/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/010111.MBX T R O U B L E D C O M P A N Y R E P O R T E R Friday, January 12, 2001, Vol. 5, No. 9 Headlines ARMSTRONG: Judge Farnan Okays Weil Gotshal & Manges as Lead Counsel BOYD GAMING: S&P Suspects a Meaningful Turnaround is Unlikely BUILDING MATERIALS: G-I Holdings' Bankruptcy Has S&P Watching CARMIKE CINEMAS: Senior Lenders Block Nine Month Exclusivity Bid CITATION CORP: Thin EBITDA & Other Pressures Catch S&P's Eye COMMUNITY DISTRIBUTORS: S&P Gives Drugstore Chain Thumbs Down CRIIMI MAE: Reintroduces Itself FLEMING FURNITURE: Files for Chapter 11 Protection in Tennessee GST TELECOMMUNICATIONS: Time Warner Finalizes $690MM Asset Purchase HARNISCHFEGER: Moves to Subordinate Equity Interest Claims HAYNES INT'L: Moody's Junks Alloymaker's Senior Notes due 2004 ICG COMMUNICATIONS: Teng Construction Moves for Relief from Stay LANGUAGEWARE.NET: Seeks M&A Partner or Additional Financing LERNOUT & HAUSPIE: Gets Okay to Pay Pre-Petition Sales & Use Taxes LOEWEN: Carothers Holding Sells Death Care Assets for $5,250,000 LTV CORP: Seeks Use of Cash Collateral Over Lenders' Objections OWENS-CORNING: Foreign Creditors Now Defined as Critical Vendors PILLOWTEX: US Trustee Appoints Unsecured Creditors' Committee RADIOLOGIX INC: S&P Taking a Closer Look at Merger Delays RELIANCE GROUP: Court Extends Order To Block Icahn's Tender Offer REVLON: S&P Says Exchange Offer is Tantamount to a Default RK POLYMERS: S&P Sees High Financial Risk & Rates Bank Line BB RO-JACK'S: Supermarket Chain Files Chapter 7 Petition in Boston SAFETY-KLEEN: Sues Sumter County, S.C., in Bankruptcy Court SAKS INCORPORATED: Moody's Cuts Senior Unsecured Rating to Ba1 SEND.COM: Will Cease Operations STAGE STORES: Disposing of 118 Leases in 16 States SUN HEALTHCARE: Stipulation Allows Insured Claim to Proceed SERVICE MERCHANDISE: Outlines 2001 Operating Initiatives TWA: American to Acquire Substantially ALL of TWA'S Assets TWA: Case Summary & List of 20 Largest Unsecured Creditors TWA: S&P Hangs D Rating on All Issues After Chapter 11 Filing WHEELING PITTSBURGH: Noteholders Hire Stroock as Lead Counsel XEROX: GECC Extends US$435 Million in New Secured Financing XO COMMUNICATIONS: S&P Junks 5.75% Convertible Subordinated Notes *BOOK REVIEW: The Big Board: A History of the New York Stock Market ********* ARMSTRONG: Judge Farnan Okays Weil Gotshal & Manges as Lead Counsel ------------------------------------------------------------------- Armstrong World Industries sought and obtained permission from Judge Farnan to employ the law firm of Weil, Gotshal & Manges LLP as their lead bankruptcy counsel in the Company's on-going chapter 11 cases to: (a) Take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on the Debtors' behalves, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; (b) Prepare on behalf of the Debtors, as debtors in possession, all necessary motions, applications, answers, orders, reports, and papers in connection with the administration of the Debtors' estates; (c) Negotiate and prepare on behalf of the Debtors any plan(s) of reorganization and all related documents; and (d) Perform all other necessary legal services in connection with these Chapter 11 cases. Stephen Karotkin, Esq., leads the Debtors' team of lawyers from Weil's New York office, assisted by Debra A. Dandenau, Esq., in Miami. The Firm will bill its customary hourly rates for its legal services: Members and Counsel $375 to $675 Associates $165 to $440 Paraprofessionals $75 to $175 For the period from October 10, 2000, to December 5, 2000, Weil Gotshal has received $850,000 from the Debtors for professional services rendered and expense incurred, including $380,000 advance estimated to over the period from December 1 through 5, 2000. Mr. Karotkin assures the Court that his Firm does not represent any party in interest in these cases other than the Debtors. In the interests of full disclosure, Mr. Karotkin advised that the firm has represented, and continues to represent, certain parties having an interest in these cases, but not in any matters adverse to or related to these Chapter 11 proceedings or the Debtors. Specifically, the firm has represented, or continues to represent, Chase Manhattan Bank, Deutsche Bank, Wachovia Bank, Bank of America National Trust & Savings Association, J. P Morgan Securities, Inc., Morgan Guaranty Bank & Trust, Barclays Bank PLC, Citibank NA, First Union National Bank, Bank One, and the Hong Singapore Banking Corporation fka Marine Midland Bank, NA.(Armstrong Bankruptcy News, Issue No. 3, Bankruptcy Creditors' Service, Inc., 609/392-0900) BOYD GAMING: S&P Suspects a Meaningful Turnaround is Unlikely ------------------------------------------------------------------- ------ Standard & Poor's revised its outlook on Boyd Gaming Corp. to negative from stable. At the same time, Standard & Poor's affirmed its double-'B' corporate credit, double-'B'-minus senior unsecured debt, and single-'B'-plus subordinated debt ratings. The outlook revision follows Boyd's announcement that it will report weaker- than-expected operating results for the fourth quarter of 2000, due largely to a competitive market, construction disruptions, and cold weather. The year 2000 was challenging for Boyd, as its two Sam's Town properties (in Las Vegas and in Tunica, Miss.) were affected by renovation-related construction, and as Sam's Town Tunica was further affected by a highly competitive market. In addition, Treasure Chest (Louisiana) experienced a significant decrease in earnings, because of intense competition from JCC Holding Co.'s land-based casino in New Orleans (partly owned by Harrah's) that opened in the fall of 1999. Still, through the first nine months of 2000, Boyd reported modest EBITDA growth on solid performance at its Indiana riverboat (Blue Chip), modest gains in Las Vegas (not including Sam's Town), and strong year-over-year performance at Par-A-Dice with the introduction of dockside gaming in Illinois in June 1999. Standard & Poor's expects that the cash flow impact of a difficult fourth quarter will increase leverage to the high end of expectations. As anticipated, Boyd spent just over $100 million in aggregate to renovate Sam's Town Tunica and to renovate and expand Sam's Town Las Vegas. In addition, the company contributed about $100 million in cash equity to its joint venture in Atlantic City, Borgata. As a result it is likely that debt balances ended 2000 at more than $1 billion. Standard & Poor's anticipates that debt leverage, as measured by total debt to EBITDA was about 5x at the end of 2000. Standard & Poor's expects EBITDA to grow modestly in 2001, since the completion of construction at Sam's Town Las Vegas will likely result in upside potential to cash flow at this property. A meaningful turnaround at Sam's Town Tunica and Treasure Chest is less certain in the near term. The competitive environment for Treasure Chest, however, could be affected by the outcome of the recent bankruptcy filing by JCC Holding Co. Boyd could also benefit from regulatory changes in Indiana and Louisiana over the intermediate term, since its properties in these states do not currently benefit from dockside gaming. Regulatory changes, however, are extremely difficult to predict. Over the longer term, Borgata is expected to perform well when it opens in 2003. Initially, though, cash flow from this property will likely be required to service construction-related debt and will not be available for dividends to the joint venture partners. Debt is expected to increase somewhat further in 2001 as the company funds the remainder of its equity contribution to Borgota (about $100 million). Additional capital spending should be modest, primarily related to maintenance expenditures. OUTLOOK: NEGATIVE The outlook reflects Boyd Gaming's weaker-than-expected operating performance, high debt leverage, and exposure to potential cost overruns at Borgata. Ratings could be lowered if operating performance does not improve over the intermediate term, Standard & Poor's said. BUILDING MATERIALS: G-I Holdings' Bankruptcy Has S&P Watching ------------------------------------------------------------------- - Standard & Poor's ratings on Building Materials Corp. of America (BMCA), a leading roofing products manufacturer, remain on CreditWatch with negative implications where they were placed on Nov. 6, 2000. Privately held G-I Holdings Inc., the successor to GAF Corp. and the parent company of BMCA, recently filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code to resolve asbestos liability claims. However, BMCA , the only operating subsidiary of G-I , was not included in the filing. The CreditWatch listing will be resolved once Standard & Poor's has had the opportunity to review with management, among other issues, BMCA's belief that it will not sustain any liabilities with regard to asbestos-related claims. BMCA recently obtained a new $100 million secured revolving credit facility and was able to extend the maturity date of its existing $110 million revolving credit facility to August 2003, Standard & Poor's said. CARMIKE CINEMAS: Senior Lenders Block Nine Month Exclusivity Bid ---------------------------------------------------------------- Carmike Cinemas Inc.'s senior lenders want to block Carmike's bid for a nine-month extension of its exclusive periods for filing a chapter 11 reorganization plan and soliciting plan votes, setting the stage for the lenders to file a plan of their own. The lenders opposed Carmike's bid alleging that it has failed to stabilize its business and preserve its assets. At a hearing on Thursday, the U.S. Bankruptcy Court in Wilmington, Del., will consider the motion picture theater operator's request to extend its exclusive plan filing through Sept. 28 and vote solicitation period through Nov. 27. Carmike's exclusive plan filing period was set to expire on Dec. 6; however, the court entered a bridge order extending it through the hearing date. (ABI 10-Jan-2001) CITATION CORP: Thin EBITDA & Other Pressures Catch S&P's Eye ------------------------------------------------------------------- ----- Standard & Poor's revised its outlook on Citation Corp. to negative from stable. At the same time, Standard & Poor's affirmed its ratings on the company. The rating actions affect Citation's $360 million secured bank credit facility. The outlook revision reflects lower-than-expected cash flow generation, which has further weakened credit protection measures, and the potential for bank covenant violations, as critical end markets may decline meaningfully in the near term. The ratings reflect Citation's very aggressive financial profile, which largely offsets the firm's position as a leading manufacturer of cast, forged, and machined components. As a result of softness in various industrial markets, high operating leverage, and manufacturing inefficiencies at one of the company's operations, on Oct. 1, 2000, EBIT coverage was thin, at 0.8 times (x), and total debt to EBITDA was 4.3x. In the near term, credit measures may weaken further as production volumes in Citation's core markets are expected to drop significantly. The major U.S. automotive manufacturers have announced production cuts between 17%-26% for the quarter ended March 2001 (versus a year ago), while excessive inventories, high diesel fuel prices, and increased interest rates are expected to result in a 30%-35% drop in heavy-duty truck production. Should these markets, which accounted for 66% of Citation's sales in fiscal 2000, decline as quickly and as meaningfully as expected, cash flow generation likely will decline from 2000 levels and could trigger bank covenant violations within the next few quarters. Still, operating initiatives, reduced capital spending, and a focus on value-added services should help keep total debt to EBITDA in the 4x-5x range. Citation is a leading manufacturer in the large, highly fragmented, and mature North American casting, forging, and machining industries. Critical end markets are cyclical, which can lead to significant unabsorbed overhead during an economic slowdown due to high operating leverage in the casting industry. Pricing pressures, especially in the automotive market, can be severe, making cost controls and the ability to provide value-enhancing services, such as engineering and machining, critical to generate fair profitability measures. Citation's manufacturing technologies, product diversity, and engineering capabilities are competitive strengths. The company is expected to focus on integrating acquired operations through improved manufacturing techniques and marketing initiatives. OUTLOOK: NEGATIVE Should operating and financial initiatives fail to offset end- market cyclicality and result in the further deterioration of financial flexibility and credit protection measures, the ratings could be lowered in the intermediate term, Standard & Poor's said. RATINGS AFFIRMED, OUTLOOK REVISED TO NEGATIVE FROM STABLE RATINGS Citation Corp. Corporate credit rating B+ Senior secured bank credit facil rating B+ COMMUNITY DISTRIBUTORS: S&P Gives Drugstore Chain Thumbs Down ------------------------------------------------------------------- ------ Standard & Poor's revised its outlook on Community Distributors Inc. to negative from stable. In addition, Standard & Poor's affirmed its single-'B'-plus corporate credit and senior unsecured debt ratings and its double-'BB' senior secured debt rating. The outlook revision reflects Community Distributors' weak credit protection measures and expectations that competitive pressures will make it difficult for the drug store company to reverse the negative trends in its operating performance. Sommerville, N.J.-based Community Distributors operates two store formats: 38 Drug Fair drug stores and 15 Cost Cutter discount stores, in the northern and central New Jersey markets. Community Distributors' credit protection measures and operating margins have been slowly deteriorating for slightly more than two years. EBITDA coverage of interest declined to 1.7x for the 12 months ended Oct. 28, 2000, from 2.3x in fiscal 1998, and the operating margin declined to 8.2% from 11.3% in the same period. The company's operating margin has been under pressure as a result of the intense competition in the industry, the increasing portion of lower margin prescription drugs in its merchandising mix, a higher portion of lower margin third-party payor customers, and weak sales of its seasonal merchandise. Significant improvement in operating performance in the near term is not expected. With 53 stores, Community Distributors is a small player in an intensely competitive industry. The company competes against large players such as Walgreen, CVS, Rite Aid, and Eckherd as well as non-drug store chains, such as supermarkets, warehouse clubs, and large discounters, such as Wal-Mart and Target. Market leadership is a critical factor for success in the industry. Larger players have advantages in negotiating terms with suppliers and third-party payors. Moreover, the larger players have been investing heavily in technology to offset the negative impact of low-margin managed-care contracts. As Community Distributors does not have significant access to the capital markets, due to its small size, it will be difficult for it to grow its store base substantially or invest heavily in technology that could reduce its cost structures. Nevertheless, Community Distributors' operating performance could improve modestly, given its plans to alter its mix of higher-margin front- end merchandise to drive sales and margin and given the strong growth in the prescription drug industry. The company has some financial flexibility from its $20 million revolving credit facility. As of Oct. 28, 2000, its seasonal peak, the company had availability of $6 million. OUTLOOK: NEGATIVE The competitive nature of the drug store industry and pressure on margins from managed care contracts will provide a challenging environment for Community Distributors' management to grow the business. Further margin erosion could result in a ratings downgrade, Standard & Poor's said. CRIIMI MAE: Reintroduces Itself ------------------------------- Criimi Mae Inc. caught a big break when Federal Reserve Chairman Alan Greenspan last week announced a half-point cut in the federal funds rate. The move will likely boost the collateralized-mortgage- backed securities (CMBS) market at a time when the once-bankrupt loan originator is reinventing itself as a mortgage servicer. As Criimi executives went to Miami this week to reintroduce themselves at the Commercial Mortgage Securities Association conference, they knew that the company's servicing portfolio of $22 billion in CMBS would likely grow this year. "The company will at least have $65 billion of gross new CMBS issuances to choose from in 2001," said Michael Youngblood, head of real estate research at Banc of America Securities LLC. Criimi, which exited a two-year stay in bankruptcy on Nov. 22 with the confirmation of an $847 million recapitalization plan, will rely on its accredited mortgage servicing business to regain its stature and not on underwriting innovative subordinated CMBS issues, as it did in its pre-bankruptcy days. Final touches are still being put on that plan, but when it's complete, Rockville, Md.-based Criimi Mae will have a balance sheet with $1.3 billion in assets and $429 million in debt. Pre-bankruptcy, it had $2.1 billion in assets and $1 billion in debt. Also pre-bankruptcy, Criimi was one of the few companies that serviced as well as originated mortgage loans. Now, instead of having $30 billion in mortgage loans to service, Criimi has $22 billion. The service always operated during the bankruptcy proceedings. (ABI 10-Jan- 2001) FLEMING FURNITURE: Files for Chapter 11 Protection in Tennessee --------------------------------------------------------------- Fleming Fine Furniture filed for reorganization Monday, citing past business problems that were exacerbated by the economic downturn and harsh winter weather. As part of its reorganization, the company will close its Mendenhall store by Feb. 1, said James P. Fleming, president of the Memphis-based company. However, there are no plans to lay off employees during the reorganization. The filing lists a total of $8.4 million in assets for the Jackson, Tenn. and Memphis stores and debts of $10.19 million. The problems began about five years ago when Fleming opened two La- Z-Boy stores and they did not perform as expected. One was converted to a Fleming Fine Furniture store, and the other was closed. This is not the first reorganization for Fleming Fine Furniture, which filed for chapter 11 in 1986. In that reorganization, the company listed debts of $2.9 million. The bankruptcy was attributed to the company's over-expansion. (ABI 10- Jan-2001) GST TELECOMMUNICATIONS: Time Warner Finalizes $690MM Asset Purchase ------------------------------------------------------------------- Time Warner Telecom Inc. (Nasdaq:TWTC), a leader in providing local and regional optical broadband networks and services to business customers, completed its purchase of substantially all of the assets of GST Telecommunications Inc. out of bankruptcy for a total purchase price of approximately $690 million. GST filed for protection under Chapter 11 of the U.S. Bankruptcy Code on May 17, 2000. Time Warner Telecom Inc. financed the purchase price with its available credit facilities. "Completing this purchase is a tremendous step in setting Time Warner Telecom apart from the rest of the competitive telecom sector," said Larissa Herda, president and CEO, Time Warner Telecom. "This acquisition significantly expands our geographic presence in 15 new markets in the Western United States. By the end of 2001, we expect to offer telecom solutions for business customers in 44 U.S. markets, including 15 Tier 1 MSAs." "Time Warner Telecom continues to execute on our business plan of growing geographically, extending our optical networks in existing markets and offering new broadband products, services and solutions for businesses," Ms. Herda said. "We have employees in place to commence the integration process in our new Western Division." By completing the acquisition, Time Warner Telecom has nearly $1.7 billion invested in network facilities and nearly 13,500 route miles of fiber in place. "Time Warner Telecom has an established track record of building and operating next generation optical networks and delivering our broadband services to businesses," said Dave Rayner, senior vice president and CFO, Timer Warner Telecom. "We look forward to bringing this experience to our new markets and assets. Our financing is in place, providing us a fully funded business plan. This transaction moves Time Warner Telecom ahead of many competitive telecom providers in terms of revenue, customers, and pure fiber route miles." HARNISCHFEGER: Moves to Subordinate Equity Interest Claims ---------------------------------------------------------- Harnischfeger Industries, Inc., asks the Bankruptcy Court in Wilmington to deem 242 proofs of claim premised in equity interests in HII in the aggregate amount of $62,061,638 subordinate to the general unsecured claims against HII, pursuant to 11 U.S.C. section 510 and general corporate law. Among these is an equity claim (no. 10895), in the amount of $61,500,000 filed by Great Neck Capital Etal. The Debtors tell Judge Walsh that the 242 equity claims are either claims that assert equity interests in Harnischfeger Industries, Inc. or litigation claims premised on equity interests in HII. In the motion, the Debtors reserve their right to object to any Equity Claim on any other ground.(Harnischfeger Bankruptcy News, Issue No. 36, Bankruptcy Creditors' Service, Inc., 609/392-0900) HAYNES INT'L: Moody's Junks Alloymaker's Senior Notes due 2004 ------------------------------------------------------------------- ------- Moody's Investors Service lowered the rating on Haynes International, Inc.'s $140 million senior notes due September 1, 2004 to Caa1 from B3, the Senior Implied rating to B2 from B1, and the Issuer rating to B3 from B2. The rating outlook is negative. The rating action was precipitated by the reported net loss of $2.7 million in the fourth quarter and the further erosion of the Company's capital base. The fourth quarter loss brought the loss for the fiscal year ended September 30, 2000 to $4.2 million. The ratings reflect the Company's heavy, and increasing, debt burden, the substantial negative net worth, insufficient interest coverage, and negative free cash flow. The ratings also take into consideration the cyclical nature of the Company's businesses coupled with its high level of fixed cost, vulnerability to customer product cycles and raw material pricing fluctuation, especially nickel, and the Company's relatively narrow product line. However, the ratings also recognize the Company's leading technological and market position in the high performance alloy industry, its well-established customer base, and the potential to benefit from the current favorable demand trend in the commercial aircraft manufacturing industry and on-going strong demand from land-based gas turbine power generator manufacturers. The Caa1 rating on the senior notes reflect their effective subordination to a $72 million senior secured bank revolving credit facility. The Company reported a net loss of $4.2 million for the fiscal year ended September 30, 2000, versus positive net income of almost $0.6 million in fiscal 1999. The FY00 performance downturn occurred despite a reduction of nearly $2.8 million to $0.7 million in costs associated with the now terminated Federal Grand Jury investigation of the nickel alloy industry. (Moody's notes that no legal action was taken against the company.) The decrease in comprehensive income, which is income net of foreign currency translation adjustment, was more significant with a loss of $8.2 million in FY00 versus a loss of $1.2 million in FY99. This resulted in a reduction of book net worth from negative $90.1 million as of the end of FY99 to negative $98.2 million. The negative earnings picture occurred despite a positive turn in product demand. Metal shipment volume for the fiscal year increased by 18.3% to about 20 million pounds over the depressed FY99 level as strong demand for product by aerospace and gas turbine manufacturers significantly more than offset sales declines to the chemical processing industry. However, revenue increased by only 9.8% to $229.5 million due to price declines and a higher proportion of sales of lower priced "commodity" nickel-base alloys compared to the higher-priced specialty and proprietary Haynes alloys. The average selling price per pound declined 6% for the year. Despite the revenue increase, gross profit dropped by 3.8% to $43 million as gross margin declined to 18.7% from 21.4%. The margin drop resulted from the lower selling price and the much higher cost of nickel, the primary raw material used in the alloys. Nickel's average price per pound, as reported by the London Metals Exchange, increased to $3.98 in FY00 from $2.29 in FY99. Operating income of $16 million realized in FY00 failed to cover the $22.6 million of interest expense-- an increase of $2.3 million over 1999 due to higher revolving credit borrowings and higher interest rates. The Company's leverage remains high, coverage is thin, and cash flow generation has been insufficient. Haynes' heavy debt burden dates back from its 1989 buy-out from Cabot Corporation and the subsequent 1997 recapitalization wherein Blackstone Capital Partners II Merchant Banking Fund L.P. acquired a 79.9% interest in Haynes Holdings. Total debt outstanding as of September 2000 was $209 million, against an equity deficit of $98 million compared with debt of $184 million and equity deficit of $90 million as of September 1999. Given the increase in borrowing during the year and decrease in EBITDA to $21 million from $22 million, credit statistics have suffered. The ratio of debt/EBITDA increased to 10.0x compared to 8.4x in FY99, and EBITDA interest coverage deteriorated to 0.9x from 1.1x in fiscal 1999. Net loss, coupled with major growth in working capital (accounts receivable and inventories), sharply reduced the Company's internally generated cash flow. Cash flow from operations was negative $12.5 million and free cash flow after capital expenditures was negative $21.5 million in fiscal 2000. Haynes' high level of fixed costs and sensitivity to industry demand cycles, combined with its high leverage, continue to pose significant earnings and credit vulnerability. Although Management has explored merger possibilities and made efforts to lever its metallurgical expertise into additional industrial applications, the cyclical aerospace and chemical processing industries continue to account for the bulk of the Company's business. In fiscal 2000, aerospace segment contributed 41% of sales and chemical processing segment contributed 27%. After a weak fiscal 1999, the aerospace segment experienced a stronger fiscal 2000 as a result of higher commercial aircraft build rates. The chemical processing segment which is tied to the overall economic activity, however, experienced lower shipments and sales in fiscal 2000 due to fewer major capital projects in the industry. The negative outlook reflects Moody's concern for the Company's ability to effect and sustain, in the medium term, sufficient earnings to improve debt coverage and strengthen the capital structure to more appropriate levels and to reduce dependence on bank borrowings to cover asset growth. Moody's does expect, however, earnings improvement in FY01 given the growth in business backlog and the recent moderation in nickel prices. Haynes International, Inc., headquartered in Kokomo, Indiana, develops, manufactures and markets high temperature and high corrosion resistant alloys (69% and 31% of revenues, respectively) primarily for the aerospace and chemical processing industries. ICG COMMUNICATIONS: Teng Construction Moves for Relief from Stay ---------------------------------------------------------------- Teng Construction LLC, through its attorney Karen C. Bifferato, Esq., at the Wilmington, Delaware firm of Connolly, Bove, Lodge & Hutz, LLP, argues that it is owed $5,909,201.67 for construction services at 11 locations leased by ICG Communications, it is a secured creditor, and it wants either adequate protection of its mechanics' liens or the ability to foreclose. Moreover, Teng objects to any priming liens granted under the $200 million debtor- in-possession financing facility proposed by the Debtors. The locations on which Teng asserts a lien, and the amount of each lien, are: 120 Essex Street $ 1,207,280.43 Harrison, New Jersey 3902 Hanna Circle, Bldg. 1 $ 805,346.04 Indianapolis, Indiana 900 Lake Street $ 776,385.25 Minneapolis, Minnesota 1309 Nobel Street $ 741.780.91 Philadelphia, Pennsylvania 300 Windsor Street $ 660,870.89 Hartford, Connecticut 7375 Woodward Avenue $ 646,053.68 Detroit, Michigan 390 Main Street $ 566,924.18 Buffalo, New York 717 South Wells Street $ 334.006.55 Chicago, Illinois 13450 Smith Road $ 67,301.01 Aurora, Colorado 678 Beale Street $ 63,126.74 Memphis, Tennessee 3211 Yeon Street, Bldg. B $ 40,125.99 Portland, Oregon (ICG Communications Bankruptcy News, Issue No. 3, Bankruptcy Creditors' Service, Inc., 609/392-0900) LANGUAGEWARE.NET: Seeks M&A Partner or Additional Financing ----------------------------------------------------------- LanguageWare.net Ltd. (OTC Bulletin Board: LWNTF; LWNUF), parent company of Wholetree.com, Inc., a provider of technology that enables multilingual and multi-cultural global business transactions over the Internet, said that it has been unable to close a definitive financing transaction with Catenas Ltd. under which Catenas Ltd. would assume the funding under an existing line of credit agreement that LanguageWare.net had previously entered with Technology Fund II Pte, Ltd., a Singapore based venture fund and shareholder of LanguageWare.net. Technology Fund II Pte, Ltd. has declined requests for additional draw-downs on the existing line of credit stating that LanguageWare.net has failed to meet performance requirements under the terms of the loan. LangaugeWare.net's board of directors considers this assertion to be without merit and is making strenuous effort to negotiate with Technology Fund II to change its position. Technology Fund II Pte Ltd has verbally indicated its willingness to provide a limited amount of funds under a new arrangement subject to its approval of a plan to be prepared by the Company. The Board is also assessing the legal aspects of the loan commitment. To date LanguageWare.net has received $1.1 Million in proceeds under the $3.0 million loan commitment. LanguageWare.net is also actively seeking other short-term financing to meet its immediate operating requirements and is actively exploring other possible strategic relationships. Management of LanguageWare.net believes that if it does not obtain adequate financing to meet its current operating needs by mid January, it will be forced to cease operations. If by January 15 additional funding has not been obtained, the Board has approved a plan for the company to retain only a skeleton technical staff capable of maintaining the integrity of the technology in the short term, seek a buyer or merger partner and attempt to negotiate settlements with its creditors. Any additional funds received from Technology Fund II would be used to retain an additional number of employees and extend the period of viability while continuing to seek funding and M&A opportunities. About Wholetree.com Inc. Wholetree.com Inc. enables businesses to communicate, transact and provide customer support multi-nationally and multi-culturally over the Internet. Its comprehensive e-business platforms are designed to help companies, their customers, vendors, suppliers and employees interact with each other in their native languages and currencies on an international scale. The company is a wholly owned, U.S. subsidiary of LanguageWare.net Ltd., which was founded in 1988. For additional information, visit the company's Web site at http://www.wholetree.com LERNOUT & HAUSPIE: Gets Okay to Pay Pre-Petition Sales & Use Taxes ------------------------------------------------------------------ In the ordinary course of its business, Lernout & Hauspie Speech Products and Dictaphone Corporation collect from its employees or customers, or is liable for, various taxes, such as sales, use and other trust fund taxes. The Debtors generally hold these trust fund taxes for a period of time before remitting them to the appropriate taxing authorities. These taxes are comprised of sales taxes that the Debtors collect from customers for remittance to the appropriate state or local taxing authority, use taxes that the Debtors incur in the ordinary course of their business, and certain other taxes, such as income, FICA and Medicare taxes, that the Debtors withhold from their employees' paychecks or pay as a result of their employees' wages, which are then periodically remitted to the appropriate federal and state taxing authorities. Generally these trust fund taxes are paid in arrears. Some of the taxing agencies were paid for all pre-petition trust fund taxes prior to the Petition Date, but others were not paid all of the trust fund taxes collected or retained by the Debtors prior to the Petition Date. As of the Petition Date, approximately $1,000,000 in pre-petition trust fund taxes was collected and remains with the Debtors. Still other taxing authorities were sent checks with respect to the trust fund taxes that may or may not have been presented or cleared as of the Petition Date. With respect to this category, the Debtors request authority to, in its discretion and to the extent applicable, issue post-petition replacement checks to those taxing authorities that have not presented or cleared pre-petition checks issued on account of trust-fund taxes. Noting that these taxes were entitled to priority of payment under the Bankruptcy Code, Judge Wizmur granted the relief as requested. (Lernout & Hauspie Bankruptcy News, Issue No. 2, Bankruptcy Creditors' Service, Inc., 609/392-0900) LOEWEN: Carothers Holding Sells Death Care Assets for $5,250,000 ---------------------------------------------------------------- As part of the Disposition Program, Carothers Holding Company, Inc. and other affiliates of The Loewen Group, Inc., seek the Court's authority: (i) to sell the funeral home and cemetery businesses and related assets at the Sale Locations to the Purchaser that the Debtors determine has submitted the highest and best offer, free of all liens, claims and encumberances; and (ii) to assume and assign to the Purchaser the 155 executory contracts and unexpired leases, pursuant to section 363 of the Bankruptcy Code and to reject one real property lease with Jack Williams. Pursuant to an Asset Purchase Agreement, the Initial Bidder (Citadel Management, L.L.C.) and Loewen have agreed to a purchase price of $5,250,000 subject to higher and better offers, and to the Court's approval. All accounts receivable, transferable permits and goodwill relating to the businesses conducted at the Sale Location will be transferred to the Initial Bidder. The Initial Bidder agrees to pay, and to hold the Selling Debtor harmless from, all costs and other expenses associated with the sale, such as taxes, levies and license and registration fees. The Initial Bidder paid the Selling Debtors a deposit of $262,500 upon the execution of the Purchase Agreement and agrees to pay the remainder of the Purchase Price at the closing. If the Selling Debtors fail to consummate the transaction because they accept a higher or better offer from another entity and actually close the sale and receive the Purchase Price from such entity, or if the Selling Debtors materially breach their obligations under the Purchase Agreement and the Initial Bidder does not materially breach its obligations under the Purchase Agreement, the Initial Bidder is entitled to expenses in the amount of $105,000. Neweol would sell and the Initial Bidder would purchase certain accounts receivable related to the Sale Locations, pursuant to a purchase agreement between Neweol and the Initial Bidder. The amount of the Neweol Allocation will be determined immediately prior to closing. In accordance with the Net Asset Sale Proceeds Procedures, the Debtors will use the proceeds generated to repay any outstanding balances under the Replacement DIP Facility and deposit the net proceeds into an account maintained by LGII at First Union National Bank for investment, pending ultimate distribution on court order. The Debtors advise that currently there are no net borrowings outstanding under the Replacement DIP Facility, so this provision is not presently operative but they covenant to comply with this provision to the extent it becomes operative in the future. Funds necessary to pay bona fide direct costs of a sale may be paid from the account without further order of the Court. The Sale Locations are: Carpenter's Funeral Home (2669) in Cherryville, NC Gaskins Funeral Home - Red Springs (3019) in Rowland, NC Mackie-Gentry Funeral Home (3075) in Yadkinville, NC Sisk-Butler Funeral Home (2670) in Bessemer City, NC Williams-Dearborn Funeral Service (2864) in Matthews, NC Carter Funeral Home (3035) in Garland, NC Reynolds Funeral Service (2744) in Eden, NC Padgett Funeral Home (3298) in Wallace, NC Sandling Funeral Home (3199) in Franklinton, NC Charlotte Memorial Gardens (5829) in Charlotte, NC Chatham Memorial Park (5696) in Siler City, NC Devotional Gardens (5783) in Warsaw, NC Grandview Memorial Park (5785) in Clinton, NC Hillcrest Memorial Park (5784) in Clinton, NC Edgecombe Memorial Park (5803) in Tarboro, NC Gardens of Gethsemane (5804) in Rocky Mount, NC Evergreen Memorial Estates (5570) in Grifton, NC Evergreen Memorial Cemetery, Inc. (5706) in Princeton, NC Fairview Memorial Park (2235) in Albermarle, NC Gardens of Faith Cemetery (5514) in Lumberton, NC Devotional Gardens Cemetery and Mausoleum (2273) in Dunn, NC Highland Memorial Gardens (2224) in Ashoskie, NC Bladen Memorial Gardens (5842) in Bladenboro, NC Lumbee Memorial Gardens (5554) in Lumberton, NC Oak Ridge Memorial Park (5571) in Pink Hill, NC Pamlico Memorial Gardens (5697) in Washington, NC Rockfish Memorial Cemetery (2256) in Wallace, NC Rose Hill Memorial Park, Inc. (5750) in Fallston, NC Roselawn Memorial Gardens (5794) in Reidsville, NC Rutherford County Memorial Cemetery (5701) in Forest City, NC Stanly Gardens of Memory (2217) in Albermarle, NC West Lawn Cemetery (2111) in Elizabeth City, NC (Loewen Bankruptcy News, Issue No. 32, Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORP: Seeks Use of Cash Collateral Over Lenders' Objections --------------------------------------------------------------- Bruce Bennett, Esq., Michael Morris, Esq., and Bennett J. Murphy, Esq., from Los Angeles-based Hennigan, Bennett & Dorman advise Judge Bodoh that, while LTV is among the largest steel manufacturers in the United States -- employing more than 17,500 people and operating 53 active facilities in 17 states -- the Debtors face a cash shortfall. Moreover, they have been unable to gain support from certain of their prepetition lenders. The Debtors have therefore filed a motion seeking interim and final relief authorizing them to use cash collateral in the ordinary course of their business, over those recalcitrant lenders' objections, so as to continue operations, avoid laying-off 17,500 employees, and circumventing the resultant immediate and irreparable loss to the Company's unsecured creditors and shareholders. In support of their Motion, the Debtors advise the Court that they have inventory with a book value of approximately $805.2 million, allegedly pledged to secure a debt of approximately $303.6 million, including $98.6 million allegedly pledged as collateral for letters of credit, and accounts receivable with a value of approximately $419.4 million, allegedly pledged to secured debt of approximately $295.3 million, including $10.3 million allegedly pledged as collateral for letters of credit. The inventory lenders in these cases are The Chase Manhattan Bank NA, BT Commercial Finance Inc., Sumitomo Bank, Ltd., Key Bank national Association, National City Bank, PNC Bank NA, Credit Agricole Indosuez, GMAC Commercial Credit LLC, and Bank of Nova Scotia. The accounts receivable lenders are Abbey national Treasury Services, PLC, Credit Agricole Indosuez, and Chase. Chase is the agent for both the Inventory Lenders and the Receivables Lenders. The Lenders have asserted liens in the assets of certain of the Debtors, which the Debtors contend are property of the bankruptcy estates. The Debtors do not concede the validity or enforceability of any liens or interests which may be asserted in assets of the estates of any of the Debtors. Given what the Debtors claim are ample equity cushions, the Debtors believe that under normal circumstances, through good faith negotiations, the Debtors would hope to work with the Lenders toward a stipulated use of cash collateral for an extended period to avoid the immediate and irreparable harm that would follow from a precipitous shutdown of the Debtors' business operations. Instead, the Debtors tell Judge Bodoh, through a "bewildering and complex array of documents, and through the establishment of Special Purpose Vehicles which have no real function," the Debtors claim that the Lenders have "conjured the illusion that the Debtors do not own their inventory, do not own their accounts, and are not in the business of manufacturing and selling steel products." The SPVs in question are LTV Steel Products LLC, a limited liability shell company set up in 1998 at the request of the Inventory Lenders, and LTV Sales Finance Company, another shell corporation set up in 1994 at the request of the Receivables Lenders. Certain of the Debtors and their non-debtor affiliates are parties to one or more agreements with the Lenders that, in substance, provide the Debtors with financing necessary to meet their working capital requirements. The Pre-petition financing transactions include two facilities. Under the first, the Inventory Lenders hold notes issued by the Inventory SPV which are purportedly secured by all of the Debtors' inventory and proceeds. The second facility is held by the Accounts Lenders and purported secured by all of the Debtors' accounts receivable. The Debtors argue that while the Lenders would claim that the Debtors simply "service" inventory and accounts "owned" by the SPVs and they are free to seize the Debtors' inventory and accounts regardless of the Debtors' ability to reorganize, nothing could be further from the truth. The Debtors say that the indicia of the reality of these transactions are: (1) the absence of fair market value or standard payment terms under the so-called "sale" agreements; (2) the allocation of risk, both direct and disguised, to the Debtors if the value of the inventory or accounts would ultimately be insufficient to repay the SPV Lenders; (3) the control that the Debtors continue to exercise over the Inventory and Receivables, as well as the terms of the financing arrangement with the SPV lenders; (4) the economic benefit that inures to the Debtors if the Inventory and Receivables generate excess proceeds; and (5) the failure to treat the SPVs consistently as separate entities in a manner that would otherwise suggest true sale rather than financing transactions. The Debtors further claim that the Lenders' complex documents and legal constructs are designed to create the appearance of a daily "arms-length sale" of all of the Debtors' current business assets (inventory and proceeds in the form of accounts) to the Inventory SPV, and the further "arms-length sale" of the Debtors' accounts from the Inventory SPV to the Accounts SPV. The Debtors claim the purpose of this fiction is obvious: to remove all of the Debtors' current assets from the jurisdiction of the Bankruptcy Court, to deprive the Debtors' unsecured creditors of the ability to realize any meaningful recovery from the Lenders' enormous equity cushion, and to enable the Lenders to exercise remedies without any accountability to this Court or any other parties in interest. In other words, the Debtors claim, the Lenders have attempted to "opt- out" of the Bankruptcy Code to capture the most valuable assets of the Debtors to dispose of as they see fit, at a painful cost to the Debtors' employees, unsecured creditors and shareholders. The economic reality is that the supposed wholesale transfers of current business assets from the Debtors to the SPVs were transfers for security for implicit loans by the SPVs to the Debtors. If there was no true sale of the inventory by the Debtors to the Inventory SPV, then the Inventory SPV did not have title to the inventory and could not have granted a security interest in the property. At best, the Inventory SPV could have granted a lien on the security interest in the inventory acquired from the Debtors in an implied financing transaction. However, the Inventory SPV did not actually advance funds to the Debtors in order to "purchase" the inventory, nor did it advance to the Debtors to support a security interest. The Debtors argued that the Lenders may, therefore, be unsecured creditors of the SPVs. However, the Debtors were not placing this issue before the Court at this early stage in the case. The Debtors therefore urge Judge Bodoh to find that: * the SPV arrangements constitute disguised financing transactions, * the Lenders' asserted liens are adequately protected by substantial cash equity cushions, and * LTV is authorized to use the Lenders' cash collateral consisting of the proceeds of inventory and collection from accounts in their possession in the ordinary course of their business. To do otherwise, the Debtors argue, would elevate form over substance at a tremendous and tragic cost. After reviewing the Debtors' Motion, and considering the evidence and arguments of counsel, Judge Bodoh entered an Interim Order authorizing the Debtors to obtain post-petition financing or use cash collateral, and granting the Lenders "adequate protection" of their interests in the form of superpriority liens for any diminution in collateral value. In short, Judge Bodoh maintains the status quo until the parties and the Court can convene a full-blown hearing to consider the Lenders' objections. Judge Bodoh makes it clear that his Interim Order is without prejudice to any final determination of the issues raised by the Motion. Judge Bodoh will convene a final hearing on January 31, 2001, at 1:30 p.m., in Youngstown. (LTV Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) OWENS-CORNING: Foreign Creditors Now Defined as Critical Vendors ---------------------------------------------------------------- Judge Walrath entered an Order supplementing her first-day Order granting Owens-Corning's motion to pay prepetition obligations held by certain critical vendors. In her supplemental Order, Judge Walrath authorizes the Debtors to pay the prepetition claims of foreign taxing authorities, foreign landlords, and other foreign creditors, as necessary to facilitate the continued operation of the Debtors' foreign branches. The Judge expressly directs that these payments be reported to the Agent for the Postpetition Lenders and the two Official Committees. (Owens Corning Bankruptcy News, Issue No. 7; Bankruptcy Creditors Service, Inc., 609/392- 0900) PILLOWTEX: US Trustee Appoints Unsecured Creditors' Committee ------------------------------------------------------------- The United States Trustee for Region III appointed the following creditors of Pillowtex, Inc., and its debtor-affiliates to serve as members of the Official Committee of Unsecured Creditors in these Chapter 11 cases: Union of Needletrade, Industrial, and Textile Employees Attn: David Prouty Southern Regional Counsel 1710 Broadway New York, New York 10019 Tele: (212) 265-7000 Fax: (212) 307-6904 Santee Print Works Attn: Hugh Everett Harrington P. O. Box 340 Sumter, South Carolina 29151 Tele: (803) 773-1461 Fax: (803) 773-0227 Parkdale Mills, Inc. Attn: H. Lee Brooks, II P. O. Drawer 1787 Gastonia, North Carolina 28053 Tele: (704) 864-7433 Fax: (704) 853-3538 U. S. Bank & Trust N.A., Indenture Trustee Attn: Kenneth D. Hoffman 180 East 5th Street, # 210 St. Paul, Minnesota 55102 Tele: (651) 244-8378 Fax: (651) 244-5847 State Street Bank & Trust Co., Indenture Trustee Attn: Laura L. Moran 2 Avenue de Lafayette Boston, Massachusetts 02111 Tele: (617) 662-1753 Fax: (617) 662-1456 Lehman Brothers, Inc. Attn: Christine Daley 3 World Financial Center, 9th Floor New York, New York 10285 Tele: (212) 526-3705 Fax: (212) 526-1501 Credit Suisse First Boston Corporation Attn: Alexander C. Robinson Eleven Madison Avenue New York, New York 10010-3629 Tele: (212) 538-6808 Fax: (212) 325-8078 Daniel K. Astin, Assistant United States Trustee, has been appointed to serve for that office in these cases. (Pillowtex Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) RADIOLOGIX INC: S&P Taking a Closer Look at Merger Delays ------------------------------------------------------------------- - Standard & Poor's placed its single-'B'-plus corporate credit and bank loan ratings for Radiologix Inc. on CreditWatch with negative implications. This action concerns the company's sizeable debt repayment due March 31. Radiologix has failed to obtain refinancing of its credit agreement as called for under the company's proposed recapitalization from a pending leveraged buyout. The deadline for the merger agreement has been extended to June 30, 2001. It was expected to close Dec. 31, 2000, but a proposed high-yield financing for the buyout fell through, and a commitment for a new bank loan was withdrawn. Dallas, Tex.-based Radiologix is a single-specialty radiology- service company that owns and operates 124 multimodality imaging centers in 18 states and the District of Columbia. The company also provides administrative services to radiology practices. The existing $160 million bank facility will need to be amended and then subsequently refinanced. Standard & Poor's will monitor the company's success in easing its financial pressure in order to resolve the CreditWatch. RELIANCE GROUP: Court Extends Order To Block Icahn's Tender Offer ----------------------------------------------------------------- A federal judge extended a restraining order that prevents financier Carl Icahn from proceeding with a tender offer for Reliance Group Holdings Inc.'s bonds until the court holds another hearing on Friday. The order, issued by U.S. District Judge Alvin K. Hellerstein in Manhattan, came in response to a lawsuit filed last Friday in which property-casualty insurer Reliance claimed Icahn's offer contains misleading statements and omits key information. An attorney for the financier had no comment on the judge's ruling, which extends an order issued late Friday that prevented Icahn from buying Reliance bonds over the weekend. Icahn, who owns about 30 percent of the company's $237.5 million in bank debt, launched the offer last month for $40 million worth of Reliance's 9 percent senior notes. Reliance's board has urged its debtholders to reject the offer. Friday, the company said it planned to announce a reorganization plan by Jan. 24. Reliance alleged in its lawsuit that Icahn's offer threatens to disrupt that plan and fails to disclose his intention to acquire control of the company. Reliance also claims that Icahn, as the owner of such a large block of bank debt, may want to block the bankruptcy plan because of his interests as a bank debtholder REVLON: S&P Says Exchange Offer is Tantamount to a Default ------------------------------------------------------------------- -- Standard & Poor's lowered its corporate credit and senior secured debt ratings on REV Holdings Inc. to double-'C' from triple-'C'- minus. The revised ratings were concurrently placed on CreditWatch with negative implications. The rating actions follow the announcement of an exchange offer for the company's zero-coupon senior secured bonds due March 15, 2001, completion of which Standard & Poor's would view as tantamount to a default. At the same time, Standard & Poor's affirmed its ratings on REV Holdings' subsidiary, Revlon Consumer Products Corp. The outlook on Revlon Consumer Products Corp. is negative. Given the open market purchase of $630 million of REV Holdings' zero-coupon senior secured bonds in December 2000 by affiliates of the company, about $140 million of bonds remain outstanding and will mature on March 15, 2001. REV Holdings has stated that it does not have sufficient funds to pay the principal amount of outstanding notes at maturity. Therefore, the company has initiated an exchange offer for the existing bonds to extend the maturity date, which would be tantamount to a default. The downgrade of REV Holdings' senior secured notes reflects the coercive nature of the exchange offer given the company's claim of insufficient funds to pay the amounts owed at maturity should bondholders not tender all of the remaining outstanding notes on or before March 15, 2001. Specifically, REV Holdings has indicated that investors who decline to participate in the exchange offer will trigger an event of default, which could result in the notes becoming immediately due and payable. REV Holdings proposes to exchange new senior secured notes, with a coupon of 12%, maturing in 2004, for the existing zero-coupon senior secured notes maturing March 15, 2001. Bondholders are being asked to agree to a significant extension of maturities. Standard & Poor's will continue to monitor developments at REV Holdings and will assign a rating to the company's new senior secured 12% notes after the exchange offer closes on March 15, 2001. RATINGS AFFIRMED Rating Revlon Consumer Products Corp. Corporate credit rating B- Bank loan rating B Senior unsecured debt CCC+ Subordinated debt CCC RK POLYMERS: S&P Sees High Financial Risk & Rates Bank Line BB ------------------------------------------------------------------- ------- Standard & Poor's assigned its double-'B'-minus corporate credit rating to RK Polymers LLC. At the same time, Standard & Poor's assigned its double-'B'-minus rating to the company's $350 million senior secured bank loan facilities. The outlook is stable. The ratings on privately held RK Polymers reflect the company's good business position as the leading producer of styrenic block copolymers (SBCs), offset by high financial risk. RK Polymers produces both unhydrogenated SBCs (USBCs) and hydrogenated SBCs (HSBCs), which the company sells under the KRATON D and KRATON G brand names, respectively. SBCs offer flexibility, resilience, strength, and durability to a wide range of products in a number of end markets, including: compounding and polymer systems, adhesives and sealants, asphalt modification, and footwear. The SBC market is about $1.3 billion and is expected to grow at about 6%, with faster growth expected in HSBCs, which are primarily used in compounding and polymer systems. USBC growth is typically slower due to some concentration of sales to the more mature footwear market. Still, demand for both USBCs and HSBCs will show some cyclicality with economic conditions. RK Polymers accounts for the largest share of SBC industry sales-- more than twice that of the nearest competitor. The company holds the leading share in both USBCs and HSBCs. The company's focus is on products and end markets that require higher performance characteristics and are more difficult to produce, leading to value-added pricing and better margins. These products offer a good trade-off between cost and performance, which supports demand and limits substitution risk. The company's sales to the more commodity-like footwear market are less than 10% of total sales, substantially less than the industry average. RK Polymers has the top share in the remaining three key end markets. Still, barriers to entry are moderate, so competitors are expected to gradually reduce the company's sizable share advantage. RK Polymers' narrow focus on SBC thermoplastic elastomers is mitigated by good end use and customer diversification, which benefit earnings and cash flow. RK Polymers benefits from good geographic balance, with strong positions in Europe and North America, and is the only producer to offer a broad range of SBCs, which contribute to strong relationships with global customers. Manufacturing facilities on four continents provide the company with a competitive advantage through worldwide reach and optimization of production logistics. R&D expenditures of about 4% should keep RK Polymers in the forefront of development. The ability to pass through cost increases should minimize the effects of volatile commodity raw materials such as styrene and butadiene. Although increasingly competitive markets limit pricing power, a focus on faster-growing, higher-end SBCs, and a favorable cost structure should support operating margins in the midteens area. RK Polymers is highly leveraged, with a debt to EBITDA ratio of about 4.3 times (x), including PIK preferred stock at the parent level. Leverage is expected to improve as earnings increase in the intermediate term. Credit quality is supported by the firm's ability to internally fund moderate working capital and investment needs. Cash flow protection is weak, with EBITDA interest coverage near 2.0x (including preferred stock dividends), but should average 2.5x over time. Funds from operations to total debt is in the low to midteens area and should improve to the 15%-20% range, which is considered appropriate for the rating. Early bank loan amortization limits financial flexibility. However, anticipated stability of cash flows and sufficient availability under the bank revolving credit facility support current credit quality. The secured bank loan facility rating is the same as the corporate credit rating, based on preliminary terms and conditions. The credit facilities consist of a $110 million term loan A and a $190 million term loan B (maturing in six years and eight years, respectively), and a $50 million, six-year revolving credit facility. RK Polymers' obligations are guaranteed by its material direct and indirect domestic subsidiaries. Foreign subsidiaries' obligations are guaranteed by RK Polymers and material domestic subsidiaries. The credit facilities are secured by the stock and substantially all assets of domestic subsidiaries and the stock of 65% of material foreign subsidiaries. This collateral should provide some measure of protection to lenders, which can expect to recover more than a typical unsecured creditor in the event of default or bankruptcy, based on Standard & Poor's simulated default scenario. However, it is not clear that a distressed enterprise value would be sufficient to cover the entire loan facility. OUTLOOK: STABLE The ratings are supported by leading market shares and good profitability. The company's aggressive financial policy makes an improvement in credit quality unlikely in the intermediate term, Standard & Poor's said. RO-JACK'S: Supermarket Chain Files Chapter 7 Petition in Boston --------------------------------------------------------------- Mansfield, Mass., supermarket chain Ro-Jack revealed that it has filed for Chapter 7 protection in U.S. Bankruptcy Court in Boston last month but a statement detailing its financial affairs will still be released next week, the providencejornal.com reports. The company's decision to file for bankruptcy was caused by its more $20 million in debt. The same article said that Ro-Jack has already transferred control of its 11 supermarkets in Southeast Massachusetts and Rhode Island to its main creditor Supervalu Inc. Supervalu's subsidiary, Butson's Enterprises of Massachusetts will continue operating the supermarket chain. No lay-offs are being planned. Ro-Jack's troubles began when it began to expand several years ago in an attempt to compete with the region's large supermarket chains. There are five Ro-Jack's stores in Southeastern Massachusetts: two in Attleboro, and one each in North Attleboro, Mansfield and Seekonk. In Rhode Island, the chain has six stores, in Cranston, Cumberland, East Greenwich, Providence, Pawtucket and Wakefield. SAFETY-KLEEN: Sues Sumter County, S.C., in Bankruptcy Court ----------------------------------------------------------- Safety-Kleen (Pinewood) Inc. initiated a lawsuit against Sumter County, South Carolina, seeking a declaratory judgment that Pinewood's applications to the South Carolina Department of Health & Environmental Control for additional capacity under its hazardous waste permit is valid and legal under Pinewood's April 1994 Consent Order, accompanying Agreement, and Memorandum of Agreement with Sumter County, South Carolina. The Pinewood facility has not exceeded the agreed capacity limit as defined in the Consent Order and Agreement, and intended by the parties, and has therefore not breached any agreement with the County. The Plaintiff Pinewood characterized the relief sought as essential to protect its vested right to the level of hazardous waste capacity understood and agreed upon by the parties to the Consent Order. The County has threatened legal action against Pinewood for applying to DHEC for additional hazardous waste capacity at the Pinewood facility. The Plaintiff claims that the County's position is based on an overbroad and incorrect reading of the Consent Order and Agreement, which primarily addressed a dispute about local zoning ordinances and not issues regarding Pinewood's capacity rights under the Resource Conservation and Recovery Act. The Plaintiff asserts that its recent requests to DHEC do not implicate zoning agreements with the County, nor do they violate the Consent Agreement.(Safety-Kleen Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) SAKS INCORPORATED: Moody's Cuts Senior Unsecured Rating to Ba1 -------------------------------------------------------------- Moody's Investors Service lowered the ratings of Saks Incorporated, based on the soft operating performance of the company's department store chains in the recent past and the challenge of maintaining appropriate merchandise and customer loyalty in an unforgiving macro-environment. The rating outlook is negative, incorporating Moody's concern about the prospects for Saks' department store businesses, given their regional concentration and the possibility that a new chief executive officer could change strategy or further re-organize operations. This rating action concludes the review for possible downgrade begun on November 3, 2000. The prospective senior implied rating of Ba1 for Saks Fifth Avenue Enterprises, which is expected to be spun-off from Saks Incorporated, is confirmed, based on its premier luxury brand, successful editing of its merchandise assortments, and the quality of its store base. However, the rating outlook for Saks Fifth Avenue Enterprises is changed from stable to negative, reflecting the potential impact of slowing luxury sales, given that it is more vulnerable than some luxury retailers because of its high adjusted leverage, more limited size and scale, and some degree of concentration of sales and earnings in a single store. Ratings lowered: Saks Incorporated: * Senior unsecured bank and public debt ratings (guaranteed by operating subsidiaries) to Ba1 from Baa3. * Senior unsecured shelf to (P)Ba1 from (P)Baa3. * Subordinated shelf to (P)Ba3 from (P)Ba2. * Preferred stock shelf to (P)"b1" from (P)"ba2". * Junior preferred stock shelf to (P)b2" from (P)"ba3". * Proffitt's Capital Trust I, II, III, IV and V: * Preferred stock shelf to (P)"ba3" from (P)"ba2" Ratings assigned: Saks Incorporated: * Senior implied at Ba1. * Long-term issuer rating at Ba2. Rating confirmed: Saks Fifth Avenue Enterprises (to be spun-off): * Prospective senior implied at Ba1. In July 2000, Saks Incorporated announced that it would spin-off Saks Fifth Avenue to create two separate public companies, "Saks Fifth Avenue Enterprises" and "DSG" (the department store group). The spin-off was originally expected to be effective in November 2000, but was subsequently delayed until the first half of 2001. DSG has been negatively impacted by the limited consumer appeal of some key collections and by the slowing of spending by sated consumers. A rapid increase in the penetration of private label goods (expected to be about 10% of sales in fiscal 2000) failed to compensate for the softness in national brands in spring and summer, as the initial private label offerings were not optimum in terms of style and quality. Saks Inc. subsequently edited its merchandise and cleared excess apparel inventory, at a cost of higher markdowns. The results of these efforts only recently helped to boost comparable store sales: while comparable stores rose a modest 1% for the five weeks of December 2000, year-to-date comparable store sales for DSG are still negative, at - 2%. In addition, DSG continues to adjust its organizational model, consolidating McRae's and Herberger's into Proffitt's and Carson Pirie Scott respectively in the third fiscal quarter. As a consequence of the challenges encountered in 2000, Moody's believes that the company's low coverage and high adjusted leverage, already below Moody's initial expectation, will not improve sufficiently in the short term to warrant an investment grade rating. Since its acquisition by Saks Incorporated, SFA Enterprises has divested under-performing stores, and improved operating efficiency and inventory management. SFA Enterprises also successfully edited the full line merchandise to offer more upscale casual apparel. As a result, SFA Enterprises' profit margins and leverage have strengthened and sales have grown. However, SFA Enterprises' EBIT margin is not high for a specialty apparel retailer, and its fixed charge coverage and adjusted leverage ratios are more in line with highly rated speculative grade companies. Investment to develop electronic commerce will pressure margins in the short term. While Moody's anticipates that SFA Enterprises' financial policy will target the application of free cash flow to debt reduction, Moody's believes that a slowing of luxury sales could hurt SFA disproportionately given its debt protection measures. Comparable store sales for SFA Enterprises fell 3.1% for the five weeks of December, due largely to poor traffic at the Off 5th stores, and are down 3.6% for the last two months of calendar 2000. Headquartered in Birmingham, Alabama, Saks Incorporated currently operates 361 department stores and specialty apparel stores. Saks also operates Saks Direct, a direct response business. SEND.COM: Will Cease Operations ------------------------------- The following is the text of a letter written by the Chief Executive Officer and Founder of Send.com. The letter was posted on the company's Web site http://www.send.com. We've all heard the stories over the past year of Internet companies closing down. Unfortunately, Send. com has now been forced to close its business due the ongoing uncertainty in the economic environment. It is with great sadness that I must inform you, one of our many valued customers that we have decided to cease operations immediately and begin the painful task of closing down Send.com. As a customer of Send.com or as a recipient of one of our gifts, you know the effort we put into making our business one that was something special. We are sorry that we will no longer be able to serve you in the future. Over the past 4 years, you have helped us at Send.com accomplish tremendous things on your behalf. We grew from a tiny upstart to a business that we are all proud to be a part of. So, as CEO of Send.com, I want to thank you personally for your business and your support. Though all of us are saddened at the closing of our company, we are all proud of the business we built, and the customers like you who made it all possible. I know I speak for everyone here at Send.com when I say it has been a pleasure serving you. I wish you and your family health and happiness in the future. All the best, Michael Lannon Founder Send.com STAGE STORES: Disposing of 118 Leases in 16 States -------------------------------------------------- Keen Realty and Hilco Real Estate said that Stage Stores, the Houston, Texas-based family department store chain that also operates as Bealls and Palais Royal, is offering for sale 118 leases in 16 states, subject to Bankruptcy Court approval. Keen Realty and Hilco Real Estate are real estate firms specializing in restructuring retail real estate and lease portfolios and selling excess assets. Stage Stores filed for chapter 11 protection in June 2000. "The rents on many of the Stage Stores leases are well below market with a large concentration of these locations in Indiana, Illinois, Ohio and Texas," said Matthew Bordwin, Keen Realty's vice president. "The Ohio and Indiana locations as a group offer a retailer the opportunity to purchase locations that are generating $22 million in sales. In addition, there are a group of very profitable stores that are available in Wyoming and Montana." Available to users and investors are 118 leases in 16 states, with 29 leases in Texas, 15 leases in Ohio, 11 leases in Indiana, 10 leases in Illinois, 5 leases in Wyoming and 3 leases in Montana. The store sites range from 3,500 square feet to 48,000 square feet, with the average size being 20,000 square feet. Rents for the locations start as low as $1.13/ square foot. (ABI 10-Jan-2001) SUN HEALTHCARE: Stipulation Allows Insured Claim to Proceed ----------------------------------------------------------- Sun Healthcare Group, Inc., and its debtor-affiliates consent to lift the automatic stay to permit the estate of Clara Gentry to file and serve a complaint on Sun and to permit the prosecution and defense of the State Court Action (whether filed in Federal or State Court) in connection with Ms. Gentry allegedly sustained injuries at the Facility Retirement Care Associates, Inc. d/b/a SunBridge Care and Rehabilitation for Coventry. Alice Gentry, individually and in her capacity as Personal Representative of the estate of Clara Gentry, has notified Sun of her claims. The parties agree that Claimant may enforce settlement or disposition in the court action to the extent such claims are covered by proceeds from any applicable Sun liability insurance policies and shall be entitled to assert a general unsecured claim in the Bankruptcy Court for such amount of the self-insured retention obligation of Sun, but Claimant shall not enforce to collect any amount from Sun, Sun's current and former employees, officers and directors, or any person indemnified by Sun or listed as an additional insured under any of Sun's Liability policies. Judge Walrath has given her stamp of approval to the agreement. (Sun Healthcare Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) SERVICE MERCHANDISE: Outlines 2001 Operating Initiatives ---------------------------------------------------------- Service Merchandise Company, Inc. (OTCBB:SVCDQ) based on its research and benchmarking against its peer competitors, and in order to compete more successfully and exit its Chapter 11 reorganization cases in a timely fashion, it will implement 2001 strategic business initiatives to significantly reduce expenses and reduce and realign its capital expenditure program. The Company's expense structure and workforce will be adjusted to match more closely the competitive framework of the specialty retail industry through the elimination of approximately 1,750 full time employees. In addition to the workforce reduction, the Company will further consolidate its field structure, consolidate the space at its headquarters, and reconfigure its jewelry repair organization. Although the Company had already, in March of 2000, announced $18 million in expense savings planned for 2001, these expense reductions should generate $35 million in additional savings. Also, the Company will reduce its bankruptcy-related professional expenses to be incurred in 2001 by at least 25% over the prior year. Separately, the Company said that, as part of its strategic management consolidation and realignment, it has entered into an agreement with a new chief financial officer who will join the Company in February 2001, following approval of an employment agreement by the Bankruptcy Court. Service Merchandise Chief Executive Officer Sam Cusano said, "We are pleased to announce the successful completion of our executive search for a new chief financial officer, which was conducted during the fourth quarter of 2000, and we are enthusiastic about the caliber and experience of our new senior financial leadership. As with other senior executive appointments made during our reorganization cases, such as Jerry Foreman's arrival to manage our home business, logistics and e- commerce, further information will be disclosed about our new chief financial officer promptly following the Court's approval of the employment agreement." The Company also said that while the recently concluded holiday retail season was one of the most challenging and difficult in recent years and very few retailers, including Service Merchandise, achieved all of their financial goals and objectives for 2000, the Company made substantial progress in its business reorganization during 2000. The Company said that it anticipates announcing final 2000 financial results next month that, while not at the level that was originally planned, should be improved from the Company's overall financial performance in 1999. On a preliminary basis, subject to physical inventory results, normal year-end adjustments and other matters, the Company said that its continuing EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring expenses) results should be in the range of $30 million to $33 million for the 12 months ended December 31, 2000, compared to $25.2 million in 1999. The Company said that preliminary sales results were 3.4% below plan and gross margin results were 1.4% below plan with the Company's home business segment exceeding its gross margin plan while its jewelry business did not meet expectations. The Company also announced that its liquidity remains strong with current cash availability in excess of $200 million. Mr. Cusano pointed out that 2000 was a year of change and new initiatives at the Company, but it was also a year characterized by a very difficult retail economy. "While our 2000 financial results fell short of plan, they are better than the prior year's overall results and we continued to maintain a strong liquidity position which was never below $146 million and peaked at $289 million in the fall season. In many respects, we are pleased with what we accomplished in 2000, having initiated an aggressive remerchandising plan, a subleasing plan, and a remodeling plan all of which were directed at expanding the Company's focus on its core competency -- fine jewelry and gift items, in addition to home, health and personal care products. While much hard work remains ahead in what is expected to be a challenging 2001 retail environment, we are anxious to move forward, make the necessary adjustments to improve our business, complete our restructuring initiatives and, with the continued support of our creditors, vendors and employees, emerge from Chapter 11 in a timely fashion." Mr. Cusano stated that, "with the changes made to our merchandise assortment, the size of our stores, and our sales base, it is now time to make the appropriate adjustments to our expense base through a reduction in the size of our workforce in the stores and our headquarters. It is always difficult to eliminate jobs, especially when these associates have contributed so much to our business, but in order to continue on our path to successfully restructure the business, it is a necessary step that will bring us in line with what our research and benchmarking show to be appropriate for the specialty retail industry." He said approximately 1,630 positions will be eliminated in the stores and field organization, and approximately 120 positions will be eliminated at the corporate office. The reductions are expected to be completed in large part by the end of January, with the remainder to be completed by mid-February. The Company also plans in 2001 to align more closely its remodel program with its strategic subleasing program. In 2000, the Company announced its plan to eliminate certain product lines and, accordingly, reduce the size of its retail stores from approximately 50,000 square feet to 25,000 square feet. Last year, the Company successfully sold through approximately $200 million in electronics, fitness and toys product lines and simultaneously reconfigured the space in all of its 218 stores to a new 25,000 square foot format, including full remodels at 73 stores. As an outgrowth of its smaller format, the Company recognized an opportunity to sublease excess space in its stores and to date has obtained court approval for transactions to sublease a portion of 45 stores. "We are very proud of the way our associates executed a number of difficult initiatives, all while continuing to operate our retail business in a very disruptive environment," Mr. Cusano stated. "But as we enter what appears to be a difficult retail economy in 2001, one in which a number of other retailers have announced plans to close and market their stores, we believe it is prudent to reassess and realign our capital expenditure program, limit the number of additional remodels and focus our subleasing efforts on the fully remodeled stores that have not yet been subleased. We will, of course, continue to consider sublease opportunities that offer appropriate returns on investment." The Company also said that as part of the consolidation of the Company's headquarters and elimination of executive positions, Charles Septer, President and Chief Operating Officer, and Rose Septer, Senior Vice President of Jewelry, have left the Company to pursue other business opportunities. "Charlie and Rose have made many contributions to the Company over the years and we wish them well in their future endeavors," Mr. Cusano said. He also stated that the Company is in the process of searching for a chief jewelry merchant and intends to fill the position in the near future. While the Company completes its search, Jana Pistole will assume interim responsibility for jewelry merchandising. Ms. Pistole has worked in diamonds with Service Merchandise for 17 years and has served as the Assistant Vice President of Diamonds and Gemstones since March 1999. Mr. Cusano stated, "Jana Pistole brings to this interim position a strong background and tremendous level of expertise in jewelry merchandising. We look forward to the benefits her skills and knowledge will provide the Company during the coming months, and I look forward to working with Jana as I become more involved on a day-to-day basis in merchandising." In addition, Jerry Foreman will continue to lead the home division as the Senior Vice President of Home Merchandising/Logistics/E-Commerce. Service Merchandise and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Middle District of Tennessee in Nashville on March 27, 1999. Service Merchandise is a specialty retailer focusing on fine jewelry, gifts and home decor products. The Company currently operates 218 stores in 31 states. TWA: American to Acquire Substantially ALL of TWA'S Assets ---------------------------------------------------------- Trans World Airlines, Inc. (AMEX:TWA) reached an agreement with American Airlines,Inc., a subsidiary of AMR Corporation (NYSE: AMR), in which American will acquire substantially all of TWA's assets. The asset purchase agreement includes TWA's jet aircraft as well as numerous routes and gates throughout the TWA system and significant maintenance facilities. The agreement will protect air service in St. Louis and maintain St. Louis's role as a major transportation center. The agreement also calls for American to offer employment to almost all of TWA's 20,000 employees. TWA currently operates approximately 190 aircraft and approximately 800 daily flights. Concurrently, TWA said that it and certain subsidiaries had voluntarily filed petitions in the U.S. District Court in Wilmington, Delaware for relief under Chapter 11 of the U.S. Bankruptcy Code. In order for the agreement with American to go forward, TWA also filed a motion seeking the Court's approval of an asset purchase agreement with American pursuant to section 363 of the Bankruptcy Code. TWA has received a commitment from American for $200 million in Debtor in Possession (DIP) financing and anticipates receiving prompt approval for that financing from the Bankruptcy Court. The DIP financing will be collateralized by security interests in the Company's assets, and is intended to enable TWA's continued operation during the transition period, which may take up to six months. The sale of TWA's assets to American is subject to, among other things, higher and better offers as a result of a bidding process plus Bankruptcy Court approval. The Court will set a hearing date and timetable. William F. Compton, president and chief executive officer of TWA, said, "This is both a sad and exciting day for TWA. It is sad because we are starting a process that will culminate in the retirement of the oldest and proudest name in the U.S. airline industry. I am, however, heartened by the fact that we have been able to work out a solution with American that we believe to be the best possible outcome for our creditors because it extracts franchise value by selling the company as an operating concern. "American has agreed to protect the jobs of substantially all of our thousands of employees in St. Louis, Kansas City, New York and elsewhere. American also agreed to take responsibility for our retirees' medical and dental benefits now provided by TWA. And, this agreement will be beneficial for our customers, who will enjoy uninterrupted service," Compton said. The agreement with American calls for significant reciprocity in many customer programs. TWA passengers who are AAdvantage frequent flyer program members will soon be able to accrue AAdvantage miles on TWA flights. Ambassadors Club memberships will be first honored and subsequently transferred into American's Admirals Club program. Customers in TWA's home city of St. Louis will continue to enjoy the convenience of a network hub schedule. In making the filing to the Bankruptcy Court, TWA noted that its steadily deteriorating financial condition, which was exacerbated by recent staggering increases in jet fuel costs, had prevented the company from capitalizing on the significant progress made in recent years to improve its operating efficiencies. Fleet improvement efforts and improvements to TWA's route system, as well as productivity improvements helped to improve revenue and reduce controllable costs. However, the timing of the company's recent capital investments coupled with the unanticipated fuel increases caused a drain on cash flow and made it necessary for TWA to seek the protection of the Bankruptcy Code in order to sustain operations. TWA: Case Summary & List of 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Trans World Airlines, Inc. One City Centre, 515 North Six St. Louis, MO 63101 Debtor Affiliates: Ambassador Fuel Corporation LAX Holding Comapny, Inc. Mega Advertising, Inc. Northwest 112th Street Corporation The TWA Ambassador Club, Inc. Trans World Computer Services, Inc. Transcontinental & Western Air, Inc. TWA Aviation, Inc. TWA Group, Inc. TWA Standards & Control, Inc. TWA Stock Holding Company TWA-D.C. Gate Company, Inc. TWA-LAX Gate Company, Inc. TWA-Logan Gate Company, Inc. TWA-NY/NJ Gate Company, Inc. TWA-Omnibus Gate Company, Inc. TWA-San Francisco Gate Company, Inc. TWA-Hangar 12 Holding Company, Inc. Ozark Group, Inc. TWA Nippon, Inc. TWA Employee Services, Inc. TWA Getaway Vacations, Inc. Trans World Express, Inc. International Aviation Security, Inc. Getaway Management Services, Inc. The Getaway Group (U.K.), Inc. Type of Business: Air transportation Chapter 11 Petition Date: January 10, 2001 Consolidated Bankruptcy Case No.: 01-00056 Court: District of Delaware Judge: Sue L. Robinson Debtor's Counsel: James H.M. Sprayregen, Esq. Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Telephone 312/861-2000 Fax 312/861-2200 and Laura Davis Jones, Esq. Pachulski, Stang, Ziehl, Young & Jones 919 Market Street Wilmington, DE 19801 (302) 652-4100 Total Assets: $2,103,910,000 Total Debts: $2,384,465,000 List of the Debtors' 20-Largest Unsecured Creditors: Creditor Nature of Claim Claim Amount -------- --------------- ------------ First Security Bank, N.A. Unsecured Notes $150,000,000 Deann Madsen Indenture 3rd Floor Corporate Trustee 79 South Main Street Salt Lake City, UT 84111 (801)246-5809 Spear, Leads & Kellog Unsecured Notes $57,385,000 Connie Kanellopoulos 120 Broadway New York, NY 10271 (212)433-7531 J.P. Morgan Securities Inc. Unsecured Notes $17,681,000 Amanda Winkelman 500 Stanton Christiano Road Newark, DE 19713 (302)552-0415 Merrill Lynch Professional Unsecured Notes $14,000,000 Clearing Corporation Romolo Catalano 101 Hudson Sreet Jersey City, NJ 07302 (201)557-0855 Boeing Company Trade Debt $11,993,835 Financial Services PO Box 3707 MC 6X UC Seattle, WA 98124 Contact: John Matthews Boeing, Inc. 500 Nannaches Avenue SW 3rd Floor Renton, WA 98055 City of St. Louis Treasurer Lease Agreement $9,961,314 Kenneth L. Below Assistant Director- Finance Lambert-St. Louis Int'l Airport P.O. Box 10212 St. Louis, MO 63148 (314)426-8026 Bear, Stearns Securities Corporation Unsecured Notes $9,894,000 Vincent Marzella One Metrotech Center North 4th Floor Brooklyn, NY 11201-3862 (212)272-0302 Pratt Whitney Commercial Products Trade Debt $7,934,000 Bank One Lockbox 73295 525 West Monroe 7th Floor Mail Room Chicago, IL 60673 Contact: Robert K. Merrill Assistant Vice President UT Finance Corporation 400 Main Street, M/S 133-54 East Hartford, CT 06108 (860)565-9966 Port Authority of New York/New Jersey Lease Agreement $7,477,750 P.O. Box 17309 Newark, NJ 07194 Contact: Steve Borrelli, Credit Department One World Trade Center, 65W New York, NY 10048 (212)435-5070 Donaldson, Lufkin and Jenrette Unsecured Notes $6,761,000 Securities Corporation Al Hernandez 1 Pershing Plaza Jersey City, NJ 07399 (201)413-3090 Charles Schwab & Co., Inc. Unsecured Notes $5,184,000 Peter Descovich c/o ADP Proxy Services 51 Mercedes Way Edgewood, NY 11717 (631) 254-7400 City of Los Angeles Lease Agreement $3,500,000 Nora R. Giron Principal Accountant Los Angeles World Airports 1 World Way Los Angeles, CA 91109 (310)646-5252 Aetna Middletown Trade Debt $3,426,340 P.O. Box 70944 Chicagao, IL 60673 Contact: Stephen A. Olean Aetna U.S. Healthcare 151 Farmington Avenue Hartford, CT 06156-7284 (860)636-2447 Goldman,Sachs,& Co. Unsecured Notes $3,250,000 Patricia Baldwin 180 Maiden Lane New York, NY 10038 (212)902-0321 Honeywell Trade Debt $2,600,000 Garrett Airline Service Division P.O. Box 93123 Chicago, IL 60673 Contact: Allen Silberman Global Director- Credit & Treasury 1140 W. Warner Road Mail Stop 1233-M Tempe, AZ 85284 (480)592-5050 SSB-Trust Custody Unsecured Notes $2,515,000 David Paldino 225 Franklin Street, M4 Boston, MA 02110 (617)654-4915 National Financial Services Unsecured Notes $2,460,000 Corporation Molly Carter 200 Liberty Street One World Financial Center New York, NY 10281 (212) 335-5357 Brown Brothers Harriman & Co. Unsecured Notes $2,250,000 Robert Davide 63 Wall Street, 8th Floor New York, NY 10005 (212)493-7946 Brown & Company Securities Unsecured Notes $2,195,000 Jeannie Lapin One Beacon Street 18th Floor Boston, MA 02108-3102 (617)624-6332 Paine Webber Incorporated Unsecured Notes $1,966,000 Jane Doyle 1000 Harbor Blvd Weekhawken, NJ 07087 (201)902-7319 TWA: S&P Hangs D Rating on All Issues After Chapter 11 Filing ------------------------------------------------------------------- ------ Standard & Poor's lowered its ratings on Trans World Airlines Inc.'s (TWA) to 'D' following the company's Chapter 11 bankruptcy filing earlier this week. The ratings are removed from CreditWatch where they were placed January 5, 2001. Approximately $290 million of rated debt is affected. American Airlines Inc., a unit of AMR Corp., plans to purchase substantially all of TWA's assets for approximately $500 million and assume many of its leases. As a result, the secured creditors are expected to receive repayment equal to the value of their collateral (which could be less than the total amount of outstanding obligations) and the unsecured creditors will receive little or no repayment. Aircraft lessors will be asked to renegotiate rates to reflect American's credit profile, which is much stronger than that of TWA's, Standard & Poor's said. RATINGS LOWERED AND REMOVED FROM CREDITWATCH Ratings Trans World Airlines Inc. To From Corporate credit rating D CCC Senior secured debt D CCC Senior unsecured debt D CC WHEELING PITTSBURGH: Noteholders Hire Stroock as Lead Counsel ------------------------------------------------------------- The Official Committee of Unsecured Noteholders appointed in Wheeling-Pittsburg's chapter 11 cases requests authority to employ and retain of the law firm of Stroock, Stroock & Lavan LLP of New York, New York, to represent its interests in these Chapter 11 cases. Stroock previously represented the Official Committee of Unsecured Creditors of Wheeling Pittsburgh Steel Corporation in its prior Chapter 11 proceedings which ended in 1991. The duties which the firm will fulfill for the Committee are: (a) Advise the Noteholders' Committee with respect to its rights, duties and powers in these cases; (b) Assist and advise the Noteholders' Committee in its consultations with the Debtors relative to the administration of these cases; (c) Assist the Noteholders' Committee in analyzing the claims of the Debtors' creditors and in negotiating with such creditors; (d) Assist with the Noteholders' Committee's investigation of the acts, conduct, assets, liabilities and financial condition of the Debtors and of the operation of the Debtors' businesses; (e) Assist the Noteholders' Committee in its analysis of and negotiations with the Debtors or any third party concerning matters related to, among other things, the terms of a plan of reorganization for the Debtors; (f) Assist and advise the Noteholders' Committee as to its communications to the general creditor body regarding significant matters in these cases; (g) Represent the Noteholders' Committee at all hearings and other proceedings; (h) Review and analyze all applications, orders, statements of operations and schedules filed with the Court and advise the Noteholders' Committee as to their propriety; (i) Assist the Noteholders' Committee in preparing pleadings and applications as may be necessary in furtherance of the Noteholders' Committee's interests and objectives; and (j) Perform such other legal services as may be required and are deemed to be in the interests of the Noteholders' Committee in accordance with the Noteholders' Committee's powers and duties as set forth in the Bankruptcy Code Lawrence M. Handelsman, Esq., assures the Court that Stroock does not represent any interest adverse to the Debtors' estates or their creditors in the matters upon which the firm is sought to be engaged. The Committee has been informed that Stroock represents Wheeling-Nisshin Steel Corp. and Nisshin Steel Co., Ltd., but Stroock does not represent either entity in matters relating to the Debtors or these estates. As the Committee has also made application to employ Hahn, Loeser & Parks LLP as local counsel, that firm may advise and represent the Committee in connection with any matters related to Wheeling-Nisshin or Nisshin Steel. Mr. Handelsman discloses that Stroock represents PricewaterhouseCoopers LLP, another professional in this case, and its current and former partners and employees in civil litigation and SEC investigatory matters. The firm has also represented Bank One as issuer in several asset-backed securities transactions; Citicorp Securities and other Citicorp entities in various matters; First Union National Bank as underwriters and placement agents, and other parties with interests in these estates in various matters, none of which involved any issues with these estates or created any adverse interest or holding by Stroock in connection with these cases. The Committee asks that Stroock's employment be approved retroactively to the Petition Date as that firm had been retained by an informal committee consisting of the holders of Senior Notes and borrowings under the Term Loan Agreement. With the exception of Bank One, the indenture trustee for the Senior Notes, all of the current members of the Noteholders' Committee participated in that informal committee. In light of the work undertaken by Stroock immediately upon commencement of these Chapter 11 proceedings, approval of their employment retroactively to the Petition Date was suggested by the Committee to be appropriate. Mr. Handelsman advises that Stroock will bill at its normal hourly rates of $425 to $650 for partners, $160 to $395 for associates, and $80 to $145 for clerks and paralegals. The current hourly rates for attorneys and paralegals with primary responsibility for this matter are: Lawrence Handelsman $ 625 Robert Raskin $ 475 Sherry Millman $ 395 Anna Taruschio $ 160 Lisa Indelicato (paralegal) $ 120 These hourly rates are subject to periodic revision in the ordinary course of Stroock's business. Other attorneys and paralegals will from time to time assist in the representation of the Debtors in connection with these cases at Stroock's regular hourly rates in effect for those personnel. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) XEROX: GECC Extends US$435 Million in New Secured Financing ----------------------------------------------------------- Xerox Corporation (NYSE:XRX) has received US$435 million in financing from GE Capital secured by the Xerox portfolio of lease receivables in the United Kingdom. The two companies are also discussing possible plans for GE Capital to provide equipment financing for Xerox customers in several European countries. "The announcement represents another significant step in our plan to ensure Xerox's financial stability," said Barry D. Romeril, Xerox vice chairman and chief financial officer. "This transaction enhances our liquidity, and discussions with GE Capital about providing equipment financing add further credibility to the long- term nature of our business. Including the proceeds from this financing, the company's current cash balance is approximately $1.8 billion." The $435 million financing will be repaid over an 18-month period. Xerox announced in October that it would transition to third-party financing as part of its turnaround plan. Over time, this may remove as much as $11 billion in equipment financing-related debt from the Xerox balance sheet and reduce the company's future cash requirements. Merrill Lynch acted as financial advisor to Xerox in its transaction with GE Capital. XO COMMUNICATIONS: S&P Junks 5.75% Convertible Subordinated Notes ------------------------------------------------------------------- ------- Standard & Poor's assigned its triple-'C'-plus rating to XO Communications Inc.'s $450 million 5.75% convertible subordinated notes due Jan. 15, 2009. At the same time, Standard & Poor's affirmed the company's single-'B' corporate credit and senior unsecured debt ratings, its single-'B'-plus bank loan ratings, and its triple-'C' preferred stock rating. Pro forma for the new issue, total debt outstanding is about $4.9 billion. The outlook is stable. The ratings on XO Communications Inc. (formerly NEXTLINK) reflect the risks inherent in the company's ongoing plans to expand rapidly its business domestically as a facilities-based competitive local exchange carrier (CLEC) and its data strategy business internationally. Risks are somewhat offset by the company's experienced management team and its ability to execute on its business plan. McLean, Va.-based XO Communications provides bundled local and long distance, as well as dedicated voice telecommunications services to small and midsize customers. The company has expanded its services through its acquisition of Concentric Network Corp., which was completed on June 16, 2000. This acquisition enables XO Communications to offer a complete, single-source communications solution to its customers by combining data and voice services. Data services include Internet access, virtual private network, Web hosting, and Ethernet services. The company has assembled a set of facilities-based broadband networks and Tier I Internet peering relationships that, when complete, will serve much of the U.S. In the U.S., XO Communications has more than 570,000 metro and intercity fiber miles in operation. In order to reduce reliance on leasing last-mile connection to their customer from the incumbent local exchange carrier, the company is constructing a fiber-optic extension from its network to the customer premise or deploying a high-bandwidth wireless connection to the customer using its fixed wireless spectrum. At Sept. 30, 2000, wireless direct connections had been deployed in 17 markets. In September 2000, the company introduced revolutionary flat-rate service packages throughout its 53 domestic markets. These packages, which combine local, long distance, Internet access, and Web-hosting services, should enable XO Communications to increase and retain its customer base. Senior company management has experience from MCI Communications Corp. and McCaw Cellular Inc. Craig McCaw retains a significant equity ownership in the company, which adds credibility to the company's ability to execute its business plan. On Nov. 28, 2000, the company announced its plans to expand its European presence, focusing on a data-centric facilities-based strategy. The company will target multilocation business customers. Currently, the company provides Internet dial-up services in Europe because of its Concentric Network acquisition. The company's plan is to transfer these customers to its network and offer high- bandwidth services. With cash on hand of about $2.7 billion at Sept. 30, 2000, proceeds from the new issue, and availability under its bank facility, the company has sufficient funding to support its business plan through first-quarter 2002. For the three months ended Sept. 30, 2000, revenues increased 59% over the previous quarter, to $224.3 million. Cash flow, as expected, continues to be negative, as the company completes the buildout of its network. Access lines in service totaled more than 737,000. OUTLOOK: STABLE Although XO Communications' extensive business initiatives are expected to improve its long-term business position, they represent capital commitments that limit any potential upgrade. Maintenance of the rating is dependent on financing of the company's business plan beyond first-quarter 2002, Standard & Poor's said. *BOOK REVIEW: The Big Board: A History of the New York Stock Market ------------------------------------------------------------------- Author: Robert Sobel Publisher: Beard Books Soft cover: 395 pages List Price: $34.95 Review by Gail Owens Hoelscher First published in 1965, The Big Board was the first history of the New York stock market. It's a story of people: their foibles and strengths, earnestness and avarice, triumphs and crash-and-burns. It's full of entertaining anecdotes, cocktail-party trivia, and tales of love and hate between companies and investors. Early investments in North America consisted almost exclusively of land. The few securities holders lived in cities, where informal markets grew, with most trading carried out in the street and in coffeehouses. Banking, insurance, and manufacturing activity increased only after the Revolution. In 1792, 24 prominent New York businessmen, for whom stock- and bond-trading was only a side business, met under a buttonwood tree on Wall Street and agreed to trade securities on a common commission basis. Five securities were traded: three government bonds and two bank stocks. Trading was carried out at the Tontine Coffee-House in a call market, with the president reading out a list of stocks as brokers traded each in turn. The first half of the 19th century was heady for security trading in New York. In 1817, the Tontine gave way to the New York Stock and Exchange Board, with a more organized and regulated system. Canal mania, which peaked in the late 1820s, attracted European funds to New York and volume soared to 100 shares a day. Soon, the railroads competed with canals for funding. In the frenzy, reckless investors bought shares in "sheer fabrications of imaginative and dishonest men," leading an economist of the day to lament that "every monied corporation is prima facia injurious to the national wealth, and ought to be looked upon by those who have no money with jealousy and suspicion." Colorful figures of Wall Street included Jay Gould and Jim Fisk, who in 1869 precipitated one of the worst panics in American financial history by trying to corner the gold market. Almost lynched, the two were hauled into court, where Fisk whined, "A fellow can't have a little innocent fun without everybody raising a halloo and going wild." Then there was Jay Cooke, who invented the national bond drive and, practically unaided, financed the Union effort in the Civil War. In 1873, however, faulty judgement on railroad investments led to the failure of Cooke & Co. and a panic on Wall Street. The NYSE closed for ten days. A journalist wrote: "An hour before its doors were closed, the Bank of England was not more trusted." Despite J. P. Morgan's virtual single-handed role in stemming the Knickerbocker Trust panic of 1907, on his death in 1913, someone wrote "We verily believe that J. Pierpont Morgan has done more harm in the world than any man who ever lived in it." In the 1950s, Charles Merrill was instrumental in changing this attitude toward Wall Streeters. His firm, Merrill Lynch, derisively known in some quarters as "We, the People" and "The Thundering Herd," brought Wall Street to small investors, traditionally not worth the effort for brokers. The Big Board closes with this story. Asked by a much younger man what he thought stocks would do next, J.P. Morgan "never hesitated for a moment. He transfixed the neophyte with his sharp glance and replied `They will fluctuate, young man, they will fluctuate.' And so they will." Robert Sobel died in 1999 at the age of 68. A professor at Hofstra University for 43 years, he was a prolific historian of American business, writing or editing more than 50 books. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles available from Amazon.com -- go to http://www.amazon.com/exec/obidos/ASIN/189312214X/internetbankrupt -- or through your local bookstore. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, May Guangko, Aileen Quijano, Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951- 6400. *** End of Transmission ***