Business memo 03/31/03

Economy grew at small rate in fourth quarter

WASHINGTON -- The economy grew at a mediocre 1.4 percent annual rate in the final quarter of 2002, and many economists think it won't do much better -- and perhaps worse -- in the current quarter as the stagnant job market and war uncertainties make American consumers and businesses more cautious.

The government's final estimate of the gross domestic product in the final three months of last year was unchanged from its previous estimate a month ago, the Commerce Department reported last week. That matched analysts' expectations.

GDP measures the total value of goods and services produced within the United States and is considered the best barometer of the economy's health.

HealthSouth takes step toward bankruptcy

BIRMINGHAM, Ala. -- Reeling amid an accounting scandal, HealthSouth Corp. took a possible step toward bankruptcy Thursday as it said it would miss $367 million in bond and interest payments this week.

The rehabilitation giant said it would default on $349.8 million in principal and interest due bondholders, plus $17.2 million in interest payments on other bonds.

JPMorgan Chase Bank, heading a group of banks owed money by the company, blocked HealthSouth from making the payments to protect their interests, said Ernie Knewitz, a spokesman for HealthSouth.

Mortgage rates rise sharply for second week

WASHINGTON -- Mortgage rates rose sharply for the second week in a row, with benchmark 30-year mortgage rates at their highest level since late January.

The average interest rate on a fixed-rate 30-year mortgage was 5.91 percent for the week ending March 28, the mortgage company Freddie Mac reported Thursday in its weekly nationwide survey.

Last week, rates on 30-year mortgages were 5.79 percent, after dipping to a record low rate of 5.61 percent the week before. That rate was the lowest since Freddie Mac began tracking 30-year mortgages in 1971.

Gap turns online division over to eToys founder

SAN FRANCISCO -- Clothing retailer Gap Inc. announced Thursday it has entrusted its online division to fallen entrepreneur Edward "Toby" Lenk, who engineered one of the Internet's biggest riches-to-ruins stories.

The 41-year-old Lenk founded eToys Inc., an online pioneer that soared to a $10 billion market value in 1999 and then crashed into bankruptcy court in early 2001. As part of its liquidation, eToys sold its name and other intellectual assets for $3.4 million to KB Toys Inc.

In his new job, Lenk will run the e-commerce sites for one of the world's best-known retailers.

-- From staff, wire reports