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/raid1/www/Hosts/bankrupt/TCR_Public/010306.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, March 6, 2001, Vol. 5, No. 45 Headlines BRIDGE INFORMATION: Paying Pre-Petition Tax Obligations BRIDGE INFORMATION: Planning To Put Assets Up For Sale CERPLEX GROUP: Creditors' Meeting Set for March 13 CRIIMI MAE: Asks For 30-Day Extension of Plan's Effective Date CROWN VANTAGE: Completes Sale of Specialty Business To KPS CYBERCASH: Selling Operating Assets to Network 1 Under Chapter 11 CYBERCASH: Case Summary & List Of 20 Largest Unsecured Creditors DAMARK INTERNATIONAL: Says Closing ClickShip Will Cost $10-$12MM EMPIRE GOLD: Lack Of Funds Raises Going Concern Doubts eTOYS: Sells BabyCenter to Johnson & Johnson For $10MM In Cash FARMERS COOPERATIVE: Planning to Sell Assets To AGP Grain Coop FLOORING AMERICA: Court Appoints Trustee in Chapter 11 Case FRUIT OF THE LOOM: Releases Q4 Results & Restructuring Update GO-RACHELS.COM: Pursuing Plan To Improve Financial Performance GRAND UNION: Completes Asset Sale to C&S Wholesale Grocers GROOVEPORT: Online Music Provider Shuts Down & Looks For Buyer HARNISCHFEGER: Equity Committee Retains Coal Market Expert ICG COMMUNICATIONS: Committee Hiring Wachtell as Lead Counsel INTEGRATED HEALTH: Bates, Campbell & Amerimed Move To Lift Stay INTEGRATED SPATIAL: Needs at Least $1.5 Mil to Fund Operations J.C. PENNEY: Embarking on a Clutter Elimination Plan? KATY INDUSTRIES: Discussing Potential Asset Sale With Buyer LERNOUT & HAUSPIE: Employing Brown Rudnick as Corporate Counsel LIBERTY HOUSE: Emerges From Bankruptcy LOEWEN GROUP: Resolves Pulaski Funeral Disputes With McKinneys LTV CORP.: Peoples Energy Presses for Assumption of Contract MONTGOMERY WARD: Kimco Venture Wins Lease Designation Rights OWENS CORNING: Court Okays Employment Of Real Estate Brokers PG&E CORPORATION: Closes $1 Billion Loan Deal to Restructure Debt RCN CORP.: Moody's Cuts Senior Bank Debt to B2 & Notes to Caa2 ROYCE BIOMEDICAL: Has No Credit, Bank Financing or Liquidity RSL COMM.: Suspends Interest Payment on 9-1/8% and 12-7/8% Notes SELECT SWITCH: Court Confirms Chapter 11 Plan SERVICE MERCHANDISE: Wants To Terminate Existing Pension Plan TBS INTERNATIONAL: April 9 Administrative Claims Bar Date Set U.S. MEDIA: Hearing to Convert or Dismiss Scheduled for March 13 U.S. INDUSTRIES: Fitch Lowers Senior Note Rating to BBB- U.S. INTERACTIVE: Caught in Bankruptcy Fight Over Bonuses VANGUARD AIRLINES: Hambrecht Trust Adds to 53.1% Equity Stake WASHINGTON GROUP: Billion-Dollar Credit Agreement Now in Default WASHINGTON GROUP: Moody's Junks Debt Ratings WHEELING-PITTSBURGH: Noteholders Tap Zolfo as Financial Advisor ********* BRIDGE INFORMATION: Paying Pre-Petition Tax Obligations ------------------------------------------------------- Bridge Information Systems, Inc. owes various Taxing Authorities for prepetition Sales and Use Tax obligations. Pursuant to 11 U.S.C. Sec. 507(a)(8), these claims are entitled to priority over many other claims against the Debtors' estates. To confirm a plan of reorganization, 11 U.S.C. Sec. 1129(a)(9)(C) requires full payment of these Tax Claims. Not paying these Tax Claims would lead to the Taxing Authorities taking aggressive collection action, the Debtors believe, and withholding of the payment of the Taxes likely would cause taxing authorities to take precipitous action, including a marked increase in state audits and a flurry of lien filings or lift stay motions. Prompt and regular payment of the Taxes will avoid this unnecessary governmental action. Accordingly, the Debtors sought and obtained Judge McDonald's permission, in their sole discretion, to pay any prepetition tax claim, without prejudice to their right to contest the amount of tax owed to any particular Taxing Authority. The Debtors do not provide any estimates of their pre-petition liabilities on account of Tax-Related Claims. (Bridge Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) BRIDGE INFORMATION: Planning To Put Assets Up For Sale ------------------------------------------------------ An attorney for Bridge Information Systems Inc. told a bankruptcy judge that the company is on the sales block, according to Dow Jones. Gregory D. Willard, a St. Louis attorney with Bryan Cave LLP, made the announcement in the U.S. Bankruptcy Court for the Eastern District of Missouri during a hearing on Wednesday. No motion was filed Wednesday concerning a sale, Willard anticipates a motion concerning a sale will be filed by mid-March. He expects a hearing on that motion to be held in mid-April. Assuming Judge McDonald approves the motion at that time, a sale could be consummated anytime after that. Bridge decided to pursue a possible sale in order to maximize value for its creditors. "I told the judge that these businesses aren't getting healthier by being in chapter 11, and therefore a prompt transaction needs to be pursued," Willard said. "We think that it's a better way to proceed rather than attempting a sale in a chapter 11 plan." It's still possible that Bridge will emerge from bankruptcy as an independent business. However, Welsh Carson Anderson & Stowe, Bridge's largest shareholder, has said it would like to make a bid for the company and Bridge wouldn't be surprised if other bidders emerged. Bridge filed for voluntary bankruptcy on Feb. 15. That move came after Highland Capital Management LP, one of Bridge's creditors, filed an involuntary bankruptcy petition on Feb. 1. The petition was aimed at forcing Bridge into bankruptcy court proceedings. (ABI World, March 2, 2001) CERPLEX GROUP: Creditors' Meeting Set for March 13 -------------------------------------------------- A bankruptcy case concerning The Cerplex Group, Inc. was originally filed under Chapter 11 on June 20, 2000 and was converted to a Chapter 7 case on February 6, 2001. A meeting of creditors is set for March 13, 2001, 1:30 PM, 844 King St., Wilmington, DE. Proofs of claim must be received by the bankruptcy clerk's office by June 11, 2001. CRIIMI MAE: Asks For 30-Day Extension of Plan's Effective Date -------------------------------------------------------------- CRIIMI MAE Inc. (NYSE: CMM) asked the bankruptcy court in Greenbelt, Maryland to extend by 30 days the March 15, 2001 date by which the company's confirmed reorganization plan would become effective. In a motion filed Friday, CRIIMI MAE said that all of the parties to the company's reorganization plan have stated that they are continuing to work toward completing the exit financing, and that few open issues remain to be finalized. According to the motion, although CRIIMI MAE has worked diligently to complete the financing documents prior to March 15, it has met with difficulty in getting its secured creditors to finalize the transaction in a timely manner. While CRIIMI MAE's priority is to quickly exit bankruptcy, the company does continue to accumulate additional funds. "Every month that the Debtors remain in bankruptcy, approximately $3.0 million on average accumulates which would otherwise be used to pay increased borrowing costs and to pay down creditors," according to the motion. The company's motion requests that all parties be required to attend a status conference before the bankruptcy court on March 30, 2001 to report on the progress being made toward the effective date. CROWN VANTAGE: Completes Sale of Specialty Business To KPS --------------------------------------------------------- Crown Vantage Inc. (OTC Bulletin Board: CVANQ) and its wholly owned subsidiary Crown Paper Co. disclosed that Crown Paper has completed the sale of substantially all of the specialty, packaging, text and cover papers business of Crown Paper, including the name "Curtis Papers, Inc.", to a wholly owned subsidiary of KPS Special Situations Fund, LLC. KPS intends to rename the subsidiary "Curtis Papers, Inc." As previously announced, Crown Paper and KPS had entered into a definitive asset purchase agreement on December 27, 2000, relating to the sale of these assets. Crown Paper continues to own and operate its integrated mill located in St. Francisville, Louisiana. Crown Vantage and Crown Paper remain in Chapter 11 bankruptcy. Crown Vantage is a leading manufacturer of value-added papers for printing, publishing and specialty packaging. The Company's diverse products are tailored for the special needs of target markets. End users include specialty magazines and catalogs, financial printing and corporate communications, packaging and product labels and coffee filters. For more information, visit http://www.crownvantage.com CYBERCASH: Selling Operating Assets to Network 1 Under Chapter 11 ----------------------------------------------------------------- CyberCash, Inc. (Nasdaq: CYCH), a leading provider of electronic payment technologies and services, announced that due to CyberCash's inability to raise the financing necessary to consummate the company's previously announced merger with Network 1 Financial, the companies have terminated their agreement and entered into an asset purchase agreement under which Network 1 Financial will acquire all of CyberCash's operating assets. The transaction will be consummated under a Chapter 11 bankruptcy proceeding in a case commenced in Delaware. CyberCash will continue to support its existing customer base of more than 27,500 Internet merchants and more than 100,000 software users with the same high quality customer service it has always provided throughout the transition period. CyberCash will also maintain all normal business functions including marketing and sales activities designed to generate new business, partner marketing programs, and completing scheduled enhancements to its industry leading Internet payment processing service. Dan Lynch, CyberCash's Chief Executive Officer, explained "CyberCash made tremendous strides over the past few quarters refining its business plan, stabilizing its capital structure and conceiving a strategy to enter acquiring settlement services with Network 1 Financial. The Network 1 merger was the culmination of months of hard work and was key to our getting profitable. Unfortunately, the financial markets have dried up and we have been held up just short of the finish line, without the funds to close and execute the plan. We are making this move now to ensure that CyberCash's obligations can be satisfied and to maximize any residual value for the company's stockholders." Mr. Lynch continued, "Operationally, CyberCash has sufficient funds to continue to operate and merchants processing transactions through CyberCash's Internet payment service will experience no interruptions. All of CyberCash's sales and customer support functions will continue as usual." Consummation of the transaction is subject to numerous conditions as well as approval by the bankruptcy court. The parties hope to close the transaction in early April. CYBERCASH: Case Summary & List Of 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: CyberCash, Inc. 2100 Reston Parkway Reston, VA 20191 Type of Business: Provides electronic payment technologies and services Chapter 11 Petition Date: March 2, 2001 Court: District Of Delaware Bankruptcy Case No.: 01-00622 Debtor's Counsel: Robert J. Dehney, Esq. Morris, Nichols, Arsht & Tunnel 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302)658-9200 Total Assets: $33,804,000 Total Debts: $10,444,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Robinson Lerner & Montgomery Trade $224,764 County Of Fairfax Trade $146,682 Corporate Software & Tech Trade $144,487 SprintParanet Inc. Trade $117,459 MCI Worldcom Communications Trade $111,217 AT&T (All) Trade $105,952 Stornet Trade $89,332 Tory Corporate RE Advisors Trade $89,290 The Vantive Corporation Trade $81,000 PSINET Transaction Solutions Trade $77,589 Bowne Of New York City, Inc. Trade $54,747 Xerox Corp. (GS-26F-1001B) Trade $49,174 GE Capital Trade $41,786 First Annapolis Capital Trade $41,279 HNC Software Inc. Trade $40,000 AccountTemps (Virginia) Trade $39,560 XYAN Trade $32,368 The NASDAQ Stock Market, Inc. Trade $26,625 C.S.S.E., Inc. Trade $25,000 BEA Systems, Inc. Trade $24,000 DAMARK INTERNATIONAL: Says Closing ClickShip Will Cost $10-$12MM ---------------------------------------------------------------- Damark International Inc. said that it could not find a buyer for its ClickShip subsidiary, and would spend between $10 million and $12 million to close down the operation over the next 24 months, according to LocalBusiness.com. Damark also said that its main lender, Bank of America, would not advance funds for the closure of ClickShip, and said it may face some liquidity problems due to the shutdown. Damark said it has sold $14.2 million of senior convertible securities to private investors, $10 million of which was funded to the company yesterday and $4.2 million of which has been placed in escrow pending satisfaction of certain conditions. George S. Richards, Damark's president, said he expects the company to be able to negotiate adequate funding from another major financial institution, but said lack of financing from Bank of America could create "a potential liquidity issue." (ABI World, March 2, 2001) EMPIRE GOLD: Lack Of Funds Raises Going Concern Doubts ------------------------------------------------------ At a Board of Directors' meeting held on November 15, 2000, Empire Gold Inc. appointed Peet Nienaber Inc. - Chartered Accountants of Vancouver BC as auditors of the company, effective January 1, 1998. KPMG -Chartered Accountants of Toronto, Canada, were dismissed by the directors at the same meeting. The former accountant's report, dated June 12, 1998, for the year ended December 31, 1997, contained a qualification as to the uncertainty that the company will continue as a going concern. The uncertainty arose because at December 31, 1997 the company had an accumulated deficit of $47,905,306 and a working capital deficiency of $162,035. The company also required additional capital to proceed with its exploration program. These matters raised substantial doubt about the company's ability to continue as a going concern. At March 31, 2000, the company has an accumulated deficit of $48,088,212 and a working capital deficiency of $218,481. Furthermore, additional funds will be required to proceed with the company's exploration program. The ability of the company to raise sufficient funds to operate in the ordinary course of business and proceed with the exploration plan, raise substantial doubt about the company's ability to continue as a going concern. eTOYS: Sells BabyCenter to Johnson & Johnson For $10MM In Cash -------------------------------------------------------------- Johnson & Johnson (NYSE: JNJ) has acquired BabyCenter, Inc., from eToys, Inc. (Nasdaq: ETYS). BabyCenter.com (http://www.babycenter.com),serving expectant and new mothers and fathers, is the largest and best-known online parenting resource. The BabyCenter family of Web sites also includes ParentCenter.com (http://www.parentcenter.com)and BabyCentre.co.uk (http://www.babycentre.co.uk). "BabyCenter and Johnson & Johnson share a commitment to help parents raise healthy kids," said Mari Baker, General Manager of BabyCenter. "This acquisition provides BabyCenter with the ability to continue to grow and expand our services to the millions of parents who rely on BabyCenter in the United States and abroad." "Johnson & Johnson was attracted to the superior content and personalized relationship that BabyCenter, as the leading online parenting brand, has created with millions of parents from conception through childhood," said Christian Koffmann, Worldwide Chairman, Consumer and Personal Care Group, Johnson & Johnson. BabyCenter's advertising business and all other site activity, including thousands of health and parenting articles, weekly e- mail newsletters, and its vibrant online community, will continue to operate independently. The BabyCenter Store was not a part of the transaction, and will be temporarily closed. Throughout its three-year history, BabyCenter has received numerous awards for its Web site and services. It was ranked as the Web site with the highest customer loyalty according to the first-ever Dialscore(TM) study. BabyCenter will be part of Johnson & Johnson Consumer Companies, Inc. It will remain based in San Francisco, CA. BabyCenter expects to retain and add to the current staff. The purchase was an all cash transaction valued at approximately $10 million. eToys Inc., whose shares have fallen to 9 cents in the stock market, is saddled with about $280 million in debts, ABI World reports. It has also disclosed last week that it would soon file for bankruptcy. Johnson & Johnson, with approximately 98,500 employees, is the world's most comprehensive and broadly-based manufacturer of health care products, as well as a provider of related services, for the consumer, pharmaceutical and professional markets. Johnson & Johnson has 194 operating companies in 51 countries around the world, selling products in more than 175 countries. FARMERS COOPERATIVE: Planning to Sell Assets To AGP Grain Coop -------------------------------------------------------------- The Farmers Cooperative Association has been negotiating with AGP Grain Cooperative to sell substantially all the debtor's assets. AGP is a subsidiary of Ag Processing, Inc. AGP, Inc. is a farmer- owned cooperative engaged in the procurement, processing, marketing and transportation of grains and grain products. In general terms, the purchase price is comprised of the two main categories: $4.5 million for the Hard Assets and the Inventory Items valued a at the lower of cost or current market prices as of the closing date, except for grain and petroleum, which will be valued at market prices at closing. Any grain in excess of the debtor's storage obligations will be valued at market prices at closing. Debtor will retain chemicals not considered current or marketable. The debtor and AGP anticipate a closing date of March 31, 2001. The debtor has determined that the sale of substantially all of the debtor's assets will result in the best, most efficient and most expedient distribution to creditors. The sale will greatly aid the debtor in proposing a confirmable plan. FLOORING AMERICA: Court Appoints Trustee in Chapter 11 Case ----------------------------------------------------------- Upon the request of Flooring America Inc. and its official unsecured creditors' committee, a court has appointed a chapter 11 Trustee to finish liquidating the floor covering distribution network operator. Having already liquidated its operating assets, including its retail stores and franchise operations, as well as substantially all its real estate holdings, Flooring America only has miscellaneous real estate holdings and accounts receivable remaining. The company must also collect other amounts owed to it such as rebate claims against vendors, and it must investigate potential claims. (ABI World, March 2, 2001) FRUIT OF THE LOOM: Releases Q4 Results & Restructuring Update ------------------------------------------------------------- Fruit of the Loom, Ltd. (OTC Bulletin Board: FTLAQ), one of the world's leading manufacturers and marketers of basic family apparel, reported operating results for its fourth quarter. The Company's operating results reflect significant manufacturing and cost improvements made in 2000 versus 1999. The Company reported sales of $332.5 million for its fourth quarter ended December 30, 2000 compared to $416.0 million for the fourth quarter of 1999. Lower sales volume was primarily due to the elimination of non-core product lines and other unprofitable products. The Company's intimate apparel and increasingly competitive Activewear business experienced lower sales during the quarter primarily due to the elimination of certain lower volume styles. This continuing reduction in product offerings was consistent with the Company's operating focus on more profitable, higher volume products. Net earnings for the fourth quarter of 2000 reached $27.5 million ($.38 per share) compared to a net loss of $398.5 million ($5.96 per share) for the fourth quarter of 1999. The fourth quarter of 2000 included an income tax provision credit of $116.2 million. For the year ended December 30, 2000, the Company reported sales of $1,549.8 million compared to $1,784.8 million in 1999. Consistent with the fourth quarter, the lower sales volume was primarily due to the elimination of the Company's non-core Gitano jeanswear business and other unprofitable products. Sales were negatively affected during 2000 due to a weaker retail market and a more competitive Activewear market. However, the Company regained the leadership share of the mass merchant men's and boys' underwear market as share increased from 43.5% to 45.1% during 2000. Loss from continuing operations for the year ended December 30, 2000 was $103.6 million ($1.55 per share) compared to a loss from continuing operations of $491.1 million ($7.25 per share) in 1999. Including discontinued operations, the net loss for the year ended December 30, 2000 was $126.4 million ($1.89 per share) compared to a net loss of $576.2 million ($8.50 per share) in 1999. The Company reported an operating loss (including one-time consolidation costs of $77.0 million) from continuing operations before interest expense in the fourth quarter ended December 30, 2000 of $13.5 million compared to an operating loss from continuing operations before interest expense (including one-time special charges) of $218.6 million during the corresponding period in 1999. This improvement of $205.1 million reflects improved cost controls, more productive and efficient operations, improved inventory and logistic management and lower selling, general and administrative expenses. The operating loss from continuing operations in the fourth quarter of 2000 includes $77.0 million in consolidation costs principally related to the closure of certain of the Company's higher cost production facilities. This consolidation of facilities was driven by significant improvements in operating efficiencies as well as the impact of the elimination of non-core unprofitable businesses. The loss from continuing operations in the fourth quarter of 1999 includes $69.1 million of special charges representing costs related to the impairment of certain European manufacturing facilities, severance, a debt guarantee and other asset write- downs and reserves. Restructuring Update Chief Executive Officer Dennis Bookshester commented, "The Company continues to focus on a strategy of becoming the low cost producer and marketer of high volume basic apparel. We have improved product quality, dramatically reduced manufacturing costs and increased customer satisfaction. While we have made significant progress in improving our operations, the increasingly competitive environment of the markets in which we compete, particularly Activewear, will require us to maintain this as our long-term strategic focus. At the same time, we continue to focus on reducing selling, general and administrative expenses to drive our overall cost competitiveness." Actual production costs incurred in 2000 were substantially lower than those incurred in 1999 (in excess of $200 million) and operating performance exceeded plan. Selling, general and administrative expenses for the year ended December 30, 2000 were approximately $90 million lower than in 1999. Excluding consolidation costs in 2000 and special charges in 1999, selling, general and administrative expenses, as a percentage of net sales, decreased from 16.4% in 1999 to 11.6% in 2000. Mr. Bookshester added, "Our top priorities continue to include reducing manufacturing and operating costs, increasing sales and market share in our core businesses and maintaining excellent customer service and satisfaction. The contributions made by our employees in all these areas remain central to the Company's improved performance." The borrowing availability under the debtor-in-possession credit facility (DIP) exceeds $255 million, and there was no usage of the revolver component of the DIP as of February 28, 2001. In addition, the Company paid $40 million in December which reduced the DIP term loan balance to $100 million. Management believes that the size of the DIP and available cash provide the Company adequate financial flexibility and liquidity to pay its suppliers and meet customer expectations. Fruit of the Loom filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code on December 29, 1999 and is currently working through its restructuring in bankruptcy proceedings. GO-RACHELS.COM: Pursuing Plan To Improve Financial Performance -------------------------------------------------------------- The viability of GO-RACHELS.COM CORP. as a going concern is in question. The company incurred net losses of $3,423,352 and $1,893,215 in 1998 and 1999, respectively, and as of December 31, 1999, had an accumulated deficit of $11,282,038. The company also has a material uncertainty regarding a stockholder dispute and is subject to several outstanding judgments. These conditions, among others, raise substantial doubt about the company's ability to continue as a going concern. The company's continuation as a going concern is dependent upon its ability to generate sufficient operating cash flows and obtain additional financing or refinancing to meet its obligations. The Company, through its subsidiary Rachel's Gourmet Snacks, Inc., manufactures, markets, and distributes healthier "Home Style" gourmet potato chips which are cholesterol free, and are relatively low in sodium and fat, under the "Rachel's Made From the Heart" label. Through its subsidiary, Triple-C-Inc., a Canadian corporation, it distributes confectionery and specialty snacks. The company expanded its current line of products to include bagel chips, rye chips, pretzels, and other confectionery and specialty snacks in the second half of calendar year 2000, and intends to continue this expansion in the first half of calendar year 2001. The company remains optimistic about the future, but its prospects must be considered and evaluated in light of the risks, operating and capital expenditures required, and uncertainty of economic conditions that may impact its operations. To achieve and sustain profitability and to remain viable, the company must successfully introduce and market additional new products, meet the demands of its customers, respond quickly to changes in its market, and control expenses and cash usage, as well as continue to attract additional capital investments. The company is pursuing plans to improve sales, reduce operating expenses, and obtain financing through debt and equity placements; however, there is no assurance that the company can raise additional financing. As stated above, the company also has a material uncertainty regarding a stockholder dispute and several outstanding judgments and a potential default on its line of credit facility. These conditions, among others, raise substantial doubt about the company's ability to continue as a going concern. GRAND UNION: Completes Asset Sale to C&S Wholesale Grocers ---------------------------------------------------------- The Grand Union Company (OTC BB: GUCO) announced that it has completed the sale of substantially all of its assets and business to GU Markets, LLC, an affiliate of C&S Wholesale Grocers, Inc., and other third party purchasers. Virtually all of the locations that will remain retail supermarkets have either already re-opened for business or will do so after a very short renovation period. Included in the assets acquired by GU Markets are approximately 170 of Grand Union's operating locations, the Company's distribution center in Montgomery, New York, and certain other non-operating locations. Of the 170 locations acquired, approximately 45 locations are expected to be immediately transferred to third party purchasers, including six to Pathmark, 19 to Shaws and 20 to Tops. The remaining locations being purchased by GU Markets and other third party purchasers will continue to operate under the Grand Union name for various transition periods, which are expected to last up to 90 days. Following the transition period, it is anticipated that GU Markets will operate approximately 30 retail food operations. During the transition period, liquidation sales will be conducted to sell the inventory at approximately 40 locations, which will either close for renovations or will be sold by GU Markets to non-food retail operators. It is anticipated that the transition period also will be utilized to permit the orderly transfer of: - 5 locations to Hannaford; - 42 locations to Stop & Shop; - approximately 30 locations to other retail food operators; and - approximately 15 locations to operators of other types of retail establishments. Grand Union will retain 16 locations and seek alternative buyers prior to the effective date of the lease rejections. GU Markets will hold liquidation sales at those locations. Grand Union filed a voluntary chapter 11 petition in the U.S. Bankruptcy Court in Newark, New Jersey on October 3, 2000, with the stated intention to facilitate the planned sale of the Company and provide for additional funding during the sale process. GROOVEPORT: Online Music Provider Shuts Down & Looks For Buyer -------------------------------------------------------------- After failing to close a badly needed round of venture capital, online music provider GroovePort has shut down operations, according to LocalBusiness.com. GroovePort allows subscribers to listen to songs from the company's library of music as well as several Internet radio stations. The streaming audio service is for listening only. The company does not act as a distributor and downloading is not allowed. Users can access songs for a small monthly subscription fee. In its short history, the company formed partnerships with some 30 record labels including Pyramid Records, Aware Records, and Daemon Records. The company, which was part of the Greenmachine incubator on Mean Street, once employed 15 workers. Executives hoped to close a $10 million first round of financing in January. The company is looking for a buyer and is in talks with several hardware companies. (ABI World, March 2,2001) HARNISCHFEGER: Equity Committee Retains Coal Market Expert ---------------------------------------------------------- The Equity Committee sought and obtained the Court's approval to retain Energy Ventures through the completion of the plan confirmation proceedings, nunc pro tunc to January 5, 2001, for providing the Equity Committee and the Court with coal-related macroeconomic expert testimony regarding the macroeconomic climate for coal demand, production and related mining activity. The Equity Committee intends to call Mr. Schwartz as an expert witness in the confirmation hearing. The Equity Committee believes that Energy's testimony is essential because it is expected to support an enterprise valuation of Harnischfeger Industries, Inc. by Goldin that Shareholders are entitled to receive a distribution under a plan of reorganization in light of the change in the outlook for coal production over the past year because of a growing energy crisis in the United States and around the world. Specifically, Goldin, in its preliminary valuation, made certain modifications to the Debtors' projections regarding Joy Technologies Inc. to reflect a change in the coal market. Goldin also made certain modifications to the technical assumptions in the Debtors' valuation in relation to the economic climate. Energy Ventures will be paid at its regular hourly rate of $230 per hour for Mr. Schwartz and $165 per hour for Ralph Barbaro, subject to fee applications filed pursuant to the administrative fee order in the cases. The Equity Committee represents that this cost for the essential function that Mr. Schwartz will serve is very low in comparison with that of the Plan proponents' experts. The Equity Committee points out that the professional fees in the cases are expected to approach $30,000,000. (Harnischfeger Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) ICG COMMUNICATIONS: Committee Hiring Wachtell as Lead Counsel ------------------------------------------------------------- Co-chairs W. R. Huff Asset Management Co., LLC, and Cerberus Capital Management L.P., of the Official Committee of Unsecured Creditors in ICG Communications, Inc.'s Chapter 11 cases requested that Judge Walsh approve and authorize employment of the New York law firm of Wachtell, Lipton, Rosen & Katz. The professional services which Wachtell expects to render the Committee are: (a) Advising and representing the Committee with respect to proposals and pleadings submitted by the Debtors or others to the Court or the Committee; (b) Representing the Committee with respect to any plans of reorganization or disposition of assets proposed in these cases; (c) Attending hearings, drafting pleadings, and generally advocating positions which further the positions of the creditors represented by the Committee; (d) Assisting in the examination of the Debtors' affairs and review of the Debtors' operations; (e) Advising the Committee with respect to the progress of the Chapter 11 proceedings; and (f) Performing such other professional services as are in the interests of those represented by the Committee. Compensation will be payable to Wachtell on an hourly basis. The firm's hourly rates currently range from $85 to $125 for paralegals, $130 to $395 for associates, and $400 to $750 for members. These hourly rates are subject to periodic adjustments to reflect economic and other conditions. Wachtell received $100,000 by the Debtors prior to the Petition Date for Wachtell's prepetition representation. To the extent that any balance remains, it will be applied to postpetition fees. Chaim J. Fortgang, Esq., a partner of Wachtell, told Judge Walsh that Wachtell was retained as special reorganization counsel by an informal committee of the holders of the Debtors' prepetition notes and was released from that representation prior to its retention by the Committee. These services, which primarily consisted of analyzing and negotiating certain matters relating to the Debtors' proposed DIP financing and purchase facilities, redounded to the benefit of all of the Debtors' creditors and would have been performed by Wachtell on behalf of the Committee if the Committee were in existence prior to the Petition Date. In the interests of full disclosure, Mr. Fortgang advised that Wachtell has represented, represents, and will represent in the future certain creditors of the Debtors on unrelated financial restructuring, litigation, corporate and other matters. These creditors include members of the Debtors' secured credit facility and holders of the Debtors' discount notes. Specifically, the firm represents The Chase Manhattan Bank, the agent and a lender under the Debtors' DIP facility, in unrelated matters; Morgan Stanley Dean Witter, the underwriter of the Debtors' discount notes and a prepetition lender, in unrelated matters as underwriter and placement agent; Wells Fargo & Company, the indenture trustee for the discount notes, in unrelated restructuring, corporate and other matters; affiliates of Bank One N.A., First Union National Bank, and Bank of America, members of the Committee and prepetition secured lenders, in unrelated matters; AT&T Corporation, the parent of Liberty Media Corporation, a major equity holder of the Debtors, including representation of AT&T in connection with the proposed spin-off of Liberty shares, but Wachtell did not represent Liberty in its purchase of equity in the Debtors; Wasserstein Perella & Company, a financial and restructuring advisor to the Debtors, including the sale of Wasserstein to Dresdner Bank AG in September of 2000; Gleacher & Co., a former financial advisor to the Debtors, including the negotiation of Gleacher's engagement by the Debtors, and Mr. Fortgang further disclosed that the partners in Wachtell are investors in a private investment fund managed by an affiliate of Gleacher, which fund purchased an equity interest in the Debtors in April 2000, but repurchased by Gleacher or one or more affiliates before the commencement of these Chapter 11 cases, and Wachtell also represented J. Shelby Bryan, former Chairman of the Board and Chief Executive Officer of the Debtors; but all of these, except as specified, were in matters unrelated to the scope of this proposed employment. Patricia A. Staiano, the United States Trustee, through her counsel made a narrow objection to this Application, pointing out to Judge Walsh that the Official Committee was not appointed until fifteen days after the Petition Day, so that employment of Wachtell retroactively beyond the date of the Committee's creation is inappropriate. The U.S. Trustee told Judge Walsh that any services rendered prior to the date of the Committee's creation and rendered to certain creditors were rendered on behalf of those creditors rather than in furtherance of the Committee's fiduciary responsibility to act on behalf of all unsecured creditors of whatever kind or nature. Otherwise, the U.S. Trustee has no objection to this employment, and suggests that Wachtell may request reimbursement of its fees prior to the Committee's formation if it can show some substantial contribution to these estates. (ICG Communications Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392- 0900) INTEGRATED HEALTH: Bates, Campbell & Amerimed Move To Lift Stay --------------------------------------------------------------- In August, 1998, before being voluntarily dissolved, American Oxygen Services of Tennessee, Inc. entered into an Agreement for Sale and Purchase of Assets with Integrated Health Services Acquisition XXVII, Inc. and IHS pursuant to which American Oxygen sold its business and assets to IHS Acquisition for $1,980,827 to be paid by the issuance of unregistered stock of IHS. Based upon a formula in the Agreement for calculating the number of IHS shares that were to be issued at closing, IHS delivered 61,061 of IHS Shares to American Oxygen. After that, American Oxygen was voluntarily dissolved, and the IHS Shares were distributed to the sole shareholders of American Oxygen -- Timothy O. Bates, Michael Campbell and Amerimed Healthcare, Inc. Shortly after that, the value of the stock began to precipitously plummet. Pursuant to the Agreement, Bates, Campbell and Amerimed (the Claimants) filed a request for arbitration with the American Arbitration Association in Orlando, Florida, naming IHS as respondent. An amended complaint was filed in the Florida Action in November 1999 to add as a respondent Mark A. Kovinsky, the present or former Senior VIce President of IHS. The allegations against Mr. Kovinsky were that Mr. Kovinsky, who signed the Agreement on behalf of IHS and IHS Acquisition, knew or should have known that the representations and warranties in the Agreement were untrue and that he failed to disclose material facts necessary so that the statements made to the Claimants would not be misleading. The amended complaint asserts claims of unjust enrichment against Kovinsky under the federal securities laws, Florida security laws, as well as state law. Mr. Kovinsky objected to personal jurisdiction over him in Florida. At the time of the filing of the IHS bankruptcy petition, Mr. Kovinsky's objection to personal jurisdiction was being briefed. Because of the commencement of the IHS chapter 11 cases, no further action has been taken in the Florida Action. By their motion in the IHS cases, the Claimants asked the Bankruptcy Court to grant relief from the automatic stay to allow them to pursue the pending action against Mr. Kovinsky. The Debtors' Objection The Debtors objected to the Claimants' motion on the grounds that the requested lifting of the automatic stay will prejudice the Debtors: (a) to the extent that the insurance proceeds sought by the movants are property of the Debtors' bankruptcy estates; (b) because the movants have failed to show that they will be prejudiced by not having the stay lifted at this time; (c) because the proper time for the Debtors to deal with all of the movants' claims will be during the Debtors' claims administration process. The Debtors told Judge Walrath that the National Union Policy which provides coverage to the Debtors' officers and directors, provides $35,000,000 of coverage that is an aggregate of both D&O claims and corporate liability claims. There is no doubt, the Debtors contend, that the proceeds of the National Union Policy are property of the Debtors' estates. Moreover, the Debtors note that the Arbitration Proceeding cannot continue without the Debtors' involvement, whether through discovery or otherwise and its continuation will indeed prejudice the Debtors. The Debtors told the Court that they have only recently begun to analyze the 12,000-plus proofs of claims which were filed in the IHS cases. Accordingly, the Debtors believe it would be premature for the Court to allow the movants access to the proceeds of the National Union Policy to the detriment of the Debtors and other claimants. Accordingly, the Debtors asked the Court to deny the movants' motion. (Integrated Health Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTEGRATED SPATIAL: Needs at Least $1.5 Mil to Fund Operations -------------------------------------------------------------- As a result of recurring losses from operations over several years, negative cash flows and certain other factors, the report of Integrated Spatial Information Systems Inc.'s independent certified public accountants, BDO Seidman, LLP, for the fiscal year ended September 30, 2000 includes a qualification statement in the audit opinion expressing substantial doubt about the company's ability to continue as a going concern. Management believes that it has the capacity to address immediate needs for cash and liquidity through an aggressive approach on a number of fronts. Operations are not currently profitable, although the company's subsidiary operation when viewed on a stand-alone basis has experienced breakeven or better levels of profitability since June 30, 2000. Integrated requires additional funds to bring current its accounts payable, to satisfy obligations to a former officer as a result of an arbitration award, to repay its operating subsidiary for funds advanced in the normal conduct of business and for working capital for the fiscal year 2001. The subsidiary organization requires funds in excess of the amounts due from the parent organization to provide working capital for operations and growth of its business. The minimum level of funding that is required to meet the aforementioned funding requirements for the parent organization is approximately $1.5 million. Management intends to raise approximately $2.5 million through a rights offering during the first half of calendar year 2001 to company shareholders and certain other qualified investors. Sums in excess of the $1.5 million will provide additional working capital for the company's subsidiary. In addition, management will seek additional and extended lines of credit. Presently, there is a working capital deficit of approximately $1,244,843 versus working capital of $124,864 a year prior. Operating revenue for the first quarter of FY 2001 amounted to $1,649,022 and resulted entirely from the operating subsidiary, PlanGraphics, Inc., geographic information systems activities. This level of current quarter revenue reflects a decrease of 9% from the same period of the prior year. Net loss attributable to common stockholders amounted to $369,252 for the current period, an increase of $94,677 over the prior quarter resulted principally from the first quarter increase in expenses related to corporate affairs and being public. J.C. PENNEY: Embarking on a Clutter Elimination Plan? ----------------------------------------------------- J. C. Penney Company, Inc. (NYSE: JCP) released preliminary sales for the four weeks ended February 24, 2001. Total sales decreased 0.8% to $2.314 billion from $2.332 billing in the comparable 2000 period. Department store sales for February decreased 3.8% to $858 million from $892 million in the 2000 period. On a comparable store basis, that is stores open at least a year, sales decreased 2.1% versus the same period last year. Catalog sales for February decreased 10.7% versus the prior year period, primarily due to the planned elimination of several sale and specialty catalogs. E-commerce sales, which are included in Catalog sales, were $22 million in February, compared to $14 million in last year's period. Total drugstore sales for the February period increased 5.0% to $1.088 billion from $1.036 billion in the 2000 period. On a comparable store basis, sales increased 12.0% with an 18.6% increase in pharmacy sales and a 1.2% increase in front-end sales. JCPenney Direct Marketing Services sales for the February period decreased 3.1% versus last year's February period. Friday, the Company said it expects same-store sales to decline in the first half of 2001 due to the slowing U.S. economy and the use of its new centralized merchandising operations. "These conditions make us cautious with respect to sales during the first half of the year and more positive as we move into the second half," Chief Financial Officer Robert Cavanaugh told retail analysts on Friday at a meeting held at its Plano, Texas headquarters, according to a report circulated by Reuters, adding that Cavanaugh indicated sales at stores open at least a year are expected to fall in the low single-digits on a percentage basis in the first half of 2001, before rebounding in the second half. To revive the business, Reuters relates, the company is making changes to its merchandise mix, has centralized purchasing and merchandising operations, is remodeling some stores, and plans a significant boost in advertising. Bloomberg News adds that Penney is planning to cut the number of items in its stores by 15%, focusing on fewer goods that yield better profit margins . . . and "to eliminate clutter from its stores." J. C. Penney Company, Inc. is America's fifth-largest retailer, employing more than 270,000 associates. The Company operates approximately 1,075 JC Penney department stores in all 50 states, Puerto Rico, and Mexico. In addition, the Company operates approximately 50 Renner department stores in Brazil. Eckerd operates approximately 2,650 drugstores throughout the Southeast, Sunbelt, and Northeast regions of the U.S. JCPenney Catalog, including e-commerce, is the nation's largest catalog merchant of general merchandise. J. C. Penney Direct Marketing Services, Inc. markets insurance products and membership services to various credit card customers by direct response solicitations primarily in the United States and Canada. KATY INDUSTRIES: Discussing Potential Asset Sale With Buyer ----------------------------------------------------------- Katy Industries, Inc. (NYSE: KT) says it's holding discussions with a potential purchaser of a substantial equity position in the company. Under the transaction as presently under consideration, the purchaser would buy a minority of the Company's outstanding common shares at a premium to the current market price, and would also invest directly in the Company through the purchase of nonvoting convertible preferred stock. The transaction would be subject to shareholder approval and restructuring of the Company's existing bank debt. Katy said that there could be no assurance that an agreement for the transaction would be reached or, if reached, would be completed. Katy said that it did not intend to comment further unless agreement is reached or discussions terminate. On November 6, 2000, Katy announced that it was exploring strategic alternatives, including the possible sale of the Company, and that it was engaged in discussions with one potential purchaser relating to the possible sale of the Company. Those discussions have been superseded by discussions with the same potential purchaser relating to the transaction referred to above. Katy Industries, Inc. is a diversified corporation with interests primarily in Electrical/Electronics and Maintenance Products. LERNOUT & HAUSPIE: Employing Brown Rudnick as Corporate Counsel --------------------------------------------------------------- Daniel P. Hart, Senior Vice President and General Counsel of Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. asked Judge Wizmur to authorize the Debtors to employ, retroactively to the Petition Date, the Massachusetts law firm of Brown, Rudnick, Freed & Gesmer, P.C., as their special counsel for general corporate and securities matters, and local law issues that may arise in Connecticut and Massachusetts during the pendency of these Chapter 11 proceedings. The professional services to be rendered by the Firm include representation of the Debtors in: (a) General corporate matters; (b) Securities matters, including periodic filings with the Securities and Exchange Commission; (c) Employee benefit plan matters, including pre-petition matters on which the firm was working when these cases were commenced; (d) Matters for which local counsel may be necessary in Massachusetts and Connecticut (including, possibly in connection with pending securities class action litigation and employment law matters); (e) Potential sales of assets with which the firm has substantial background knowledge; and (f) Such other matters as the Debtors may request from time to time. The Debtors agreed to compensate the firm for services rendered based on its hourly rates charged which are as follows: Partners $300 to $600 Associates $125 to $325 Paralegals $ 75 to $185 The firm told Judge Wizmur that the law does not require a special counsel to be a "disinterested person". It is enough that the special counsel does not represent or hold any interest adverse to the Debtors or to the estate with respect to the matter in which the special attorney is to be employed. Lawrence M. Levy, a member of Brown, Rudnick, on behalf of the firm, disclosed that the Debtors owe the firm an unpaid claim, estimated on Debtors' list of twenty largest creditors to be about $1,500,000.00, for unpaid prepetition legal fees. In addition, the firm has represented Lernout & Hauspie Speech Products since 1991, has acted as LHSP's principal United States counsel for corporate and securities matters, and has assisted LHSP in its acquisitions of Dictaphone and Dragon Systems, and with SEC filing obligations after that. Mr. Levy further disclosed that prior to the commencement of these cases the firm has assisted Bryan Cave, proposed special counsel for the Debtors, in connection with the SEC investigation, and has worked with Leoff Claeys Vereke, the Debtors' Belgian counsel, and Milbank Tweed, lead counsel for the Debtors, in connection with prefiling negotiations with the Debtors' prepetition lenders. The firm has represented Jo Lernout and Pol Hauspie, L&H's founders and significant shareholders and former officers, and companies they control, such as Oldco N.V. and L&H Investment Company N.V. The firm also briefly represented Flanders Language Valley Fund C.V.A., a venture capital fund initially organized by Messrs. Lernout and Hauspie. The firm has also represented other Lernout and Hauspie ventures, such as SailTrust VZM. The firm has also represented certain creditors in these cases, such as Finova Capital, Fremont Financial, Fortis Health, which may be an affiliate of Fortis Bank N.V., Deutsche Bank Securities, Inc., an affiliate of Deutsche Bank, State Street Bank & Trust, a trustee under the indenture governing Dictaphone's bonds, and is acting as local counsel for Patton Boggs in a litigation matter in Massachusetts. Certain firm attorneys own shares in LHSP and FLV Fund. Mr. Levy himself owns an option to hold 90,000 shares out of the approximately 142 million shares outstanding. Various other members and employees may hold shares in LHSP or the FLV Fund, but Mr. Levy assures Judge Wizmur that none of these holdings are significant. Mr. Levy swore that to the best of his knowledge, neither he nor any member of the firm holds or represents any interest materially adverse to the debtors' estates or of any class of creditors or equity security holders in respect to the specific services for which the firm would be retained as special counsel. (L&H/Dictaphone Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) LIBERTY HOUSE: Emerges From Bankruptcy -------------------------------------- It took almost three years, but the Liberty House bankruptcy saga ended Thursday when the store's reorganization plan went into effect and the Hawaiian company announced it emergence from bankruptcy, according to TheHawaiichannel.com. As a result, vendors and others owed less than $5,000 will receive 100-percent of what's due plus interest within 30 days. Other creditors will receive a cash payment worth 40 percent of what they're owed and a note worth 50 percent payable over five years. Company president John Monahan said that Liberty House has also been extended a $40 million line of credit. He said that the store now makes enough money to pay off its operating expenses every month. (ABI World, March 2, 2001) LOEWEN GROUP: Resolves Pulaski Funeral Disputes With McKinneys -------------------------------------------------------------- The Loewen Group, Inc. sought and obtained the Court's authority for Loewen Group International, Inc. (LGII) and Pulaski Funeral Home, Inc. (PFH) to enter into a Settlement Agreement with Jerry and Elizabeth McKinney and Citizens National Bank to resolve controversy in connection with the McKinneys' management of PFH which was acquired by Loewen in 1995 by purchasing all the outstanding stock of PFH from Mr. McKinney. At approximately the time of the acquisition, LGII and Mr. McKinney also entered into a non-competition agreement, a management agreement pursuant to which Mr. McKinney served as manager of PFH, and related documents. Following LGII's acquisition of PFH, LGII and the McKinneys had several disputes relating to Mr. McKinney's management and operation of PFH. Among other matters, LGII concluded that Mr. McKinney had committed certain legal and ethical violations, including the taking of certain funds belonging to PFH, while acting as manager of PFH. Consequently, the Debtors fired Mr. McKinney from his position with PFH. Mr. McKinney has asserted he still is owed amounts under the Share Purchase Agreement and the Non-Competition Agreement. Shortly after that, the McKinneys filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the Kentucky Bankruptcy Court. The McKinneys' proposed plan of reorganization has been confirmed by the Kentucky Bankruptcy Court. Following the McKinneys' Chapter 11 filing, LGII and the McKinneys remained unable to resolve their disputes. LGII filed certain proofs of claim in the McKinneys' Chapter 11 case. In addition, LGII and PFH filed Adversary Proceeding No. 98-60 17 in the Kentucky Bankruptcy Court seeking, among other things: (a) a declaration that the debt of the McKinneys due to the Plaintiffs was not discharged in the McKinneys' bankruptcy; (b) the recoupment of certain funds received and expended by the McKinneys; and (c) the cancellation of certain contractual rights and payment rights, stemming primarily from the McKinneys' alleged breaches of contract. Mr. McKinney filed proofs of claim numbers 2843 and 7659 in Loewen's chapter 11 cases for amounts allegedly due under the Share Purchase Agreement and Non-Competition Agreement. To resolve all outstanding disputes between the parties, including the Claims, LGII, PFH and the McKinneys have agreed to enter into the McKinney Settlement Agreement. The McKinneys have obtained approval from the Kentucky Bankruptcy Court to enter into this Settlement Agreement in connection with their plan of reorganization. The Kentucky Bankruptcy Court directed the Plaintiffs to request that the Delaware Bankruptcy Court approve the McKinney Settlement Agreement. Pursuant to the McKinney Settlement Agreement, the Debtors, the McKinneys and Citizens National Bank of Somerset have agreed that: (1) In full and complete satisfaction of all their claims against the Debtors, the McKinneys will be entitled to all funds currently held in the Citizens National Bank Escrow Account titled "Benny Ham For Pulaski Funeral Home, Inc." relating to rental payments for the lease of the Pulaski Funeral Home. (As of August 31, 2000, the funds in the Citizens National Bank Escrow Account totaled $71,180. (2) In full and complete satisfaction of all their claims against the McKinneys, LGII and PFH will be entitled to all funds held in the escrow account "Benny Ham For Dinsmore and Schohl [sic] Jerry McKinney Escrow Account," established by Dinsmore & Shohl (the Dinsmore & Shohl Escrow Account) at the time of the sale of PFH to LGII. (As of August 31, 2000, the funds in the Dinsmore & Shohi Escrow Account totaled $51,887.87.) (3) The McKinneys, PFH and Citizens National Bank of Somerset agree to dismiss all claims they may have against each other with prejudice. (4) The McKinneys and LGII will withdraw all proofs of claim, including the Claims, filed in the respective bankruptcy cases. (5) The real estate that is the subject of the lease to Pulaski Funeral Home, Inc. will be transferred back to Mr. McKinney. (6) The McKinneys will cooperate as reasonably necessary with the Debtors to accomplish the transfer of all PFH assets to a new owner, including confirming that the Lease is in good standing and not subject to default. (7) Any disagreement between the text of this Motion and the McKinney Settlement Agreement will be resolved in favor of the McKinney Settlement Agreement. (Loewen Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORP.: Peoples Energy Presses for Assumption of Contract ------------------------------------------------------------ Peoples Energy Services Corporation, a manager and broker of power services, including gas and electric services, in Chicago, Illinois, appearing through Marc B. Merklin and Rebecca A. Kucera of the firm of Brouse McDowell of Akron, Ohio, asked that Judge Bodoh compel Welded Tube Co. of America to assume or reject the Natural Gas Agreement dated January 5, 1998, and the Base Power Sale and Purchase Agreement dated December 6, 2000. The Gas Agreement expires by its own terms on July 31, 2001, and as of the Petition Date the debtors owed Peoples the amount of $188,236.10 for gas provided to the Debtors prior to the Petition Date. Based on the historical data of The LTV Corporation The LTV Corporation's account, the Debtor's projected postpetition annual gas usage through July, 2001, is approximately $688,886.85. LTV-Copperweld Regal Tube and Peoples are parties to the Power Agreement. Performance under this agreement had not yet begun at the Petition Date, but the term of the Agreement is scheduled to run through June, 2001. Based upon the historical data of the Debtor's account, Peoples believes that the Debtor's projected postpetition annual electric usage through June 2001 is approximately $309,593. Under both agreements, Peoples is obligated to manage all power and gas requirements delivered to the Debtors, and the Debtors are obligated to pay all monthly charges. Under the terms of the agreement, if the Debtors fail to make payments when due, Peoples may terminate the agreement on 10 days' written notice. Under both these agreements, the Debtors receive a negotiated and below market rate for their electric and natural gas requirements that is lower than the tariff rates regularly charged by the regulated utility company. Peoples' brokering services are described as "competitive". Peoples does not enjoy monopoly status, and is not a public utility so it does not enjoy the privileges of termination of service within twenty days of the Petition if it is not paid. However, in the Debtors' utility motion the Debtors identified Peoples Energy Corporation, the parent of Peoples Energy Services, as a utility. If Peoples is a utility, it is entitled to seek further assurance of future payment under the Court's prior Order. Peoples told Judge Bodoh it believes there is a reasonable and "substantial doubt" that the Debtor can fully perform through the expiration of the respective agreements, so that Peoples would be greatly prejudiced if it is required to continue to provide its management and brokering services through the expiration of the existing agreements without full payment. Moreover, if the governing agreements are rejected by the Debtors, they may freely obtain its postpetition services from the regulated utility companies and negotiate with other non-regulated brokers of power and gas services. Given the prospective harm to Peoples and the short duration of the existing contracts, failure to set an early date for assumption or rejection may result in the Debtors' obtaining all of the benefits of performance of the contract by Peoples, without Peoples receiving the protection to which it is entitled by the Bankruptcy Code. (LTV Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-00900) MONTGOMERY WARD: Kimco Venture Wins Lease Designation Rights ------------------------------------------------------------ Kimco Realty Corp. (NYSE: KIM), in a joint venture with Simon Property Group (NYSE: SPG) and the Schottenstein Group, has been awarded asset designation rights for all of the real estate property interests of the bankrupt estate of Montgomery Ward LLC and its affiliates. These property interests consist of 250 former Montgomery Ward retail locations and other operating real estate assets; in total, the designation rights include 315 separate fee simple and leasehold property interests. These designation rights enable the venture to direct the ultimate disposition of the fee and leasehold positions held by the bankrupt estate. The venture has agreed to purchase the designation rights for an initial purchase price of $60.5 million that may ultimately exceed $435.5 million under the terms of the asset purchase agreement. The designation rights commenced simultaneously with the approval of the US Bankruptcy Court in Delaware, which was received Thursday, and will expire on February 26, 2002 for the leasehold positions and on December 31, 2004 for the fee owned locations. During the marketing period Kimco and its partners will be responsible for all carrying costs associated with operating the properties until a site is designated to a user. Due to the nature of the agreement, the timing and extent of the impact that this transaction will have on funds from operations cannot yet be determined. Kimco, a publicly traded real estate investment trust, has specialized in shopping center acquisitions, development and management for more than 30 years. Kimco currently owns and operates the nation's largest portfolio of neighborhood and community shopping centers, with interests in 495 properties comprising approximately 66 million square feet of leaseable space located throughout 41 states. OWENS CORNING: Court Okays Employment Of Real Estate Brokers ------------------------------------------------------------ Prior to the Petition Date, Owens Corning routinely employed numerous real estate brokers as part its ongoing business operations, which are conducted at hundreds of leased and owned facilities throughout the nation. The Debtors employ brokers on a transaction-by-transaction basis. In general, brokers are paid a commission equal to a percentage of he transaction value. Sales commissions are based on sales price, and lease commissions are based on rental stream. Commissions vary from 4% to 6% of transaction value, which translates into commissions ranging from $10,000 to $2,000,000. The Debtors anticipate that the brokers will provide both customary, ordinary course services to the Debtors, as well as services that relate more directly to the Debtors' Chapter 11 cases. For example, the Debtors anticipate using brokers to find suitable tenants to assume various unneeded leases, or to find replacement properties for leases that the Debtors ultimately reject. Given the burden to the Debtors' estates of seeking judicial review and approval for individual brokerage agreements, the Debtors proposed to employ and compensate each broker under procedures comparable to those previously approved by the Court in the order authorizing the Debtors to employ and compensate other professionals in the ordinary course of its business. The Debtors proposed to employ: The Staubach Company Great Lakes Region Corporate Services 1001 lakeside Avenue E, Suite 1717 Cleveland, Ohio 44114 Attn: Mr. E. Donald Bain Insignia/ESG, Inc. 311 South Wacker Drive, Suite 400 Chicago, Illinois 60606 Attn: Mr. Thomas H. Wenkstern CB Richard Ellis, inc. 233 North Michigan Avenue, Suite 2200 Chicago, Illinois 60601-6787 Attn: Gary J. Beban Fischer Company 13355 Noel Road, Suite 2400 Dallas, Texas 75240 Attn: Ted Uzelac Anderson & Layman 9 North 3rd Street Newark, Ohio 43055 Attn: Steve Layman Cushman & Wakefield 455 North Cityfront Plaza Dr., Ste. 2800 Chicago, Illinois 60611 Attn: Jane Endres Grubb & Ellis Company Corporate Services Group 2215 Sanders Road, Suite 400 North Brook, Illinois 60062 Attn: Steven Scruggs Binswanger Two Logan Square Philadelphia, Pennsylvania 19103-2759 Attn: Mr. Caleb Fox Colliers International Corporate Headquarters 1960 The Alameda, Suite 100 San Jose, California 95126 Attn: Mr. Phil Dixon Dillin Corporation 139 West Indiana Avenue Perrysburg, Ohio 43551-1578 Attn: Mr. Larry Dillin The Debtors proposed that they be permitted to pay each broker 100% of its fees and disbursements incurred upon submission to, and approval by, the Debtors of an appropriate invoice setting out in reasonable detail the nature of the services rendered and disbursements actually incurred by the broker without the need for the real estate broker to submit individual fee applications. The Debtors will not, however, pay any broker more than $1.5 million for any single transaction without prior approval by the Court. In order to provide sufficient information to parties in interest regarding compensation to real estate brokers, the Debtors proposed to include all fees paid to brokers on the periodic reports of professional fees required under the ordinary-course professionals order. The Debtors also requested that the brokers be excused from submitting separate retention applications and affidavits. The Debtors recognize the importance of providing information regarding brokers to the Court, the United States Trustee, and other parties in interest, so the Debtors proposed that each broker be required to file with the Court and serve on the United States Trustee and the Committees a declaration and disclosure statement within 30 days of the later of (a) the entry of an order granting this relief, or (b) the broker's first postpetition engagement by the Debtors. The U. S. Trustee and the Committees will then have 20 days from the date of service of such a declaration to object to the retention of the broker. If no objection is submitted within this time period, the broker's retention will be deemed approved by the Court without further notice or a hearing. By this Motion, the Debtors do not seek to retain real estate brokers that provide only services which are unrelated to these Chapter 11 cases. These brokers are not, the Debtors assured Judge Walrath, "professional persons" requiring formal applications for employment and compensation. The Debtors will continue to employ these types of brokers in the ordinary course of their businesses. However, the Debtors proposed that the same procedure for filing and objecting to declarations be followed whenever a broker is employed in the ordinary course of the Debtors' businesses. By her Order, Judge Walrath approved the employment of the real estate brokers on the terms stated in the Application. (Owens Corning Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) PG&E CORPORATION: Closes $1 Billion Loan Deal to Restructure Debt ----------------------------------------------------------------- PG&E Corporation (NYSE: PCG) closed a $1 billion loan agreement with GE Capital Structured Finance Group, as Lender and Co- Arranger, and Lehman Brothers as Lender, Administrative Agent, Lead Arranger, and Book Manager, to restructure the Corporation's debt and pay obligations on which it has defaulted. The loans, secured by the Corporation's equity interest in its PG&E National Energy Group, LLC, have enabled the Corporation to pay its outstanding debt obligations on which the Corporation has defaulted or would default in the near future. The obligations that have been paid include: $501 million in payments to commercial paper holders, $434 million in borrowings under a revolving credit agreement, and $116 million owed to PG&E Corporation common shareholders for the defaulted fourth-quarter 2000 dividend. The agreement also provides the lenders with options that, depending on certain factors, would allow them to acquire between 2 percent and 3 percent of the shares of PG&E National Energy Group, Inc. The term of the loan agreement is two years with an option by PG&E Corporation to extend it for an additional year. "The defaults created the risk that the Corporation might face a bankruptcy in the near future," said Chairman, CEO and President Robert D. Glynn, Jr., "and bankruptcy of the Corporation would benefit no one." Glynn emphasized that the financing would be repaid with PG&E Corporation shareholder dollars only. "Unlike the Utility's costs of procuring wholesale electricity for utility customers, this financing is a general corporate obligation of PG&E Corporation, and it will be repaid entirely with shareholder dollars," he said. "It has no impact on the rates the Utility's customers pay now or in the future." As required by the loan agreement, the funds were used to repay substantially all outstanding debt, and the Corporation's fourth- quarter 2000 common stock dividend, on which the Corporation defaulted in January when it was due to be paid. The Corporation's Board of Directors declared the dividend in October of 2000. The payment became an outstanding obligation after the record date on December 15, 2000, and the failure to pay it represented a default, which the lenders required the Corporation to pay with the proceeds of the loan, as part of the agreement. The loan agreement prohibits the Corporation from declaring or paying future common stock dividends until the loans are repaid. Dividend payments will be resumed when the Board of Directors determines that it is in the best interest of the Corporation to do so. PG&E Corporation markets energy services and products throughout North America through its National Energy Group. PG&E Corporation's businesses also include Pacific Gas and Electric Company, the Northern and Central California utility that delivers natural gas and electricity to one in every 20 Americans. RCN CORP.: Moody's Cuts Senior Bank Debt to B2 & Notes to Caa2 -------------------------------------------------------------- Moody's Investors Service lowered the debt ratings for RCN Corporation (RCN), as follows: * $1 billion of senior secured bank credit facilities to B2 from B1, and * the combined $2.025 billion (face amount) of senior unsecured notes to Caa2 from B3 Meanwhile, the company's senior implied rating is placed at B3, and RCN's senior unsecured issuer rating is at Caa2. Approximately $3.0 billion of debt securities are affected, while the outlook for all ratings remains negative. Accordingly, the rating actions conclude the agency's review of the company's debt ratings, which began December 29, 2000. Moody's states that the downgrades principally reflect the company's inability to perform in accordance with its expectations, including those assumptions on which the ratings were originally predicated in 1997, as well as those as revised by management more recently. Moody's specifically noted that the pace of network construction and subscriber additions has been considerably slower and materially more costly than anticipated, notwithstanding the company's market expansion to the west coast and mid-west geographical regions since the original business plan was evaluated. Reportedly, the company's former strategy of acquiring regional Internet service providers as a market entree and lead- in to migrating subscribers to these services onto RCN's own network, and the enhanced economics that would ensue therefrom, have also been largely unsuccessful. Finally, the rating agency thinks that that management has been spread too thin, and that past mis-steps in execution - although they are being addressed - may ultimately hinder the company's long-term success, Moody's relates. Communications company RCN Corporation is constructing network and marketing video, voice and data services mainly to residential households located in high-density northeast, west coast and midwest markets in competition with leading incumbent service providers. The company is located in Princeton, New Jersey. ROYCE BIOMEDICAL: Has No Credit, Bank Financing or Liquidity ------------------------------------------------------------ Royce Biomedical Inc. has experienced significant losses over the past five years, including $34,251 in the current period and has an accumulated deficit of $2,433,250 at December 31, 2000. The company's continued existence as a going concern is dependent upon its ability to continue to obtain adequate financing arrangements and to achieve and maintain profitable operations. The company does not have any available credit, bank financing or other external sources of liquidity. Due to historical operating losses, its operations have not been a source of liquidity. In order to obtain capital, the company may need to sell additional shares of its common stock or borrow funds from private lenders. During the twelve months ending December 31, 2001 the company will need approximately $4,000,000 in additional capital for the acquisition of a pharmaceutical manufacturing facility that will allow the company to manufacture H. Pylori test kits in China. In addition, if during the twelve months ending December 31, 2001 the company suffers additional losses, it will need to obtain additional capital in order to continue operations. There can be no assurance that the company will be successful in obtaining additional funding. RSL COMM.: Suspends Interest Payment on 9-1/8% and 12-7/8% Notes ---------------------------------------------------------------- RSL Communications PLC stated that, as part of its efforts to preserve cash, it is suspending the regular semiannual interest payments due on March 1, totaling approximately $22 million, to holders of its 9-1/8% notes (maturing March 1, 2008), 12-7/8% U.S. dollar denominated notes (maturing March 1, 2010) and 12- 7/8% Euro denominated notes (maturing March 1, 2010). The indentures governing such notes provide for a 30 day grace period. The Company said that it has been working cooperatively with an unofficial committee representing holders of its outstanding notes, including the foregoing notes. The committee has advised RSL COM that it will continue to work with the Company with a view toward the formulation of a consensual restructuring of the Company's note obligations. The Company has also made a decision to indefinitely defer the payment of interest and the repayment of principal on the $100 million loan extended to the Company late last year by Ronald S. Lauder, Chairman of RSL COM. RSL COM is evaluating all of its strategic alternatives, including actively pursuing the sale of numerous subsidiaries. In that regard, the Company is in various stages of negotiations with potential buyers for all or part of a number of its subsidiaries. RSL COM has closed on the sale of its prepaid calling card business in the USA and most of the residential mobile customer base in the UK. As announced in early January, the Company closed on the sale of its investment in Telegate AG, yielding gross proceeds of nearly EUR 300 million. As previously announced, the Board of Directors of RSL COM has retained the investment banking firm of Dresdner Kleinwort Wasserstein to advise the Company with respect to its strategic alternatives and to assist it in executing a plan to sell assets. The Board of Directors has also appointed Keith Maib as Chief Restructuring Officer. Mr. Maib has extensive experience in complex operational and financial restructurings. Mr. Maib said: "Over the past several months, we have worked closely and cooperatively with an unofficial group of noteholders to address and resolve many of the issues facing the Company. The most important issue is cash resources, and the action today is consistent with our goal to maintain adequate levels of cash flow to support operations while we seek to refocus the business." RSL Communications is a facilities based communications company that provides a broad range of data/Internet, voice and value- added product and service solutions to customers in selected markets around the globe. RSL COM is headquartered in Hamilton, Bermuda with executive offices in New York City. SELECT SWITCH: Court Confirms Chapter 11 Plan --------------------------------------------- The US Bankruptcy Court for the Central District of California issued a notice on February 16, 2001, confirming a Chapter 11 plan of reorganization. SERVICE MERCHANDISE: Wants To Terminate Existing Pension Plan ------------------------------------------------------------- As authorized by the Court pursuant to the Pension Plan Order, Service Merchandise Company, Inc. amended its Pension Plan, implementing the cessation of the accrual of benefits under the Pension Plan effective September 30, 1999. The Debtors' actuarial advisors have determined that the Pension Plan is presently fully funded. However, the interest rates that impact the solvency of the Pension Plan fluctuate from year to year. As a result, the Pension Plan's status is subject to change. In the exercise of their business judgment, the Debtors have determined to terminate the Pension Plan and take advantage of the current funding status of the Plan, rather than risk adverse changes in prevailing interest rates. The Debtors believe that the proposed relief is also well justified because it will likely enable the Debtors to make full distributions to eligible participants under the Pension Plan. Moreover, the Debtors believe that under ERISA, they are allowed to terminate the Pension Plan and to commence making distributions so long as they comply with certain requirements of ERISA and the Internal Revenue Code. The Debtors make it clear that they do not ask the Court to modify or alter these requirements in any way but are seeking the Court's permission to perform an act they otherwise would be entitled to perform outside of the context of their chapter 11 cases. In particular, the Debtors intend to give notice to all eligible participants under ERISA and the Internal Revenue Code of their intention to terminate the Pension Plan. In accordance with applicable nonbankruptcy law, the Pension Plan assets will be reinvested pending the implementation of the termination process to protect the assets from further interest rate fluctuations. After seeking an appropriate determination letter from the Pension Benefit Guaranty Corporation and the Internal Revenue Service and other relevant authorities and after giving eligible participants appropriate notice, the Debtors will commence distributions under the Pension Plan. In addition, the Debtors estimate that there may be surplus assets available to the Debtors after the distributions are complete. Accordingly, the Debtors also request authority to use the surplus in the ordinary course of business, including, but not limited to, using the surplus to fund a defined contribution plan for current and future employees. With this, the Debtors sought the Court's authority, pursuant to 11 U.S.C. sections 105 and 363(b) to take all steps necessary and appropriate to effectuate the termination of the Service Merchandise Company, Inc. Restated Retirement Plan in accordance with the provisions of the Employee Retirement Income Security Act of 1974, as amended and to implement the procedures for distributions. The Debtors believe that the relief requested is in the best interests of the estates and reflects the Debtors' exercise of sound business judgment. (Service Merchandise Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) TBS INTERNATIONAL: April 9 Administrative Claims Bar Date Set ------------------------------------------------------------- On October 12, 2000 the U.S. Bankruptcy Court for the Southern District of New York entered an order confirming the Third Amended Joint Plan of Reorganization of TBS International Limited and the affiliated debtors. On February 8, 2001, the Bankruptcy Court entered an order approving certain modifications to the plan, and confirming the plan, as modified. On February 8, 2001, the plan was substantially consummated and became effective. Holders of administrative expense claims shall file and serve a request for payment of such claims on each of the following entities no later than 5:00 PM, Eastern Time, on April 9, 2001. Attorneys for the debtors are James P. Ricciardi, PC and Rosalie W. Gray, Gison, Dunn & Crutcher LLP, New York, NY. U.S. MEDIA: Hearing to Convert or Dismiss Scheduled for March 13 ---------------------------------------------------------------- On motion of the US Trustee for the Southern District of New York, a hearing will be held before the Honorable Arthur J. Gonzalez at the U.S. Bankruptcy Court, Southern District of New York at the above address on March 13, 2001 at 9:30 AM for an order converting the Chapter 11 case, U.S. Media Holdings, Inc., to a case under Chapter 7 of the Bankruptcy Code, or in the alternative dismissing this Chapter 11 case and such other and further relief as may be deemed just and proper. U.S. INDUSTRIES: Fitch Lowers Senior Note Rating to BBB- -------------------------------------------------------- U.S. Industries, Inc.'s (USI) $375 million senior notes are downgraded to 'BBB-' from 'BBB' and commercial paper program is lowered to 'F3' from 'F2'. Both ratings have been placed on Rating Watch Negative. These actions follow the company's announcement that the anticipated spin-off of its lighting and industrial tools businesses and other debt repayment activities will not be completed within the time period previously contemplated. The delay in completing the spin-off of these businesses and monetizing the Strategic Industries seller notes has resulted in higher debt levels and weaker credit protection measures than previously anticipated. With regard to proposed asset sales, future debt reduction remains uncertain. Also of concern is the weakness experienced in certain of USI's business lines and the impact a continued economic slowdown could have on the company's operating results. USI announced that on April 30, 2001, its unsecured revolving credit facilities will become secured with the company's senior notes remaining pari passu, sharing equally in the security with the revolving facilities. The Rating Watch Negative status is expected to be resolved following the resolution of the company's new capital structure and further debt reducing activities. The company's operating performance will also be considered. U.S. INTERACTIVE: Caught in Bankruptcy Fight Over Bonuses --------------------------------------------------------- U.S. Interactive Inc. is caught up in a bankruptcy court wrangle over bonuses promised to employees who stuck around to shut down the former King of Prussia, Pa. corporate headquarters, according to LocalBusiness.com. The failed web consultancy has been in chapter 11 bankruptcy since January and was recently kicked off the Nasdaq and hit with the first of an expected onslaught of shareholder suits. U.S. Interactive filed bankruptcy after announcing it was shutting down Pennsylvania operations and retreating to the California stronghold of SoftPlus Inc., a rival it bought but could not pay for. Mohan Uttarwar, who resigned as Chief Executive Officer of U.S. Interactive at the time of the filing, had been CEO at SoftPlus. After he took over in the fall, U.S. Interactive made various representations about the fate of the Pennsylvania-based workforce in filings with the Securities and Exchange Commission. At one point, the company said it would pay $1.5 million to people considered essential to the firm's future. Now a federal judge in Wilmington has to decide whether to give the nod to bonuses promised to senior staffers persuaded to hang on for the last hurrah. About $875,000 is sitting in escrow, earmarked for the bonuses. (ABI World, March 2, 2001) VANGUARD AIRLINES: Hambrecht Trust Adds to 53.1% Equity Stake ------------------------------------------------------------- The Hambrecht 1980 Revocable Trust beneficially owns 17,439,275 shares of the common stock of Vanguard Airlines, Inc., exercising sole voting and dispositive power over such shares. The amount held represents 53.1% of the outstanding common stock of the airline. The Hambrecht 1980 Revocable Trust is a California revocable trust. The trustee of the trust is William R. Hambrecht, whose occupation is investing in public and private companies. Mr. Hambrecht is regularly engaged in the business of investing in publicly-held and private companies. On February 13, 2001, the Trust arranged for the issuance of an irrevocable letter of credit in the amount of $2,000,000 in favor of a commercial bank for the account of the Vanguard. In exchange for the arrangement of the issuance of the letter of credit, the Trust received a warrant to purchase 2,000,000 shares of common stock of Vanguard. Mr. Hambrecht acquired the securities to increase the Trust's equity interest in the airline. WASHINGTON GROUP: Billion-Dollar Credit Agreement Now in Default ---------------------------------------------------------------- Washington Group International, Inc. (NYSE:WNG) (formerly Morrison Knudsen Corporation) faces severe near-term liquidity problems. The company is in default under certain covenants in its senior credit facilities with its banks. In addition, the company currently is unable to secure performance bonds necessary to obtain certain new projects. The company will request waivers from its lenders and attempt to restore its bonding capacity; however, no assurance can be given that it will be able to obtain waivers or that it will improve its liquidity and financial condition to a level necessary to obtain bonding capacity. Washington attributes its liquidity problems to a delay in resolving purchase price adjustments in connection with its acquisition of Raytheon Engineers & Constructors (RE&C) and due to substantial cost overruns and negative cash flows associated with certain RE&C projects acquired. Prior to its acquisition of the RE&C businesses, Washington had uncollateralized revolving credit facilities providing an aggregate borrowing capacity of $325,000,000, of which $99,900,000 was outstanding at June 2, 2000. On July 7, 2000, in order to finance the RE&C acquisition, refinance existing revolving credit facilities, fund working capital requirements and pay related fees and expenses, Washington: (1) obtained new senior secured credit facilities, providing for an aggregate of $1,000,000,000 of term loans and revolving borrowing capacity and (2) issued and sold $300,000 aggregate principal amount of senior notes due July 1, 2010. The New $1,000,000,000 Credit Agreement, dated as of July 7, 2000 among MORRISON KNUDSEN CORPORATION, the Lenders named therein, BANK OF MONTREAL, as Syndication Agent, CREDIT SUISSE FIRST BOSTON, as Administrative Agent, Collateral Agent and an Issuing Bank and as Arranger and BANK OF AMERICA, N.A. and U.S. BANK NATIONAL ASSOCIATION, as Documentation Agents, provided the Company with access to: (a) two senior secured term loan facilities in an aggregate principal amount of up to $500,000,000 including a $100,000,000 multi-draw Tranche A term loan facility that matures July 7, 2005 and a $400,000,000 Tranche B term loan facility that matures July 7, 2007, and (b) a five-year $500,000,000 senior secured revolving credit facility, all of which is available in the form of letters of credit. Initial borrowings under the New Credit Facilities totaled $400,000,000 representing the full amount available under the Tranche B term loan facility. On October 5, 2000, Washington terminated the Tranche A term loan facility due to its determination that near term borrowing capacity is sufficient and to eliminate ongoing related commitment fees. The Company's obligations under the Credit Agreement are secured by pledges, guarantees and other collateral. The Senior Notes are unsecured senior obligations that mature on July 1, 2010. Interest on the Senior Notes is payable semiannually in arrears on January 1 and July 1, commencing January 1, 2001. The Senior Notes were sold in a private offering to: Credit Suisse First Boston Corporation..... $ 225,000,000 BMO Nesbitt Burns Corp..................... 60,000,000 U.S. Bancorp Libra, a division of U.S. Bancorp Investments, Inc................ 15,000,000 ------------- Total............................ $ 300,000,000 ============= Under a registration rights agreement for the benefit of the holders of the Senior Notes, Washington Group is required to offer to exchange the Senior Notes for new Senior Notes that are registered under the Securities Act of 1933. The Senior Notes provide for additional interest to the extent and for the period that the registration process is not completed within the specified periods. The Senior Notes accrued interest at a rate of 11% per annum through September 20, 2000, and currently accrue interest at 11.5% per annum. They will continue at that rate until Washington fully complies with the registration requirements of the registration rights agreement, subject to a further increase in interest rate of .5% per annum from and after December 20, 2000, until the registration process is completed. At that time, the Senior Notes will again accrue interest at the annual rate of 11%. The Senior Notes rank equally with existing and future senior unsecured indebtedness. The Senior Notes effectively rank junior to all secured indebtedness and to all liabilities of the subsidiaries that are not guarantors of the Senior Notes. The Senior Notes rank senior to any future subordinated indebtedness. The Senior Notes are guaranteed on a senior basis by: * Centennial Engineering, Inc. * Morrison Knudsen Corporation * Morrison Knudsen Corporation (Montana) * Montana Morrison Knudsen International, Inc. * Morrison Knudsen Leasing Corporation * Morrison Knudsen LLC * National Projects, Inc. * Pomeroy Corporation * Washington Contractors Group, Inc. and these RE&C subsidiaries: * Asia Badger, Inc. * Badger Energy, Inc. * Energy Overseas International, Inc. * Raytheon-Catalytic, Inc. * Raytheon Constructors, Inc. * Raytheon Constructors International, Inc. * Raytheon Demilitarization Company * Raytheon-Ebasco Overseas Ltd. * Raytheon Engineers & Constructors, Inc. * Raytheon Engineers & Constructors, Midwest, Inc. * Raytheon Engineers & Constructors UK Ltd. * Rust Constructors, Inc. * United Engineers Far East, Ltd. * United Engineers International, Inc. * United Mid-East, Inc. The indenture under which the Senior Notes were issued contains affirmative, restrictive and financial covenants and specifies events of default which are typical for an indenture governing an issue of high-yield senior unsecured notes. Among the covenants are those limiting Washington's ability (and certain of its subsidiaries) to incur debt or liens, provide guarantees, make investments and pay dividends or repurchase shares. * * * Because of the additional time needed to focus on its near-term liquidity position and to reflect the impact of its current situation in its financial statements and related disclosures, the company also announced that it will delay its fourth quarter and fiscal 2000 earnings announcement until Friday, March 16, 2001. Washington Group expects a significant cash payment from Raytheon Company when Raytheon complies with its contractual obligations under the acquisition agreement. "The purchase price adjustment should have been determined by now," said Dennis R. Washington, Chairman and Chief Executive Officer. "And if it had, we simply wouldn't be in this position. Several RE&C projects had serious undisclosed problems and were in trouble before we acquired RE&C, and were it not for those contracts our business would be strong." Under the acquisition agreement, performance on these contracts is the responsibility of Washington Group, but performance guarantees by Raytheon Company to the project owners remain in place on most of the troubled RE&C projects. On July 7, 2000, Washington Group paid Raytheon Company approximately $53 million and assumed liabilities then estimated to be $450 million to acquire RE&C. The purchase price was based on a Raytheon-prepared preliminary April 30, 2000 balance sheet and remains subject to a cash adjustment, based on an audited version of that financial statement. The parties agreed that Raytheon would prepare and deliver the audited balance sheet of the RE&C businesses by January 14, 2001, and Raytheon has failed to do so. The acquisition agreement provides for a dispute resolution process to resolve any disagreements between the parties once the audited balance sheet has been prepared. Despite Washington Group's efforts to complete the process in a timely manner, the adjustments to the purchase price remain unresolved and Washington Group has not received the cash payment it expects under the contract. As previously reported, as of September 1, 2000, the company reduced RE&C assets and increased liabilities by approximately $700 million from amounts originally estimated. Washington Group's viability is dependent upon resolution of its near-term liquidity problems. Washington Group is currently in discussions with its lenders, surety companies and other parties to attempt to solve its near-term liquidity problems. It is considering all alternatives to increase liquidity, including various measures to conserve cash, the incurrence of additional debt, the issuance of additional equity and the sale of all or a portion of its assets. Given the near-term nature of its liquidity problems, however, Washington Group's alternatives are limited and there is no assurance that Washington Group will be able to obtain additional funds. If Washington Group is unable to obtain additional sources of cash, it may, among other alternatives, seek protection from its creditors under the United States Bankruptcy Code. David S. Kurtz, Esq., and Jeffrey W. Linstrom, Esq., (formerly at Jones, Day, Reavis & Pogue and now at Skadden, Arps, Slate, Meagher & Flom) guided Morrison Knudsen through its prepackaged chapter 11 proceeding in 1996 before The Honorable Peter J. Walsh in the U.S. Bankruptcy Court for the District of Delaware (Bankr. Case No. 96-1006). Anthony W. Clark, Esq., at Skadden Arps, served as Special Counsel to MK's Board of Directors. Leon C. Marcus, Esq., at Marcus Montgomery P.C., represented an Unofficial Committee of Equity Security Holders. That band of interest holders attempted to derail MK's pre-petition merger deal with Washington Construction Group, Inc., and subject MK to a post-petition auction process. The Unofficial Committee was unable to persuade Judge Walsh to find that MK's impaired creditors were recovering a greater than 100% return and hold that the distribution of warrants to MK shareholders under Debtors' Plan was not fair and equitable within the meaning of 11 U.S.C. Sec. 1129(b)(2)(C). Since emergence from chapter 11, Robert A. Yolles, Esq., in Jones Day's Chicago office has provided legal services for the Company on various occasions. PricewaterhouseCoopers LLP serves as Washington Group's auditors and accountants. Kris F. Heinzelman, Esq., at Cravath, Swaine & Moore, serves as counsel to CSFBC in connection with the registration of the Senior Notes. United States Trust Company of New York serves as the Intenture Trustee for the 11% Senior Note issue. Washington Group International, Inc. is an international engineering and construction firm with more than 39,000 employees at work in 43 states and more than 35 countries. WASHINGTON GROUP: Moody's Junks Debt Ratings -------------------------------------------- Moody's Investors Service cut the debt ratings of Washington Group International, Inc. and left the ratings under review for possible further downgrade. Approximately 1.3 billion of debt are affected. Said ratings are as follows: * Senior secured bank credit facility lowered to Caa1 from Ba1, * senior unsecured notes lowered to Caa3 from Ba2, * senior implied rating lowered to Caa1 from Ba1, and * senior unsecured issuer rating lowered to Caa3 from Ba2. According to Moody's, the downgrades follow the company's recent announcement that it is in default under certain covenants in its senior credit facilities and is facing severe near-term liquidity problems due to substantial cost overruns and negative cash flows associated with certain projects acquired through the Raytheon Engineers & Constructors (RE&C) acquisition, and ongoing disputes regarding purchase price adjustments with Raytheon relating to this acquisition. Moody's has noted that the company's debt structure included approximately $400 million outstanding under its bank credit facility as of September 1, 2000, and about $300 million of senior unsecured notes. Its maturity profile is said to be modest with only $4.0 million of scheduled maturities due each year through 2005. Accordingly, the company's bank credit facilities benefit from a pledge of substantially all of the tangible and intangible assets of the company. However, because of the apparent erosion of the balance sheet since September 1, and the cost overruns incurred on various contracts, the potential recovery for secured creditors could be impaired, Moody's states. The rating agency also adds that the effective subordinated position of the unsecured creditors would likely result in a substantial reduction in their recovery potential. The ongoing rating review will assess the company's ability to secure needed waivers and amendments from its bank group, the ongoing negotiations with Raytheon regarding purchase price adjustments, and the company's ability to maintain adequate liquidity for its operations, Moody's relates. The review will also consider the ongoing effect of the current situation on potential recovery values for all creditors, according to Moody's. WHEELING-PITTSBURGH: Noteholders Tap Zolfo as Financial Advisor --------------------------------------------------------------- The Official Committee of Unsecured Noteholders of Wheeling- Pittsburgh Steel Corporation and the related Debtors, and the Official Committee of Unsecured Trade Creditors for these Debtors, jointly asked Judge Bodoh for his approval and authorization of the employment by them of the New York accounting firm of Zolfo Cooper LLC as their bankruptcy consultants and special financial advisors. All the services that Zolfo Cooper will provide to the Committees will be: (i) at the request of the Noteholders' Committee, Trade Committee or both, (ii) appropriately directed by the Noteholders' Committee, Trade Committee or both, so as to avoid duplicative efforts among the professionals retained in the case, and (iii) performed in accordance with applicable standards of the accounting profession. It is presently anticipated that Zolfo Cooper will provide the following services: (a) Monitor the Debtors' cash flow and operating performance, including: (1) Comparing actual financial and operating results to plans; (2) Evaluating the adequacy of financial and operating controls; (3) Tracking the status of the Debtors'/Debtors' professionals' progress relative to developing and implementing programs such as preparation of a business plan, identifying and disposing of nonproductive assets, and other such activities; and (4) Preparing periodic presentations to one or both of the Committees summarizing findings and observations resulting from Zolfo Cooper's monitoring activities; (b) Analyze and comment on operating and cash flow projections, business plans, operating results, financial statements, other documents and information provided by the Debtors/Debtors' professionals, and other information and data pursuant to one or both of the Committees' requests; (c) Understand and monitor the Debtors' process to sell, merge, acquire or dispose of assets, business units or companies and advise the Committees with respect to the Debtors' activities; (d) Advise the Committees concerning interfacing with the Debtors, other constituencies and their respective professionals; (e) Prepare for and attend meetings of the Committees and subcommittees thereof; (f) Analyze claims and perform investigations of potential preferential transfers, fraudulent conveyances, related-party transactions and such other transactions as may be requested by the Committees; (g) Testify before the Bankruptcy Court or other forum as required; (h) Analyze and advise the Committees about the Debtors' proposed plan of reorganization, the underlying business plan, including the related assumptions and rationale, and the related disclosure statement and any proposed sale of assets under Section 363 of the Bankruptcy Code; (i) Assist the Committees in negotiating and, if appropriate, drafting a plan of reorganization; and (j) Provide other services as requested by the Committees. Zolfo Cooper has indicated to the Committees that its decision to accept this engagement to advise and assist the Committees is contingent upon its ability to be retained in accordance with its customary terms and conditions of employment and compensated for its services and reimbursed for the out-of-pocket expenses it incurs in accordance with its customary billing practices. Zolfo Cooper's fees are based upon the actual hours expended at the firm's standard hourly rates which are in effect when the services are rendered. Zolfo Cooper's current hourly rates in effect as of January 1, 2001 are: Principals/members $450-595 Professional Staff $125-440 Support Staff $ 75-100 Kevin M. Golmont, a member of Zolfo Cooper, told Judge Bodoh that staff professionals do not have titles; the title member at Zolfo Cooper is a legal distinction, not a distinction of professional proficiency. Mr. Golmont is the member who will be responsible for this engagement. Mr. Golmont assured Judge Bodoh that Zolfo Cooper neither holds nor represents any interest adverse to the Committees on the employment for which approval is sought. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) ********* 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.bankrupt.com/books/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. 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