/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/010510.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, May 10, 2001, Vol. 5, No. 92 Headlines AMAZON.COM: Legg Mason Discloses 14.67% Equity Stake AMEDISYS INC: Reports Improved First Quarter 2001 Results BETHLEHEM STEEL: Moody's Puts Debt Ratings Under Review CALIFORNIA PACIFIC: Rice Marketer Files For Bankruptcy CALIFORNIA PACIFIC: Case Summary & Largest Unsecured Creditors CMI INDUSTRIES: Responds To Noteholders' Involuntary Petition FINOVA GROUP: Overview Of Joint Plan Of Reorganization FRUIT OF THE LOOM: Selling Non-Operating Facilities & Equipment FUSION NETWORKS: Initiates Assignment for Benefit of Creditors GOLDEN STAR: Shareholders To Convene In Toronto On June 27 GROVE WORLDWIDE: Chapter 11 Case Summary GROVE WORLDWIDE: S&P Slashes Credit Ratings To 'D' HARNISCHFEGER: Identifies Members Of Advisory Committee IGI INC: Names Earl Lewis As New Chairman of the Board IMPERIAL CREDIT: Starts 12% Senior Note Exchange Offer Today IMPERIAL SUGAR: Creditors Seek Order Disbanding Equity Committee KOMAG INCORPORATED: Posts $51 Million Net Loss in Q1 2001 LERNOUT & HAUSPIE: Court Establishes June 11 Claims Bar Date LOEWEN GROUP: Canadian Pref'd Shareholders Object To Joint Plan LUCENT TECHNOLOGIES: CFO Shuffle Spooks Investors LUZON SERVICES: Files Chapter 11 Petition in Oregon LUZON SERVICES: Chapter 11 Case Summary MARINER: Wants To Assume ACMS Sublease For California Facility MOE GINSBURG: List of 20 Largest Unsecured Creditors MORGAN GROUP: Progresses On Acquisition of New Credit Facility PACIFIC GAS: Court Grants More Time To File Schedules PILLOWTEX CORP: Wants To Assume Software Agreements With Camstar REGAL CINEMAS: Says It's Unable to Cure Debt Covenant Defaults RITE AID: Reports Fourth Quarter And Year-End Financial Results SAFETY-KLEEN: Judge Approves Payment Of Superfund Obligations SIMONDS INDUSTRIES: S&P Cuts Corporate Credit Rating to B SUN HEALTHCARE: Transferring Five More SunBridge Facilities TRANS ENERGY: Selling Debt Securities To Raise Needed Funds TRANSPORTATION COMPONENTS: Files Chapter 11 Petition in Houston TRANSPORTATION COMPONENTS: Chapter 11 Case Summary USG CORPORATION: Moody's Downgrades Senior Note Rating To B2 VIDEO UPDATE: Movie Gallery Buys Senior Secured Bank Debt W.R. GRACE: Moves To Withdraw Reference re Asbestos Claims W.R. GRACE: Obtains Approval for $250 Million DIP Financing WHEELING-PITTSBURGH: Proposes Workers' Income Protection Policy ********* AMAZON.COM: Legg Mason Discloses 14.67% Equity Stake ---------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, Legg Mason, Inc., based in Baltimore, Maryland, discloses that it beneficially owns 52,599,180 shares of common stock in Amazon.com Inc. This amount represents 14.67% of the outstanding common stock of the company. AMEDISYS INC: Reports Improved First Quarter 2001 Results --------------------------------------------------------- Amedisys, Inc. (OTC BB: "AMED"), one of America's leading home health nursing companies, reported its financial results for the first quarter of 2001. The Company reported net income from continuing operations, before income taxes, of $2.7 million for the three months ended March 31, 2001. Net of income taxes, the Company reported income from continuing operations of $2.4 million, or $0.32 per diluted share, for the first quarter of 2001, on revenues of approximately $26.2 million. These results compared with revenues of approximately $23.4 million and a net loss, before special items, of ($1.4 million), or ($0.42) per share, in the first quarter of 2000. The significant improvement in operating profitability was primarily attributable to the implementation of Medicare's Prospective Payment System in the fourth quarter of 2000. "We are pleased to report that the earnings turnaround that followed the implementation of Medicare's new Prospective Payment System in October 2000 is continuing," stated William F. Borne, Chairman and Chief Executive Officer of Amedisys, Inc. "A revenue gain of 12% in the first quarter reflected growth in patient admissions, contributions from acquired home nursing agencies, and changes in the Medicare payment system. Operating income for the quarter totaled $3.2 million, or 12% of net revenue, as compared with an operating loss of ($816,000) for the same quarter of last year." "The recent acquisition of seven home care agencies from Seton Home Health Services, Inc., as previously reported, should contribute $12-$14 million to Amedisys' annualized revenues. We are continuing to pursue an acquisition strategy that will expand the geographic scope of our services and fill in coverage gaps in our present market areas." "We also believe that the managed care industry can benefit from our ability to provide home nursing services on a cost-effective basis," continued Borne. "Amedisys recently signed managed care contracts with United Healthcare of Alabama and United Healthcare of Georgia that cover approximately 650,000 residents in those two states. We will continue to pursue managed care contracts as we expand throughout our market areas." "Patient admissions continued strong during the month of April, and we expect to report a profitable second quarter, compared with a loss from continuing operations in the prior-year period. We believe that Amedisys is positioned for continuing profitability as a cost-effective provider of nursing and disease state management services in the home care environment. Our strategy is to pursue both internal and external growth opportunities within the home nursing industry. Consistent with our goal of enhancing shareholder values, we are also applying to have our common stock listed on Nasdaq or the American Stock Exchange in the near future," concluded Borne. BETHLEHEM STEEL: Moody's Puts Debt Ratings Under Review ------------------------------------------------------- Moody's Investors Service placed Bethlehem Steel Corporation's ratings under review for possible downgrade. These are: * Senior secured credit facility rating of B2, * Senior implied rating of B3, * Senior unsecured issuer rating of Caa1, * Senior unsecured debentures and notes ratings of Caa1, * Preferred stock rating of "caa". Approximately $900 million of debt securities are affected. Moody's stated that the review is prompted by the unexpectedly steep decline in the company's liquidity during the first quarter, its having entered into negotiations to a modify financial covenant in its existing credit agreement, and its seeking a new and larger secured credit agreement. Accordingly, the review will focus on Bethlehem's success with obtaining modifications of its covenants and negotiating a new increased credit facility, as well as on the company's progress with lowering its working capital requirements. Based in Bethlehem, Pennsylvania, Bethlehem Steel Corporation is the second largest U.S. steel producer. CALIFORNIA PACIFIC: Rice Marketer Files For Bankruptcy ------------------------------------------------------ Due to sharp losses incurred from the sale of rice to Japan a year ago, California Pacific Rice Milling (Cal Pac) was prompted to file for Bankruptcy Court protection from creditors. The unexpected competition from China in 1999 apparently reduced Japanese demand for U.S. short-grain rice, and Cal Pac proved to be the most vulnerable marketer, The Sacramento Bee reported. Cal Pac was forced to write down the value of the huge surplus. According to Don Haywood, Cal Pac's chief executive, the company ultimately sold some of it for feed. Moreover, Mr. Haywood said that because of the company's weakened financial position, Union Bank of California had frozen all loans to Cal Pac nine months ago, forcing the company to operate on its own cash since then. Also, several rice growers filed a complaint recently with the state Department of Food and Agriculture, claiming the company still owes them about 25 percent of what they are due for rice they delivered in 1999 for processing, according to The Sacramento Bee. But Haywood claimed the company has met all its contractual obligations to growers. California Pacific Rice Milling, a Sacramento Valley business, processes and markets nearly 20 percent of the state's rice crop. It was founded in 1985 by a private partnership of rice farmers, marketers and food distributors. The company is said to rank alongside Sunwest Milling Co. of Davis as the state's third largest rice milling and marketing firm. CALIFORNIA PACIFIC: Case Summary & Largest Unsecured Creditors -------------------------------------------------------------- Debtor: California Pacific Rice Milling Ltd. 1603 Highway 99 West PO Box 725 Arbuckle, CA 95912 Type of Business: The company is a rice milling and marketing firm with market concentration in Sacramento Valley. Chapter 11 Petition Date: May 03, 2001 Court: Eastern District Of California Bankruptcy Case Nos.: 01-25416 Judge: Jane Dickson McKeag Debtor's Counsel: Rober S. Bardwell, Esq. 555 Capitol Mall Suite 640, Sacramento, CA 95814 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 13 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ PM & O Line $ 5,114.14 Cornerstone Systems $ 4,847.00 San Joaquin Mercantile $ 4,304.10 Three B's Toilet Rentals $ 3,606.97 Canan Financial Services $ 3,521.02 Associates Fleet Services $ 3,268.24 EA Trucking, Inc. $ 3,150.00 English & Sons $ 2,541.00 Matson Navigation $ 2,529.31 Quezada & Sons Trucking $ 2,041.50 Cintas Corporation $ 2,008.70 Wadham Energy $ 1,783.67 GE Capital & 1,721.75 CMI INDUSTRIES: Responds To Noteholders' Involuntary Petition ------------------------------------------------------------- CMI Industries, Inc. announced that in response to the involuntary petition reportedly filed against the Company under the Bankruptcy Code late last week by certain holders of the Company's 9 1/2% Senior Subordinated Notes due 2003, the Company intends to continue to trade and operate in the ordinary course and to work to achieve its strategic objectives; and the Company is implementing a plan to do so. Under the bankruptcy laws, CMI has full authority to continue to operate its business and to carry out its other business plans without court supervision unless and until a court hearing is resolved adverse to the Company. No such hearing is now scheduled, and the Company will be able to respond beforehand. CMI intends to vigorously seek the dismissal of this unwarranted lawsuit if it is not first dismissed by the petitioning bondholders. Representatives of the petitioning bondholders are currently discussing with the Company the basis for dismissing the petition and a cooperative approach to restructuring the Company's debt structure outside of the bankruptcy context. In the meantime, all trade vendors are current and are being paid in the normal course of business. In addition, the Company is joining its senior secured bank lender to file an emergency motion to secure an order from the Delaware court that the Company may continue to utilize the borrowing capacity that, but for the bondholder's action, the Company would enjoy under its existing senior secured bank facility. At present, that borrowing capacity under the existing senior secured bank facility would allow additional borrowings of at least $12 million. CMI Industries, Inc., and its subsidiaries manufacture textile products that serve a variety of markets, including the home furnishings, woven apparel, elasticized knit apparel and industrial/medical markets. Headquartered in Columbia, South Carolina, the Company operates manufacturing facilities in Clarkesville, Georgia; Clinton, South Carolina; Greensboro, North Carolina; and Stuart, Virginia. The Company had net sales from continuing operations of $194.7 million in 2000. FINOVA GROUP: Overview Of Joint Plan Of Reorganization ------------------------------------------------------ The FINOVA Group, Inc.'s Reorganization Plan contemplates the restructuring and payment of the bank, bond and other debt of FNV Capital through implementation of a comprehensive restructuring transaction with Berkadia LLC, a joint venture of Berkshire Hathaway Inc. and Leucadia National Corporation, that was first announced on February 27, 2001. Under the Plan, Berkadia will make a $6,000,000,000 loan to FNV Capital that, together with the Debtors' cash on hand and the issuance by FNV Group of approximately $4,400,000,000 aggregate principal amount of New Senior Notes, will enable the Debtors to restructure their debt. In addition, the Plan contemplates that, upon the Effective Date, Berkadia will designate a majority of the Board of Directors of Reorganized FNV Group as of the Effective Date, and that two members of the Board of Directors of Reorganized FNV Group will be directors currently serving on FNV Group's Board of Directors. The Debtors expect to emerge from chapter l1 on or before August 31, 2001. The plan constitutes separate plans of reorganization for each of the nine Debtors. After implementation of the Plan, each Debtor, other than FINOVA Finance Trust, will emerge from chapter 11 as a separate corporate entity. Under the Plan, FNV Trust will dissolve. The Plan contemplates that all creditors of each of the Debtors, other than general unsecured creditors of FNV Capital and holders of Securities Litigation Claims, will receive reinstatement of their Claims, surrender of collateral or payment in Cash on the Effective Date of the Plan, unless they agree with the Debtors to alternate treatment. With respect to creditors with secured Claims, the Plan also permits Debtors to surrender the assets securing the Claim. The Plan further contemplates that general unsecured creditors of FNV Capital will receive the proceeds of the Berkadia Loan, the New Senior Notes and Cash in satisfaction of their Claims. Under the Plan, equity Interest holders in each of the Debtors, other than FNV Trust, will retain their Interests in the applicable Reorganized Debtor, subject to dilution in certain cases. The holders of preferred equity Interests in FNV Trust, also called TOPrS, will receive a pro rata distribution of Group Subordinated Debentures issued by FNV Group, which are the only assets held by FNV Trust. Common equity Interests in FNV Trust will be cancelled and FNV Group, as the holder thereof, will not receive any distribution or retain anything on account of its Interests. The Plan further provides for the treatment of claimants in various Securities Litigation actions now pending against the Debtors and others. Specifically, the Plan contemplates the issuance of Preferred Stock of FNV Group to satisfy any final judgments against FNV Capital arising from an existing class action Securities Litigation against FNV Capital and the issuance of Additional Mezzanine Common Stock to satisfy any final judgments against FINOVA Mezzanine Capital Inc. arising from an existing class action Securities Litigation against FNV Mezzanine. The Plan contemplates that all existing common stock of FNV Mezzanine will be retained by FNV Capital as the existing holder, but that Additional Mezzanine Common Stock may be issued to satisfy final judgments, if any, for plaintiffs in an existing Securities Litigation against FNV Mezzanine. Further, the Plan contemplates that all existing common stock of FNV Group will be retained by the existing holders, but that New Group Preferred Stock will be issued to satisfy final judgments, if any, for plaintiffs in an existing Securities Litigation against FNV Capital. Finally, the Plan contemplates the issuance of Additional Group Common Stock to: (a) the Berkadia Parties, in an amount that will constitute 5l% or a lesser amount as may be agreed by the Berkadia Parties, of the outstanding equity of FNV Group on a Fully Diluted Basis as of the Effective Date; and (b) satisfy any final judgment against FNV Group arising from an existing Securities Litigation against FNV Group. For all issuances of stock in connection with the Securities Litigation described, holders of Allowed Claims will receive stock having a value as determined by Final Order equal to the amount of such Claims that is not covered by applicable insurance policies. In the event that any Additional Group Common Stock is issued after the Effective Date, the Berkadia Parties will contemporaneously receive additional FNV Group common stock in the amount that they would have received if such issuances had occurred before the Effective Date. Berkshire has guaranteed 90% and Leucadia has guaranteed 10% of Berkadia's commitment to make the Berkadia Loan. Berkshire has secondarily guaranteed the 10% of Berkadia's commitment to make the Berkadia Loan that is guaranteed by Leucadia. FNV Group and all of its direct and indirect subsidiaries (other than (x) FNV Capital, and (y) any special purpose subsidiary that is contractually prohibited as of February 26, 2001 from acting as a guarantor) will guarantee repayment by FNV Capital of the Berkadia Loan. The guarantees will be secured by substantially all of the Guarantors' assets. The New Senior Notes: (1) will be issued by FNV Group; (2) will mature 10 years after the Effective Date; (3) will bear interest, payable semi-annually out of 'available cash" (as defined in the New Senior Notes Indenture), at the weighted average interest rate (as of a date within five business days prior to the Effective Date) on FNV Capital's bank and bond debt outstanding on the Petition Date; and (4) will be secured by a security interest in all of the capital stock of FNV Capital, which security interest will be junior to the first priority security interest in the stock of FNV Capital to be granted to Berkadia to secure FNV Groups guarantee of the Berkadia Loan. The holders of the New Senior Notes will have no right to enforce this security interest until the Berkadia Loan is paid in full. Under the New Senior Notes, "available cash," will be used for paying or funding a reserve to pay accrued interest on the Berkadia Loan, paying taxes, operating and other corporate expenses (including interest on and principal of permitted indebtedness as defined in the New Senior Notes Indenture), and providing for reserves and paying or funding a reserve to pay interest on Group Subordinated Debentures during any Extension Period (as defined in the New Senior Notes Indenture). After all these, it will be used to pay accrued interest on the New Senior Notes. Other than this payment, no payments of principal will be made on the New Senior Notes until the Berkadia Loan is paid in full, and until accrued interest on the Group Subordinated Debentures has been paid. However, beginning with the first calendar quarter following the Effective Date, FNV Group will spend up to $75,000,000 per quarter, solely from "available cash" as defined in the New Senior Notes Indenture, to purchase New Senior Notes, through tender offers, open market purchases and/or privately negotiated transactions or otherwise, at a price not to exceed par plus accrued and unpaid interest, so long as there exists no event of default under the Berkadia Loan (including an event of default that would be caused by the making of the quarterly repurchase). The obligation to make the quarterly repurchases will survive until the earlier of (i) payment in full of the Berkadia Loan and (ii) fifth anniversary of the Effective Date. If permitted by Berkadia, and subject to cash being available for this purpose, FNV Group may, in its discretion, spend more than $75,000,000 per quarter to purchase New Senior Notes in a quarterly period, in which case such purchases would be applied to satisfy FNV Group's obligation to purchase New Senior Notes in future quarterly periods. Each quarter, Reorganized FNV Group will first purchase New Senior Notes from holders other than Berkshire, up to an aggregate amount equal to the percentage of $75,000,000 that is equal to the percentage of New Senior Notes held by holders other than Berkshire, and then will purchase the remaining percentage of $75,000,000 from Berkshire at a price equal to the average price paid by Reorganized FNV Group in that quarter to holders other than Berkshire. Purchases in excess of $75,000,000 per quarter will be made in a similar fashion. The board of directors of Reorganized FNV Group will adopt other procedures that neither prefer nor discriminate against Berkshire if required to address any circumstances not addressed by this procedure. After payment in full of the Berkadia Loan, making payments or funding reserves required prior to making an interest payment on the New Senior Notes, paying accrued interest on the New Senior Notes, and paying or funding a reserve to pay accrued interest on the Group Subordinated Debentures, 95% of the remaining "available cash" will be used to make semi-annual prepayments of principal on the New Senior Notes and 5% will be used for distributions to and/or repurchases of stock from FNV Group stockholders. The board of directors of Reorganized FNV Group will adopt procedures in connection with any non-pro rata purchase of FNV Group common stock neither to prefer nor to discriminate against the Berkadia Parties in any such purchases. After payment in full of the outstanding principal of the New Senior Notes and payments to FNV Group common stockholders in an aggregate amount equal to 5.263% of the aggregate principal amount of New Sensor Notes issued pursuant to the Plan, 95% of any "available cash" will be used to pay Contingent Interest to holders of New Senior Notes in an aggregate amount of up to $100 million (reduced pro rata to reflect New Senior Notes repurchased, but not New Senior Notes prepaid or repaid at maturity, by FNV Group) and 5% of such remaining "available cash' will be used for distributions to and/or repurchase of stock from FNV Group stockholders. Contingent Interest payments will terminate 15 years after the Effective Date. Pursuant to a Management Services Agreement, which was entered into prior to these Chapter 11 Cases, and which was amended and restated on April 3, 2001, Leucadia is providing advice and assistance during the bankruptcy cases related to the restructuring and the Debtors' asset portfolio, subject to oversight by the FNV Group Board of Directors or a special committee of the Board and will provide management functions to the Reorganized Debtors upon the effectiveness of the Plan. The Plan contemplates that the Debtors' businesses will be operated after the Effective Date under the Management Services Agreement with Lencadia, pursuant to which Leucadia will designate its employees to act as Chairman of the Board and President of Reorganized FNV Group. The Debtors' post-confirmation business plan does not contemplate any new business activities related to new customers. While other activities may be initiated or undertaken in the future, the main objective of the Debtors' post- confirmation business plan is to maximize the value of their portfolio through the orderly liquidation of the portfolio over time. (Finova Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) FRUIT OF THE LOOM: Selling Non-Operating Facilities & Equipment --------------------------------------------------------------- Pursuant to 11 U.S.C. Sec. 363, Fruit of the Loom, Ltd. wants to auction off and sell certain real estate and other equipment. The auction is in accordance with Debtors' move to streamline operations and rationalize capacity. Judge Walsh has already authorized the retention of three auctioneers to perform the sale. The non-operating real properties of Fruit of the Loom and a brief description are given below: (a) Campbellsville, Kentucky, 1101 Greensburg Road; former textile facility, distribution center, parts and machinery repair; closed since 1998; (b) Frankfort, Kentucky, U.S. 421 South; former embroidery and screen-printing facility and distribution center; closed since April 2000; (c) York, South Carolina, #7 Ross Cannon Street; former yarn mill; closed since July 1999; (d) Winfield, Alabama, 135 Mallard Road; former yarn mill; closed since November, 2000; (e) Aliceville, Alabama, 315 Alabama Street SW; former yarn mill; closed since November, 2000; (f) Osceola, Arkansas, 1425 Ohlendorf Road; textile plant; closed since November, 2000; (g) Greenville, Mississippi, One Fruit of the Loom Drive; former textile plant; closed since November 2000; (h) Jackson, Mississippi, 4350 Industrial Drive; former distribution center; closed since June 2000; (i) Jacksonville, Alabama, 404 Alexandria Road SW; former distribution center; closed since January/February 2001; Union Underwear already filed a motion requesting the authorization of the sale of its facility in Bowling Green, Kentucky, mentioned above. Except for the Jacksonville, Alabama facility, which Union Underwear closed during the last month, the real properties have been idle between 6 months and 2.5 years. During such periods, Union has actively marketed each of the properties through asset management consultants, Corporate Asset Advisors. Union also listed two properties with industrial real property agents. In each instance, the efforts did not yield any purchase offers that constituted adequate value. Union estimates that the aggregate annual holding costs associated with the properties are $5,500,000. These costs include minimal utility services, property taxes, site security and insurance. Holding the facilities through the typical marketing period for industrial property, estimated to be 18-24 months, may cost the estates approximately $7,500,000 to $11,000,000. However, in light of previous unsuccessful marketing efforts, which included a traditional sales approach, there is no assurance that sales transactions would ultimately be concluded. Union states that there is sound business justification for the auction and it is a reasonable business judgment. The sale is fair and reasonable and the purchaser is proceeding in good faith. The sale is in the best interests of creditors and the estates. Union requests that the sale be free and clear of all liens, claims, interests and encumbrances. (Fruit of the Loom Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) FUSION NETWORKS: Initiates Assignment for Benefit of Creditors -------------------------------------------------------------- Fusion Networks Holdings, Inc. (Pink Sheets:FUSN) and its wholly owned subsidiary, Fusion Networks, Inc. announced that each filed separate actions in Florida state court to assign their respective assets for the benefit of their respective creditors under Chapter 727, Florida Statutes. GOLDEN STAR: Shareholders To Convene In Toronto On June 27 ---------------------------------------------------------- The Annual General and Special Meeting of Shareholders of Golden Star Resources Ltd. will be held at 10:00 am (Toronto time) on Wednesday, June 27, 2001, in the Calvin Room of the Ontario Club, 30 Wellington Street West, Toronto, Ontario, Canada for the following purposes: (1) to receive the report of the directors to the shareholders and the consolidated financial statements of the Company, together with the auditor's report thereon, for the fiscal year ended December 31, 2000; (2) to elect directors until the next annual general meeting; (3) to appoint PricewaterhouseCoopers, Chartered Accountants, as auditor to hold office until the next annual general meeting at a remuneration to be fixed by the directors; (4) to approve the issuance of 3,000,000 common shares to Anvil Mining NL, subject to all necessary regulatory approvals; (5) to approve in advance the issuance of a number of common shares of the Company, by virtue of exemptions from registration and prospectus requirements under applicable securities legislation and transactions which may not be fully marketed public offerings, that may exceed 25% of the Company's issued and outstanding common shares, subject to all necessary regulatory approvals; (6) to transact such other business as may properly come before the meeting or any adjournment of it. The Board of Directors has fixed the close of business on May 9, 2001, as the record date for the determination of shareholders entitled to notice of and to vote at the meeting and at any adjournment thereof. GROVE WORLDWIDE: Chapter 11 Case Summary ---------------------------------------- Debtor: Grove Worldwide LLC PO Box 21 Shady Grove, PA 17256 Chapter 11 Petition Date: May 07, 2001 Court: Middle District of Pennsylvania Bankruptcy Case No.: 101-02611 Judge: Robert J. Woodside Debtor's Counsel: Alan J. Carr, Esq. Jay M. Fay Goffman, Esq. 4 Times Square New York, NY 10036-6522 (212) 735-3000 Dino A. Ross, Esq. 213 Market St. PO Box 11844 Harrisburg, PA 17108 (717) 234-5988 GROVE WORLDWIDE: S&P Slashes Credit Ratings To 'D' -------------------------------------------------- Standard & Poor's lowered its ratings on Grove Holdings LLC/Grove Holdings Capital Inc. and Grove Worldwide LLC/Grove Capital Inc. to 'D' (see list below). All ratings were removed from CreditWatch, where they were placed on Feb. 20, 2001. Total debt as of Dec. 30, 2000, was about $524 million. The rating actions follow Grove Worldwide's filing of voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Grove has reached an agreement with its secured lender bank group and is actively negotiating with its senior bondholders on a financial restructuring of the company. Under the terms of the proposed plan, members of the bank group will be issued $125 million in promissory notes, $45 million in debentures, and 75% of the common stock in a reorganized Grove. Holders of the company's senior subordinated debentures will receive 20% of the new common stock and warrants to purchase an additional 10%. Interests of the holders of senior discount notes will be cancelled. The company expects to achieve plan confirmation and complete the reorganization within a matter of months. Grove manufactures mobile hydraulic cranes, aerial work platforms, and truck-mounted cranes. The company has reported poor operating results during the past few years, which led to high financial leverage and severely constrained liquidity. Grove reported a $110 million net loss in fiscal 2000 and a $32 million net loss in fiscal 1999. The 2000 loss includes a $53 million goodwill impairment charge. In the first quarter of fiscal 2001, EBITDA interest expense coverage was only 0.5 times (x), and total debt to EBITDA was more than 10x on a last 12 months basis. The company's 1999 operating performance was adversely affected by difficulties in implementing an enterprisewide software system, heightened competition as key competitors introduced new products, and declining prices. Although sales increased in 2000, the company's operating performance weakened, primarily due to heavy losses in its Manlift division, which reported negative operating income of $22 million in fiscal 2000. Manlift has lost market share due to its relatively weak position with national rental equipment firms, which have become the dominant purchasers of aerial work platforms. In addition, Manlift lacks the scale of several of its larger competitors and has suffered from a declining price environment. Grove has reduced the operations of the unit. Ratings Lowered And Removed From CreditWatch TO FROM Grove Holdings LLC/ Grove Holdings Capital Inc. Corporate credit rating D CCC+ Senior unsecured debt D CCC- Grove Worldwide LLC/ Grove Capital Inc. Corporate credit rating D CCC+ Senior secured bank loan rating D CCC+ Subordinated debt D CCC- HARNISCHFEGER: Identifies Members Of Advisory Committee ------------------------------------------------------- As reported, on the Effective Date of Harnischfeger Industries, Inc.'s chapter 11 plan, Beloit Corporation and the Liquidating Trust shall be deemed to have executed the Plan Administrator Agreement among them and the Plan Administrator. The Plan Administrator will be authorized to act as a representative of each Liquidating Debtor's estate, except as directed by the Advisory Committee. The Plan Administrator Agreement describes the rights, duties, and obligations of the Plan Administrator and the Advisory Committee. The Advisory Committee will consist of a representative of New HII and of other representatives of Holders of Claims against one or more Liquidating Debtors (Beloit Representatives). The Debtors have identified the members of the Advisory Committee as follows: (A) Beloit Representatives John Hopp Franklin High Yield Tax-Free Income 777 Mariners Island Boulevard San Mateo, CA 94404 Charles Germain Rockwell International Corporation 1201 S. Second Street Milwaukee, WI 53204 Pamela A. Mull Potlatch Corporation 601 West Riverside Avenue, Suite 1100 Spokane, WA 99210 Walzen Irle GmbH Attn: Tanya K. Dietrich Walzen Irle GmbH Postbox 31 61 D-57244 Netphen-Denz/Germany M. Bruce Daiger SunTrust Bank 225 East Robinson Street Suite 250 Orlando, FL 32801 Robert Morrish US Bancorp Libra 11766 Wilshire Boulevard, Suite 870 Los Angeles, CA 90025 Nick Agopian Circul-Aire 3999 Cote Vertu Montreal (Quebec) CANADA H4R IR2 (B) HII Representative Kenneth A. Hiltz, the Senior Vice-President and Chief Financial Officer of HII, will serve as the HII Representative on the Advisory Committee on and after the Effective Date. (Harnischfeger Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) IGI INC: Names Earl Lewis As New Chairman of the Board ------------------------------------------------------ On April 20, 2001, the Board of Directors of IGI, Inc. designated director Earl R. Lewis as Chairman of the Board of Directors. The Board also elected the Company's President, John Ambrose, to be Chief Executive Officer of the Company. IMPERIAL CREDIT: Starts 12% Senior Note Exchange Offer Today ------------------------------------------------------------ Imperial Credit Industries, Inc. (Nasdaq: ICII) announced that today, May 10, 2001, it will commence an offer to exchange all of its outstanding senior notes, including securities issued by a related trust, (the "Old Notes") for a combination of newly issued 12% Senior Secured Notes due June 30, 2005, shares of ICII Common Stock and warrants to purchase additional shares of ICII Common Stock in the amount and manner set forth in the Exchange Circular and Consent Solicitation to be distributed to all registered holders. The issuance and sale of Senior Secured Notes will be made pursuant to an exemption from registration under the Securities Act of 1933, as amended. H. Wayne Snavely, ICII's Chairman, President and Chief Executive Officer, stated: "The Exchange Offer represents the second phase of our recapitalization plan, announced this past February. The exchange will reduce the amount of holding company debt and assist the efforts of ICII to increase capital levels of its principal subsidiary, Southern Pacific Bank." Concurrently with the Exchange Offer, the Company is also soliciting consents from the holders of certain of the Old Notes to proposed amendments to the indentures under which the Old Notes were issued. The Exchange Offer and Consent Solicitation will expire at 5:00 P.M. New York City time on June 22, 2001 unless extended. Each holder exchanging Old Notes in the Exchange Offer will receive, in exchange for each $1,000 in aggregate principal or liquidation amount of Old Notes exchanged: (i) Exchange Notes in a principal amount equal to (a) the principal or liquidation amount of Old Notes tendered multiplied by (b) the applicable Old Note exchange multiple (as described below); (ii) 13.684163 shares of Common Stock for each $1,000 in aggregate principal amount of Exchange Notes received in the Exchange Offer; and (iii) Warrants to purchase, at a price of $2.15 per share, 47.894572 shares of Common Stock for each $1,000 in aggregate principal amount of Exchange Notes received in the Exchange Offer. Exchange Notes will only be issued in denominations of $1,000 or integral multiples thereof. Any fractional portion of Exchange Notes that would otherwise be issuable will be paid in cash on the exchange date. All calculations will be made in accordance with standard market practice. -- The exchange multiple for the 9.75% Senior Notes due January 15, 2004 will be equal to .50. -- The exchange multiple for the 9.875% Series B Senior Notes due January 15, 2007 will be equal to .65. -- The exchange multiple for the 10.25% Remarketed Redeemable Par Securities ("ROPES") will be equal to .80. ICII will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to the expiration date. Old Notes may be tendered only in multiples of $1,000 of principal or liquidation amount. The consummation of the Exchange Offer is conditioned upon ICII obtaining the consent of its shareholders (or its determination that such consent is not necessary) to certain elements of the transactions contemplated by the recapitalization plan ICII has previously adopted, and is subject to certain other customary conditions. The Exchange Notes will bear interest at the rate of 12% per annum from and including the exchange date. Holders of Old Notes accepted for exchange will receive the amount of interest accrued on the Old Notes to but not including the exchange date. IMPERIAL SUGAR: Creditors Seek Order Disbanding Equity Committee ---------------------------------------------------------------- The Official Committee of Unsecured Creditors in Imperial Sugar Company's chapter 11 cases informed Judge Robinson that it had been opposed to the idea of an equity committee and had even written the US Trustee not to appoint one citing various reasons why the appointment of an equity committee would be unnecessary and inappropriate. The Creditors' Committee added that the Debtors had even made a similar request to the US Trustee. By and through David M. Fournier, at Pepper Hamilton LLP, in Delaware, the Creditors' Committee asked the Court to direct the US Trustee to disband the Official Equity Security Holders Committee, arguing that, while an equity committee may be appointed by the US Trustee if necessary to assure adequate protection, the Bankruptcy Code affords no test of adequacy of representation and leaves the Court with the discretion to determine if additional committees are warranted. Mr. Fournier asserted that the Debtors are insolvent and their stockholders are simply too far out of the money to be entitled to official committee representation. Based upon the Debtors' financial situation, it is clear that the equity holders would not be entitled to receive anything unless each creditor class is paid in full, which under the proposed reorganization plan they are not. As a result, the equity holders are not entitled to receive any distribution in the bankruptcy cases and any distribution to them allowed under the plan would essentially be a gift. The Creditors' Committee insisted that time is another critical factor bearing on whether it is appropriate to appoint a committee. It submitted that a formation of an equity committee after a reorganization plan has been filed is inappropriate and can often cause delay and disruption in the reorganization process. Since the primary function of a committee is to negotiate a reorganization plan, the Equity Committee is unnecessary considering that a plan has already been filed. The Creditors' Committee continued that, since 25% of the equity holders participated in the plan's formulation, the equity holders' concerns were adequately represented and addressed. Mr. Fournier warned the Court that the Equity Committee's continued existence will result in substantial additional costs and considerable financial drain on the Debtors' estates as well as significant delay in the Debtors' reorganization process. He supports this assertion by pointing out to Judge Robinson that the Equity Committee has already filed applications seeking the appointment of two sets of counsel, and has advised the Debtors and the Creditors' Committee that the Equity Committee intends to retain E&Y Capital Advisors as financial advisors. The administrative burden associated with the Equity Committee simply outweighs any concern for equity representation in the Debtors' cases. The fact that the Equity Committee has presented the Debtors with a lengthy and detailed information request list and questions, is a perfect example of how the existence of an equity committee also will require additional time and resources dedicated by the Debtors, the Creditors' Committee and their professionals toward educating and involving that committee in all matters in the Debtors' bankruptcy cases. The Equity Committee's Response The Official Committee of Equity Security Holders responded to the Motion, asking it be denied. The Trustee has exercised her discretion to appoint the Committee, and the Committee said that under the plain language of the statute and its legislative history, that decision is not reviewable as a matter of law. Even if the Trustee's decision could be reviewed by a court, it could only be under an abuse of discretion standard. Under that standard, the Trustee's decision is appropriate. The Committee pointed out that the Debtors' equity securities are widely held and actively traded, these bankruptcy cases are large and complex, and the appointment of the Equity Committee was not made either prematurely or too late. Citing the Debtors' balance sheet and its proposed plan, the Committee said both show that there is a prospect of value for the equity holders. The Debtors' insider management shareholders cannot adequately represent the interests of the shareholders in general because they will receive consideration in the form of stock options and retention bonuses in excess of the consideration they propose to provide to the Debtors' other shareholders. Calling the Creditors' Committee's Motion only a "tactic to impede and distract the Equity Committee", undertaken to prevent it from carrying out its fiduciary duties in this case, and to create a premature confirmation hearing on the ultimate issues of value before relevant facts have been disclosed and analyzed, the Equity Committee asked that the Motion be denied in its entirety. The United States Trustee Responds Patricia A. Staiano, the United States Trustee for Region 3, joined the Equity Committee in asking that the Creditors' Committee's Motion to disband be denied. She stated that in February 2001 she received three written requests for an equity committee, setting forth reasons why the requesting parties believed that the Debtors' management - despite the management's own significant equity interests in the Debtors -- was not representing and would not represent the interests of non- management shareholders. After receiving these requests, the Trustee reviewed the Debtors' plan and disclosure statement, SEC filings, and audited financial statements. From this analysis, the Trustee concluded that: (1) The Debtors' equity securities are widely held. Approximately 32.4 million shares of outstanding publicly traded stock are held by approximately 3,182 shareholders of record. Information as to the specific number of beneficial owners is not readily available because many shares are held in "street" names. (2) The Debtors' audited financial statements were prepared based on a "going concern" method, and acknowledge the negotiations between the Debtors and their creditors concerning reorganization and a possible debt-to-equity conversion. These statements indicated that the Debtors had a going-concern value of $318.6 million. (3) Under the prospective plan the Debtors will cancel all existing common stock and issue up to 10 million shares of stock in the reorganized debtors to unsecured creditors on a pro rata basis. The Debtors' management, who negotiated this plan without input from the non-management shareholders, will receive options to purchase approximately 1.25 million shares of the stock of the reorganized Debtors at a as-yet-undisclosed strike price. These management options are over and above any retention plan payments, bonus payments, and severance payments that management is already slated to receive, and over and above any distribution that management personnel will receive on account of their equity interests. If they vote as a class in favor of the plan, existing equity security holders, including the Debtors' management, will receive 200,000 shares of the reorganized Debtors, plus warrants to purchase approximately 1.1 million shares of stock, again at a yet-undisclosed price. At the conclusion of this review, the Trustee determined that appointment of an equity committee was appropriate, and following an accelerated identification, poll and solicitation, appointed the existing committee. The Trustee argued to Judge Robinson that her decision to appoint the equity committee was within her discretion, and that discretion should not be disturbed. The principal purpose of any committee is to serve as an advocate and fiduciary for the members of the committee's class or interests from which it is selected. Legislative history of the Bankruptcy Code states these committees are to be the primary negotiating bodies for the formulation of a plan. Even though the Equity Committee was appointed after a plan was filed, this case has moved quickly so that the appointment was neither premature nor late. The Creditors' Committee suggestion that a committee may never be appointed after the filing of a plan "overstates" existing case law, which does not establish any per se rule. Finally, the Trustee stated that her decision is either unreviewable, or is subject to review only for an abuse of discretion. Her decision to appoint the Equity Committee reflects her balancing of facts and exercise of her Congressionally granted discretion. The Trustee therefore asked that the Motion be denied. (Imperial Sugar Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) KOMAG INCORPORATED: Posts $51 Million Net Loss in Q1 2001 --------------------------------------------------------- Komag, Incorporated (Nasdaq: KMAG), the largest independent producer of media for disk drives, announced its financial results for the first fiscal quarter of 2001. As a result of a widespread slowdown in demand, especially in the server segment of the data storage industry, net sales for the first fiscal quarter of 2001 totaled $87.9 million, down 21% from $111.2 million recorded in the fourth quarter of 2000. The company's net loss for the first quarter of 2001 was $51.0 million, or $0.46 per share based on 111.6 million weighted average shares outstanding, compared to a loss of $43.7 million, or $0.40 per share based on 110.0 million weighted average shares outstanding, in the fourth quarter of 2000. Komag shipped 12.7 million disks during the first quarter of 2001, in line with the company's earlier forecast announced earlier. During the first quarter of 2001, Komag also shipped 3.4 million nickel plated and polished ("NPP") substrates. First quarter disk production was approximately 13.7 million units, 81% of which were made in the company's Malaysian factories. First quarter average selling price for finished disks was $6.30 per disk compared with $6.40 in the fourth quarter of 2000. The quarter-over-quarter decline of less than 2% was in line with the company's expectation of relatively flat pricing stated in a previous press release. Sales to Maxtor, Seagate and Western Digital were 36%, 12%, and 46% of revenue, respectively. Komag ended the quarter with a cash and short term investment balance of $51.6 million. The decline from last quarter of $29.1 million was in line with the company's expectations. It resulted from operating the company's U.S. factories at low utilization, the continued cost of moving manufacturing equipment to Malaysia to prepare for the cessation of U.S. manufacturing, a scheduled payment of $7.5 million to reduce senior debt, and the $6.6 million semiannual interest payment on the HMT convertible bonds. Earnings before interest, taxes, depreciation and amortization, were a negative $3.3 million. The company expects this measure of performance to improve substantially as Komag completes its planned relocation of all U.S. manufacturing operations to Malaysia. Komag's ending accounts receivable balance improved to 30 days of sales outstanding compared with 33 days in the fourth quarter of 2000. Inventory turns declined from 21 to 12 annualized turns due to changes in timing of customer demand for disks in the first quarter. Komag expects shipments for the second quarter of 2001 to be approximately 14 million disks, up 10% from the first quarter, and average selling prices to remain flat. The company currently expects further modest increases in unit shipments with continued flat pricing in the second half of 2001. Sales of NPP substrates are expected to decline in the second quarter. Komag's announced strategy has been to locate 100% of its production capacity in Malaysia to achieve low manufacturing costs. The company ceased manufacturing at its facilities located in Fremont and Santa Rosa, California and Eugene, Oregon within the last ten days. These closures are ahead of schedule, accelerating the timing of expected cost savings. The three production lines that have been moved to Malaysia already are fully qualified and are producing disks at high yields. "Now that all of our production comes from our Malaysian facilities, our U.S. presence will be focused on research and development. Our R&D team in San Jose will continue to develop finished media and substrate development efforts will remain in Santa Rosa," said T.H. Tan, Komag's chief executive officer. By shifting all manufacturing offshore to Malaysia, Komag expects to significantly reduce the cost of production. The company's business model anticipates that fixed manufacturing costs, including employee, factory and equipment expenses, will be around $35 million per quarter compared with $52 million in the first quarter of 2001. The variable cost of producing a disk is approximately $2.70 to $2.80 per disk. "Our low cost structure is a significant competitive advantage and will be instrumental in returning the company to profitability. We are moving Komag to the next phase. In spite of the current weakness in demand, closing our U.S. manufacturing ahead of schedule places us on track for a much healthier business in the second half of this year," stated Mr. Tan. Komag's technology continues to provide leading edge products to disk drive customers. Currently the company is the only fully qualified source shipping volume quantities of 30 gigabyte ("GB") per platter disks in the industry. These are the highest storage density disks available in the market today. The company continues to be on schedule in qualifications of 40 GB and 60 GB per disk programs and is providing synthetic antiferromagnetic (SAF) and perpendicular recording media samples for advanced technology evaluations. The company is also engaged in qualification of its low cost glass substrates and media. On April 5, 2001 Komag filed a registration statement for a proposed exchange offer to exchange the company's existing convertible bonds for new convertible bonds. The proposed exchange offer is part of a comprehensive restructuring plan that also includes proposed new debt financing from Malaysian sources and proposed use of cash proceeds and new convertible bonds to settle the company's existing senior debt and a note held by Western Digital Corporation. The registration statement includes a more detailed description of the company's plan. Komag expects to commence the exchange offer as soon as practical. Currently, none of the parts of the restructuring plan has been completed, and the terms are subject to change. ABOUT KOMAG: Founded in 1983, Komag completed a merger with HMT Technology Corporation in October 2000. The combined company is the world's largest independent supplier of thin-film disks, the primary high-capacity storage medium for digital data in computers and consumer appliances. Komag's advanced development capability and high-volume, low-cost manufacturing expertise provide high quality, leading-edge disk products at a low overall cost to its customers. These attributes enable Komag to partner with customers in the execution of their time-to-market design and time-to-volume manufacturing strategies. Supplementing its core disk business, Komag has launched a diversification program that will leverage the company's knowledge of magnetic recording and its ultra-high precision manufacturing capabilities. LERNOUT & HAUSPIE: Court Establishes June 11 Claims Bar Date ------------------------------------------------------------ Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. asked that Judge Wizmur establish June 11, 2001, at 4:00 p.m. Eastern Time as the final date for all parties to file proofs of claim asserting a claim against any of the Debtors that arose prior to the commencement of these Chapter 11 cases. Judge Wizmur is also asked to establish the later of (a) the bar date, or (b) 30 days after the entry of any order authorizing a member of the Debtors to reject an executory contract or unexpired lease as the date on or before which a proof of claim relating to the Debtor and arising from the rejection of the executory contract or unexpired lease must be filed. The Debtors also asked Judge Wizmur to establish the later of (a) the bar date, or (b) 30 days after an entity is served with notice that the Debtors have amended their Schedules to reduce the undisputed, noncontingent, and liquidated amount, or to change the nature or classification of a scheduled claim, as the date on or before which a proof of claim relating to the amended scheduled claim must be filed. Certain groups need not meet this deadline: (a) Governmental units holding claims against any Debtor, whether arising from prepetition tax years or periods of prepetition transactions to which a Debtor was a party; (b) Entities whose claims against a member of the Debtors arise out of the obligations of the entities under a contract for the provision of liability insurance to the Debtor; (c) Entities who asserted a claim against L&H in conjunction with its concordat proceeding in the Ieper, Belgium, Commercial Court, and which filed a declaration of receivables with the Ieper Commercial Court; and (d) Entities whose claims against a member of the Debtors arise from or relate to the purchase or sale of a security issued by the Debtor or an affiliate of the Debtor, including, but not limited to, claims: (i) For rescission of a purchase or sale of a security of such Debtor; (ii) For damages arising from the purchase or sale of such a security; or (iii) For indemnification, reimbursement or contribution (or fees and costs in connection therewith) arising from or related to such a claim. Other entities need not file any proof of claim against the Debtors. These are: (a) Any entity that already has properly filed with the Court a proof of claim against the Debtor or any one of them; (b) Any entity (i) whose claims against the Debtor or any one of them is not listed as "disputed", "contingent", or "unliquidated" in the Schedules for the Debtor against which the claim is made, and (ii) who agrees with the nature, classification and amount of the claims set out in the Schedules and the identification of the Debtor liable for the claim; (c) Any entity whose claims against the Debtor have been allowed by, or paid pursuant to, an order of this Court; (d) Any entity whose claim is limited exclusively to a claim for the repayment by the applicable Debtor of principal and interest on or under any of the 11-3/4% Senior Subordinated Notes Due 2005 issued by Dictaphone, the 8% Convertible Subordinated Notes Due 2001 issued by L&H, and the 4.75% Convertible Junior Subordinated Debentures Due 2008 issued by L&H, or the indenture in respect to each of the Notes, and each such Indenture collectively with the Notes issued thereunder; provided that this exclusion does not apply to the indenture trustees under each such indenture. Each Indenture Trustee is required to file a proof of claim on account of the applicable debt claims on or under the applicable debt instruments for which it is the Indenture Trustee on or before the bar date. Each Indenture Trustee and any holder of Notes that wishes to assert a claim arising out of or relating to a debt instrument, other than a debt claim, is required to file a proof of claim on or before the bar date, unless another of these exceptions applies. (e) Any debtor in these Chapter 11 cases, or a wholly-owned non-debtor subsidiary of any Debtor, having any claims against any debtor in these Chapter 11 cases; and (f) Any entity owning or holding equity securities of a Debtor asserting a claim solely on account of the holder's ownership interest in or possession of the stock or equity securities, other than those to which another exclusion or exception is applicable. In support of this request the Debtors told Judge Wizmur that establishing filing deadlines for proofs of claim is necessary to allow them to develop their plan. To develop that plan the Debtors need complete and accurate information regarding the nature, amount and status of all prepetition claims against each member of the Debtors that will be asserted in these Chapter 11 cases. A prerequisite to developing a long-term business plan, and ultimately a plan of reorganization, is the Debtors' ability to prepare comprehensive and accurate estimates of the aggregate amounts of claims held against each member of the Debtors. By Order Judge Wizmur has set the bar date as requested by the Debtors in their Motion. (L&H/Dictaphone Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOEWEN GROUP: Canadian Pref'd Shareholders Object To Joint Plan --------------------------------------------------------------- The Canadian Preferred Shareholders (Deutsche Bank Canada, Sunrise LLC, and Amaranth Fund LLP) has interposed an objection to The Loewen Group, Inc.'s Joint Plan complaining about: (1) Change in Structure and Transfer of Assets The objectors pointed out that: -- the Plan will change the corporate structure of TLGI and its subsidiaries; -- under the Plan, TLGI will transfer substantially all of its assets from Canada to the United States by transferring them to LGII or subsidiaries of LGII; -- the existing stock of LGII owned by TLGI in turn will be cancelled, and the stock of reorganized LGII will be issued to its existing U.S. creditors; -- the Plan involves stripping all the Canadian assets and sending them to the United States to pay United States creditors of TLGI's current U.S. subsidiary, LGII; -- TLGI will become a worthless shell and the Canadian Preferred Shareholders, in turn, will receive nothing under the Plan, but will retain their ownership interest in the shell that TLGI will become. (2) Treatment of The Nafta Claims In Contrast to That of CTA Claims The objectors debunked that the Nafta Claims (the claims and causes of action asserted by TLGI in the pending arbitration matter entitled The Loewen Group, Inc. and Raymond L. Loewen v. the United States of America, ICSID Case No. ARB (AF) /98/3) are among the assets to be stripped out of TLGI and transferred to reorganized LGII (or subsidiaries of LGII). What the objectors see in the treatment of the Nafta Claims under the Plan is that these will end up owned either by LGII directly or by Nafcanco, a wholly-owned subsidiary of reorganized LGII, with 25% of the "Nafta Net Proceeds" diverted to the Liquidating Trust, where they are split up among the holders of the O'Keefe Note (who got the judgment in the first place that gives rise to the Nafta Claims) and other unsecured U.S. creditors of existing LGII. The Objectors also pointed out that, as defined in the Plan, the "Nafta Net Proceeds" are the recoveries from the Nafta Claims left to TLGI after splitting the net recovery with Raymond Loewen, TLGI's principal common shareholder, pursuant to the Nafta Arbitration Agreement. The Disclosure Statement alludes to an agreement between Raymond Loewen and TLGI, defined as the Nafta Arbitration Agreement, and described as a letter agreement dated May 27, 1999, between TLGI and Raymond Loewen "to apportion any recoveries obtained pursuant to binding arbitration..." and to reimburse Mr. Loewen for certain legal expenses in connection with the Nafta Claims. The objectors have big question marks about this treatment, and they wonder why a copy of the alluded letter agreement is not attached to the Disclosure Statement. The objectors also noted that the Plan says that the only unpaid creditors of TLGI are the holders of "CTA Note Claims" who will receive new notes and stock of reorganized LGII that pay at least 68% of their claim under the Plan. These payments are also tendered in full discharge and satisfaction of the Canadian guaranties that the holders of the CTA Notes hold from TLGI of the CTA debt, the objectors steered Judge Walsh's attention to this part of the Plan. The objectors contended that the Plan as proposed by the Debtors should not be confirmed because the Plan conveys to creditors of LGII that are not creditors of TLGI assets of TLGI of substantial and significant value to which the Canadian Preferred Shareholders are entitled. No substantive consolidation has been ordered or found to be justified in this case, the objectors reminded Judge Walsh, and the Bankruptcy Code does not authorize the taking of the assets of a corporation to pay the creditors of another affiliated corporate entity. Therefore, the plan does not comply with the applicable provisions of Title 11 and may not be confirmed pursuant to 11 U.S.C. 1129(a)(l), the objectors contended. The Canadian Preferred Shareholders further objected to the Plan conveying to or for the benefit of creditors assets of TLGI in excess of the value of all the creditor claims against it, to which value the Canadian Preferred Shareholders are entitled. Specifically, the objectors noted that according to the Disclosure Statement, the CTA Note Claims aggregate $2.04 billion and are paid 68 cents on the dollar under the Plan, leaving no more than $650 million to be paid by TLGI on the Series 5 Notes and its downstream guaranties of the CTA Note Claims. The objectors further accused that, as the face value of the Nafta Claims is in excess of $125,000,000, without even taking into consideration the value of other TLGI assets in addition to the Nafta Claims that are being conveyed out of TLGI to pay LGII creditors, over US$75,000,000, or approximately Can $l17.2 million, that could potentially be available for the Canadian Preferred Shareholders is being conveyed to LGII creditors. By leaving intact the Nafta Arbitration Agreement, the Plan conveys assets of TLGI to common shareholders that are subordinate to the Canadian Preferred Shareholders in violation of the absolute priority rule, the objectors charged. Thus, the Plan is not fair and equitable within the meaning of 11 U.S.C. 1129(b)(2)(C)(i) with respect to the treatment of the Canadian Preferred Shareholders of TLGI, the objectors told Judge Walsh. (Loewen Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) LUCENT TECHNOLOGIES: CFO Shuffle Spooks Investors ------------------------------------------------- Shares of Lucent Technologies Inc. fell more than 5% Monday after the struggling telecommunications-equipment maker spooked investors by firing its chief financial officer, Deborah Hopkins, according to Reuters. The move brought up more questions about the company's restructuring process and market rumors that it may file for bankruptcy. On Sunday, Lucent fired Hopkins, the high-profile executive it nabbed from Boeing Co. just a year ago, and tapped company insider Frank D'Amelio as her replacement to oversee its restructuring. Analysts and investors doubted that Hopkins' removal would derail the Murray Hill, N.J.-based company's recovery efforts. They said that Lucent's problems began before Hopkins' arrival and that its recovery efforts will depend on more than just one executive. (ABI World, May 8, 2001) LUZON SERVICES: Files Chapter 11 Petition in Oregon --------------------------------------------------- Struggling fast food chain Luzon Services Inc. of Salem filed for Chapter 11 bankruptcy protection from creditors. Stephen Caroll of Eugene, the company's bankruptcy lawyer, disclosed that the company has fallen behind on mortgage and other payments for its eight restaurants and needs the protection in order to restructure its debt, The Register-Guard reported. Mr. Caroll related that the company is also considering selling some of its stores, but nothing is quite definite yet. For now, its 70 employees continue to be paid and the company's eight outlets remain in business, Mr. Carroll said. Owned by Luzviminda and Frank McKitrick of Salem, the company reportedly has assets of $4.2 million and liabilities of $4 million. The biggest creditor is Bend-based Bank of the Cascades, which is owed $2.8 million, most of it in the form of mortgages on the company's stores in Lane, Marion and Deschutes counties. Mr. Caroll said the company has fallen behind on the loan payments but recently reached an agreement with the bank to keep operating, according to The Register-Guard. Other creditors include Margaret Houck of Salem, who has a $102,000 mortgage claim against one of the company's two eateries in Salem, and WRH Inc. of Bend, which has a $285,000 mortgage claim against all of Luzon's properties. Among food vendors, Sysco Food Services was listed as being owed $82,819. Luzon also reportedly fell behind on property tax payments in Lane, Marion and Deschutes counties for a combined $69,654. (The Register-Guard, May 7, 2001) LUZON SERVICES: Chapter 11 Case Summary --------------------------------------- Debtor: Luzon Services, Inc. a.k.a. Bob's Burger Express 3379 Hawthorne NE Salem, OR 97303 Chapter 11 Petition Date: May 02, 2001 Court: District of Oregon Bankruptcy Case No.: 01-63389 Judge: Albert E. Radcliffe Debtor's Counsel: L E Ashcroft, Esq. 117 Commercial St NE #300 Salem, OR 97301 503-364-6733 Stephen C.P. Carroll, Esq. 800 Willamete St #700 Eugene, OR 97401-1758 541-687-4757 MARINER: Wants To Assume ACMS Sublease For California Facility -------------------------------------------------------------- Mariner Post-Acute Network, Inc. and American-Cal Medical services, Inc. (ACMS) seek to exercise the renewal option of a sublease under which ACMS is the sublessee and Santa Monica Rental Company is the subleasor pertaining to a facility that has a proven track record of profitability as well as projected profitability. The Facility, located at 1320 20th Street, Santa Monica, California, is well-positioned competitively, has a solid reputation in its local market, and has strong relationships with key referral and payor sources. Pursuant to an assignment of Thousand Oaks Convalarium's leasehold interests, ACMS and SMRC are parties to the sublease which commenced on November 1, 1961. Pursuant to the exercise of the first twenty-year renewal option, it is currently set to expire on October 31, 2001, subject to second twenty-year renewal option without rental escalators. The only default of which the Debtors are aware consists of uppaid real property taxes in the amount of $8,338.59 plus interest and penalties, occasioned by the timing of the filing of the Debtors' chapter 11 petitions. The Debtors explained that the Motion has been filed at this time because (a) by its letter of March 14, 2001, SMRC disputed the validity of the exercise of the option, terming it a "conditional exercise" not authorized under the terms of the Sublease, and (b) the Debtors are now prepared to assume the Sublease as extended by the Renewal. By Motion, the Debtors seek to eliminate any ambiguity regarding their continuing interest in the Sublease by the entry of an order, pursuant to sections 105, 363 and 365 of the Bankruptcy Code and Bankruptcy Rules 6004 and 6005. Specifically, the Debtors seek an order by the Court: (1) confirming and approving the timely exercise of ACMS' option to renew, as sublessee, its existing sublease with Santa Monica Rental Company, as subleasor, or in the alternative, to deem the motion, which seeks approval of the exercise of the renewal option and the assumpton of the sublease, a valid exercise of the renewal option; and (2) authorizing the assumption of the executory rights and obligations of ACMS and all MPAN Debtors under the Sublease. (Mariner Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) MOE GINSBURG: List of 20 Largest Unsecured Creditors ---------------------------------------------------- Entity Claim Amount ------ ------------ Cantoni $515,000 Tony Meisto 30 West 57th Street New York, NY 10019 (212) 245-4014 Media & Marketing $287,000 Marty Weissberg 1515 N. Federal Highway Suite 200 Boca Raton, FL 33432 (561) 338-3333 HARTZ $233,000 Hugo Boss $153,000 Component By John McCoy $125,000 Marzotto $110,000 Bill Blass $109,000 Novapparel $ 94,000 NYS Sales TAX $ 90,000 LUBIAM $ 87,000 GFT $ 81,000 Murray Hill Property Management $ 80,000 Hudson Paper $ 76,000 RAO & RAO LLC $ 76,000 (Promissory Note) Korey Kay $ 75,000 PLAID $ 61,000 Kaye Scholer LLP $ 50,000 Chillingworth / Radding $ 47,000 Hart Marx $ 38,000 BALLIN $ 34,000 MORGAN GROUP: Progresses On Acquisition of New Credit Facility -------------------------------------------------------------- The Morgan Group, Inc. (AMEX:MG) reported continued progress in obtaining a new credit facility to replace the Company's facility that expired on January 28, 2001. According to Anthony T. Castor III, President and Chief Executive Officer of The Morgan Group, the Company has received commitment letters from several financial institutions to provide a replacement credit facility. Each of the commitment letters is conditioned upon satisfactory completion of due diligence procedures as well as the Company meeting various financial covenants and requirements prior to closing. A tentative agreement has been reached with the Company's major shareholder Lynch Interactive Corp. (AMEX:LIC) to invest $2.0 million into Morgan, and this represents a key component in obtaining the new credit facility. Subject to approval by the Lynch Interactive Board, the new investment would involve the purchase of 1.0 million newly issued Morgan Group `B' shares. This would increase Lynch Interactive's ownership from 55.6% to 68.5%. It is contemplated that The Morgan Group Board of Directors, subsequent to the proposed share purchase by Lynch Interactive, will grant to all shareholders a warrant providing the right to purchase a share of Morgan Group stock at $9.00 per share for each share held. In such event, Morgan Group `A' shareholders would be provided a one-time 30 day window during which the `A' shareholders only would have the right to reduce their strike price by up to 1/3. Although the Company had no borrowings against the credit facility that expired on January 28, 2001, the facility is necessary to collateralize letters of credit totaling $6.7 million that are outstanding primarily to secure losses on liability insurance claims. According to Castor, the Company's lack of a credit facility since January caused a mandatory "Going Concern" qualification in the Company's audit report on the financial statements for the year ended December 31, 2000. "We believe that once a new credit facility is in place, our auditors should be able to remove the Going Concern qualification from their opinion", noted Castor. The Morgan Group, Inc., through its subsidiaries Morgan Drive Away, Inc. and TDI, Inc., is the nation's largest company managing the delivery of manufactured homes, commercial vehicles and specialized equipment in the United States. PACIFIC GAS: Court Grants More Time To File Schedules ----------------------------------------------------- Due to the complexity of Pacific Gas and Electric Company's businesses and its significant assets, liabilities, financial and transactional records, executory contracts and unexpired leases Dinyar B. Mistry, Pacific Gas' Controller, told the Court, the Debtor will be unable to complete and file their Schedules of Assets and Liabilities, Schedules of Current Income and Expenditures, Statements of Financial Affairs and Statements of Executory Contracts by the deadline imposed under Rule 1007 of the Federal Rules of Bankruptcy Procedure. The Company said that it expects to have all information necessary to enable them to complete the preparation of its Schedules and Statements by May 11, 2001. Accepting the Debtor's arguments that extensions of time to file Schedules and Statements are routinely granted in large chapter 11 cases and an similar extension of Pacific Gas' time is warranted, Judge Montali granted the Debtors' request without prejudice to the Company's right to seek further extensions if necessary. (Pacific Gas Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX CORP: Wants To Assume Software Agreements With Camstar ---------------------------------------------------------------- Lockheed Martin Corporation entered into a software license agreement and a software maintenance agreement with Camstar System, Inc. Lockheed then assigned its interests in those agreements to Pillowtex Corporation. Under the license agreement, Camstar gives the Debtor a non-exclusive, multiple use, non-transferable license to use certain production system software, in exchange for an initial fee of $700,000. A supplement to the agreement provides for an additional upgrade fee of $600,000. The license's term is indefinite with no further amounts owed or to become due unless the Debtor decides to purchase further upgrades. The maintenance agreement concurrently entered into with the license agreement allows the Debtor to obtain Camstar's services in maintaining and supporting the licensed software. The agreement has an initial one-year term, renewable for additional one-year terms if the Debtor notifies Camstar of its intent to renew the maintenance agreement at least 30 days prior to the renewal date. By a supplement to the agreement, the Debtor has agreed to purchase, for an additional three years, support services under the agreement consisting of: (a) Revision, updates, modifications and enhancements to the licensed software as they become available, including changes that correct defects as well as enhancements and upgrades to update the licensed software to the software's most current release being generally marketed for Camstar; (b) Corrections to any material programming errors in the licensed software attributable to Camstar; (c) Telephone support pertaining to the licensed software's operation and application; and (d) Special services requested by the Debtor for maintenance and support services not specifically provided for in the software maintenance agreement, to be provided at Camstar's current service rates. In return for the support services, the Debtor agrees to pay an annual maintenance fee and, for the period of October 1, 2000 through September 30, 2001, the Debtor has been required to pay $158,709. William H. Sudell, Jr., Eric D. Schwartz, and Michael G. Wilson, at Morris, Nichols, Arsht & Tunnell, in Delaware, told Judge Robinson that the Debtors intend to continue with Camstar's support services because they believe that the licensed software is important to their operations. The Debtor has negotiated with Camstar, and they have come up with a supplement to the maintenance agreement providing for the terms of Debtor's assumption of the agreement and Camstar's commitment to continue providing support services. By motion, the Debtors requested Judge Robinson to allow the assumption of the maintenance agreement as modified by the supplement, and, to the extent it is an executory contract, the related license agreement. The Debtors believe it's a fair deal because, while the supplement requires the Debtor to assume the maintenance agreement, Camstar will not only continue to provide support services to the Debtor, but will also give the Debtor the licensed software's source code. There would be no need for the Debtor to purchase future upgrades because, with the source code, the Debtor would be able to customize to customize the licensed software, without paying Camstar for it. In connection with the assumption, the Debtor will pay Camstar $59,515.88, the prorated amount due under the maintenance agreement from the Petition Date through the beginning of March 2001. In addition, the Debtor will pay Camstar an additional $100,484 for support services during the period April 1 through December 31, 2001. For year 2002, the annual maintenance fee would be $120,000 and $90,000 for the year 2003. The proposed assumption of the maintenance agreement will require no cure payments considering that Camstar has agreed to waive any fee for the period of October 1, 2000 through the Petition Date. (Pillowtex Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) REGAL CINEMAS: Says It's Unable to Cure Debt Covenant Defaults -------------------------------------------------------------- Regal Cinemas, Inc. is the largest motion picture exhibitor in the United States based upon the number of screens in operation. At December 28, 2000, the Company operated 391 theatres, with an aggregate of 4,328 screens in 32 states. Since its inception in November 1989, the Company has achieved growth in revenues and net income before interest expense, income taxes, depreciation and amortization, other income or expense, extraordinary items, non-recurring charges, impairment charges, and other theatre closing costs including loss on disposal of operating assets ("EBITDA"). As a result of the Company's focus on enhancing revenues, operating efficiently and strictly controlling costs, the Company has achieved what management believes are among the highest EBITDA margins in the domestic motion picture exhibition industry. The Company operates primarily multiplex theatres and has an average of 11.1 screens per location, which management believes is among the highest in the industry and which compares favorably to an average of approximately 8.6 screens per location for the five largest North American motion picture exhibitors at June 1, 2000. The Company develops, acquires and operates multiplex theatres primarily in mid-sized metropolitan markets and suburban growth areas of larger metropolitan markets, predominantly in the eastern and northwestern United States. The Company seeks to locate each theatre where it will be the sole or leading exhibitor within a particular geographic film licensing zone. Management believes that at December 28, 2000, approximately 85% of the Company's screens were located in film licensing zones in which the Company was the sole exhibitor. The Company has historically upgraded its theatre circuit by opening new theatres, adding new screens to existing theatres and selectively closing or disposing of under-performing theatres. The Company has also grown by acquiring eleven theatre circuits during the last seven years. From its inception through December 28, 2000, the Company has grown by acquiring 233 theatres with 1,905 screens (net of subsequently closed locations), developing 158 new theatres with 2,255 screens and adding 168 screens to existing theatres. This strategy has served to establish and enhance the Company's presence in selected geographic markets. In addition, as a result of this strategy, the Company enjoys one of the most modern asset bases in the industry with 44.3% of its circuit having been built since 1997. Approximately 44.0% of the Company's screens are in theatres with 15 or more screens. As a whole, the film exhibition industry is in a period of transition. Over the past several years, film exhibition companies, including the Company, embarked on aggressive programs of rapidly building state of the art theatre complexes (complete with amenities such as stadium seating and digital stereo surround-sound) in an effort to increase overall industry attendance. However, these aggressive new building strategies generated significant competition in once stable markets and rendered many theatres obsolete more rapidly than anticipated. This effect, together with the fact that many of the now obsolete theatres are leased under long-term commitments, produced an oversupply of screens throughout the exhibition industry at a rate much quicker than the industry could effectively handle. The industry overcapacity coupled with declining national box office attendance during 2000 severely impacted the operating results of the Company and many of its competitors. The exhibition industry continues to report severe liquidity concerns, defaults under credit facilities, renegotiations of financial covenants, as well as many recently announced bankruptcy filings. These industry dynamics have severely affected the Company, which has experienced deteriorating operating results over the last fiscal year. Additionally, because the Company has funded its expansion efforts over the past several years primarily from borrowings under its credit facilities, the Company's leverage has grown significantly over this time. Consequently, since the fourth quarter of 2000, the Company has been in default of certain financial covenants contained in its Senior Credit Facilities and its Equipment Financing. As a result of the default, the administrative agent under the Company's Senior Credit Facilities delivered payment blockage notices to the Company and the indenture trustee of its 9-1/2% Senior Subordinated Notes due 2008 and its 8-7/8% Senior Subordinated Debentures due 2010 prohibiting the payment by Regal of the semi-annual interest payments of approximately $28.5 million and $8.9 million due to the holders of the notes on December 1, 2000 and December 15, 2000, respectively. As a result of the interest payment defaults, the Company is also in default of the indentures related to the Regal Notes and Regal Debentures Accordingly, the holders of the Company's Senior Credit Facilities and the indenture trustee for the Regal Notes and Regal Debentures have the right to accelerate the maturity of all of the outstanding indebtedness under the respective agreements, which together totals approximately $1.82 billion. The Company does not have the ability to fund or refinance the accelerated maturity of this indebtedness. The Company has engaged financial advisers and is currently evaluating a longer-term financial plan to address various restructuring alternatives and liquidity requirements. The financial plan will provide for the closure of under-performing theatre sites, potential sales of non-strategic assets and a potential restructuring, recapitalization or a bankruptcy reorganization of the Company. Total revenues increased in 2000 by 9.0% to $1,130.7 million from $1,037.1 million in 1999. This increase was attributable primarily to increased ticket prices. Box office ticket prices averaged $5.36 during 2000, which was 9.4% higher than the $4.90 average ticket price in 1999. Average concession per patron were also higher in 2000 ($2.17) versus 1999 ($2.03). The higher prices per patron increased revenue by $84.6 million. Also, the slight increase in year over year admissions of 2.0 million patrons contributed $14.2 million of the revenue increase. Such increases were partially offset by declines in other operating revenues. Operating loss for 2000 increased to $110.0 million, or 9.7% of total revenues, from $2.4 million, or 0.2% of total revenues, in 1999. The increased loss is primarily due to the $70.7 million increase in theatre closing costs, loss on disposals of assets, and impairment charges over 1999. Before the $190.4 million and $119.7 million of nonrecurring expenses for 2000 and 1999, respectively, operating income was 7.1% and 11.3% of total revenues for 2000 and 1999, respectively. The decrease is due to increased direct theatre costs, depreciation, and amortization. Prior to 2000 net loss in 1999 increased by 20.4% to $88.5 million from $73.5 million in 1998. Before nonrecurring expenses and extraordinary items, net loss was $(14.9) million and net income $29.6 million for 1999 and 1998, respectively, reflecting a 150.3% decrease. RITE AID: Reports Fourth Quarter And Year-End Financial Results --------------------------------------------------------------- Rite Aid Corporation (NYSE, PSE:RAD) announced financial results for its fourth quarter, ended March 3, 2001. Revenues for the 14-week quarter were $4.1 billion, up from $3.5 billion in the 13-week period a year ago. Compared to the same 14-week period a year ago, sales increased 8.3 percent from $3.8 billion. Same store sales increased 10.6 percent during the fourth quarter as compared to the year-ago period, reflecting prescription sales growth of 12.7 percent and a 7.7 percent increase in front-end same-store sales. Prescription revenue accounted for 58.8 percent of total drugstore sales, and third party prescription sales represented 90.9 percent of total pharmacy sales. Fourth quarter earnings before interest, taxes, depreciation, amortization and non-recurring expenses (EBITDA) amounted to $179.2 million. Excluding non-operating income of $7.8 million received in the fourth quarter from the settlement of litigation with certain drug manufacturers, EBITDA was $171.4 million. Excluding non-operating income, EBITDA was 4.2 percent of sales for the fourth quarter as compared to EBITDA of 3.4 percent of sales in the third quarter. Our associates have made dramatic improvements in the operation of our stores as part of our turnaround plan, said Mary Sammons, Rite Aid president and chief operating officer. These improvements have resulted in strong fourth quarter sales gains and continuing increases in EBITDA. Interest expense for the quarter was $150.1 million, consisting of $140.6 million of interest on indebtedness and capital lease obligations and $9.5 million of non-cash interest from amortization of debt issue costs and the accretion of interest on closed stores and other reserves. Net loss from continuing operations for the fourth quarter was $362.1 million or a loss per share of $1.07 compared to a net loss from continuing operations of $730.6 million or a loss per share of $2.82 in the year-ago period. The net loss from continuing operations would have been $75.7 million or a loss per share of $0.22 without non-cash and one-time charges of $280.9 million and the $7.8 million litigation settlement received. Non-cash charges included $207.0 million for store closings and impairment, $38.2 million for stock-based compensation, an $18.3 million LIFO charge on inventory, $8.5 million related to debt for equity exchanges and $6.1 million from the company's share of drugstore.com's losses. The company reported a cash charge of $8.7 million for accounting and legal fees resulting from the restatement of the company's historical financial statements. During the quarter, the Company opened 4 new stores, relocated 4 stores and closed 98 stores. Stores in operation at the end of the quarter totaled 3,648. Year-End Results For the fiscal year ended March 3, 2001, Rite Aid had drugstore revenues of $14.5 billion as compared to drugstore revenues of $13.3 billion for the 52 weeks in the year prior. Same store sales increased 9.1 percent for the 53-week period compared to the prior fiscal year, reflecting prescription sales growth of 10.9 percent and a 6.5 increase in front-end same- store sales. Prescription revenue accounted for 59.6 percent of total drugstore sales, and third party prescription revenue represented 90.3 percent of pharmacy sales. For the fiscal year ended March 3, 2001, Rite Aid reported a net loss from continuing operations of $1.4 billion or a loss per share of $5.15 compared to a net loss from continuing operations of $1.1 billion or a loss per share of $4.34 for fiscal year 2000. Included in the fiscal 2001 net loss from continuing operations were non-cash charges of $645.8 million, including $415.3 million for store closings and impairment, $100.6 million related to debt for equity exchanges, $48.9 million for stock- based compensation, a $40.7 million LIFO charge on inventory and $36.7 million for the company's share of drugstore.com's losses. During fiscal year 2001, the Company reported $473.2 million of EBITDA. Further Debt Reduction Rite Aid also announced that since fiscal year end, it completed and has contracted to complete private exchanges of its common stock for $219.4 million of its debt, primarily bank debt and 10.5% notes due in 2002. The company also said that it reduced debt by approximately $157.6 million in the fourth quarter of fiscal 2001 by retiring $76.9 million principal amount of its 6.7% notes due in December, 2000; applying $34.5 million received from the final accounting of the sale of PCS Health Systems, Inc.; and from $42.5 million of private exchanges of common stock for debt. These are in addition to the debt reductions of approximately $763.5 million announced in March. At that time Rite Aid reduced debt with $284.2 million in proceeds from the sale of AdvancePCS common stock and with $200 million from the repayment by AdvancePCS of senior subordinated notes, both of which it received in October, 2000, when PCS was sold, and the exchange of approximately $279.3 million of debt for common stock upon completion of a public tender offer. In addition to the improvement in our operations, we are pleased by the substantial reduction in our debt, said Bob Miller, Rite Aid chairman and chief executive officer. Both have placed the company in a better position to refinance its debt obligations due in August and September 2002. The company estimated that the debt reductions since the start of the fourth quarter, fiscal 2001 will reduce annual cash interest costs by approximately $85 million. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of more than $14 billion and more than 3,600 stores in 30 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's website at www.riteaid.com. SAFETY-KLEEN: Judge Approves Payment Of Superfund Obligations ------------------------------------------------------------- Judge Walsh found that it is in the best interests of the Debtors and their estates to grant Safety-Kleen Corp.'s request for authority to pay, as may be appropriate and in their sole and absolute discretion, the Superfund Obligations now due or becoming due on or before December 31, 2001. In addition, Judge Walsh directed that: (a) The Lenders and the Creditors shall be permitted the Superfund Payment Review period of 14 days, from the date of the Notification to review the proposed payments; (b) To the extent the Lenders or the Creditors' Committee requests from the Debtors, during the Superfund Payment Review Period, additional information with respect to the proposed payments, the Superfund Payment Review Period shall be extended until 7 days following the receipt of the additional information by the requesting party; and (c) If either of the Lenders or the Creditors' Committee timely objects to the payment of the obligations described in the Superfund Payment Chart for the applicable period, or requests additional information, and the objection and/or the request for additional information is not resolved on a consensual basis, the Debtors shall have the option of, (i) foregoing the payment of the applicable Superfund Obligations for the applicable quarter, or (ii) seeking Court order for authority to pay the applicable Superfund Obligations over the Lenders and/or the Creditors' Committee objection. (Safety-Kleen Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) SIMONDS INDUSTRIES: S&P Cuts Corporate Credit Rating to B --------------------------------------------------------- Standard & Poor's lowered Simonds Industries Inc.'s corporate credit rating to B from B+ and subordinated debt rating to CCC+ from B-, affecting $100 million in debt securities. The outlook remains negative. The rating downgrades reflect weaker-than-expected financial performance, due to weak end-market demand, pricing pressures, reduced customer capital spending, and challenges with the integration of a recent acquisition. The ratings reflect Simonds' weak financial profile, which offsets the company's leading positions in mature, highly fragmented, and competitive markets. Operating performance over the past year has been subpar. For the last 12 months ending March 31, 2001, EBITDA was approximately $15.8 million, compared with $19.4 million for the same prior-year period. High financial risk will likely persist for the foreseeable future, reflecting the company's highly leveraged capital structure, heavy debt burden, and soft end markets. Simonds manufactures industrial cutting and sharpening tools, including saw blades, files, knives, steel rule, and filing room equipment. Products are sold to three end-user markets--metal cutting (49% of sales), wood cutting (40%), and paper products (11%). Simonds faces strong competition from several full-line companies similar in size and numerous, smaller niche suppliers. The company is one of the top three suppliers in each of the market segments it serves. However, the scope of the company's operations is relatively small, with 2000 sales of $127 million and EBITDA of about $17.5 million. Operating and financial performance during the last 12 months has been negatively affected by several factors. The company has experienced integration challenges with its recent acquisition of Nicholson Band Saws from Cooper Industries Inc. Sales of the company's machine tools and filing products have been affected by soft industrial production and reduced capital spending. In addition, demand for the company's wood-cutting products has been adversely affected by the continued consolidation of lumber mills and reduced production schedules as a result of weak pulp and paper prices. In addition, pricing pressures have increased as a result of foreign imports. To offset these pressures, management continues to focus on improving profitability by reducing costs, closing and consolidating facilities, and reducing overhead. As of March 31, 2001, total debt to EBITDA was about 6.8 (x) times and EBITDA interest coverage was about 1.3x. Near term, credit measures are expected to remain weak, with EBITDA interest coverage ranging between 1x and 1.5x and total debt to EBITDA between 6x and 7x. Significant improvement is not expected in the short term as markets are expected to remain weak. Financial flexibility remains limited. In the near term, the company has a $5.1 million interest payment associated with its subordinated notes due July 15, 2001. As of March 31, 2001, the company had approximately $1.3 million in cash and $26 million of availability on its $40 million revolving credit facility. OUTLOOK: NEGATIVE The ratings assume that cost-reduction efforts will help offset industry pressures. Further deterioration in operating results as a result of weak market conditions could lead to liquidity pressures and additional ratings downgrades, Standard & Poor's said. SUN HEALTHCARE: Transferring Five More SunBridge Facilities ----------------------------------------------------------- Pursuant to the Court's authorization of Procedures for the Disposition of Certain Healthcare Facilities and the Related Leases and Provider Agreements, Sun Healthcare Group, Inc. sought and obtained approval for the transfer of another 5 facilities, 4 of which were originally operated by Debtor Retirement Care Associates, Inc. (1 - 4 below) and facility shown in (5) below was operated by SunBridge Healthcare Corporation: (1) SunBridge Care and Rehab for Coventry, located in Ocala, Florida * Annual savings from transfer: $315,096 * Sales price of inventory: Debtor's cost * Lease rejection damage claim: $837,534 * Pre-petition employee claims: Debtors shall pay directly to employees * Landord: Ganot Corporation * Proposed New Operator: Prime Healthcare Services, LLC * Effective Date: upon satisfaction of conditions, the first to occur of the 1st or 16th of a calendar month * Treatment of Medicare Provider Agreement: reject * New Operator's Share of HCFA Global Settlement: $13,300 (2) SunBridge Care & Rehab for Reidsville located in Reidsville, NC * Annual savings from transfer: $200,356 * Sales price of inventory: Debtor's cost * Lease rejection damage claim: $709,689 * Pre-petition employee claims: Debtors shall pay directly to employees * Landord: Ganot Corporation * Proposed New Operator: Healthlink West, Inc. * Effective Date: upon satisfaction of conditions, the first to occur of the 1st or 16th of a calendar month * Treatment of Medicare Provider Agreement: reject * New Operator's Share of HCFA Global Settlement: $13,300 (3) SunBridge Care & Rehab for St. Cloud located in St. Cloud, FL * Annual savings from transfer: $473,260 * Sales price of inventory: Debtor's cost * Lease rejection damage claim: $845,175 * Pre-petition employee claims: Debtors shall pay directly to employees * Landord: Ganot Corporation * Proposed New Operator: Healthlink West, Inc. * Effective Date: upon satisfaction of conditions, the first to occur of the 1st or 16th of a calendar month * Treatment of Medicare Provider Agreement: reject * New Operator's Share of HCFA Global Settlement: $13,300 (4) SunBridge Care & Rehab for Coventry, located in Virginia Beach, VA * Annual savings from transfer: $ 1,168,126 * Sales price of inventory: Debtor's cost * Lease rejection damage claim: $1,523,935 * Pre-petition employee claims: Debtors shall pay directly to employees * Landord: Ganot Corporation * Proposed New Operator: Healthlink West, Inc. * Effective Date: upon satisfaction of conditions, the first to occur of the 1st or 16th of a calendar month * Treatment of Medicare Provider Agreement: reject * New Operator's Share of HCFA Global Settlement: $13,300 (5) SunBridge Care and Rehabilitation for Bay St. Joseph, located in Bay St. Joe, Florida, operated by SunBridge Healthcare Corporation: * Annual savings from transfer: $489,778 * Sales price of inventory: $0 - to be removed * Lease rejection damage claim: $1,310,504 * Pre-petition employee claims: Debtors shall pay directly to employees * Landord: Health Care Capital of Louisiana, Inc. as successor in interest to HCC Gulf, Inc. * Proposed New Operator: LaSalle Bank National Association * Effective Date: March 15, 2001 * Treatment of Medicare Provider Agreement: reject and terminate * New Operator's Share of HCFA Global Settlement: $12,500 (Sun Healthcare Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) TRANS ENERGY: Selling Debt Securities To Raise Needed Funds ----------------------------------------------------------- Trans Energy, Inc., a Nevada corporation, is primarily engaged in the transportation, marketing and production of natural gas and oil, and also conducts exploration and development activities. The Company owns an interest in three oil and gas wells in West Virginia, owns and operates one oil well in Wyoming, and owns an interest in seven oil wells in Wyoming that it does not operate. The Company also owns and operates an aggregate of over 100 miles of three-inch, four-inch and six- inch gas transmission lines located within West Virginia in the Counties of Ritchie, Tyler and Pleasants. This pipeline system gathers the natural gas produced from these wells and from wells owned by third parties. The Company also has approximately 18,000 acres under lease in the Powder River Basin in Campbell, Crook and Weston Counties, Wyoming. In 2000, the Company participated in the drilling of four drill downs to the Benson Sand in West Virginia. Total revenues of $1,125,257 for the year ended December 31, 2000 increased 3% when compared to $1,092,899 for the year ended December 31, 1999. In 2000, oil made up 70% of total revenues compared to 37% in 1999. Accordingly, gas sales decreased from 63% of sales in 1999 to 30% in 2000. This increase in oil revenues was due to the Gulf Canada interests in Wyoming which produces oil and not natural gas. The Company had a net loss of $4,144,703 for 2000 compared to a net loss of $6,298,333 in 1999. The Company's total costs and expenses decreased 10% in 2000 and, as a percentage of revenues, decreased from 392% in 1999 to 343% in 2000. The cost of oil and gas decreased 33% in 2000 due to lower purchases and a set price. As a percentage of revenues, cost of oil decreased from 46% in 1999 to 30% 2000 due to increased oil selling prices in 2000. Selling, general and administrative expenses increased 188% in 2000 when compared to 1999, primarily due to additional amortization on pre-paid advertising and marketing. Salaries and wages increased 41% in 2000 due to the exercise of options granted to employees for services rendered. Depreciation, depletion and amortization decreased 87% in 2000 from 1999 due to the Company not having any prepaid marketing and advertising costs. Interest expense in 2000 decreased 45% from 1999 due to conversion of debentures during the year. Historically, the Company's working capital needs have been satisfied through its operating revenues and from borrowed funds. Working capital at December 31, 2000 was a negative $4,550,117 compared with a negative $9,115,862 at December 31, 1999. This change was primarily attributed to the conversion of certain debentures into commons stock in 2000. The Company anticipates meeting its working capital needs during the 2001 fiscal year with revenues from operations and possibly from capital raised through the sale of either equity or debt securities. The Company has no other current agreements or arrangements for additional funding and there can be no assurance such funding will be available to the Company or, if available, it will be on acceptable or favorable terms to the Company. TRANSPORTATION COMPONENTS: Files Chapter 11 Petition in Houston --------------------------------------------------------------- Transportation Components, Inc., which operates as TransCom USA, and all of its domestic subsidiaries, have voluntarily filed to reorganize under Chapter 11 of the United States Bankruptcy Code. The filings, made in federal bankruptcy court in Houston, will enable the TransCom group to continue to operate their businesses in the normal course, using their own internally generated cash and the proceeds of debtor in possession financing being arranged with the company's bank group. TransCom's Canadian subsidiary, Wes-T-Rans, and its Amparts operations in Mexico, are not included in the filings. TransCom cited a prolonged industry slump, declining sales, acute liquidity problems, and a heavy debt load as factors prompting the need to reorganize. In connection with the filing, TransCom's bank lenders, led by Bank One, have allowed TransCom the use of their cash collateral and have agreed in principle to extend the company up to $5.5 million in debtor in possession financing, including $3.5 million immediately and another $2 million to be made available August 1 of this year if TransCom meets agreed milestones. To guide it through the reorganization TransCom's Board of Directors has hired the New York based crisis management and bankruptcy consulting firm of Bridge Associates LLC. Anthony H. N. Schnelling, a managing director of Bridge Associates, will head the Bridge team's efforts on behalf of the company. Schnelling said, "The TransCom board decided the company's financial and operational challenges could best be addressed through a Chapter 11 reorganization. We look forward to assisting the TransCom board and management in the restructuring of TransCom's financial obligations and operations." According to Mr. Schnelling, TransCom is already working toward that goal on several key fronts, by moving to streamline management, reduce costs, dispose of non-core businesses, and restructure its long-term debt. TransCom also announced that T. Michael Young has resigned as the company's President and Chief Executive Officer. Mr. Young will remain a director and continue as Chairman of the Board of TransCom as it transitions into the reorganization process. David N. Phelps, previously a senior vice president of the company, has been promoted to executive vice president. Mr. Phelps, who will continue as TransCom's chief financial officer, joins two other TransCom Executive Vice-Presidents, Dan Bucaro, who heads operations, and David Olsen, in charge of sales, to form TransCom's principal management team. The three officers, working with Bridge Associates, will report directly to the TransCom board. TransCom's shares stopped trading on the New York Stock Exchange on April 12, after the company failed to comply with the exchange's minimum continued listing requirements. Trading in the over-the-counter market may not begin until the company files its 2000 annual report with the Securities and Exchange Commission. The report, due in April, has been deferred pending clarification of the company's financial uncertainties. Initiation of the reorganization process should enable TransCom to complete its 2000 audit and file its annual report some time in the near future, but TransCom is uncertain if and when trading in its shares will resume. Houston based TransCom is a nationwide distributor of heavy duty truck parts. It has 90 operating locations in the United States, Canada and Mexico. TransCom's customer base includes common carriers, private and rental fleets, independent repair shops, specialty OEMs and others. TRANSPORTATION COMPONENTS: Chapter 11 Case Summary -------------------------------------------------- Lead Debtor: Transportation Components, Inc. Three Riverway, Suite 200 Houston, TX 77056-1942 Debtor affiliates filing separate chapter 11 petitions: Transcom USA Management Co. Amparts International, Inc. Drive Line, Inc. Gear & Wheel, Inc. Perfection Equipment, Co. Transportation Component, Co. American Truck Transport Equipment, Inc. TUSA GP, Inc. TUSA LP, Inc. The Cook Brothers Companies, Inc. NEC Leasing, Inc. Plaza Automotive, Inc. Brake & Spring, Inc. Mobile Power & Hydraulics, Inc. Hardy's Truck Parts, Inc. Universal Fleet Supply, Inc. Charles W. Carter Co-Arizona Charles W. Carter Co-Hawaii, Inc. K.O.Y. Corp. Brake Service & Equipment Co. of Florida, Inc. JDK Industries, Inc. DSS/ProDiesel, Inc. Type of Business: TransCom distributes replacement parts and supplies for commercial trucks, trailers, and other heavy duty vehicles and equipment throughout North America and Mexico. The company also performs parts installation and repair, fleet maintenance management, machine shop services, and remanufacturing of brake shoes, fuel injectors and turbo chargers. Chapter 11 Petition Date: May 07, 2001 Court: Southern District of Texas Bankruptcy Case Nos.: 01-35158 through 01-35180 Debtors' Counsel: John F. Higgins, Esq. Porter & Hedges, L.L.P. 700 Louisiana, Suite 3500 Houston, TX 77002 (713) 2260600 Total Assets: $211,603,000 Total Debts: $118,273,000 USG CORPORATION: Moody's Downgrades Senior Note Rating To B2 ------------------------------------------------------------ Moody's Investors Service downgraded the ratings of Chicago- based USG Corporation and its subsidiary United States Gypsum Company. Specifically, these are: USG Corporation: - senior notes, debentures & industrial revenue bonds to B2 - shelf registration for senior debt to (P)B2, - subordinated debt to (P)Caa1 and - preferred stock to (P)"caa". United States Gypsum Company: - industrial revenue bonds to B2. Approximately $740 million of debt securities are affected. Accordingly, the downgrades reflects USG's ongoing exposure to asbestos litigation and the continuing, accelerated downward impact on operating performance caused by price deterioration in the wallboard markets and higher fuel costs in the manufacturing process. With respect to the asbestos litigation, sizeable settlement payments are anticipated going forward, insurance proceeds are likely to cover only a minor portion of expected future payments and will be exhausted in the near term, Moody's said. Moody's also expressed its concern over USG's ability to renew its $200 million 364 day bank facility due June 29, 2001 on comparable terms, given the company's current operating fundamentals. Moody's noted that USG may borrow under this facility up to the expiry date and that such borrowings would have an expiry date of June 29, 2002. The outlook remains negative given the uncertainty surrounding the extension of the maturing bank facility, the period of time for capacity and price correction in the wallboard markets, and the continuing asbestos exposure, Moody's reported. According to the rating agency, how the Company addresses near term liquidity availability requirements and debt maturities will be a critical factor in its ongoing analysis of USG's ratings. VIDEO UPDATE: Movie Gallery Buys Senior Secured Bank Debt --------------------------------------------------------- Movie Gallery, Inc. (Nasdaq/NM: MOVI) has purchased the senior secured bank debt of Video Update, Inc. from a syndication of financial institutions led by BNP Paribas. The bank debt, which has a $121 million face value, was purchased at a discount of greater than 90%. Video Update, Inc., which is currently operating under Chapter 11 of the United States Bankruptcy Code, owns and operates over 350 video specialty retail stores in the United States and Canada. Commenting on the purchase of the bank debt, Joe Malugen, Chairman and Chief Executive Officer of Movie Gallery, stated, We are excited about the opportunity of participating in the reorganization of Video Update and having input in the disposition of each of the Video Update stores over the next few months. Movie Gallery, Inc. currently owns and operates a total of 1,036 video specialty stores located in 31 states. Movie Gallery is the third largest video specialty retailer in the United States and is the leading provider of movie and video game rentals and sales in rural and secondary markets. W.R. GRACE: Moves To Withdraw Reference re Asbestos Claims ---------------------------------------------------------- W. R. Grace & Co.'s chapter 11 filing, David M. Bernick, Esq., at Kirkland & Ellis explained, is not driven by concerns over its ongoing business operations. Rather, these are asbestos- driven cases. While the Debtors will take full advantage of whatever benefits it can derive from the chapter 11 process on an operational level, the main task of this restructuring is to define the scope of the Company's asbestos-related personal injury tort liability, contain it, and resolve it once and for all. The Congress grants original and exclusive jurisdiction of all bankruptcy cases under title 11 to the United States District Courts pursuant to 28 U.S.C. Sec. 1334(a). Pursuant to 28 U.S.C. Sec. 157(a), each Article III District Court may refer bankruptcy cases to the Bankruptcy Court, which functions as a unit of the District Court. W.R. Grace's chapter 11 cases were referred to the Bankruptcy Court pursuant to a revived general order of reference entered by the District Court on December 15, 2000. That reference, however, is not without limits. Core proceedings, described at 11 U.S.C. Sec. 157(b)(2), specifically exclude "personal injury tort or wrongful death claims." W.R. Grace faces four types of asbestos-related claims: (A) bodily injury claims alleging health effects from exposure to Grace's asbestos-containing products; (B) claims alleging personal injury and property damage from exposure to naturally occurring asbestos in connection with the mining and processing of vermiculite at Grace's mine in Libby, Montana; (C) property damage claims generally seeking payment for the cost of removing or containing asbestos in buildings; and (D) claims for removal of vermiculite attic insulation seeking damages and other relief. A significant portion of Grace's potential asbestos-related liability stems from personal injury cases. Because determinations about the validity of personal injury claims are non-core proceedings, the Bankruptcy Court is not the forum in which W.R. Grace can complete the main task of its restructuring endeavor. Mr. Bernick notes that the lawyers could argue about the "coreness" of the asbestos-related claims for a long time, pointing to case law: (i) expressly holding that such determinations are non-core proceedings, see, e.g., In re Schepps Food Stores, Inc., 169 B.R. 374, 377 (Bankr. S.D. Tex. 1994) and In re UNR Indus., 74 B.R. 146, 147-48 (N.D. Ill. 1987); (ii) concluding that dispositions of personal injury claims can be core proceedings within the jurisdiction of a bankruptcy court, see, e.g., In re Aquaslide 'N' Dive Corp., 85 B.R. 545, 546 (9th Cir. B.A.P. 1987)(ruling on debtor's "product identification" defense is "a core proceeding") and In re Dow Corning Corp., 215 B.R. 346, 361 (Bankr. E.D. Mich. 1997)(debtor's motion for summary judgment seeking to disallow silicone implant personal injury claims, on the ground that claimants' causation evidence was insufficient under Daubert, is a core proceeding which the bankruptcy court may hear and determine); and (iii) in the case of the Third Circuit, taking middle-of-the- road positions to side-step the issue. See, e.g., In re C&G Excavating, Inc., 217 B.R. 64 n.1 (E.D. Pa. 1998). W.R. Grace doesn't want to have "coreness" conversations. Rather, it wants to define and resolve its asbestos-related liability and get out of bankruptcy. The Debtors' liability is presently uncontrolled and undefined. In front of a District Court, rather than a Bankruptcy Court, W.R. Grace believes that it can put specific procedures in place to define its asbestos- related liability. These procedures include: (1) the consolidation of all litigation in one court, subject to the Federal Rules of Evidence and Civil Procedure; (2) the bar date procedure, which permits the identification of all existing claims; (3) the claims allowance and disallowance procedure, which can be used to gather the information necessary to litigate or resolve claims on a consolidated basis; (4) the availability of standard litigation procedures under the Federal Rules, including summary judgment motions under Rule 56 and common issue trials under Rule 42; and (5) the ultimate ability to provide for the consolidated payment (or litigation) of claims through a post- confirmation trust. No process, Mr. Bernick contends, could fit more squarely within the purview of an Article III court and there are four clear benefits to a partial withdrawal of the reference in the first instance: (w) withdrawal will eliminate issues concerning the power of the bankruptcy court to dispositively resolve issues regarding personal injury liability. See In re Sevko, Inc., 143 B.R. 114, 117 (N.D. Ill. 1992); (x) the District Court's expertise in applying the Federal Rules of Evidence, including Daubert precepts, can be fully employed. See In re Dow Corning, 215 B.R. 526, 529 ("Judicial expertise with respect to Daubert hearings is yet another factor to consider. . . . [T]he District Court has far greater expertise in handling such matters."); (y) the District Court can develop immediate and direct control over a very complex bankruptcy that ultimately will come before the District Court for confirmation of a plan of reorganization to obtain the benefits of a discharge and channeling injunction under 11 U.S.C. Sec. 524(g); and (z) the District Court can retain the flexibility to decide that particular matters are better handled by the Bankruptcy Court, thus mitigating any burden the District Court might sense or fear. Accordingly, the Debtors ask that the District Court take direct control -- now -- over all issues concerning Grace's tort liability and the allowance or payment of tort claims. While these procedures arguably can be deployed -- at least to a point -- initially in the Bankruptcy Court, W.R. Grace submits that the more efficient and effective course is for the District Court to take charge of all tort liability issues from the beginning, in essence to set out the blueprint for how the case is to proceed. Decisions can then be made on an issue-by-issue basis or subject matter-by-subject matter basis as to whether certain aspects of the litigation can be more appropriately handled by the Bankruptcy Court. The Bankruptcy Court -- of course, Mr. Bernick explained -- would retain jurisdiction over all matters not related to Grace's tort liability. Mr. Bernick assures the Court that W.R. Grace is not asking the judiciary to venture into new and uncharted waters. The Kirkland & Ellis legal team has already taken Babcock & Wilcox Co., another recently-filed chapter 11 case prompted by an unmanageable avalanche of asbestos-related claims, down this road. In that case, the District Court for the Eastern District of Louisiana bought into a partial withdrawal of the reference, recognizing that efficiency and judicial economy would be served. See In re The Babcock & Wilcox Co., No. Civ. A. 00-0558, 2000 WL 422372 (E.D. La. Apr. 17, 2000). The District Court in Babcock & Wilcox's case contemplates entertaining motions for summary judgment concerning, among other things, "the appropriate standard of liability, the availability of punitive damages, the validity of claims based on unreliable scientific evidence of disease and causation, the appropriate statutes of limitation, and the applicability of the sophisticated purchaser and government contractor defenses." Id. at *4. It appears that the Debtors' wish came true. Judge Robinson reassigned the case from visiting Bankruptcy Judge Randall Newsome to District Court Judge Joseph J. Farnan. (W.R. Grace Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Obtains Approval for $250 Million DIP Financing ----------------------------------------------------------- W. R. Grace & Co. (NYSE: GRA) announced that it has received approval from the U.S. Bankruptcy Court in Wilmington, Delaware, for its use of $250 million of debtor-in-possession financing from Bank of America, N.A. The Company will use these funds to help it in meeting future needs and obligations associated with operating its businesses. Grace's Chairman, President and Chief Executive Officer Paul J. Norris commented, "With this approved financing now in place, Grace is solidly positioned to continue to meet all of its future obligations to customers, employees, suppliers and business partners. This DIP financing package should serve as further assurance that we have the means to continue our businesses as usual and will continue to compete effectively as a leader in our major markets. Obtaining and receiving approval for this financing facility is a positive signal that our businesses will have sufficient liquidity as we work to resolve our litigation issues." On April 2, 2001, Grace and 61 of its United States subsidiaries and affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in Wilmington, Delaware. Grace's non-U.S. subsidiaries were not part of the filing. The filing was made in response to a sharply increasing number of asbestos-related claims. Under Chapter 11, Grace expects to continue to operate these entities as debtors-in- possession under court protection from creditors and claimants, while using the Chapter 11 process to develop and implement a plan for addressing the asbestos-related claims and satisfying obligations to other creditors. Grace is a leading supplier of catalysts and silica products, specialty construction chemicals and building materials, and container products. With annual sales of approximately $1.6 billion, Grace has over 6,000 employees and operations in nearly 40 countries. For more information, visit Grace's web site at http://www.grace.com. WHEELING-PITTSBURGH: Proposes Workers' Income Protection Policy --------------------------------------------------------------- James M. Lawniczak, Esq., at Calfee, Halter & Griswold LLP, in Ohio, reminded Judge Bodoh -- like he could have forgotten -- that low steel prices have driven Wheeling-Pittsburgh Steel Corp. and many other steel companies to the halls of the Nation's bankruptcy courts. Continued low prices compel the Debtors to save costs wherever possible, including permanent severance of employees. WPSC and Pittsburgh-Canfield foresee that they may be required to lay off some employees, a course of action, which, although is necessary, would be a big blow on employee morale. To cushion the severe detrimental impact of layoffs, the Debtors proposed, and sought the Court's authority to implement an income protection policy for salaried workers who may be affected by the layoffs. Income Protection Policy The proposed policy provides supplemental payments to affected employees equal to the difference between, (i) unemployment benefits received by affected employees receive, and (ii) one- half the affected employees' normal base salary. Payments to individual affected employees would be subject to a cap of $500 per week and will not exceed 26 weeks in duration, except that re-hired employees would be entitled to reestablish their eligibility or one week of benefits for each two weeks of permanent, continuous, full-time work occurring after the initial layoff. Eligibility is strictly limited to full-time, permanent management employees where: (a) Layoff is due to economic conditions resulting in lack of work; (b) Employee has no more than one week of vacation eligibility; (c) Layoff is not due to plant or departmental permanent shutdown, government regulation or act of God; (d) Employee must be eligible to receive state unemployment benefits; (e) Employee has not refused a work assignment offered by the employer; (f) Employee is able and available for work, has registered at and reported to the state employment service and has not failed or refused to accept suitable employment or voluntarily left that suitable employment; and (g) Employee is not eligible for any subsistence benefit from any other source. Amounts to be expended under the proposed plan, of which the Debtors do not have an estimate yet, would depend on the number of eligible employees who are laid off and the differences between one-half their salaries and the benefits provided by relevant state unemployment benefit programs. The Debtors believe that, the amounts that would be paid under the proposed plan would not be additional expenses to the estates, but rather, a partial limitation on the amounts that the Debtors would save through layoffs of management employees. While cost- savings are important, the Debtors believe that it is also critical to maintain employee morale and to provide employees with necessary reassurances concerning the potential consequences of layoffs, and that on balance the proposed plan's adoption is appropriate and necessary. Stock Redemptions WPSC maintains an employee stock investment plan where eligible employees originally were entitled to invest in stock issued by Wheeling-Pittsburgh Corp., or WPC. This stock investment plan: (a) allowed employees to redeem the stocks, commonly referred to by the Debtors as ESOP redeemable stocks, that employees held at fixed prices, that is, $15 per share for employees who have reached 30 years of services or $20 per share upon qualified retirement; and (b) provides that WPC would repurchase stock from participants in the plans. When WHX Corp. was formed and became the ultimate parent company, the WPC stocks were converted to WHX stocks. By a contribution and assumption agreement between WHC and WHX, various WPC assets and liabilities were transferred to WHX, including all WPC rights and obligations under existing WPC stock option plans and WPSC stock investment plans. WHX also issued a proxy statement and prospectus confirming its assumption of the obligation to purchase ESOP redeemable common stock. From 1994 through 2000, the Debtors redeemed the ESOP stocks and charged WHX for those amounts through inter-company accounts. When WHX expressed its belief that WHX should not be charged for the repurchase, the Debtors temporarily suspended redemption of the ESOP stocks. By motion, the Debtors asked Judge Bodoh to approve stock redemptions by the Debtors in accordance with the stock incentive plan, pending resolution of inter-company disputes regarding legal liability for those redemptions. The Debtors allege that the suspension of redemptions has imposed significant hardships on numerous retired employees, including many members of the Debtors' unions. The unions have asked the Debtors to resume stock redemptions. In order to minimize hardships on the affected employees, and to preserve good relations with unionized employees and other employees, the Debtors proposed, at their discretion, to resume redemptions of redeemable stocks from eligible employees, while at the same time preserving the Debtors' right to recover the costs of redemptions from WHX. The Debtors estimate that redemptions for January, February and March 2001, will cost $85,128 for unionized employees and $42,961 for other eligible employees, for a total of $128,089. Further, the Debtors submit that ongoing monthly costs of redemptions, while varying, will average about $50,000 per month, representing the gross redemption price for the WHX stock that is redeemed. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 6; 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. 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