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/raid1/www/Hosts/bankrupt/TCR_Public/010122.MBX T R O U B L E D C O M P A N Y R E P O R T E R Monday, January 22, 2001, Vol. 5, No. 15 Headlines 1-800-AUTOTOW: Files for Protection Under Chapter 11 ALGOMA STEEL: Moody's Downgrades First Mortgage Notes to Caa1 ANICOM INC: Case Summary & 20 Largest Unsecured Creditors ARMSTRONG HOLDINGS: Retaining Foley Hoag as Legislative Counsel BAZILLION.COM: In Talks With Strategic Partners BUSINESS TELECOM: Moody's Downgrades Ratings to Low-B's CHIQUITA BRANDS: Bondholders Expected to Approve Restructuring CHIQUITA BRANDS: Moody's Downgrades Senior Notes and Debentures CLASSIC CABLE: Moody's Junks Senior Subordinated Debt Rating COUNTRYCOOL.COM: On-Line Country Music Site Shuts Down Operations DENMANS.COM: On-Line Jeweler Shuts Down Website & Directors Resign DESTINY RESOURCE: Obtains Bride Financing to Pay Past-Due Payables EDISON MISSION: S&P Continues CreditWatch & Negative Outlook GLOBALSTAR: Moody's Lowers Senior Unsecured Debt Ratings to Ca ICG COMMUNICATIONS: Engages Logan as Claims & Noticing Agent JCC HOLDING: Casino Restructuring Takes Toll on Harrah's Earnings KEYSTONE CONSOLIDATED: Moody's Downgrades Ratings to Junk Status LANGUAGEWARE.NET: Shuts Down Operations & Pares to Skeleton Staff LERNOUT & HAUSPIE: UST Appoints Official Creditors' Committee LERNOUT & HAUSPIE: Establishes New Credit Line with Banking Group LERNOUT & HAUSPIE: Reuters Says DaimlerChrysler Shows Interest LERNOUT & HAUSPIE: Shareholders Eye Auditors as Target Defendants LERNOUT & HAUSPIE: Chairman Roel Pieper Resigns LERNOUT & HAUSPIE: Judge Allows AllVoice Computing to File Suit LOEWEN GROUP: Resolves Claims Asserted by American Commercial Bank LTV CORPORATION: Judge Issues Vendor & Supplier Comfort Order MEDICAL ARTS: Sells Assets and Lab Operations to Dynacare NORTHPOINT COMMUNICATIONS: Case Summary NORTHPOINT COMMUNICATIONS: Moody's Issues Further Downgrades OWENS CORNING: Walks Away from Burdensome Warehouse Leases PACIFIC GAS: S&P Assigns BBB Rating to PG&E National Energy Group PACIFIC GAS: Fitch Cuts Preferred Securities' Rating to C SAFETY-KLEEN CORPORATION: Seeks Extension of 9027 Removal Period SERVICE MERCHANDISE: Landlord Delivers Non-Disturbance Agreement SUN HEALTHCARE: Finalizes Agreement on Johnson Injury Claims U.S. FURNITURE: Closes Down Operations VENCOR INC: Settles SERP and Other Claims with W. Earl Reed VENCOR INC: Court Approves Extension of DIP Financing Maturity WHEELING-PITTSBURGH: Wants to Assume General Electric Contract WEC COMPANY: Moody's Junks Bond Ratings & Says Outlook Negative BOND PRICING: For the week of January 22 - 26, 2001 ********* 1-800-AUTOTOW: Files for Protection Under Chapter 11 -------------------------------------------------------- Leonard D. Levin, as acting President and CEO of 1-800-AUTOTOW, Inc. (OTCBB:AUTWE), www.1800autotow.com, an operator of vehicle towing companies, announced last week that the Company filed for protection and Reorganization under Chapter 11 of the Bankruptcy Code. ALGOMA STEEL: Moody's Downgrades First Mortgage Notes to Caa1 ------------------------------------------------------------- Moody's Investors Service downgraded ratings for Algoma Steel Inc. as follows: * US$350 million of 12.375% first mortgage notes due 2005, from B2 to Caa1 * C$200 million secured revolving credit facility from B1 to B3 * senior implied rating from B2 to Caa1 * senior unsecured issuer rating from B3 to Caa2 The rating outlook remains negative. The rating actions are a reflection of Moody's concerns about weak steel market conditions and the related impact on the company's operating performance, cash flow, and liquidity. Moody's expects steel market conditions to remain weak for the entire first half of 2001, and only slowly recover in the second half of the year. Moody's believes weaker automobile production and manufacturing activity will impact Algoma's sheet and plate orders and prices, resulting in reduced production, negative cash flow, and diminished liquidity. The downgrades are based on an assumed 2001 EBITDA of C$30 million, yielding a ratio of EBITDA to interest of 0.3, and free cash flow of approximately negative C$100 million. If correct, Algoma will deplete its existing sources of liquidity in 2001, as unused availability under its revolving credit facility was C$90 million on September 30, 2000. This facility matures on December 31, 2001. Algoma had C$626 million of debt as of September 30, 2000. The credit facility is secured by accounts receivable and inventories. The first mortgage notes are secured by substantially all the company's fixed assets, which had a net book value of C$869 million on September 30. Algoma Steel Inc. is headquartered in Sault Ste. Marie, Ontario. It produces 2 million tons per year of sheet and plate products and had sales of C$1.1 billion in 1999. ANICOM INC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Anicom, Inc. 6133 N River Road Suite 1000 Rosemont, IL 60018 Type of Business: Distribution specialist of multimedia technology Chapter 11 Petition Date: January 5, 2001 Court: Northern District of Illinois Bankruptcy Case No.: 01-00485 Judge: Susan Pierson Sonderby Debtor's Counsel: John Robert Weisman, Esq./ Mark K. Thomas, Esq. Katten Muchin Zavis 525 West Monroe Street STE 1600 Chicago, IL 60661 312-902-5200 Total Assets: $348,394,362 Total Debts: $206,146,120 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Microwave Tower Service, Inc. Trade $6,090,903 Attn: Donna Gronowski 562 Captain Neville Drive Waterbury, CT 06705 800-545-9014 Superior Essex Comm Trade $4,446,453 Attn: Officer, Manager, Director 150 Interstate North Parkway Suite 300 Atlanta, GA 30339-2101 770-953-8338 Amp Incorporated Trade $2,978,641 Attn: Carole Anderson P.O. Box 91869 Chicago, IL 60693 717-564-0100 Comm/Scope, Inc. Trade $2,290,896 Attn: Theresa Munsey 1375 Lenoir Rhyne Blvd. Hickory, NC 28603 800-982-1702 Belden Wire and Cable Trade $2,117,027 Attn: Daniel Nunez Box 101297 3585 Atlanta Avenue Atlanta, GA 30354 800-235-3361 Optical Cable Corp. Trade $1,793,852 Attn: Chuck Neely 5290 Concourse Drive Roanoke, VA 24002 800-622-7711 Decibel Products Trade $1,535,250 Attn: Officer, Manager, Director 8635 Stemmons Freeway Dallas, TX 75247 214-631-0310 Nordx/CDT Trade $1,269,729 Attn: Officer, Manager, Director 3701 Algonquin Road Suite 260 Rolling Meadows, IL 60008 800-331-0779 Rome Cable/BSCC Trade $1,153,468 Attn: Helen 680 Mechanics Street Suite 1201 Leominster, MA 01453 800-366-9473 Alcoa Fujikura Trade $994,294 Attn: Dottie 150 Ridge View Circle Duncan, SC 29334 800-866-3953 Siemon Company Trade $919,569 Attn: Sharon 76 Westberry Park Road Watertown, CT 06795 860-274-2523 BICC Gen. Ind n/k/a Trade $914,238 General Cable Attn: Dawn Campo 4 Tesseneer Drive Highland Heights, KY 41076 888-593-3355 Austin Cable Trade $797,883 Attn: Eric Swanson 115 E. Saint Elmo Road #C Austin, TX 78716 800-875-8112 Americable Trade $666,383 Attn: Officer, Manager, Director P.O. Box 70649-T Cleveland, OH 44190 800-643-1516 Mohawk/CDT Trade $664,324 Attn: Sharon Cardinal 835 W. University Drive Arlington Heights, IL 60004 800-422-9961 Hubbell Premise Wiring Trade $620,248 Attn: Paula 14 Lords Hill Road P.O. Box 901 Stonington, CT 06378 800-626-0005 General Wire Products Trade $572,099 Attn: Officer, Manager, Director 425 Shrewsbury Street Worcester, MA 01684 508-752-8260 Molex Premise Networks Trade $416,075 Attn: AnnMarie Cummings 8 Executive Drive Hudson, NH 03051 603-324-0214 Carlon Telecom Services Trade $409,003 Attn: Officer, Director, Manager 3715 Powderhorn Drive The Lamson & Sessions Co. Okemos, MI 48864 517-337-7777 Realm Communications Group Trade $338,899 Attn: Officer, Manager, Director 2181 Del Franco Street San Jose, CA 95161 408-944-9090 ARMSTRONG HOLDINGS: Retaining Foley Hoag as Legislative Counsel --------------------------------------------------------------- Armstrong Holdings, Inc., asks Judge Farnan for an Order authorizing it to employ the law firm of Foley, Hoag & Eliot LP in Boston, Massachusetts, as special legislative counsel during the course of its chapter 11 cases. As legislative counsel, Foley Hoag has provided and will continue to provide the Debtors with a wide range of representation in the legislative area. Specifically, the Debtors propose to engage Foley Hoag to secure Congressional passage of global asbestos settlement legislation. Foley Hoag also provides, and will continue to provide, the Debtors with advice concerning health care, energy, international trade, tax, environmental, and technology issues. Dennis R. Kanin, Esq., a partner of Foley Hoag, tells Judge Farnan that, while the firm neither holds nor represents any interest adverse to these estates on the matters for which employment is sought, the firm also represents, or continues to represent, parties in interest such as Chase Manhattan Bank, Bank of America National Trust & Savings, Deutsche Bank, Citibank, Exxon Corporation, Occidental Chemical Company, PNC Bank, Owens Corning Fiberglass, KPMG, Union Carbide Corporation, E.I. DuPont deNemours Company, Ferro Corporation, and others, but only in matters unrelated to these Chapter 11 cases. Within the year prior to the commencement of these Chapter 11 cases, Foley Hoag received payments from the Debtors in the amount of $250,000 for services rendered and expenses incurred. As of the Petition Date, the Debtors were obligated to Foley Hoag in the amount of $23,895 in unbilled fees and $12,362.16 in billed, but unpaid, fees. Mr. Kanin further discloses that he will the primary professional responsible for the services performed for the Debtors, and his standard hourly rate in these cases is $ 391.50. Mr. Kanin avers that this amount represents a 10% discount from his usual hourly rate. Other attorneys and paraprofessionals may perform services for the Debtors from time to time. (Armstrong Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) BAZILLION.COM: In Talks With Strategic Partners ----------------------------------------------- Bazillion.com, which closed its doors last week after failing to secure more financing, said yesterday it was in talks with strategic partners who might be interested in its business. However, the provider of high-speed Internet services dismissed its remaining 125 employees without severance pay after it failed to secure additional funding, according to the Seattle Times. The start-up, which had spent $50 million in venture capital since its inception, was seeking an additional $35 million to $50 million from Dallas-based investment firm Hicks, Muse, Tate & Furst. Another $6 million was available from an unnamed source if those discussions progressed, said Bazillion Chairman Vern Fotheringham. Internet hardware maker Cisco Systems also had pledged an additional $60 million contingent on the Hicks Muse funding. But those hopes collapsed when Hicks Muse refused to agree to initial terms for an investment, forcing Bazillion to close quickly. What happens next depends largely on whether any companies are interested in parts of the business. If not, Bazillion could file for bankruptcy protection. Fotheringham did not name potential partners he is talking to. "We're looking at all the alternatives that would be available to protect creditors, employees and stakeholders," Fotheringham said. "That includes the possibly of a chapter 11 filing. However, that's not been decided yet." (ABI 18- Jan-2001) BUSINESS TELECOM: Moody's Downgrades Ratings to Low-B's ------------------------------------------------------- Moody's Investors Service downgraded ratings of BTI Telecom Corp. as follows: * $250 million 10 1/2% Senior Notes due 207 to Caa1 from B3 * issuer rating to Caa1 from B3 * senior implied rating to B3 from B2 * Business Telecom, Inc.'s $60 million senior secured bank facility to B2 from B1. All ratings are on review from possible further downgrade. The action reflects Moody's view on the company's liquidity situation. It is also concerned that the $20 million capital infusion from BTI's chairman and Welsh, Carson, Anderson and Stowe, which it received January 12, may be insufficient to fund the capital requirements and debt service obligations for this year. BTI Telecom Corp., headquartered in Raleigh, NC, is a leading provider of telecommunications services in the southeastern United States. CHIQUITA BRANDS: Bondholders Expected to Approve Restructuring -------------------------------------------------------------- Chiquita Brands International Inc.'s bondholders are expected to go along with plans for a restructuring because they stand to recover more that way than with a traditional chapter 11 bankruptcy, according to the Wall Street Journal. The Cincinnati-based fruit and vegetable distributor has said it cannot pay its debts and will stop making payments, starting with an $87 million payment due March 28. It has hired the Blackstone Group to negotiate a restructuring plan with its creditors. If successful, Chiquita's restructuring plan would result in converting a large portion of its $862 million of public debt into common equity. "Bondholders have an incentive to negotiate a settlement in which they receive equity for debt rather than force a traditional bankruptcy, which could turn into a more expensive proposition," said Andrew Ebersole, high-yield bond analyst at KDP Investment Advisors. Blackstone's negotiations with bondholders by late fall could produce a deal to be presented for court approval by the end of the year, Ebersole said. Chiquita has also said that it has a commitment for an $85 million bank loan to repay maturing debt at its subsidiaries and to fund working capital needs. Analysts said the loan should be enough to finance Chiquita for at least nine months as it tries to restructure. Chiquita has said its restructuring plans won't impact day-to-day operations. (ABI 18-Jan-2001) CHIQUITA BRANDS: Moody's Downgrades Senior Notes and Debentures --------------------------------------------------------------- Moody's Investors Service downgraded ratings of Chiquita Brands International, Inc. as follows: * $775 million senior note issues to Ca from Caa1. The maturities for the notes range from 2004-09. * $87 million 7% convertible subordinated debentures due 3/28/01 to C from Caa3 * its $245 million preferred stock (series A, B and C) to "c" from "ca" The senior implied rating was downgraded to Caa3 from B3, and the senior unsecured issuer rating from to Ca from Caa1. The downgrades came after Chiquita's announcement January 16 that it intends to restructure its debt at CBII, the parent holding company, with the objective of converting a significant portion of that debt into equity. Chiquita has decided not to make interest or principal payments on the senior note issues or the convertible subordinated debentures, aggregating $862 million of debt, which constitute CBII debt. Payments affected include $87 million of principal due March 28, and coupon payments on the senior notes, the first of which was due January 16 (and has a 30 day grace period). Chiquita has approximately $400 million of debt, primarily secured, in its operating subsidiaries and intermediate holding company. Chiquita believes the payment defaults at CBII should not impact the continuing business of its operating subsidiaries, nor cause any material defaults of subsidiary indebtedness. The Ca ratings on the senior notes reflect the likely recovery values, given their unsecured position at CBII, whose primary asset would be equity in an intermediate holding company. The senior note issues downgraded to Ca include: * $175 million 9 1/8% notes, due 2004; * $250 million 9 5/8% notes, due 2004; * $200 million 10% notes, due 2009; and * $150 million 10 1/4% notes, due 2006. The C rating on the convertible subordinated debenture and "c" rating on the preferred stock reflect their subordinated position at CBII. Chiquita Brands International, Inc. is based in Cincinnati, Ohio. The company is a leading global producer of bananas, and marketer and processor of fruits and vegetables. CLASSIC CABLE: Moody's Junks Senior Subordinated Debt Rating ------------------------------------------------------------ Moody's Investors Service lowered the debt rating for Classic Cable, Inc. as follows: * $375 million of senior subordinated notes from B3 to Caa1 * B1 senior implied lowered to B2 * B2 senior unsecured issuer ratings lowered to B3 All ratings remain under review for possible further downgrade. Moody's action reflects Classic's weaker than expected operating performance relative to original expectations, along with a very tight liquidity position and related revisions to Moody's expected loss assumptions for senior subordinated noteholders. Moody's believes the prospect of a near-term event of default, and potentially an interest payment default, is increasingly likely. The continuing review started on November 27 last year, and will focus management's ability to effect certain asset sales and/or monetization activities that are deemed necessary to preclude what in Moody's estimation are near-certain financial covenant violations at the end of the first quarter, and the likely ramifications of such an event of default in their absence. Moody's will also evaluate the longer-term viability of the company, and management's ability to improve the operating profile by abating further subscriber erosion to competing multichannel video service providers and enhancing the economic returns from the retained subscriber base, as balanced by the capital requirements to do so and the ability of the cable operations to adequately support and service the company's debt load. Classic Cable is a domestic multiple cable system operator with approximately 404,000 subscribers. The company is relocating its headquarters to Tyler, Texas. COUNTRYCOOL.COM: On-Line Country Music Site Shuts Down Operations ----------------------------------------------------------------- CountryCool.com Inc., an online country music site that last year significantly reduced its presence in Nashville, Tenn., will cease operating its web site at the end of this month due to financial difficulties, according to a newswire report. CountryCool.com initially secured $2 million in start-up financing from Nashville- based Gaylord Entertainment Co. and the Next Generation Fund, a Fairfax, Va.-based high-tech venture capital fund. But last year the company ran into financial problems and a lack of funding forced it in June to temporarily shut down its Nashville office, just three months after moving into a $810,000 Music Row office. (ABI 18-Jan-2001) DENMANS.COM: On-Line Jeweler Shuts Down Website & Directors Resign ------------------------------------------------------------------ Denmans.com, the online jeweler, yesterday closed down its web site and ceased operations due to a lack of additional funding, according to a newswire report. While the company looks for a strategic partner and/or a possible sale of its operation, four of its directors - Terry Bowering, Nancy Pier Sindt, Brigette von Engelbrechten and Drew Parker - have resigned, as has Kurt Dohlen, the firm's chairman. The board of directors said they had ceased web site operations in the company's best interests and are now seeking strategic alternatives. (ABI 18-Jan-2001) DESTINY RESOURCE: Obtains Bride Financing to Pay Past-Due Payables ------------------------------------------------------------------ Destiny Resource Services Corp. announced it has obtained working capital financing. Destiny is immediately applying over $4 million to accounts payable, including all accounts over 60 days. Bruce Libin, Chairman and Managing Director of Destiny, said that "the matters announced today, together with the strong environment for Destiny's operating businesses, make Destiny's management and Board very confident that 2001 will be a strong year for the Company. Our operations have been hampered by our corporate liquidity problems. The support announced today by our major shareholder, our Board, our senior management and our principal lenders puts Destiny in a position to seize the many opportunities in front of us to provide quality and value to our customers, stability in our relationships with our suppliers and meaningful returns to our shareholders." "This support, together with the sale or discontinuation of certain businesses by Destiny at year end, recent management changes and the provision for the prudent valuation of non-core assets, establishes the basis for a strong, focused operation in 2001. I am confident that our operations will generate cash and profits to let Destiny be viewed by our suppliers as a preferred customer and by our customers as a preferred supplier. Our continuing businesses, Wolf Survey and Mapping, Destiny Line Clearing, Double R Drilling, Battle River Construction, the McConnell Group of Companies and Destiny Drilling Overseas, collectively had a strong year in 2000, and are positioned to deliver sustainable earnings and cash flow in 2001 and beyond." Destiny also announced that it has entered into agreements with its largest shareholder and with its two principal lenders in relation to a bridge loan in anticipation of a rights offering, decreasing its near-term obligations to its major equipment financier and the previously announced conversion of accrued interest to equity. First Reserve Fund VIII, L.P. has advanced $3.5 million to Destiny as a bridge loan, the proceeds of which are immediately being applied to the payment of accounts payable. The loan bears interest at 13% per annum, is due June 30, 2001 and is secured by a subordinated debenture. Destiny has agreed to conduct a rights offering to its shareholders, entitling them to purchase additional Common Shares at $0.28 per share, with potential proceeds of almost $4 million. The proceeds will be used to repay the loan. If the proceeds are not sufficient to repay principal and interest on the loan, the unpaid balance will be converted to Common Shares at $0.28 per share. First Reserve and certain directors and officers of Destiny have committed to fully subscribe rights issued to them. First Reserve has converted interest on an existing debenture accrued to December 31, 2000 in the amount of $1,257,032 into Common Shares of Destiny at $0.25 per share (the closing price of Destiny shares on the date the conversion was approved by the Board of Directors of Destiny). Interest accruing from January 1, 2001 to June 30, 2001 will be converted to Common Shares on a monthly basis at a weighted average trading price, calculated monthly. As a result of the interest conversion, GMAC Commercial Credit Corporation - Canada, the Company's working capital lender, has released reserves of $900,000. Over $500,000 of this amount is being applied to the payment of accounts payable. RoyNat Inc., the Company's principal equipment lender has agreed to an amortization schedule for the payment of Destiny's approximately $8,000,000 obligation to RoyNat that provides for Destiny to repay RoyNat over 54 months, instead of approximately 30 months as per the prior arrangement. The impact of this is to reduce Destiny's debt service obligations to RoyNat by approximately $1.5 mm per year. Destiny also announced that it expects to report a net loss for 2000 of approximately $7 million. This amount includes approximately $5.9 million of losses from operations that were closed or sold in 2000 and provisions against the carrying value of non-core assets. The Company expects that it will report cash flow for 2000 from on-going operations of approximately $4.8 million and EBITDA for 2000 from on-going operations of approximately $9 million. The operations that were closed or sold in the fourth quarter of 2000 are Sharp Environmental, Destiny Oilfield Construction (formerly Fitzpatrick Contracting) and JD & ME Oilfield Construction. Mr. Libin expressed the appreciation of Destiny to First Reserve for, in effect, backstopping the planned rights offering. "The bridge loan enables us to move past some liquidity pressures while permitting all shareholders to equitably participate in the share issue we are planning." With the conversion of the accrued interest owed to First Reserve and the conversion of interest for the first half of 2001, and in the event of full conversion of the bridge loan principal and interest to Common Shares, First Reserve's ownership interest in Destiny would increase from approximately 34% to approximately 61%. "Like First Reserve, I and other members of Management have committed to fully exercise our rights. I anticipate other shareholders will as well as they understand Destiny's capacity and ability to produce sustainable earnings and cash flow" said Mr. Libin. Destiny expects to issue the rights, with accompanying disclosure material, to its shareholders in late first quarter or early second quarter 2001. The financing transactions described above were approved by Destiny's Board of Directors, with the representatives of First Reserve abstaining. The Board of Directors noted that Destiny had minimal availability on its credit lines, had a working capital deficiency and was in need of an immediate cash injection to meet its obligations to its customers and suppliers. The Board also noted that other alternatives such as monetization of non-core assets could not be accomplished on a timely basis. The Company relied on the "financial hardship" exemption from the valuation and minority approval requirements of OSC Rule 61-501. The Rule states that the exemption is available where: (1) the Company is in serious financial difficulty; (2) the transactions are designed to improve the financial position of the Company; (3) the "bankruptcy, insolvency or reorganization" exemption under the Rule is not applicable; and (4) the Board of Directors and not less than two-thirds of the independent Directors of the Company acting in good faith determine that paragraphs (1) and (2) are applicable and that the terms of the transactions are reasonable given the Company's circumstances. The material change report for the transactions will be filed less than 21 days before the expected date of closing of the transactions given the Company's immediate need for financing. First Reserve has advised Destiny that it has acquired the bridge loan convertible debenture and the 5,028,128 Common Shares of Destiny on the conversion of the accrued interest (and will acquire Common Shares on the further conversion of interest during the first six months of 2001) for investment purposes only and that unless Destiny requires additional financing, First Reserve has no immediate intention to acquire additional securities of Destiny except by virtue of the exercise of rights and conversion of the bridge loan convertible debenture. The number of shares to be issued on future interest conversion is dependent upon the price of Destiny's Common Shares on The Toronto Stock Exchange for each month through June, 2001. The number of shares that will be issued if the average price is $0.40, $0.35, $0.30 or $0.25 is approximately 992,000, 1,113,000, 1,322,000 and 1,587,000, respectively. Destiny is the only service company in Canada and internationally providing geophysical survey, line clearing and shothole drilling services from a single source, thereby offering its clients greater convenience and accountability in a complete front-end package. With over 25 years of operating experience in front-end services, together with a strategic presence in oilfield construction and maintenance, Destiny provides quality, integrated services to the oil and gas exploration and production industry in Canada and internationally. EDISON MISSION: S&P Continues CreditWatch & Negative Outlook ------------------------------------------------------------ In a press release issued last week, Standard & Poor's incorrectly reported that Edison Mission Energy Funding Corp.'s triple-'B'- minus rating had been removed from CreditWatch with negative implications. The rating is still on CreditWatch negative. Standard & Poor's on January 18 lowered its ratings on Edison Mission Energy Co.(EME) as follows: * EME's issuer credit rating to triple-'B'-minus from single- 'A'-minus; * EME's senior unsecured debt to triple-'B'-minus from single-'A'-minus; * EME's commercial paper program to 'A-3' from 'A-2'; and * EME's preferred securities to double-'B' from triple-'B'. The ratings were removed from CreditWatch Negative where they were placed on Dec. 13, 2000. The outlook is stable. Standard & Poor's also lowered its ratings on EME subsidiaries as follows: * Midwest Generation LLC's (MG) series A, $333.5 million pass-through certificates due 2009, and series B, $813.5 million pass-through certificates, due 2016, to triple-'B'- minus from single-'A'-minus; * Edison Mission Midwest Holdings Co.'s (EMMH) issuer credit rating to triple-'B'-minus from triple-'B', and EMMH's revolving credit facilities to triple-'B'-minus from triple-'B'; * Midwest Funding LLC's senior-secured bank notes rating to triple-'B'-minus from triple-'B'. The ratings were removed from CreditWatch Negative where they were placed on Dec. 13, 2000. The outlook is stable. The rating actions follow the revision of EME's company structure into a special-purpose entity that is bankruptcy remote from its parent, Edison International (EIX). On Jan. 16, 2001, Standard & Poor's downgraded its issuer credit rating on Edison International to double-'C' from triple-'B'-minus (see related article) and placed it on CreditWatch with negative implications. This new structure is designed to ring-fence EME and affiliates from the possible bankruptcy or further credit downgrade of EIX. The EME ratings are based primarily on the stand-alone creditworthiness and the perceived disincentives of the parent or its creditors of attempting to file EME into bankruptcy. EME has also adopted certain legal clauses to its constituent documents that permit a single-purpose entity classification. Though ring-fenced subsidiaries are often not rated appreciably higher than their parents for various economic and legal reasons, the extraordinary circumstances surrounding the California electricity market, the economic self-sufficiency of EME, the rationale for implementing the ring-fencing structure, and the ring-fencing provisions themselves allow Standard & Poor's more flexibility in this case. Standard & Poor's has assigned EME a rating higher than that of EIX primarily because of Standard & Poor's conclusion that creditors to EIX, and EIX itself, have numerous economic incentives not to file EME into bankruptcy following a EIX bankruptcy filing. This conclusion is based on the incremental liabilities that EME would incur from a bankruptcy filing that would materially reduce its value to EIX creditors, the potential loss of value of the going concern, and the fact that generally all of EME's assets are already encumbered with senior liens at the project level. These liabilities would be substantial and would likely include damages due to breach of energy trading and marketing hedges, equity commitment guarantees, debt service reserve replenishment obligations, lease guarantee obligations related to EME Midwest assets and general re-organizational costs. Moreover, an EME bankruptcy event would require EIX to cover additional material obligations of EME that would further dilute the financial resources available to EIX creditors. Standard & Poor's concluded that were an otherwise financially sound EME to file for bankruptcy, the adverse financial and contractual consequences of such a filing would likely outweigh any perceived advantages. As part of the ring-fencing restructuring, EME has adopted a restriction limiting its ability to declare dividends to EIX, and has appointed an independent manager whose assent is required for EME to file itself into bankruptcy. The dividend restriction can both protect and improve EME's financial position and its ability to meet its obligations under its guarantees. The ring-fenced structure should protect EME in all but extreme cases from rating downgrades that Standard & Poor's may take with respect to EIX. The EME rating reflects the following risks: -- Project risk concentration from four major merchant investments: Homer City (Edison Mission Holdings: issue rating triple-'B'-minus/Stable); EMMH; First Hydro (U.K.); and the Fiddler's Ferry and Ferrybridge (FFF: U.K.). These entities account for about 62% of cash flow. -- Cash flows to EME are structurally subordinate to project level debt and exposed to any potential re-leveraging of that debt. -- The increased scope of EME's business, which now includes large coal-fired generation, electricity trading and marketing, and the supply and distribution business may stretch existing core competencies. -- An aggressive asset acquisition strategy over the past two years may result in a debt burden that may be difficult to cover comfortably in the long run. Nonetheless, the following strengths adequately offset the risks: -- A portfolio of investments, including many well-performing contract-revenue projects, which will tend to minimize volatility of cash flow from growing merchant investments. -- A cash balance, as of Nov. 30, 2001 of $699 million that gives EME some financial flexibility; -- A corporate total recourse debt-to-adjusted capitalization ratio, as of Dec. 31, 2001, of 47-49%; -- EME's long-term excellent management record of project development and operations, which continue to limit operations risk; -- Continued strong performance of Homer City (17% of cash flow) due in part to capacity shortages in the Pennsylvania-New Jersey-Maryland markets and high gas prices that have driven electricity prices up; -- Continued strong performance of the First Hydro hydro project, which provides about 10% of cash flow; and -- The 2000 acquisition of Citizens Power that should provide EME with a much needed centralized, electricity marketing organization to manage EME's U.S. merchant operations. EME is an international power developer, based in Irvine, Calif., with investments in 77 projects totaling 28,827 MW of generation capacity (22,693 net MW). OUTLOOK: STABLE A record of receiving predictable cash distributions from a broad portfolio of well-operating projects, moderate corporate recourse debt, and expectations that distributions will continue to support a stable outlook. Moreover, the only fundamental change in EME's credit profile comes from the loss of its parent support. Nonetheless, should underlying project cash flows become more volatile, or if merchant risk increases, or trends downward, or both, a ratings downgrade could follow, Standard & Poor's said. GLOBALSTAR: Moody's Lowers Senior Unsecured Debt Ratings to Ca -------------------------------------------------------------- Moody's Investors Service performed the following ratings downgrades: * senior unsecured debt ratings of Globalstar, LP from Caa1 to Ca * preferred stock rating of Globalstar Telecommunications Ltd. from "caa" to "c" The ratings action concludes Moody's review for possible downgrade initiated in November. It reflects Globalstar's announcement that it suspended payments on all its funded debt obligations, and has hired The Blackstone Group to assist in restructuring efforts. Moody's says the ratings reflect limited prospects for recovery for Globalstar creditors in a restructuring given the company's very low subscriber levels and very modest growth. Globalstar, a joint venture between Loral Space & Communications, Qualcomm and other international satellite and telecommunications companies, is a global mobile satellite telephony provider. ICG COMMUNICATIONS: Engages Logan as Claims & Noticing Agent ------------------------------------------------------------ The large number of creditors and other parties in interest involved in ICG Communications, Inc.'s chapter 11 cases, the company tells the U.S. Bankruptcy Court in Wilmington, may impose heavy administrative and other burdens upon the Court and the Office of the Clerk of the Court. To relieve the Court and the Clerk's Office of these burdens, the Debtors propose to engage Logan & Company as a claims processing and noticing agent in these chapter 11 cases. Logan is a data processing firm that specializes in claims processing, noticing and other administrative tasks in Chapter 11 cases. The Debtors anticipate, as the Claims and Noticing Agent, that Logan will, at the request of the Debtors or the Clerk's Office: a. prepare and serve required notices in these chapter 11 cases, including: * a notice of the commencement of these chapter 11 cases and the initial meeting of creditors under the Code; * notice of claims bar dates; * notices of objections to claims; * notices of any hearings on a disclosure statement and confirmation of a plan of reorganization; * such other miscellaneous notices as the Debtors or the Court may deem necessary or appropriate for an orderly administration of these chapter 11 cases; b. within five business days after the service of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes: (i) a copy of the notice served; (ii) an alphabetical list of persons upon whom the notice was served, along with their addresses; and (iii) the date and manner of service; c. maintain copies of all proofs of claim and proofs of interest filed in these cases; d. maintain official claims registers in these cases by docketing all proofs of claim and proofs of interest in a claims database that includes the following information for each such claim or interest asserted; * the name and address of the claimant or interest holder and any agent thereof, if the proof of claim or proof of interest was filed by an agent; * the date the proof of claim or proof of interest was received by Logan and/or the Court; * the claim number assigned to the proof of claim or proof of interest; * the asserted amount and classification of the claim; and * the applicable Debtor against which the claim or interest is asserted. e. implement necessary security measures to ensure the completeness and integrity of the claims registers; f. transmit to the Clerk's Office a copy of the claims registers on a weekly basis, unless requested by the Clerk's Office on a more or less frequent basis; g. maintain an up-to-date mailing list for all entities that have filed proofs of claim or proofs of interest and make the list available upon request to the Clerk's Office or any party in interest; h. provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in these cases without charge during regular business hours; i. record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and provide notice of the transfers as required by Rule 3001(e); j. comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; k. provide temporary employees to process claims, as necessary; l. promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; and m. provide such other claims processing, noticing and related administrative services as may be requested from time to time by the Debtors. In addition, the Debtors seek to employ Logan to assist them with, among other things: a. the preparation of their schedules, statements of financial affairs and master creditor lists and any amendments thereto; b. the reconciliation and resolution of claims; and c. the preparation, mailing and tabulation of ballots for the purpose of voting to accept or reject a plan or plans of reorganization. The Debtors have agreed to make an advance payment to Logan to be applied to the final billing in an amount equal to $50,000. The Debtors have agreed to compensate Logan according to this fee schedule: INTERNAL RECONCILIATION REPORTING Claim Variance Reports, Claim Workbook, etc. Report Processing & Print $100 Per Request Customized Layout $90 Per Hour CONSULTING Account Executive Support $145 Per Hour Statement & Schedule Preparation $200 Per Hour Programming Support $100 Per Hour Project Coordinator $105 Per Hour Data Entry $50 Per Hour Clerical $35 Per Hour CLAIMS DOCKETING Claims Date Stamped, Mylar Label Affixed, and Input to Database $50 Per Hour Claims Microfilmed For the Court $0.25 Per Image TELECOMMUNICATIONS On-site Connection to Mainframe $0.30 Per Minute OTHER SERVICES Copies .15 Each Newspaper and Legal Notice Publication Quoted As Required Fax $1.00 Per Page (ICG Communications Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) JCC HOLDING: Casino Restructuring Takes Toll on Harrah's Earnings ----------------------------------------------------------------- Harrah's Entertainment, Inc. (NYSE: HET), said it expects to report a net loss of $1.36 to $1.40 per diluted share for the fourth quarter of 2000. The company said the net loss is due primarily to certain restructuring and other special charges that were recorded in the quarter: -- Reserves of approximately $220 million related to the previously announced bankruptcy reorganization of JCC Holding Company, which is approximately 43 percent owned by Harrah's Entertainment. The impact of the reserves on the fourth-quarter results is estimated to be approximately $1.25 per share after tax. -- Reserves of approximately $39 million related to the previously announced bankruptcy reorganization of National Airlines, which is approximately 48 percent owned by Harrah's Entertainment, in addition to its share of fourth-quarter operating losses, which approximate $2 million. The impact of these losses on Harrah's Entertainment's fourth-quarter earnings per share is estimated to be 23 cents after tax. -- Losses and reserves of approximately $16 million, or 9 cents per share after tax, related to other write-offs and reserves, net of recoveries; project opening costs, and incremental depreciation related to assets to be removed from service in 2001. Harrah's operating results also were impacted by the: -- Lower than normal hold percentage at the Rio. The hold percentage was low in October and November, but December's hold percentage was above normal. The impact on the quarter as a whole was an estimated 4 cents per share after tax. -- Weather-related disruptions affected results at Eastern and Central Region casinos, reducing per-share earnings by an estimated 7 cents after taxes. Harsh winter weather throughout the Central Region affected patronage during the key Christmas to New Year's holiday period. -- Losses arising from mark-to-market adjustment of insurance contracts held by the company amounted to approximately $5 million, or an estimated 3 cents per share after tax. Fourth-quarter diluted earnings per share, adjusted for the impact of the items discussed above, is expected to range from 31 to 35 cents. "Due to the expected reduction of losses associated with Harrah's New Orleans, which assumes a successful reorganization of JCC Holding by March 31, and the expected reduction of losses related to National Airlines, we believe the strong performances of our core Harrah's brand properties should enable Harrah's Entertainment to meet or exceed analysts' current consensus estimates for year 2001 earnings per share," said Phil Satre, Chairman and Chief Executive Officer. "The year 2000 was disappointing for us," he said. "Stellar operating results at most of our properties were offset by issues in New Orleans, National Airlines and the Rio. But I believe we are about to put those issues behind us. "We are looking at a very stable competitive supply situation in most markets for 2001," Satre said. "Demand appears to be firm and our consumer marketing-based strategy is firing on all cylinders. I believe Harrah's has an excellent opportunity to grow revenues and earnings organically by capitalizing on our geographic distribution, brand strategy, Total Rewards player-loyalty program, information technology capabilities and emphasis on customer service. We also are making carefully targeted capital investments at some of our existing locations where we can see the opportunity for appropriate returns. "We believe we are ahead of competing casino operators in using our investment in technology to build strong customer relationships. Aside from weather problems, the fourth-quarter performances at key Harrah's brand properties provide a compelling example of the power of Total Rewards in convincing customers to consolidate their casino play at our properties," he said. "The year 2001 will be the first year Total Rewards is integrated into all of our properties, and we expect it will help drive continued same-store sales growth." Founded more than 60 years ago, Harrah's Entertainment, Inc. is the most recognized and respected name in the casino-entertainment industry, operating 21 casinos in the United States under the Harrah's, Showboat, Rio and Players brand names. With a combined database of more than 19 million players, Harrah's Entertainment is focused on building loyalty and value with its target customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. KEYSTONE CONSOLIDATED: Moody's Downgrades Ratings to Junk Status ---------------------------------------------------------------- Moody's downgraded ratings for Keystone Consolidated Industries, Inc., as follows: * $100 million of 9.625% senior secured notes from B3 to Caa3. The notes are due 2007. * $60 million senior secured revolving credit facility from B2 to Caa1 * senior implied rating from B3 to Caa2 * senior unsecured issuer rating from Caa1 to Ca The outlook remains negative. The downgrades reflect continuing weak market conditions for wire products, Keystone's negative free cash flow, and its very limited liquidity. Moody's believes there is a heightened potential of Keystone defaulting on its debt, and that the company will have nearly used up its liquidity in February. The $4.8 million semiannual interest payment on its 9.625 senior secured notes is due February. For the first nine months of 2000, Keystone earned EBITDA of $12.6 million, which did not cover interest and capex of $21.2 million. While Keystone has taken steps to reduce its losses, no significant change in its free cash flow is likely in the near term, as the ongoing weakness in US fabricated wire and rod markets could well continue through at least the first half of 2001. Keystone Consolidated Industries, Inc., headquartered in Dallas, manufactures fabricated wire products, industrial wire, and carbon steel rod for the agricultural, industrial, construction, OEM, and retail consumer markets. LANGUAGEWARE.NET: Shuts Down Operations & Pares to Skeleton Staff ----------------------------------------------------------------- LanguageWare.net, parent company of multilingual, multicultural B2B technology firm Wholetree.com, is shutting down, according to a newswire report. On Jan. 5, the company said that unless it received offers or funding for the business, it would be forced to commence the dissolution of the business. LanguageWare.net is, however, still looking to sell its core technology. Seventeen of its 23 U.S. employees have been laid off, leaving a skeleton staff to wind up operations. (ABI 18-Jan-2001) LERNOUT & HAUSPIE: UST Appoints Official Creditors' Committee ------------------------------------------------------------- Patricia A. Staiano, the United States Trustee for Region III, has confirmed the appointments to the Official Committee of General Unsecured Creditors of the following institutions and their respective representatives or counsel: Fortis Bank N.V./S.A. KBC Bank N.V. Deutsche Bank N.V. State Street Bank & Trust Company as Indenture Trustee Wilmington Trust Company as Indenture Trustee U. S. Trust Company of New York As Indenture Trustee JVC Americas Corporation Studio Tognini B.V. By letter directed to Ms. Staiano, Bradley J. Lucido, Vice President for Merrill Lynch Investment Managers, announced that Merrill Lynch Corporate Bond Fund, Inc. - High Income Portfolio, resigned immediately after its appointment. Mr. Lucido says that the Committee, as currently composed, is controlled by creditors of Lernout & Hauspie Speech Products N.V. and L&H Holdings USA, with conflicting interests to those of the Dictaphone creditors. As a result, Merrill Lynch believes that the Committee cannot adequately represent the interests of the holders of the holders of the Dictaphone 11-3/4% Senior Subordinated Notes due 2005. Mr. Luciso urges the U.S. Trustee to appoint a separate unsecured committee in the Dictaphone case, or alternatively, a separate committee of Dictaphone bondholders. (L&H/Dictaphone Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392- 0900) LERNOUT & HAUSPIE: Establishes New Credit Line with Banking Group ----------------------------------------------------------------- Belgian banking group KBC Bancassurance spokesman Piet Jaspaert told Reuters Wednesday they were currently negotiating with Lernout & Hauspie Speech Products N.V. to establish a new credit line, but did not provide any details. L&H, which has $489.6 million in debt, claimed earlier this month to be in talks to acquire $60 million debtor-in-possession financing. Mr. Jaspaert added that negotiations could be completed soon, and that Philippe Bodson's appointment Tuesday as L&H's new CEO would "absolutely" help negotiations, Reuters said. Belgian-Dutch financial services group Fortis is also involved in the negotiations, according to Belgian newspaper De Financieel Economische Tijd. KBC and Fortis were part of a syndicate of five banks that had lent L&H about $430 million to finance its acquisition last year of Dictaphone Corp. The banks called in their loans in November after L&H missed a payment and talks to reschedule the debt broke down. The move forced L&H to file for bankruptcy protection in the United States and in Belgium. LERNOUT & HAUSPIE: Reuters Says DaimlerChrysler Shows Interest -------------------------------------------------------------- An "unidentified industry source" told Reuters late last week that DaimlerChrysler may be interested in buying the speech-recognition developer's technology part of Belgium's Lernout & Hauspie Speech Products N.V. while it goes through the bankruptcy restructuring process. The source said the German-American auto group's interest was very tentative, and that the acquisition would be of minor significance to DaimlerChrysler and would be more of an opportunity purchase than a strategic move, Reuters relates. The technology allows drivers to make phone calls or surf the Internet through voice commands. A DaimlerChrysler spokeswoman called the information "pure speculation" and declined to comment, Reuters said. Officials at L&H also declined to comment. LERNOUT & HAUSPIE: Shareholders Eye Auditors as Target Defendants ----------------------------------------------------------------- Michael Lange, representing shareholders of bankrupt speech recognition software company Lernout & Hauspie Speech Products N.V. and Dictaphone Corp., said shareholders plan to sue the company's auditors KPMG International, Reuters relates. Mr. Lange is a partner at Boston law firm Berman, DeValerio & Pease. The firm is handling one of the shareholder lawsuits seeking class- action status against L&H. "Whenever you have a massive accounting fraud like this one when the fraud is pervasive, the question is not if you're going to sue the auditors but when you sue the auditors," Mr. Lange told Reuters Thursday. He added, "Lead counsel has not been appointed. Once that happens KPMG will be front and center." The case was filed in U.S. District Court in Boston. LERNOUT & HAUSPIE: Chairman Roel Pieper Resigns ----------------------------------------------- The Board of Directors of Lernout & Hauspie Speech Products N.V. (EASDAQ: LHSP, OTC: LHSPQ), a world leader in speech and language technology, products and services, announced that Roel Pieper resigned his position as Chairman of the Board of Directors. A new board of directors will be elected, and a new chairman will be appointed, following an upcoming extraordinary shareholders meeting. Roel Pieper said, "I want to give L&H's new CEO, Philippe Bodson, complete latitude to form a new management team that will guide the company through the next stage of its recovery plan and beyond. I fully support and have the utmost confidence in Philippe, who is well qualified to lead this effort. In addition to making room for new leadership, I wish to dedicate more of my time to my position at Insight Capital and to my professorship at the University of Twente in the Netherlands." Philippe Bodson, President, Chief Executive Officer and Managing Director, said, "Roel played a leading role in securing reorganization protection for L&H in Europe and the U.S., which has enabled our company to proceed with a recovery plan. We thank Roel for his invaluable contribution toward rebuilding L&H and understand his wishes to focus his energies on his venture capital projects and teaching." Separately, the Company also announced that board member Bernard Vergnes, former President of Microsoft Europe, resigned two weeks ago. About Lernout & Hauspie Lernout & Hauspie (L&H) is a global leader in advanced speech and language solutions for vertical markets, computers, automobiles, telecommunications, embedded products, consumer goods and the Internet. The company is making the speech user interface (SUI) the keystone of simple, convenient interaction between humans and technology, and is using advanced translation technology to break down language barriers. The company provides a wide range of offerings, including: customized solutions for corporations; core speech technologies marketed to OEMs; end user and retail applications for continuous speech products in horizontal and vertical markets; and document creation, human and machine translation services, Internet translation offerings, and linguistic tools. L&H's products and services originate in four basic areas: automatic speech recognition (ASR), text-to-speech (TTS), digital speech and music compression (SMC) and text-to-text (translation). For more information, please visit Lernout & Hauspie on the World Wide Web at www.lhsl.com. L&H is a trademark of Lernout & Hauspie Speech Products N.V. in the United States and/or other countries. All other product names or trademarks referenced herein are trademarks of their respective owners. LERNOUT & HAUSPIE: Judge Allows AllVoice Computing to File Suit --------------------------------------------------------------- U.S. Bankruptcy Judge Judith Wizmur granted British company AllVoice Computing Plc a preliminary injunction to prevent Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. from selling a voice recognition software product called NaturallySpeaking, Reuters relates. AllVoice claims in its patent-infringement lawsuits, filed in a U.S. district court and at the First U.S. Circuit Court of Appeals, that the 3.25 and 5.0 versions of NaturallySpeaking infringe on its U.S. patent of WordExpress. WordExpress is a dictation software product that converts speech into written words. An automatic bankruptcy court stay prevented AllVoice from pushing through with its lawsuits. L&H attorneys told the judge that NaturallySpeaking was a mainstay among the company products and would affect the reorganization if subject to injunction, Reuters said. LOEWEN GROUP: Resolves Claims Asserted by American Commercial Bank ------------------------------------------------------------------ To resolve the Stay Relief Motion and related matters, The Loewen Group, Inc. and American Commercial Bank agree and stipulate that: (1) The Debtor shall make a Catch-Up Payment to ACB in the amount of $22,861.77 on the Agreement Effective Date, that is, the date that the Agreement becomes a final, nonappealable order of the Court; such amount is equal to the amount of interest accrued from March 1, 2000 through September 30, 2000, calculated at the appplicable non default rates. (2) The Debtor shall make monthly Future Payments to ACB in the amount of $3,307.63 on the first business day of each month beginning on November 1, 2000, provided that the Agreement Effective Date has occurred, until a plan of reorganization is confirmed by the Court or any other further order of the Court addressing the obligations arising under the 1999 Agreement; such amount is the amount of interest that would have accrued during the month prior to payment on the outstanding principal balance under the 1999 Agreement at a non-default interest rate of 12% per annum. (a) To the extent that the amount of any Future Payment is greater than the Actual Amount of interest, the difference shall be applied to reduce the outstanding principal balance under the 1999 Agreement. (b) To the extent that the amount of any Future Payment is less than the Actual Amount, the difference shall be payable, without interest, pursuant to the terms of the Confirmation Order or such other further order of the Court addressing the obligations under the Loan Documents. (3) Future Payments shall be considered timely so long as they are received by ACB on or before the 10th calendar day of the applicable month; if a Late Fee Amount, Catch-Up Payment or Future Payment required under the Stipulation and Order is not received by ACB by the 10th calendar day of the applicable month, then: (a) ACB or its counsel shall provide notice of the non- receipt of such payment by telecopier to the counsel to the Debtors. (b) The Debtors shall have 10 days after its counsel receives such a notice to cure any such late payment. If the Debtors fail timely to exercise their cure right, ACB may schedule a hearing in the Court with respect to the relief requested in the Motion on not less than 30 days' notice and provide notice to the counsel to the Debtors with the date of such hearing. (4) The Catch-Up Payment and the Future Payments shall be credited first to interest and then to principal under the 1999 Agreement. (5) The Debtors' obligation in respect of the late payment of installments up to the time of the Stipulation is agreed to he equal to the amount of $3,100 (the Late Fee Amount); the Debtors shall pay one-half of the Late Fee Amount to ACB on the Agreement Effective Date and the remaining one-half in accordance with the Confirmation Order or such other further order of the Court addressing the issue. (6) The parties agree that the amount of interest that accrued under the 1999 Agreement for the period from July 11, 1999 through and including February 29, 2000 is $23,563.25 which shall be payable, without interest, pursuant to the terms of the Confirmation Order or such other further order of the Court addressing the matter. (7) Other than the Late Fee Amount, so long as the Catch-Up Payment, the First Late Fee Amount Payment and the Future Payments are made in a timely fashion as contemplated in the Stipulation, ACB waives any right that it may have under the Loan Documents to a claim for late fees or charges, prepayment premiums, acceleration fees, premiums or penalties or "interest on interest" on account of untimely payments under the Loan Documents. (8) ACB waives any right that it may have under the Loan Documents to a claim for interest on account of untimely payments at any "default" or "penalty" rate exceeding the applicable nondefault rate. (9) ACB and the Debtors reserve their rights concerning: (a) a determination of the value of ACB's collateral; and (b) any contractual or statutory rights that ACB may have under section 506(b) of the Bankruptcy Code or other applicable law to assert and be paid a claim for reasonable fees (including attorneys' fees), costs or charges under the Loan Documents. (Loewen Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORPORATION: Judge Issues Vendor & Supplier Comfort Order ------------------------------------------------------------- Judge Bodoh issued an order at the Debtors' behest confirming the statutory administrative expense priority status of The LTV Corporation's undisputed obligations to suppliers for the postpetition delivery of goods and provisions of services. In the ordinary course of the Debtors' businesses, numerous suppliers and service providers provide the Debtors with goods and services that are integral to the Debtors' on-going operations. In addition, as of the Petition Date, the Debtors had outstanding prepetition purchase orders with numerous suppliers, including outstanding orders for a variety of raw materials and supplies that the Debtors require to produce finished goods for their customers and maintain current production schedules. As a result of the commencement of these Chapter 11 cases, the Debtors believe that the suppliers may perceive a risk that they will be treated as prepetition general unsecured creditors for the invoiced cost of any supply shipments made or services provided after the Petition Date pursuant to outstanding orders. In particular, certain suppliers may incorrectly assess their risk of non-payment based upon prior unfavorable experiences in the steel industry, including losses incurred (a) in other steel manufacturer reorganizations, and (b) in connection with the failures of certain steel-related businesses under current adverse market conditions. As a result, the suppliers may refuse to ship raw materials and supplies to the Debtors or provide essential services to the Debtors unless the Debtors issue substitute postpetition purchase orders or provide other assurances of payment. Issuing substitute purchase orders on a postpetition basis would be administratively burdensome, time consuming and counterproductive to the Debtors' reorganization efforts. Such a requirement imposed by suppliers - or other request for assurance of payment - inevitably will lead to delays in the Debtors' receipt of essential goods and services, ultimately (a) resulting in the disruption of established production schedules and "just in time" distribution systems, and (b) hindering the Debtors' ability to fulfill their obligations to their customers. Moreover, even if new postpetition purchase orders are issued, there is no assurance that suppliers will feel sufficiently confident of the Debtors' ability to pay for new goods and services to continue doing business with the Debtors without interruption. Under these circumstances, Judge Bodoh confirmed that the Debtors' undisputed obligations to suppliers arising from (a) shipments of goods delivered to and accepted by the Debtors following the Petition Date and (b) the provision of services to the Debtors following the Petition Date at the Debtors' request will be entitled to administrative expense priority status under the Bankruptcy Code. (LTV Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) MEDICAL ARTS: Sells Assets and Lab Operations to Dynacare --------------------------------------------------------- Dynacare Inc. (NASDAQ: DNCR), a leading provider of clinical laboratory services in North America, said it signed an agreement to purchase the laboratory operations and assets of Medical Arts Laboratory, Inc. and Southern Medical Arts Laboratory, Inc. Medical Arts Laboratory, Inc., Southern Medical Arts Laboratory, Inc., and the parent company, Southern Medical Arts Companies, Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code in October of 2000. Since then, all three companies have continued to operate under Chapter 11. This agreement is subject to the approval of the Bankruptcy Court for the Western District of Oklahoma. Dynacare's expertise in target regional markets and hospital partnerships allow the company to provide innovative and trusted clinical laboratory services to its clients, their patients and professional partners. Dynacare provides services in 18 U.S. states, with a significant presence in Canada. Dynacare's laboratory partners include: Memorial Hermann Healthcare System in Houston, TX, University Health System, Inc. in Knoxville, TN (Owner/Operator of the University of Tennessee Medical Center), Froedtert Memorial Lutheran Hospital in Milwaukee, WI, and Allegheny General Hospital, a member of the West Penn Allegheny Health System in Pittsburgh, PA. NORTHPOINT COMMUNICATIONS: Case Summary --------------------------------------- Debtor: NorthPoint Communications Group, Inc. fka Northpoint Communications Holdings, Inc. 303 2nd St. S Tower San Francisco, CA 94107-1366 Debtor affiliates separately filing for chapter 11 petitions in the same court: NorthPoint Communications of Virginia NorthPoint Communications, Inc. aka Firstmile Communications, Inc. NorthPoint International, Inc. fka Northpoint Europe, Inc. Type of Business: Provides dedicated Internet access service via DSL technology. Chapter 11 Petition Date: January 16,2001 Court: Northern District of California (SanFrancisco) Bankruptcy Petition Nos.: 01-30125 through 01-30128 Judge: Thomas E. Carlson Debtors' Counsel: Michael S. Lurey, Esq. Law Offices of Latham and Watkins 633 W 5th St. #4000 Los Angeles, CA 90071 213-485-1234 NORTHPOINT COMMUNICATIONS: Moody's Issues Further Downgrades ------------------------------------------------------------ Moody's Investors Service downgraded the ratings of Northpoint Communications Group, Inc. as follows: * $400 million senior unsecured notes due 2010 from Caa2 to Ca * senior implied rating from Caa1 to Caa3 * issuer rating from Caa2 to Ca This concludes the review for possible downgrade initiated November 30 last year. Northpoint announced January 16 that it had filed a voluntary petition for bankruptcy under Chapter 11 of the US bankruptcy code. The company also announced it would proceed with a structured sale of substantially all business and assets. Northpoint intends to seek approval of open bid procedures from the U.S. Bankruptcy court. The company has received conditional commitment for Debtor-in-Possession financing for up to $38 million to allow it to continue operations. Northpoint is based in San Francisco, California and provides dedicated Internet access service via DSL technology. OWENS CORNING: Walks Away from Burdensome Warehouse Leases ---------------------------------------------------------- Owens Corning moved for an Order authorizing the rejection of leases of nonresidential real property effective as of January 17, 2001. The lessors, the property, and the rental and expiration date of these leases are: Location: Norandex Bowling Green, Bowling Green, Kentucky Landlord: Blue Ridge Group, Inc. 1953 Scottsville Rd, Ste. 201 Bowling Green, KY 42104 Expiration: 7/31/01 Base Rent: $ 4,781.25 monthly Location: Norandex Buffalo NY DC-016, Cheektowago, NY Landlord: Commercial Properties Associates P. O . Box 391440 Solon, Ohio 44139 Expiration: 3/31/01 Base Rent: $6,029.32 monthly Location: OEM Columbus Fab Warehouse, Grove City, Ohio Landlord: Accurate Logistics, Ltd. 3330 Urbancrest Industrial Drive Grove City, Ohio 43123 Expiration: 3/31/01 Base Rent: $11,400 monthly Location: OEM Oklahoma City Plant, Oklahoma City, OK Landlord: Crossroads Distribution Center LLC 6403 N. Grand Blvd., Ste. 200 Oklahoma City, OK 73116 Expiration: 12/31/04 Base Rent: $14,750 monthly These locations were previously leased by the Debtors for use as warehouses. In addition to the obligation to pay rent, the leases in general also obligate the Debtors to maintain insurance, perform certain property maintenance and incur other related charges. The Debtors have determined, in their business judgment, that these substantial costs constitute an unnecessary drain on their cash resources. By rejecting these leases now, the Debtors will avoid incurring unnecessary administrative charges that provide no tangible benefit to the Debtors' estates, creditors or interest holders. The Debtors believe these leases are either at or above market rental rates and therefore that the Debtors would be unable to obtain any value for the leases through assumption and assignment. According, the Debtors have asked Judge Walrath to permit their rejection in the best interests of these estates. (Owens Corning Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: S&P Assigns BBB Rating to PG&E National Energy Group ----------------------------------------------------------------- Standard & Poor's assigned its triple-'B' corporate credit rating to PG&E National Energy Group Inc. (NEG). At the same time, Standard & Poor's raised its ratings on PG&E Generating Co. L.L.C (PGen) and USGen New England Inc. (USGenNE), wholly owned subsidiaries of NEG, to triple-'B' from triple-'B'-minus. The ratings on NEG, PGen, and USGenNE reflect the consolidated strength of the group owned by NEG. Standard & Poor's also removed the ratings of PGen and USGenNE from CreditWatch Negative where they were placed on Dec. 13, 2000. The outlooks are stable. Standard & Poor's also affirmed its ratings on NEG's subsidiaries as follows: * PG&E Gas Transmission-Northwest (GTN) at single-'A'-minus; * PG&E Energy Trading Holdings Co. (ETH) at triple-'B'-plus; * Indiantown Cogeneration Funding Corp. at triple-'B'-minus; * Selkirk Cogen Funding Corp. at triple-'B'-minus; * Northampton Generation Co. L.P. at triple-'B'-minus; and * Panther Creek Partners at triple-'B'-minus. The outlooks are stable. The rating actions follow the formation of a new special-purpose, bankruptcy-remote entity, NEG Holdings LLC (NEG Holdings), and the contribution by PG&E Corp. to NEG Holdings of 100% of the issued and outstanding shares of NEG. PG&E Corp. will own all of the membership interests of NEG Holdings while the latter will hold all of the outstanding shares of NEG. PG&E Corp. (double- 'C'/CreditWatch Negative/'C') is also the parent of Pacific Gas & Electric Co. (Pacific Gas & Electric), a regulated utility (double-'C'/CreditWatch Negative/'C'). NEG, a wholly owned subsidiary of PG&E Corp., has ownership and management responsibilities in 30 power plants in 10 states, with a combined generating capacity of nearly 7,700 MW and more than 10,000 MW under construction or in advanced development. NEG is also engaged in wholesale energy marketing and risk management, which is conducted by ETH and owns GTN, a 612-mile Federal Energy Regulatory Commission regulated pipeline, which extends from the Canadian border to the California/Oregon border and transports 2.7 bcf/day of natural gas. The triple-'B' rating on NEG reflects the following risks: -- Asset concentration in the Northeast region of the U.S., which is expected to contribute about 40% of the overall corporate 10- year average cash flow; -- Concentration in natural gas-fired generating stations, which are expected to comprise more than 50% of overall corporate cash flow; -- Debt at PGen is structurally subordinated to more than $1 billion of debt at the project level; -- Over the next 10 years, NEG will rely on merchant generation for more than 30% of its overall cash flow; -- An aggressive construction program with more than 30% of the 10-year average cash flow contributed by projects currently under construction; -- Use of Siemens Westinghouse 501G and ABB GT24B turbines in its construction program, which use less commercially proven technology; and -- Bullet maturities and significant guarantees that will have to be financed. However, the following strengths offset the risks: -- Strong quality of cash flow-18% of NEG's 10-year average cash flow coming from PG&E Gas Transmission, a single-'A'-minus rated regulated pipeline. -- A portfolio of operating power projects, of which more than 50% of the cash flow is contributed by investments that have investment-grade characteristics. -- Over the past three years, NEG demonstrated a strong operating record with availability averaging 94%. -- Strong projected consolidated funds-from-operations interest coverage at more than 4 times for the five-year period through 2005. Standard & Poor's has assigned NEG's rating based primarily on NEG's stand-alone creditworthiness. NEG's rating is higher than PG&E Corp.'s because of the perceived economic disincentives of PG&E Corp. or its creditors to file these subsidiaries into bankruptcy. Though ring-fenced subsidiaries are often not rated appreciably higher than their parents for a number of economic and legal reasons, the extraordinary circumstances of the California problem, the economic self-sufficiency of NEG, the rationale for implementing the ring-fencing structure, and the ring-fencing provisions themselves allow Standard & Poor's more flexibility in this instance. Along with certain other considerations, the interposition of NEG Holdings between PG&E Corp. and NEG structurally insulates, or ring-fences NEG from the possible bankruptcy or further credit downgrade of PG&E Corp. GTN and ETH, which were previously ring- fenced from PG&E Corp., remain ring-fenced from both PG&E Corp. and NEG and therefore carry higher ratings than NEG. As part of this restructuring, NEG will assume a significant amount of guarantees currently provided by PG&E Corp. to various subsidiaries of NEG. With respect to such guaranteed obligations, NEG will substitute its own creditworthiness for that of PG&E Corp. The rating of NEG incorporates the assumption of these guarantees by NEG. Standard & Poor's also notes that, as part of the ring-fencing restructuring, NEG has adopted a restriction limiting its ability to declare dividends. Standard & Poor's views this dividend restriction as improving NEG's financial position and its ability to meet its obligations. In Standard & Poor's opinion, the ring-fenced structure should protect NEG and its subsidiaries in all but extreme cases from rating downgrades that Standard & Poor's may take with respect to either PG&E Corp. or Pacific Gas & Electric. Standard & Poor's concludes that if an otherwise healthy NEG is filed into bankruptcy, the adverse financial and contractual consequences of such a filing would likely outweigh any advantages. While the asset base of NEG is large (more than $10 billion), a large proportion of these assets are pledged to secure project-financed debt. In addition, should NEG be consolidated in a bankruptcy of PG&E Corp., a significant amount in contingent liabilities may become immediately due and payable. In Standard & Poor's view, NEG's value as a going concern (not included in any bankruptcy proceedings of PG&E) is greater than if it was part of a consolidated bankruptcy filing; outside of bankruptcy, a large portion of NEG's contingent liabilities (those relating to the energy marketing and trading) probably would not be called. Moreover, the effect of the ring-fencing should, at worst, be neutral to PG&E Corp. creditors because NEG contributed a small amount of cash flow to PG&E Corp.--less than 10% of PG&E Corp.'s cash flow -- and PG&E Corp. is being relieved of its obligations under significant guarantees. Standard & Poor's believes any loss of liquidity resulting from the implementation of the dividend restriction is outweighed by the benefit of transferring the guarantees to NEG. OUTLOOK: STABLE The stable outlook reflects the strong, stable and predictable cash flow contributed from NEG's investments. Further, the outlook anticipates a financial profile that remains strong in comparison with its peers and demonstrates only gradual improvement. A demonstrated ability to operate in a restructured power market will be needed for any ratings upgrades, Standard & Poor's said. - --CreditWire PACIFIC GAS: Fitch Cuts Preferred Securities' Rating to C --------------------------------------------------------- Fitch lowered its ratings of Pacific Gas and Electric Company (Pac Gas) preferred securities based on nonpayment of maturing commercial paper. Pac Gas has not paid its $33 million of commercial paper which matured January 17, and omitted dividends on its preferred stock last week. The utility maintains cash reserves of approximately $700 million, but has stated it is not in a position to pay maturing or accelerated obligations. Fitch initially lowered the ratings of Pac Gas below investment grade on January 4, reflecting Fitch's view that default on this debt is a real possibility. Because Pac Gas' first mortgage debt has a healthy margin of collateral relative to outstanding secured debt, Fitch is not changing the rating for that security class. The Rating Watch remains at Evolving. The new ratings are: Pacific Gas and Electric Company: -- First mortgage bonds remain at 'B-'. -- Preferred securities lowered to 'C' from 'CC'; Great uncertainty remains, even if a deal is brokered with large power suppliers and acted upon by the California legislature. If a deal is reached, there is no guarantee that Pac Gas will receive sufficient cash to make timely debt and trade payments. Further, a small group of unpaid suppliers could file a petition for an involuntary bankruptcy, even if the principal group of creditors reaches an agreement. Unless a rescue package emerges to provide immediate cash, a voluntary filing may become Pac Gas' most expedient option. Negotiations to structure long-term purchase and supply agreements continue in Washington and California. The California legislature is also attempting to remedy California's dysfunctional market and facilitate any long-term deal reached with suppliers. Key issues to be resolved within an extremely tight time frame include the future cost of procuring power, recovery of past and future costs for the utilities, recovery of Qualifying Facility costs, and the valuation and ownership of generation within the state. Resolution will likely need to come within the next two weeks. Pacific Gas and Electric Company is a wholly owned subsidiary of PG&E Corp., and is based in San Francisco, Calif. SAFETY-KLEEN CORPORATION: Seeks Extension of 9027 Removal Period ---------------------------------------------------------------- The Safety-Kleen Corporation is seeking to extend the time, pursuant to Rule 9027 of the Federal Rules of Bankruptcy Procedure, during which the bankruptcy estates may remove actions pending as of the commencement of these Chapter 11 cases to the District of Delaware for continued litigation and resolution. As of the Petition Date, Safety-Kleen reminds Judge Walsh, the Debtors were parties to hundreds of civil actions pending in various jurisdictions in the United States involving a variety of claims in contract or tort, as well as claims arising under federal, state, and local environmental laws. The Debtors have requested an extension of the removal period to the earlier to occur of (i) July 5, 2001, or (ii) 30 days after the entry of an Order terminating the stay with respect to any particular action sought to be removed. (Safety-Kleen Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392- 0900) SERVICE MERCHANDISE: Landlord Delivers Non-Disturbance Agreement ---------------------------------------------------------------- After the Court gave its approval for Service Merchandise Company, Inc. to sublease space at certain designated stores to TJX, the Debtors delivered to Melaver, Inc. (landlord of Store No. 157 located at Savannah, Georgia), a non-disturbance agreement (NDA). In response, the landlord sent the Debtors a letter advising that, despite the Court's ruling that the proposed transaction with TJX was a sublease, the landlord believed it to be an assignment. In the letter, the landlord enclosed a form of NDA acceptable to the landlord. The Debtors found that the form of NDA supplied by the Landlord does not comply with the Primary Lease because, other than by name, it is not an NDA. Specifically, this Landlord-proposed NDA provides that the Landlord's non-disturbance obligations terminate if the Debtors' interest in the Savannah Store is terminated. For the Debtors, this negates the protection of the NDA at the precise moment when it is most needed. In light of that, TJX advised the Debtors that it would not consummate the sublease transaction for the Savannah Store, the Debtors related. The Debtors explain that an NDA is an agreement whereby a party with a senior interest in real estate agrees not to disturb the rights of the holder of a junior interest in the same real estate. According to the Debtors, such an agreement is most commonly found where the party with the junior interest intends to make a substantial investment in the real estate or will otherwise generate value for the holder of the senior interest. Such an agreement, the Debtors opin, is particularly important where the holder of the senior interest and the holder of the junior interest are not in privity because in such circumstance, the holder of the junior interest has no contractual rights it can rely on to protect its investment. The Debtors remind the Court that in the case with the Savannah Store, TJX intends to invest substantial sums in the Store. In approving the TJX Sublease, the Court has found that this investment will benefit the Landlord. The Debtors advise that in the event that they continue their business, remain in the Savannah Store and otherwise comply with the Primary Lease, the Landlord would have no ability to interfere with TJX's interests. However, in the event that the Debtors' interest in the Savannah Store are terminated, the Primary Lease is rejected or, in the extreme case where the Debtors successfully emerge from chapter 11, the Landlord would be able to interfere with TJX's right to possess the Savannah Store. The Debtors complain that as a result of the landlord's actions regarding the NDA, the Debtors have been prevented from consummating the proposed transaction with TJX. Accordingly, the Debtors moved the Court to compel Melaver, Inc. to deliver an NDA in a form satisfactory to the Debtors. In the motion, the Debtors indicated that they remain willing to work with the Landlord to agree to an acceptable NDA. Following the Debtors' motion for compelling the landlord to deliver the NDA in compliance with the TJX Sublease order, Melaver, Inc. filed a motion requesting that the Court alter or amend its memorandum because Melaver believed that the Court had incorrectly characterized the TJX transaction on the Savannah Store as a "sublease" instead of an "assignment". Melaver also appealed under 28 U.S.C. section 158 to the United States District Court against the Bankruptcy Court's judgment authorizing "Debtors and the TJX Companies, Inc. to Enter into Sublease With Respect to Debtors' Store No. 157 and For Related Relief . . ." Subsequently, by way of an agreed order signed by Mr. Paul G. Jennings of Beth A. Dunning, the Debtors' local counsel and by Mr. Robert C. Goodrich of Farris, Warfield & Kanaday, Plc., representing Melaver, Judge Paine authorized that the Landlord shall execute the NDA as attached to the agreed order and the Landlord's Motion to Alter or Amend the Court's Memorandum as well as the Landlord's Notice of Appeal shall each be deemed withdrawn with prejudice. The agreed order was later superseded by a corrected agreed order with a slightly amended form of NDA agreed by both parties and approved by the Bankruptcy Court. (Service Merchandise Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) SUN HEALTHCARE: Finalizes Agreement on Johnson Injury Claims ------------------------------------------------------------ Monique Wood Faulkner, as personal representative for the estate of Betty E. Johnson, filed claims (no. 4928 and 98) each in the amount of $10 million against Sun Healthcare Group, Inc. Ms. Faulkner agrees that she only has one claim against the Debtors, which arises out of a personal injury lawsuit against the Debtors. In connection with the matter, Claimant agreed to assert a claim of $100,000 against the Debtors' bankruptcy estates, and to collect insurance proceeds for the remainder of the settled amounts, which has in fact been paid by the insurance companies. The parties agree and stipulate that: (1) Claim No. 4928 is disallowed and expunged in its entirety. (2) Claim No. 98 is allowed in the amount of $100,000 (3) Claimant shall not assert any other proof of claim in connection with these bankruptcy cases. (Sun Healthcare Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392- 0900) U.S. FURNITURE: Closes Down Operations -------------------------------------- U.S. Furniture Industries, a High Point, N.C.-based manufacturer and employer for decades, has gone out of business after 53 years, according to a newswire report. The company closed its doors officially on Monday, said David Lees, president of U.S. Furniture. Lees said a financial problem with a sister manufacturing division in Malaysia led to the decision to shut down assembly operations in North Carolina. "Lang Furniture became financially unable to manufacture the product, and the parent company (Malaysian-based Land & General Berhad) didn't have the cash flow to bail them out," he said. "Without the ability to manufacture the product as needed, there was no need to keep the assembly and sales end of the business open." While U.S. Furniture already is beginning to liquidate assets, Lees stressed that the company is not expected to enter into bankruptcy and will meet its financial obligation. (ABI 18- Jan-2001) VENCOR INC: Settles SERP and Other Claims with W. Earl Reed ----------------------------------------------------------- On January 6, 2000, W. Earl Reed filed a proof of claim (as amended or supplemented by additional proofs of claim by Reed) in Vencor, Inc.'s Bankruptcy Cases. The parties agree and stipulate that: (1) As sole and exclusive distribution from the Debtors on account of, and in full satisfaction of, the Reed Claims, and any claim that Reed could have asserted in the Bankruptcy Cases: (a) upon Vencor's assumption, pursuant to the Plan, on the Effective Date, of the SERP including the SERP Amendments, all payments owed to Reed under the SERP shall be made in accordance with the terms of the SERP; and (b) an allowed Put Right in respect of Reed's Old Preferred Stock shall receive the treatment provided in paragraph 5.08 of the Plan, under which monetary damages in respect of Reed's allowed Put Right shall be canceled in exchange for the cancellation of all obligations of Reed arising under that certain Nontransferable Full Recourse Note in the original principal amount of $990,000 dated April 30, 1998 (the Reed Preferred Equity Interest Loan). (2) Reed expressly consents to and agrees to abide by the SERP Amendments, including, without limitation, any future amendment to the SERP, ncluding any future amendment eliminating or modifying any change in control provision under the SERP (the Change In Control Amendment); provided, however, that no such future amendment (except the Change In Control Amendment) shall defer the commencement of payments to Reed under the SERP, or reduce the present dollar value of Reed's claim under the SERP, determined based on the actuarial assumptions that the SERP and other provisions in effect refer to. (3) Reed expressly waives any claim under the SERP except as provided in the Stipulation and Order, and expressly waives any claim in respect of any change in control provision under the SERP. (4) Except as set forth in the stipulation, Reed expressly waives any claim under the Separation Agreement and Release of Claims between Reed and Vencor, Inc., executed on or about September 30, 1998. (5) All payments currently being made by Vencor in respect of any benefits under the Separation Agreement shall continue until the Effective Date but shall cease as of the Effective Date. (6) Reed's Indemnification Claim shall be allowed subject to the conditions of the stipualtion and all rights of indemnification, contribution and/or other similar relief of Reed against the Debtors or any of them shall be preserved; provided, however, that (a) Debtors shall use their commercially reasonable efforts to continue and maintain Reed's present rights to insurance coverage under any so-called directors' and officers' policy (a D&O Policy), and will afford Reed the same treatment afforded all ex- officers and directors respecting renewal or acquisition of insurance coverage; and (b) any and all obligations of the Debtors to provide indemnification, contribution and/or other similar relief to Reed, including, without limitation, all obligations in respect of the Indemnification Claim, shall be satisfied only through payments made or funded under any available present or future D&O Policy. (7) The Debtors reserve all rights, claims and causes of action (the Debtors' Reserved Note Claims) in respect of the Promissory Note by Reed as maker and Vencor, Inc. as payee, dated June 15, 1998, in the original principal amount of $623,500 (the Reed Note), and Reed reserves all rights to raise any defenses that he may have under the terms of the Reed Note to the Debtors' Reserved Note Claims. (8) Except as provided for in the stipulation, the Reed Releasors release, discharge and acquit forever the Debtors and other from all claims, causes of action, liabilities, etc., provided that such release shall not be deemed to limit Reed's rights to coverage under any insurance maintained by the Debtors or any of them. (9) Except as set forth in the stipulation, the Reed Releasors release, discharge and acquit forever Ventas in respect of any claims arising under the SERP, the Deferred Compensation Plan, the Old Preferred Stock, the Reed Note, the Put Right, the Reed Preferred Equity Interest Loan, the Reed Employment Agreement, any options to acquire Old Common Stock, and the Separation Agreement. (The Reed Releasors refer to Reed, and his heirs, executors, agents, attorneys, administrators, successors and assigns, and such other persons or entities who or which may make any claims derived under or through them; the Reed Releasees refer to the Debtors, and their affiliates, subsidiaries, corporate parents, and each of their present and former officers, directors, managing directors, control persons, stockholders, employees, agents, attorneys, administrators, successors and assigns.) (10) The Reed Releasors, and each of them, reserve all other claims and rights against Ventas, including, without limitation, any and all claims to indemnification, contribution and/or other similar relief against Ventas in respect of claims made against any Reed Releasor by reason of any action of Reed which is or may be the basis of a claim for indemnification, contribution and/or other similar relief, whether arising under any of the foregoing agreements or otherwise. (11) The Debtor Releasors release, discharge and acquit forever Reed and other Debtor Releasees from all claims, causes of action, liabilities, etc. (Vencor Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) VENCOR INC: Court Approves Extension of DIP Financing Maturity -------------------------------------------------------------- Vencor, Inc. announced that the United States Bankruptcy Court for the District of Delaware approved an amendment to the Company's debtor-in-possession financing to extend its maturity until March 31, 2001. The Amendment also revises and updates certain financial covenants. In addition, the Amendment extends through March 31, 2001, the period of time for the Company to file the appropriate pleadings to request confirmation and consummation of its plan of reorganization. The DIP Financing and existing cash flows will be used to fund the Company's operations during its restructuring. As of January 17, 2001, the Company had no outstanding borrowings under the DIP Financing. The Company is currently soliciting approval of the Company's fourth amended plan of reorganization filed with the Court on December 14, 2000 (the "Amended Plan"). The Court has scheduled a confirmation hearing on the Amended Plan for March 1, 2001. Vencor and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 with the Court on September 13, 1999. Vencor, Inc. is a national provider of long-term healthcare services primarily operating nursing centers and hospitals. WHEELING-PITTSBURGH: Wants to Assume General Electric Contract -------------------------------------------------------------- Wheeling-Pittsburgh Steel Corporation requested the Court to allow it to assume a contract with General Electric Industrial Systems and to use escrow funds to replace and/or retrofit certain PCB transformers and PCB capacitors. The Debtors explain that the United States and WPSC are parties to a stipulation approved by the Bankruptcy Court for the Western District of Pennsylvania on May 11, 1989, and amended on April 26, 1991. The Stipulation, entered in WPSC's previous Chapter 11 case, resolved claims made by the United States on behalf of the Environmental Protection Agency involving the civil penalty provisions of a Consent Decree. Under the Stipulation an escrow fund was established and funded by an initial deposit by WPSC in April 1991. The Escrow Agreement permits WPSC to request approval from the EPA to withdraw funds from the escrow account for projects that are beneficial to the environment, but that are not required by law. Any funds remaining in the escrow account after nineteen years must be turned over to the United States. The escrow account has a current balance of approximately $4,000,000. In November 1999 WPSC requested approval from the EPA to withdraw funds from the escrow account for three environmentally beneficial projects. This request included funds for the replacement or retrofit of twenty-two PCB transformers and thirty PCB capacitors; the purchase and installation of a SODAR meteorological station; and the partial funding of an environmental education center at Oglesbay Park. The EPA has approved WPSC's application to withdraw funds from the escrow account for these three projects. To carry this out, WPSC entered into a contract with General Electric to replace or retrofit the relevant PCB transformers and capacitors. The total cost of equipment and services for this project was bid by GE at $1,064,785 for equipment, and $556,860 for labor: Location Equipment costs Labor costs -------- --------------- ----------- Allenport plant $ 414,375 $ 251,090 Mingo Junction $ 631,350 $ 269,120 Mingo Junction $ 19,060 Yorkville None $ 28,700 Yorkville $ 7,950 The Debtor argued that the estate will benefit by the replacement of these aging PCB transformers, and these benefits will be provided at virtually no cost to the WPSC estate since the costs for the performance of the GE contract will be drawn from the escrow account. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) WEC COMPANY: Moody's Junks Bond Ratings & Says Outlook Negative --------------------------------------------------------------- Moody's Investors Service downgraded the ratings on WEC Company's and Woods Equipment Company's as follows: WEC Company: - $130 million of 12% senior unsecured notes, due 2009, to Caa3 from B2; - $40 million secured credit facility to B3 from Ba3; Woods Equipment: - $25 million of senior discount notes, due 2011 to Ca from Caa1. Moody's lowered the senior implied rating from B1 to Caa2, and the unsecured issuer rating from B3 to Ca. The outlook is negative. Moody's foresees a delay in the payment of the coupon on the 12% senior unsecured notes. The ratings are also a reflection of the company's weak overall performance caused primarily by a significant decline in demand in the construction segment (23% of sales). Moody's says the negative outlook is a reflection of the likelihood of continued weakness in the construction segment in 2001 which could drain the company's cash. Since WEC was operating under tight credit measurements as a result of its 1999 recapitalization, it had no cushion to absorb lower results. In an 8-K filed on 1/12/01, the company stated it would not make the interest payment due 1/16/01 under its 12% senior notes because of working capital constraints. ( WEC's working capital requirements reach a seasonal peak in the first quarter due to increases in accounts receivable). In addition, the company stated it is currently negotiating a new, asset-based senior credit facility for up to $50 million, to be used for general corporate purposes, including working capital. The new facility is expected to be in place by the end of January. Following the closing on the new facility, WEC intends to pay the coupon on the senior notes, which it believes will be within the 30-day grace period before nonpayment becomes an event of default. Failure to pay the coupon would place the company in default. Moody's noted the company violated bank covenant requirements for two consecutive quarters through 9/30/00 (for which it obtained waivers), and will likely fail to meet covenants for the fourth quarter ended 12/31/00. The new credit facility will incorporate revised covenant tests. At the direction of its majority equity holder, Madison Dearborn Capital Partners L.P. II ("MDCPII") - which owns approximately 92% of the company - WEC has installed new operating management, specifically, Ed Olson as Chairman of the Board of Directors and Mike Goldberg as acting Chief Financial Officer. Both executives have considerable experience in restructuring troubled companies. WEC Company, the operating subsidiary of Woods Equipment Company, is located in Rockford, Illinois, and is a leading manufacturer of attachments for a variety of mowing, cutting and clearing, construction, material handling, landscaping and grounds maintenance applications under the brand names "TISCO," "Tru- Part," "TRUPOWER," "CALCO," "WoodsCare," "Woods," "Gannon," "Wain-Roy," "Central Fabricators," "Gill," and "Alloway" brand names. BOND PRICING: For the week of January 22 - 26, 2001 --------------------------------------------------- Following are indicated prices for selected issues: AMC Ent 9 1/2 '09 66 - 69 Amresco 9 7/8 '05 54 - 56 Asia Pulp & Paper 11 3/4 '05 36 - 38 Chiquita 9 5/8 '04 48 - 50 Conseco 9 '06 82 - 84 Federal Mogul 7 1/2 '04 29 - 31 Globalstar 11 3/8 '04 10 - 12 Oakwood Homes 7 7/8 '04 35 - 38 Owens Corning 7 1/2 '05 26 - 28(f) PSI Net 11 '09 33 - 36 Pacific G & E 6 1/4 '04 84 - 86 Revlon 8 5/8 '08 48 - 51 Saks 7 '04 77 - 79 Sterling Chemical 11 3/4 '06 50 - 52 Teligent 11 1/2 '07 16 - 18 Tenneco 11 5/8 '09 56 - 58 TWA 12 '02 77 - 80(f) ********* 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 are available at your local bookstore or through Amazon.com. Go to http://www.amazon.com/exec/obidos/ASIN/189312214X/internetbankrupt to order any title today. 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, Aileen Quijano and 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 ***