $186.7 million in taxable Build America Bonds and $80 million in taxable Recovery Zone Economic Development Bonds. The securities will be used to finance construction and improvement of the wastewater collection and treatment system and refinance outstanding debt. Underwriters led by Siebert Brandford Shank & Co. will market the issue to investors, which is rated Aa2 by Moody’s and AA by S&P, both third-highest, one level below the AA+ grade from Fitch. (Added Oct. 7)

CITY OF CHICAGO will issue $251 million in Midway Airport revenue bonds next week. The debt for the second-busiest airport in Illinois behind O’Hare International will include $88 million in taxable Build America Bonds earmarked for construction. Underwriters led by JPMorgan Chase & Co. will market the securities, which carry ratings of A3 from Moody’s and A- from both S&P and Fitch, all fourth above non-investment grade. (Added Oct. 7)

UTAH plans to sell $201 million in general obligation bonds next week to refinance outstanding debt. The issue will backed by the full faith and credit of the state. The securities, rated highest by Moody’s, Fitch and S&P will be marketed by underwriters led by JPMorgan. (Added Oct. 7)

Chicago Hilton Workers Start 3-Day Strike

Associated Press

 

Hundreds of Hilton Chicago Hotel workers started a three-day strike Saturday that union officials say is in protest of the hotel chain's efforts to "lock workers into cheap recession contracts."

Unite Here Local 1 spokeswoman Annemarie Strassel told The Associated Press workers began striking in Chicago early Saturday and won't return to their jobs until early Tuesday. The union represents about 600 workers at the Hilton Chicago downtown.

Strassel said the employees have joined striking workers in San Francisco, who went out Wednesday, and in Honolulu, who went out Thursday. The Chicago workers include housekeepers, dishwashers, cooks, bell staff and food servers.

"Hilton wants to lock workers into cheap recession contracts even as the hotels rebound," she said early Sunday in a phone interview. "Workers simply want a share in the recovery."

The AP could not immediately reach hotel officials. But Hilton Chicago told the Chicago Tribune that the hotel is "operating as normal."

"Union tactics such as work stoppages and demonstrations will do nothing to bring us closer to a new contract," Hilton said in a statement. "They are harmful to employees, to the hospitality industry and to the City of Chicago."

Hilton said the wages and benefits its workers receive are "competitive" and that it offered wage increases and other advantages during negotiations.

More than 8,000 Chicago area hotel workers, including ones at five Hiltons, saw their contracts expire in August 2009. The sides have been unable to reach a deal.

Strassel said the strike is only affecting the Hilton Chicago, which is both owned and operated by Hilton Worldwide. One of the world's largest buyout firms, Blackstone Group LP, owns Hilton Worldwide.

"We've been calling this strike a taxpayers' strike because Hilton finagled $180 million in bailout funds when Hilton Worldwide was able to write off debt for the federal reserve that it owed American taxpayers," Strassel said.

Workers are picketing in shifts around the clock, carrying signs that read "Unite Here!" and "Taxpayers on Strike."

In Honolulu, members of the Unite Here Local 5 are striking for five days at the Hilton Hawaiian Village. A union contract there expired June 30.

Chicago Bank Failure Makes 109 this Year

Bloomberg / Business Week

 

Ravenswood Bank, a Chicago-based lender with $265 million in assets, was shut by regulators as the number of U.S. failures this year reached 109.

Northbrook Bank & Trust Co. acquired Ravenswood’s $270 million in deposits and two branches, according to a statement posted today on the Federal Deposit Insurance Corp. website. The failure cost the FDIC’s deposit-insurance fund $68.1 million.

Regulators may close the most banks this year since 1992 as borrowers struggle to keep up with payments amid weak hiring and bad residential and commercial loans impair capital levels. Failures in 2010 will surpass last year’s total of 140, FDIC Chairman Sheila Bair said last month in a Bloomberg Television interview.

“If the economy remains weak and we don’t see material workouts of these problematic commercial loans, we would expect to see a material number of failures spilling into 2011,” Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said today in a phone interview.

Ravenswood is the 13th Illinois lender shut this year, the statement said. The FDIC included 775 banks with $431 billion in assets on the confidential list of problem lenders as of March 31, an increase from 702 banks with $402.8 billion at the end of the fourth quarter.

Union Pacific, Illinois Agree on High-Speed Passenger Rail Plan

Bloomberg / Business Week

Union Pacific Corp., the biggest U.S. railroad, and the state of Illinois agreed to begin construction of the first U.S. high-speed passenger rail route created with economic-stimulus money.

The company was among freight railroads operating in the U.S. that balked at May guidance from the U.S. Federal Railroad Administration that spelled out relationships between them and operators of high-speed passenger service on their tracks.

“Today’s announcement will create hundreds of jobs and is a major step towards making high-speed rail a reality in Illinois,” Governor Pat Quinn, a Democrat, said today in an e- mailed statement. “When the corridor is completed, travelers will be able to move from Chicago to St. Louis in under four hours.”

The Chicago-St. Louis route received $1.1 billion from last year’s $787 billion economic-stimulus package to help create faster passenger rail service. Illinois is the home state of President Barack Obama and U.S. Transportation Secretary Ray LaHood.

Union Pacific Chief Executive Officer James Young said the May U.S. guidance led the Omaha, Nebraska-based railroad to “basically stop” the project on the Chicago-St. Louis line. Since then, Young and other railroad executives met with LaHood about their concerns.

Rail and Illinois concrete contractors are due to begin work in September.

Japanese Firm Makes a Mark in Chicago

The Wall Street Journal

Construction crews will begin excavating a site overlooking Interstate 294 in Chicago's north suburbs next month to prepare for an unusual event in this ailing commercial real estate market: a new office building.

Astellas Pharma Inc., a Japanese pharmaceutical company, will break ground on a $150 million two-building campus that will be the new headquarters for North American and South American operations. GlenStar Properties of Chicago, which sold Astellas the land, has remained the building's developer.

Most developments are stuck on drawing boards these days because the conventional bank construction financing market is dead. The Astellas project is among the few able to move forward because it is going to be occupied by a company with a strong balance sheet.

The Astellas development also is notable because of the Illinois concrete construction bargains the company was able to achieve. Labor unions and vendors have been so desperate for business they have been willing to cut costs. Nationwide, the cost of building an office building has dropped about 4.8% in March from a year earlier, according to the Bureau of Labor Statics Producers Price Index.

"There was never a better time to buy," says Collette Taylor, manager of facilities for Astellas.

The $150 million price tag on the 425,000-square foot Astellas project is roughly 20% less than the $180 million to $190 million range that the building might have cost closer to the peak of the building boom a few years ago, according to David Graff of MB Real Estate, which is managing the project for Astellas.

Thanks to the lower costs, Astellas was able to afford a trophy-style design by a brand name architect, Goettsch Partners, which will stand out in the suburbs where less-costly precast concrete buildings are more the norm. "You don't see many buildings like this in the suburbs," says Mr. Graff.

Astellas' will pay about $11 million for the glass curtain-wall that cost $13 million in 2008, he said. The savings enabled the company to buy slightly more land and build a covered parking structure, where each space will cost $1,200 rather than $1,600. Structural steel was purchased for $7 million, down from the $11 million expected cost..

Other items on the company's wish list didn't have to be cut because of the savings, says Joseph Dolinar, a partner with Goettsch Partners.

But the savings on construction costs for companies like Astellas means Illinois concrete contractors are slicing their margins very thin to win business, says Ken Simonson, chief economist with the Associated General Contractors of America. With costs of some materials such as copper and diesel fuel on the rise again, some contractors are getting pinched.

"It's extremely tough for most contractors," says Mr. Simonson. This year he expects many of them to go out of business.

Astellas, which makes the drug Prograf that is used by transplant patients, has been expanding at its Americas' headquarters in Deerfield, Ill., since the Japanese company was formed in 2005 by a merger of Yamanouchi Pharmaceutical Co., Ltd. and Fujisawa Pharmaceutical Co. Ltd. It began exploring expansion options in 2007 and acquired the site from GlenStar in the fall of 2009.

Until banks get back to financing concrete construction, more companies will have to pay for their own new buildings, says Jack McKinney, president of the Chicago real estate services firm of J.F. McKinney & Associates. He adds that the shift makes sense given that corporations can often borrow money at lower costs than developers. Ms. Taylor declined to say how the company was financing the project.

Mr. McKinney notes that in the 1970s buildings like Chicago's Sears Tower, now known as Willis Tower, were paid for and built by their corporate tenants. If that trend returns, developers will be more involved in building, rather than owning projects, he says. It could prove less lucrative, but it would reduce risk, he notes. "Half a loaf is better than no loaf."

Iconic Name Would Endure in Chicago

Chicagoans are abuzz about the possibility that the Wrigley name could be erased from one of their oldest institutions. But they are more likely to be thinking about Wrigley Field, home of the Chicago Cubs baseball team, than the Wm. Wrigley Jr. Co.

Cubs fans have griped that Sam Zell, who led the recent buyout of Wrigley Field owner Tribune Co., might rename the ballpark if a corporate sponsor pays for the rights. But the proposed merger between the 117-year-old gum giant and Mars Inc. isn't likely to have a significant effect on the nation's third-largest metropolitan economy, experts say.

At a news conference in Chicago on Monday, Wrigley Chairman William Wrigley Jr. declined to comment on what the Mars deal could mean for the ballpark, but said, "the Wrigley family loves the fact that the name's on the field."

If the Mars deal is completed, the Wrigley company will become a stand-alone entity within Mars, retaining its name and its signature downtown headquarters overlooking the Chicago River.

Mr. Wrigley said the company will continue its civic and philanthropic involvement in the city, and Wrigley's 16,000 employees shouldn't expect big changes. "We might actually be adding some people to the Chicago base," he said.

Wrigley shuttered a chewing-gum manufacturing plant in the city in late 2006. That came shortly after the company opened a research and development center, subsidized by millions of dollars in city and state money, on Chicago's north side. The shift reflects the broader Chicago economy's own evolution from one based largely on manufacturing to one that relies on a large swath of legal, marketing, financial and other service jobs.

In the last two decades, the city has lost many high-profile corporate headquarters to acquisitions and mergers, including Quaker Oats, Bank One and Amoco Corp., but other companies have chosen to move their base to Chicago, including Boeing Co., which arrived in the early 2000s.

"Overall the city is doing very well," said Edward Snyder, dean of the University of Chicago Graduate School of Business.

William Fruth, founder and owner of Policom Corp., an independent research firm based in Palm City, Fla., ranks Chicago ninth out of 363 metropolitan areas in the U.S. for overall economic strength.

"Anytime there is a loss of a headquarters or a manufacturing company it will negatively impact a local economy but the Chicago economy is so large the impact will likely be absorbed," Mr. Fruth said.

*Therefore, despite these manufacturing losses, Chicago still remains a highly desirable city, in which many live in downtown Chicago apartments.

The Wrigley company, founded in 1891, joined a booming confectionary industry around Chicago. By the 1920s Chicago was a national center for confectioners and was exporting its candy and gum around the world.

The Wrigley headquarters, a 30-story French-Renaissance-inspired stone structure that was once one of the city's tallest buildings, anchors the Magnificent Mile shopping strip. In 1920, the company founder bought the Chicago Cubs, and later their ballpark became Wrigley Field.

By: Ilan Brat & Douglas Belkin
Wall Street Journal; April 29, 2008