/raid1/www/Hosts/bankrupt/TCR_Public/010713.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, July 13, 2001, Vol. 5, No. 136
Headlines
360NETWORKS INC.: Moves To Obtain $100,000,000 Of DIP Financing
AMF BOWLING: Employs Wachtell Lipton As Corporate Counsel
ASSISTED LIVING: Completes Amendment to Heller Line of Credit
AUTOLEND GROUP: Reports Financial Losses For Fiscal Year 2001
BRIDGE INFORMATION: Committee Retains AmEx As Financial Advisor
CENTRAL VERMONT: Bondholders Okay 42nd Supplemental Indenture
COMPUTONE: Losses & Debt Defaults Raise Going Concern Doubts
ECO SOIL: Appeals Nasdaq's Move To Delist Shares
EGLOBE INC.: Intends To Sell Assets of Four Subsidiaries
ENVIROSOURCE INC.: Executes Supplemental Indentures
FOAMEX INTERNATIONAL: Plans To Buy General Foam Corporation
FOAMEX INTERNATIONAL: Outgoing PwC Issues Reports
GENCOR INDUSTRIES: Florida Court Confirms Chapter 11 Plan
GENESIS HEALTH: Allocation Of Value Under the Revised Plan
GLOBAL TELESYSTEM: Agrees To Sell Golden Telecom Stock For $25MM
HECHINGER COMPANY: Bankruptcy Court Says No To Kmart Settlement
LAIDLAW INC.: Court Allows Continuance of Cash Management System
LENOX HEALTHCARE: Files Second Chapter 11 Case in Wilmington
LENOX HEALTHCARE: Chapter 11 Case Summary
LERNOUT & HAUSPIE: Asks To Extend Lease Decision Period To Dec.7
LIBERTY HOUSE: Sold To Federated Department Stores For $200 Mil
LIBERTY LOBBY: Loses Court Battle And Ceases Operations
LOEWEN GROUP: Summary Of Third Amended Plan Of Reorganization
LTV CORPORATION: US Trustee Amends Noteholders' Committee
MARINER POST-ACUTE: Settles Dispute With Palmer & Cay
PACIFIC GAS: Moves TO Continue Making Capital Expenditures
PILLOWTEX: Stipulates To Continue Paying Frontline Consulting
PLATINUM ENTERTAINMENT: Plan Confirmation Hearing Is On July 26
POLAROID CORPORATION: Get Waiver of Loan Covenants to Oct. 12
PRECEPT BUSINESS: Converts Bankruptcy Case to Chapter 7
PSINET INC.: Hires Sidley Austin Brown & Wood As Special Counsel
RENT-WAY INC.: Auditor Issues Negative Going Concern Opinion
RITE AID: Releases First Quarter 2001 Results
SAFETY-KLEEN: Prepares To Market Chemical Services Business
SENIOR HOUSING: Issues 245,000 Shares & $2MM of Preferred Notes
SERVICE MERCHANDISE: Assumes Lease Of Store #110 In Pompano, FL
SINGING MACHINE: Shareholders' Annual Meeting Set For Aug. 16
STAR TELECOM: Cuts Off Wholesale Carrier Services In U.S.
TELENETICS CORP.: Requests Hearing to Remain on Nasdaq Market
TRANS HAWAIIAN: Tour Bus Company Plunges Into Bankruptcy
USG CORP.: Seeks To Continue Workers' Compensation Programs
VLASIC FOODS: Hires Peter Menikoff As Chief Financial Officer
WARNACO GROUP: Continues To Employ Ordinary Course Professionals
WINSTAR COMM.: Rejecting Distribution Contracts With Anixter
WORLDWIDE XCEED: Court Gives Go Ahead For Asset Sale
BOOK REVIEW: THE FAILURE OF THE FRANKLIN NATIONAL BANK:
Challenge to the International Banking System
*********
360NETWORKS INC.: Moves To Obtain $100,000,000 Of DIP Financing
---------------------------------------------------------------
Alan J. Lipkin, Esq., at Willkie, Farr & Gallagher, advised
Judge Gropper at the First Day Hearing that 360networks inc. has
secured a proposed Commitment Letter, dated June 27, 2001,
outlining the terms and conditions of a proposed post-petition
financing arrangements providing 360 with access to up to
$100,000,000 of fresh post-bankruptcy debtor-in-possession
financing to fund on-going working capital need throughout their
reorganization proceedings. Vanessa A. Wittman, the Debtors'
Chief Financial Officer, relates that representatives of the
Pre-Petition Lenders have received a copy of the proposed
Commitment Letter on a confidential basis.
As would be customary in such a transaction, the Post-Petition
Financing will be secured by Liens on all or substantially all
of the assets and property of the Debtors and those Liens would
be senior and superior to the Pre-Petition Liens pursuant to
section 364(d)(1) of the Bankruptcy Code.
Without prior approval of the Cash Collateral Stipulation or
some other consensual arrangement, Harold S. Novikoff, Esq., at
Wachtell, Lipton, Rosen & Katz, indicates, the Pre-Petition
Agents and the Pre-Petition Lenders will object to the priming
of their Pre-Petition Liens under any Post-Petition Financing
pact. (360 Bankruptcy News, Issue No. 2; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AMF BOWLING: Employs Wachtell Lipton As Corporate Counsel
---------------------------------------------------------
AMF Bowling Worldwide, Inc. asks Judge Tice for permission,
pursuant to 11 U.S.C. Sec. 327(e), to employ Wachtell, Lipton,
Rosen & Katz as special counsel to perform certain corporate and
strategic legal services they will require during the course of
these chapter 11 cases. For four years, WLRK has served as AMF's
legal advisors with respect to matters of corporate law and
strategy, advising senior management and the Board of Directors
with respect to mergers and acquisitions and other major
corporate transactions, securities law and disclosure, corporate
structure, corporate finance and capital structure, and debt
refinancing and restructuring, and about the proposed plan of
reorganization for the Debtors.
Specifically, the Debtors seek to retain WLRK to advise the
Debtors and their Board of Directors in connection with:
(a) evaluation and negotiation of such mergers,
acquisitions, asset sales and other major corporate
transactions as may be proposed during the course of
the chapter 11 cases, including advice as to the tax,
antitrust, and employee benefits aspects of such
transactions;
(b) securities law and disclosure obligations;
(c) corporate finance;
(d) corporate and capital structure;
(e) debt refinancing and restructuring; and
(f) such of the foregoing matters as may arise in the
formulation of a plan of reorganization for the
Debtors.
WLRK will charge hourly rates to the Debtors that are consistent
with customary hourly rates charged by WLRK, which currently
are:
Partners $400 to $875
Associates $130 to $395
Paralegals $90 to $125
The primary attorneys who will be handling the above matters and
their current standard hourly rates are:
Richard D. Feintuch $675 per hour
Mitchell S. Presser $500 per hour
WLRK's limited role in these cases will be that of a senior
corporate advisor to the Debtors' management and Board of
Directors with respect to mergers and acquisitions and other
major corporate transactions, securities law and disclosure,
corporate structure, corporate finance and capital structure,
and debt refinancing and restructuring, including such of the
foregoing matters as may arise in the formulation of a plan of
reorganization for the Debtors. "Accordingly, while the number
of hours expended by WLRK is expected to be very small as
compared to the hours expended by the Debtors' general
bankruptcy and reorganization professionals, a large proportion
of those hours will necessarily require the services of
experienced partners such as Mr. Presser and myself," Mr.
Feintuch says.
In matters unrelated to these cases, Mr. Feintuch relates, WLRK
has in the past represented, currently represents, and likely in
the future will represent (but is not general counsel to)
certain of the Debtors' and their affiliates' significant
current vendors, unsecured lenders, secured lenders, holders of
more than 5% of voting stock, underwriters, indenture trustees,
guarantee beneficiaries, noteholders, sureties, and customers,
as well as certain attorneys, accountants, and financial
advisors for such entities.
In addition, during the prepetition period, WLRK represented AMF
Bowling, Inc., the non-debtor parent company of the Debtors, and
Richard Friedman, a Director and Chairman of the Board of AMF
Bowling, Inc., as defendants in an ongoing shareholder class
action litigation. Mr. Friedman is also a Director of two of
the Debtors, AMF Group Holdings, Inc. and AMF Bowling Worldwide,
Inc.; however, he is a defendant in the Shareholder Litigation
only in his capacity as Director of AMF Bowling, Inc. WLRK will
continue to represent Mr. Friedman and AMF Bowling, Inc. in the
Shareholder Litigation subject to the limitation on such
representation that WLRK will not represent such defendants in
asserting any claims by them against the Debtors for
indemnification (or otherwise) in connection with the
Shareholder Litigation. AMF Bowling, Inc. and Mr. Friedman have
consented to this limitation on WLRK's representation of them in
the Shareholder Litigation.
WLRK likely also, from time to time, has represented in
unrelated matters other lenders in Debtors' prepetition and
debtor-in- possession lending groups, as well as many of the
Debtors' other creditors, equity interest holders and other
parties in interest, their attorneys, accountants and financial
advisors, and certain affiliates, parents and subsidiaries of
the foregoing. None of such representations, however, has in the
past involved, currently involves, or in the future will
involve, the Debtors or any aspect of WLRK's relationship with
the Debtors. (AMF Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ASSISTED LIVING: Completes Amendment to Heller Line of Credit
-------------------------------------------------------------
Assisted Living Concepts, Inc. (AMEX:ALF), a national provider
of assisted living services, reported the closing of an
amendment to its secured line of credit facility with Heller
Healthcare Finance, Inc.
As amended, the facility may now be used to pay trade payables,
certain professional fees relating to its debt and lease
restructuring, closing costs and other anticipated costs, and to
fund an interest reserve and tenant deposit account. The
amendment reduces the aggregate line of credit available from
$45.0 million to $20.0 million, of which the Company has drawn
approximately $10.1 million to date. Borrowing under the amended
facility is subject to certain conditions, including debt
coverage, project yield and loan-to-value requirements. The line
of credit may not be used to fund future interest payments on
its convertible debentures, and it may no longer be used to
repurchase leased facilities or debentures, or to fund future
payments in connection with the Company's litigation settlement.
The line of credit remains guaranteed by the Company; however,
the filing of a petition under Chapter 11 of the U.S. Bankruptcy
Code by the Company no longer triggers an event of default under
the loan agreement with respect to any affiliate of the Company
that does not also file such a petition. An additional 10
previously unencumbered residences secure the amended line,
which is six fewer than the number that would have been required
to secure the original line of credit had the Company drawn the
entire $45 million under the original line. The new maturity
date is September 28, 2001. If none of the Company or any of the
borrower subsidiaries files a petition for relief under Chapter
11 of the U.S. Bankruptcy Code before such date, the borrower
subsidiaries may extend the maturity date to the earlier of May
31, 2002, or the earliest date on which the Company or any of
the borrower subsidiaries files such a petition.
AUTOLEND GROUP: Reports Financial Losses For Fiscal Year 2001
-------------------------------------------------------------
AutoLend Group, Inc. recorded a net loss of approximately $0.8
million for the year ended March 31, 2001. Contributing to the
net loss were general and administrative expenses of $0.7
million and a $0.1 million loss on the termination agreement
with Nunzio P. DeSantis, the Company's former Chief Executive
Officer. Net revenues realized from viatical insurance Policies
in the year ended March 31, 2001, was zero, as compared to
$5,000 in net viatical revenues in the year ended March 31,
2000. The Company generally ceased purchasing Policies after
September 1994, and in May and July 1995, sold the majority of
its portfolio. Future net revenues from the remaining portfolio
of five Policies will be irregular, depending primarily upon the
timing of mortality of the insured. Net viatical revenues from
the Policies are determined by subtracting the Policy cost from
the relevant face value after a Policy "matures" (becomes
payable by the insurance company).
As of April 1, 2000, the used car loan portion of the Company's
business has been classified as a discontinued operation. Since
that date, Loan collections are no longer recorded as Loan
revenues or Loan loss recoveries, and likewise, collection
expenses are no longer recorded as part of general and
administrative expenses; instead, the total net result of any
remaining Loan activity are recorded as either a net income or
loss from discontinued operations. Thus, there were no revenues
from Loans recognized during the fiscal year ended March 31,
2001, compared to the $10,000 realized during the fiscal year
ended March 31, 2000. Similarly, there was no Loan loss recovery
recognized for the fiscal year ended March 31, 2001, compared to
a recovery of $274,000 for the fiscal year ended March 31, 2000
related to previously charged-off Loans. (The recoveries were
the result of collections on old Loans, which had, in the past,
been more than six months in arrears and had therefore been
written off, in accordance with the Company's long-standing
procedures.) The net result of discontinued (Loan) operations
for the fiscal year ended March 31, 2001, was a net income of
$57,000. On April 4, 2001, the Company sold the loan portfolio
for $95,000 to an unrelated third party.
General and administrative expenses were $0.7 million during the
year ended March 31, 2001, which represented a reduction of $0.8
million, compared to the $1.5 million expended during the year
ended March 31, 2000. This decrease resulted from a combination
of offsetting factors, a $0.4 million reduction in salary
expense and related payroll expenses approximately $0.3 million
reduction in general administrative expenses (insurance,
supplies, licenses, taxes, rent and supplies), and a $0.1
million reduction in legal and accounting fees. The
$0.7 million expended during the year-ended March 31, 2001
consisted primarily of $.03 million in salaries, payroll taxes,
and benefits, $0.2 million in legal and accounting fees and $0.1
million in rent.
Operating losses for the year ended March 31, 2001, were $0.8
million, compared to operating losses of $1.2 million for the
year ended March 31, 2000. In total, the $0.4 million decrease
in operating losses were primarily due to a reduction in general
and administrative expenses (as noted above), offset by the
absence of any operating revenue sources for the fiscal year
ended March 31, 2001, and a loss on the termination agreement
with Nunzio P. DeSantis, the Company's former CEO, of
approximately $117,000, which was primarily due to the
cancellation of an outstanding receivable due under the
adversary settlement which was offset in the termination
agreement with a cancellation of DeSantis' claim for
reimbursement of legal expenses.
The impact of non-operating income, court settlements and
extraordinary items for the year ended March 31, 2001, was a net
$13,000, compared to $1.0 million for the year ended March 31,
2000. This results in a net decrease in non-operating income of
approximately $1.0 million, which difference is due to a
confluence of one-time events, as follows. The $13,000 non-
operating income for the current period was primarily due to the
recapture of $16,000 related to a purchased viatical insurance
policy written off in the prior year, $6,000 in rental income
related to subleasing the Company's office space, $5,000 of
interest income, and a $10,000 gain related to the receipt of
rights to a security deposit related to the ITB settlement,
offset by the amortization of the discount on the notes payable
of $26,000. The $1.0 million non-operating income for the prior
period was primarily due to the $451,000 gain as a result of the
settlement with Nunzio DeSantis, a cancellation of a $178,000
Florida tax claim, a $178,000 gain on a Debenture settlement, a
viatical policy write-down recapture of $106,000, and interest
income of $87,000.
In addition to the above, for the year ended March 31, 2001, the
Company incurred no reorganization costs related to the
bankruptcy proceedings, compared to $190,000 in the prior year.
The net effect of the foregoing was a net loss of $0.8 million
for the year ended March 31, 2001. The net loss for the same
period last year was $0.4 million. The $0.8 million loss in the
present period is due to a $0.1 million loss on the termination
agreement with Nunzio P. DeSantis, the Company's former CEO, and
general and administrative expenses of $0.7 million. The $0.4
million loss in the prior period was due primarily to an
operating loss of $1.2 million and reorganization costs of $0.2
million, partially offset by non-operating income of $1.0
million. The net decrease in income of $0.4 million, as compared
to the prior fiscal year, was attributable primarily to one-time
events occurring in the current year as previously noted, and a
reduction in general and administrative expenses. The net
decrease in income was also due to one-time events occurring in
the prior year including the $0.5 million gain on settlement of
adversary agreement and the cancellation of a $0.2 million tax
claim which was partially offset that year by a $0.2 million
spent on reorganization costs.
BRIDGE INFORMATION: Committee Retains AmEx As Financial Advisor
---------------------------------------------------------------
The Official Committee of Unsecured Creditors in Bridge
Information Systems, Inc.'s chapter 11 cases sought and obtained
the Court's authority to employ and retain American Express Tax
and Business Services, Inc., as its consultants, accountants,
and financial advisors, nunc pro tunc March 28, 2001.
Michael A. Becker, Esq., at Helfrey Simon & Jones, in St. Louis,
Missouri, explains the Committee needs the services of
experienced consultants, accountants and financial advisors to
assist and advise it in these Chapter 11 cases.
AmEx is tasked to:
(i) Assess financing options for the Debtors, including
the present DIP financing and potential refinancing thereof;
(ii) Monitor the Debtors' ongoing performance, attend
meetings and assist in negotiations with the Debtors' potential
investors, and other parties in interest (and professionals
hired by the same);
(iii) Review and provide analysis, recommendation and
consultation regarding proposed sales of assets, operational
changes, and all other aspects of the Debtors' restructuring
efforts, to the extent applicable;
(iv) Review and provide analysis, recommendation and
consultation regarding the Debtors' proposed non-ordinary course
expenditures;
(v) Review and provide analysis of all business plans,
restructuring plans and offers for the purchase of all or part
of the Debtors' assets;
(vi) Consult with outside financial advisors and
accountants retained by the Debtors as may be required;
(vii) Review and provide analysis of any proposed plan and
disclosure statement, including a review of the adequacy of the
disclosure statement and evaluation of the feasibility of any
plan;
(viii) Analyze the proposed capital structure, assessment
of corporate strategy and other issues significant to the
Debtors' reorganization efforts;
(ix) Provide analysis concerning valuations on behalf of
the Committee as requested;
(x) Provide testimony in Court on behalf of the Committee,
if necessary; and
(xi) Provide the Committee with any other necessary
services as the Committee or the Committee's counsel may request
from time to time with respect to the financial, business and
economic issues that may arise.
Mr. Becker tells the Court that AmEx informed the Committee it
does not represent any other entity with an adverse interest in
connection with the matters for which it is to be retained in
this case.
According to Mr. Becker, AmEx agreed to apply to the Court for
compensation and reimbursement of expenses. Mr. Becker says the
Debtors will compensate AmEx at its customary hourly rates for
work performed on behalf of the Committee:
Professional Hourly Rate
------------ -----------
Scot Peltz $325
Mitchell Hirsh 275
Lawrence Levine 300
Jonathan Howe 225
Aaron Lytle 180
Aside from these individuals, Mr. Becker notes, other
professionals, paraprofessionals and staff may be asked to work
on behalf of the Committee on an as-needed basis at rates
ranging from $100 to $150 per hour.
Mr. Becker adds that the Debtors will reimburse any actual and
necessary expenses incurred by AmEx while performing services on
behalf of the Committee such as telephone and telecopier toll
charges, photocopying charges, travel expenses, expenses for
working meals, as well as other non-ordinary overhead expenses.
Since there is no fixed engagement term, Mr. Becker discloses,
the Committee can terminate AmEx's engagement whenever its
services are no longer needed. (Bridge Bankruptcy News, Issue
No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CENTRAL VERMONT: Bondholders Okay 42nd Supplemental Indenture
-------------------------------------------------------------
On June 28, 2001, Central Vermont Public Service Corporation
obtained from its bondholders sufficient consents to implement
the Forty-Second Supplemental Indenture to its First Mortgage
Bonds that eliminates the risk of a cross-default under the
Mortgage if in the future there occurs an insolvency of or
financing default by Catamount Resources Corporation, a wholly-
owned subsidiary of the Company, and its current and future
wholly- and partially-owned direct and indirect subsidiaries and
partially-owned affiliates. All of the Company's non-regulated
operating units are owned by CRC. The amendment removes CRC from
the definition of "subsidiary" for these purposes under the
indenture. The Forty-Second Supplemental Indenture also
consolidates dividend restrictions for all outstanding First
Mortgage Bonds.
COMPUTONE: Losses & Debt Defaults Raise Going Concern Doubts
------------------------------------------------------------
Computone Corporation was incorporated as a Delaware corporation
in 1987 under the name CPX, Inc. In August 1987, the Company
acquired certain operating divisions of Computone Systems
Incorporated pursuant to an order of the United States
Bankruptcy Court for the Northern District of Georgia, and
simultaneously changed its name to Computone Systems
Incorporated.
In May 1988, the Company changed its name to World-Wide
Technology Inc. In May 1991, the Company changed its name from
World-Wide Technology Inc. to Computone Corporation. During
fiscal 2001, the Company incurred a net loss of $4,423,000 on
revenues of $10,882,000 compared to a net loss in fiscal 2000 of
$1,251,000 on revenues of $11,198,000.
Net sales of Connectivity Products decreased from $11,198,000 in
fiscal 2000 to $5,840,000 in fiscal 2001. The fiscal 2001
decrease in Connectivity Products sales was primarily due to the
slowdown of the United States economy. The Company also
experienced a decline in sales of its legacy products in fiscal
2001 resulting in reduced revenues due to erosion in the
asynchronous product market and the demand downturn associated
with the post Year 2000 period. A substantial portion of the
decrease in net revenues is also attributable to lower sales to
the Company's two largest non-distribution customers. During the
prior year, these customers were involved in projects to replace
competitor's equipment and expand the use of the Company's
products in additional applications. The net sales from Service
and Support were $5,042,000 for the current year.
During the years ended March 31, 2001 and 2000, as stated above,
the Company suffered net losses of $4,423,000 and $1,251,000,
respectively, and experienced operating cash flow deficiencies
of $1,279,000 and $689,000, respectively and as of March 31,
2001, the Company had a net working capital deficiency of
$2,794,000.
Through March 31, 2001, the Company had a revolving line of
credit with a bank that provided for borrowings of up to
$1,400,000 based on the available borrowing base. Borrowings
under the Line bore interest at prime plus 2%. As of March 31,
2001, the Company had $587,000 in outstanding borrowings under
the Line leaving $48,000 available under the line. The Line was
collateralized primarily by the Company's accounts receivable
and inventory.
The Line contained minimum net working capital and tangible net
worth covenants and, as of March 31, 2001, the Company was in
violation of the net working capital covenant. In April 2001,
the Company received notice that the lender had made demand for
payment of the Line's outstanding balance and terminated the
Line. On June 22, 2001, the Company repaid all remaining
outstanding Line borrowings. While the Company is engaged in
negotiations with several prospective lenders to provide working
capital financing, no assurance can be given that the Company
will be able to consummate an agreement.
On June 28, 2000, the Company entered into an agreement with a
lender to issue a $2,500,000, 11% note payable due on December
28, 2001, the proceeds of which were used to partially fund the
Multi-User acquisition and the Company's general working capital
needs. The Note also required the Company to issue a warrant to
purchase 392,577 shares of its common stock exercisable at $3.25
per share. The warrant is currently exercisable in whole or in
part and expires in June 2003. Exercise of the warrant may be
either in cash or by surrender of the warrant to the Company in
exchange for the Company's common stock equal to the value of
the warrants as defined in the warrant agreement. The fair value
of the warrant is $1,328,000, determined through the use of the
Black Sholes valuation model.
The Note was subordinated to the Company's line of credit. The
Note is guaranteed by the Company and its wholly owned
subsidiaries and places restrictions on the Company's ability to
sell its business or its product lines, incur additional
indebtedness, declare or pay dividends, consolidate, merge or
sell its business and make investments. The Note also includes a
cross default provision whereby a default on the Note would
occur if the Company was in default of any covenants of any of
its other financing arrangements in excess of $50,000.
As of March 31, 2001, the Company was in violation of the Note's
cross default provision. On June 22, 2001, the Company cured the
default by repayment of the Line.
The management of Computone has stated that the above noted
matters "raise substantial doubt about the ability of the
Company to continue as a going concern."
ECO SOIL: Appeals Nasdaq's Move To Delist Shares
------------------------------------------------
Eco Soil Systems Inc. (Nasdaq:ESSI) received a Nasdaq Staff
Determination on July 5, 2001 that it has not maintained
compliance with the minimum bid requirement for continued
listing under Marketplace Rule 4450(a)(5), and that its common
stock is, therefore, subject to delisting from the Nasdaq
National Market.
Eco Soil has requested a hearing before the Nasdaq Listing
Qualifications Panel to appeal the Staff Determination. Eco
Soil's common stock will continue to trade on The Nasdaq
National Market until a final determination is made by the
Qualifications Panel following the hearing. There can be no
assurance that the Qualifications Panel will grant Eco Soil's
request for continued listing.
If its stock is delisted from The Nasdaq National Market, Eco
Soil intends to apply for listing on The Nasdaq SmallCap Market,
the OTC Bulletin Board or another quotation system or exchange
on which Eco Soil could qualify. There can be no assurance,
however, that Eco Soil will be eligible initially for listing on
another quotation system or exchange if its securities are
delisted from The Nasdaq National Market or that if Eco Soil
does become listed, it would be able to maintain eligibility.
Eco Soil develops, markets, and sells proprietary biological
products and their delivery systems for the golf and
agricultural industries. Eco Soil is emerging as a technology
leader in the "green" industry. The company is striving to
develop cost effective, environmentally friendly programs to
reduce exclusive reliance on chemical pesticides, and to improve
yields and crop quality. Its proprietary products evolve from
the BioJect(R), a patented and EPA-approved device that cultures
and dispenses biological products through irrigation systems,
and are sold under the FreshPack(TM) or the BioJect(R) brands.
Eco Soil's Internet site address is http://www.ecosoil.com.
EGLOBE INC.: Intends To Sell Assets of Four Subsidiaries
--------------------------------------------------------
EGlobe Inc. is seeking to sell nearly all the assets of four
wholly owned subsidiaries-Interactive Media Works Inc., Oasis
Reservations Services Inc., Telekey Inc. and Transglobal
Communications Inc., according to Dow Jones. The U.S. Bankruptcy
Court in Wilmington, Del., has scheduled a hearing for July 19
to consider the proposed sales. Objections are due Friday. The
company has proposed to sell the assets of each business as a
going-concern. The Internet service provider hasn't proposed
financial terms of the deals because it's seeking to sell the
assets at an open public auction. As a result, the company
hasn't received initial bids for the assets. Also, the company
claimed the subsidiaries do not have enough funding to continue
operating under chapter 11 as going concerns and to satisfy
restructuring expenses.
As reported, the bankruptcy court on June 21 approved sale
procedures for some of eGlobe's assets and authorized the
company to hire Advanced Asset Services Inc. as auctioneer for
the assets. The company will liquidate telecommunications,
networking, connective support and other equipment at the public
auction July 19. Washington-based eGlobe filed for chapter 11
bankruptcy April 18, listing consolidated assets of $99.4
million and liabilities of $89.7 million as of Sept. 30, 2000,
in its petition. (ABI World, July 11, 2001)
ENVIROSOURCE INC.: Executes Supplemental Indentures
---------------------------------------------------
Envirosource, Inc. (OTCBB:ENSO) and United States Trust Company
of New York, as trustee, executed supplemental indentures for
the Company's 9-3/4% Senior Notes due 2003. The supplemental
indentures eliminate substantially all of the restrictive
covenants and modify certain of the events of default and other
provisions of the indentures governing the Senior Notes. The
supplemental indentures became effective upon execution and will
become operative upon the consummation of the Company's exchange
offer for all of the Company's 9-3/4% Senior Notes due 2003,
which commenced on June 11, 2001 and which is scheduled to
expire on July 12, 2001 at 5:00 p.m., New York City time.
As a result of the execution of the supplemental indentures,
Senior Notes that have been tendered in the exchange offer may
not be withdrawn.
Requests for assistance regarding the exchange offer or for
copies of the exchange offer materials should be directed to
Mackenzie Partners, Inc., the information agent for the exchange
offer, at (800) 322-2885.
FOAMEX INTERNATIONAL: Plans To Buy General Foam Corporation
-----------------------------------------------------------
Foamex International Inc. (Nasdaq:FMXI), the leading
manufacturer of flexible polyurethane and advanced polymer foam
products, has signed an agreement to acquire certain assets of
General Foam Corporation (GFC), a manufacturer of polyurethane
foam products for the automotive, industrial and home
furnishings markets. GFC had revenues of nearly $100 million
last year.
"Foamex has grown historically through acquisition," noted
Foamex Chairman Marshall S. Cogan. "Strategic acquisitions that
have significant synergies with our existing businesses continue
to be an important component of our growth."
John Televantos, President and Chief Executive Officer of
Foamex, said, "The GFC transaction is consistent with our
acquisition strategy. General Foam is a quality manufacturer
with a strong reputation for customer service and a commitment
to technology. This acquisition strengthens our automotive,
technical products and foam products businesses and expands our
product and service offerings to our customers."
The transaction, which is subject to approval by Foamex's
lenders and certain other conditions, is expected to close by
the end of July 2001.
Foamex, headquartered in Linwood, Pennsylvania, is the world's
leading producer of comfort cushioning for bedding, furniture,
carpet cushion and automotive markets. The company also
manufactures high-performance polymers for diverse applications
in the industrial, aerospace, electronics and computer
industries as well as filtration and acoustical applications for
the home. Revenues for 2000 were $1.3 billion.
FOAMEX INTERNATIONAL: Outgoing PwC Issues Reports
-------------------------------------------------
On June 28, 2001, Foamex International Inc. was informed by its
independent accountant, PricewaterhouseCoopers LLP that it
resigned, effective immediately.
For the year ended December 31, 2000, the Report of Independent
Accountants, dated March 30, 2001, included an explanatory
paragraph regarding the Company's financial debt covenants, with
which the Company must comply on a quarterly basis.
For the year ended December 31, 1999, the Report of Independent
Accountants, dated March 10, 2000, was modified as to the
existence of substantial doubt about the Company's ability to
continue as a going concern.
For the year ended December 31, 1999, the Report of Independent
Accountants, dated March 10, 2000, was also modified to indicate
that PwC was unable to review the quarterly data within the year
ended December 31, 1998, in accordance with standards
established by the American Institute of Certified Public
Accountants.
On August 5, 1999, PwC informed the Audit Committee that as
stated in its letter dated August 2, 1999, PwC was unable to and
did not complete timely reviews of the Company's interim
financial statements for the first and second calendar quarters
of the year ended December 31, 1999, or for the first six month
period then ended because it believed that the Company's
internal controls for the preparation of interim financial
information, did not provide an adequate basis to enable it to
complete such reviews. For the same reason, PwC also did not
complete a timely review of the Company's interim financial
statements for the third calendar quarter of the year ended
December 31, 1999, or for the nine month period then ended.
On August 5, 1999, PwC also reiterated to the Audit Committee
that the Company conduct a thorough review of its internal
controls. PwC's letter dated August 2, 1999, which was also
discussed with the Audit Committee on August 5, 1999, set forth
PwC's views on the principal aspects of the control review and
its continued view of the importance and urgency that the
Company must act to improve its controls. Accordingly, the
Company initiated a comprehensive internal control review, which
was conducted by the internal audit department of the Company.
Following completion of the internal control review, corrective
actions were initiated in the fourth quarter of 1999. A follow-
up review was conducted in the third quarter of 2000.
For the year ended December 31, 1999, PwC issued to the Audit
Committee a Report to Management, dated May 24, 2000. The Report
to Management included the following:
* The need for significant improvement in the control
environment at the Company's Mexican operations.
* The need for standardized reporting practices of foreign
operations to the Company's corporate accounting department.
* The need for comprehensive analysis of the financial
results of the Company on a quarterly basis.
* Improved inventory reporting, including increased
utilization of automated systems.
* An information technology ("IT") steering committee
should be established to develop a comprehensive IT strategy,
including an enterprise-wide security program.
In February and March 2001, PwC reported to the Audit Committee
the following for the year ended December 31, 2000:
* The role of the Executive Committee of the Board of
Directors was not clearly defined and minutes of its meetings
were not prepared.
* Executive management did not have oversight
responsibility for foreign operations.
* The Chief Financial Officer position was not permanently
filled for an extended period.
* The Asian joint venture operations of the Company require
significant improvement in the timeliness of the reporting
process.
* The financial closing, reporting and analysis process
needs improvement.
* The accounting staff requires additional professional
development and consideration should be given to additional
staffing.
* Financial reporting and related support systems need to
be upgraded.
GENCOR INDUSTRIES: Florida Court Confirms Chapter 11 Plan
---------------------------------------------------------
Gencor Industries, Inc., Orlando-based manufacturer of
industrial machinery equipment reported the confirmation of its
Chapter 11 plan for reorganization by the Honorable Karen S.
Jennemann in the United States Bankruptcy Court for the Middle
District of Florida. The plan provides for 100% repayment to all
creditors and vendors without dilution to equity.
Gencor's Chairman, E.J. Elliott stated, "We are extremely
pleased to have confirmed our Chapter 11 plan of reorganization,
particularly in light of the many challenges which confronted
the Company during the case. Looking ahead, we are encouraged by
the Company's prospects. The Company is well-positioned in its
core markets and possesses the key resources necessary to be the
unquestioned leader in each of its products and markets."
Mr. Elliott continued, "The Company has been enjoying positive
and profitable results both domestically and abroad and the
positive operating trend and financial strength gives the
Company good reason to be optimistic about the future." The
Company's operations and cash flow, along with the proceeds from
the divestiture of the CPM business unit has allowed the
reduction of more than $72 million of bank indebtedness in the
last 9 months.
The Company wishes to thank all those who played a significant
part in the successful outcome for the Company and all
concerned. Gencor wishes to acknowledge and thank its customers,
employees, vendors and associates worldwide for their loyalty
and support during this difficult period. Gencor is looking
forward with great anticipation to a very bright and profitable
long-term future filled with continued growth and prosperity.
Gencor Industries is a diversified heavy machinery manufacturer
for the production of highway construction materials, synthetic
fuels and environmental control machinery and equipment used in
a variety of applications.
GENESIS HEALTH: Allocation Of Value Under the Revised Plan
----------------------------------------------------------
The amount of Genesis Senior Lender Claims (Class G2) has been
revised, as shown in the table below.
As mentioned under the original Plan, the largest claims against
the Genesis Health Ventures, Inc. & The Multicare Companies,
Inc. Debtors consist of the Genesis Senior Lender Claims (Class
G2) and the Multicare Senior Lender Claims (Class M2). With
minor exceptions, the claims in these classes are secured by
first priority liens on substantially all the property of the
Genesis Debtors and the Multicare Debtors, subject to the liens
of the lenders under the debtor in possession credit agreements
and the liens of pre-existing mortgagees and other secured
creditors described in Classes G1 and M1.
Senior Lender Deficiencies
As under the original Plan, after setting aside the value of the
properties that are collateral for the preexisting secured
claims (Classes G1 and M1), there is not enough enterprise value
remaining to provide a full recovery to the holders of the
Genesis Senior Lender Claims and the Multicare Senior Lender
Claims, even if those classes received 100% of the New Senior
Notes, the New Convertible Preferred Stock, the New Common
Stock, and the New Warrants. The following table illustrates
such deficiencies:
Value or Claim
--------------
Genesis Enterprise Value $1,125,000,000
less: Debtor in Possession financing 200,000,000
Administrative Expenses 25,000,000
Other Secured Claims (Class G1) 115,077,000
--------------
Value Remaining $784,923,000
Amount of Genesis Senior Lender Claims
(Class G2) $1,193,460,000
less: Adequate Protection Payments Received 195,979,000
Remaining Genesis Senior Lender Claims
(Class G2) $997,481,000
Deficiency for Class G2 ($217,558,000)
--------------
Under the Original Plan:
Amount of Genesis Senior Lender Claims
(Class G2) $1,198,460,000
Remaining Genesis Senior Lender Claims
(Class G2) $1,002,481,000
Deficiency for Class G2 ($217,558,000)
---------------
Multicare Enterprise Value (no change from original Plan)
(including cash on hand) $400,000,000
less: Administrative Expenses 10,000,000
Other Secured Claims (Class M1) 26,318,000
Value Remaining $363,682,000
Amount of Multicare Senior Lender Claims
(Class M2) $443,400,000
Deficiency for Class M2 ($79,718,000)
--------------
The absolute priority rule in section 1129(b) of the Bankruptcy
Code would preclude the distribution of any value to junior
classes, including to holders of unsecured claims in Classes G4,
G5, M4, and M5.
In the case of the Genesis Debtors, the holders of the Genesis
Senior Lender Claims have a deficiency of over $212 million. As
to the claims of holders of the Genesis senior subordinated note
claims (Class G5), the defienciency would include postpetition
interest on the Genesis Senior Lender Claims, for a total
deficiency, calculated as of June 30, 2001, of approximately
$330 million.
In the case of the Multicare Debtors, the holders of the
Multicare Senior Lender Claims have a deficiency of over $79
million. As to the claims of holders of the Multicare senior
subordinated note claims (Class M5), the deficiency would
include postpetition interest on the Multicare Senior Lender
Claims, for a total deficiency, calculated as of June 30, 2001,
of approximately $120 million.
Compromise with Unsecured Creditors
As previously reported about the original Plan, the holders of
the Genesis Senior Lender Claims have agreed to provide a
portion of the value to which they would otherwise be entitled
to holders of unsecured claims in Classes G4 and G5. No such
agreement by the holders of the Multicare Senior Lender Claims
is provided under the original Plan.
The revised Plan reflects the agreement of the Multicare Senior
Lenders to provide a portion of the value to which they would
otherwise be entitled to Classes M4 and M5.
Exceptions to the Liens of the Senior Lenders
The Disclosure Statement says that the recovery under the Plan
is superior to the application priority rule for Class G4 and
M4. The reasoning is as follows:
-- The absolute priority rule would not apply to any properties
of the Debtors that are not encumbered.
-- In a nonconsensual restructuring, the aggregate value of the
properties owned by the Debtors that are unencumbered or
likely would become unencumbered through the exercise of the
Debtors' avoidance powers would be available to the holders
of unsecured claims, including the deficiency claims of the
holders of the Genesis/Multicare Senior Lender Claims.
-- The following table shows how the value of those properties
would be allocated, giving effect to the contractual
subordination provisions of the holders of claims in Class G5
in favor of the Genesis Senior Lender Claims in Class G2.
Recovery
claim % distribution %
---------------------------------------------------------------
Genesis Sr Lender Deficit * **
G4 (Gen Unsecured Claims) 80,069,000
G5 (Subordinated Claims) 387,425,000 **
---------------------------------------------------------------
total unsecured claims 100.00%
* This amount is greater than the deficiency shown in the table
on the treatment of claims because it includes the value of
the property on which the liens securing the Genesis Senior
Lender Claims may be avoidable.
** All value otherwise allocable to Class G5 would be
distributed to Class G2 until the deficiency in Class G2 is
paid in full, in accordance with the subordination
provisions in the indentures governing the senior
subordinated notes in Class G5.
-- As the table illustrates, the recovery under the Plan is
superior to the application of the absolute priority rule
for Class G4 (7.34%) and Class G5 (7.34% compared to 00%).
-- The following table shows how such value would be allocated,
giving effect to the contractual subordination provisions of
the holders of claims in Class M5 in favor of the Multicare
Senior Lender Claims in Class M2.
----------------------------------------------------------------
Recovery
claim % distribution %
----------------------------------------------------------------
Multicare Sr Lender Deficit * **
M4 (Mul Unsecured Claims) 26,439,000
M5 (Subordinated Claims) 257,817,000 **
----------------------------------------------------------------
Total unsecured claims 100.00%
* This amount is greater than the deficiency shown in the table
on the treatment of claims because it includes the value of
the property on which the liens securing the Genesis Senior
Lender Claims may be avoidable.
** All value otherwise allocable to Class M5 would be
distributed to Class M2 until the deficiency in Class M2 is
paid in full, in accordance with the subordination
provisions in the indentures governing the senior
subordinated notes in Class M5. As the table illustrates,
the recovery under the Plan is superior to the application
of the absolute priority rule for Class M4 (7.34%) and
Class M5 (7.34% compared to 0.00%).
(Genesis/Multicare Bankruptcy News, Issue No. 11; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GLOBAL TELESYSTEM: Agrees To Sell Golden Telecom Stock For $25MM
----------------------------------------------------------------
Global TeleSystems, Inc. (GTS) (OTC: GTLS; NASDAQ EUROPE: GTSG;
Frankfurt: GTS) said that its Global TeleSystems Europe
Holdings, BV subsidiary has agreed to sell 2,272,727 shares of
common stock in Golden Telecom, Inc. (NASDAQ: GLDN) to Golden
Telecom for $11 per-share, or $25 million. Golden Telecom is the
largest alternative provider of voice and data/Internet services
in Russia and other countries of the Commonwealth of Independent
States (CIS). After the conclusion of this sale, GTS will own
588,479 shares, or approximately 2.6 percent, of Golden Telecom.
The agreement is part of GTS's previously announced plan to
divest most or all of its interest in Golden Telecom as part of
an overall restructuring programme. On 14 May 2001, GTS
announced that its subsidiary had has sold most of its equity in
Golden Telecom for $125 million to a group of institutions (the
Purchasers) that included: Alfa Telecom Limited (Alfa), an
affiliate of Alfa Bank; Capital International Global Emerging
Markets Private Equity Fund, L.P. (Capital); and a group of
funds advised by Baring Vostock Capital Partners (BVCP). As a
part of that agreement, the Purchasers acquired an option,
exercisable over the subsequent 60 days, to purchase up
to an additional $25 million of Golden Telecom shares from GTS
at a price of $11.00 per share. They have now agreed to exercise
this option, with Golden Telecom acting as the designated
purchaser of the shares.
About GTS
GTS is the parent company of Ebone, the original and most
experienced data-only broadband optical and IP networking
company in Europe. Its fibre network extends over 22,000
kilometres, reaching virtually all major European cities. The
Ebone network is Europe's leading broadband IP network, serving
25 percent of European Internet users, and the first IP network
to operate at 10 Gbps. The network is directly connected to
North America via Ebone's own trans-Atlantic fibre pair, which
is initially provisioned with 80 Gbps of capacity. With
operations in North America and in over 50 European cities,
Ebone delivers tailored networking services to telecommunication
carriers, Internet service providers, Internet-centric and
multinational corporations.
HECHINGER COMPANY: Bankruptcy Court Says No To Kmart Settlement
---------------------------------------------------------------
A bankruptcy court denied a motion that would have approved a
claims settlement between Hechinger Co. and Kmart Corp.-a
critical element to Hechinger's forthcoming plan of liquidation,
reported Dow Jones. Hechinger now must amend its proposed
settlement to address various concerns raised by Judge Peter J.
Walsh of the U.S. Bankruptcy Court in Wilmington, Del., at a
hearing yesterday. The amended motion will be considered at the
company's disclosure statement hearing on Aug. 8. The denial
forced Hechinger and Kmart to push back their own instituted
deadlines. The two companies had agreed to try to obtain court
approval of a settlement before pursuing individual interests.
If a settlement isn't approved at the Aug. 8 hearing, Hechinger
can bring a lawsuit against Kmart 15 days after the hearing.
During that time, Kmart will likely exercise a $150 million
claim against Hechinger.
Judge Walsh denied the motion for several reasons, including a
lack of evidence to support Hechinger's claim that the deal was
in the best interest of the estate. Walsh also balked at various
clauses that mandated that several provisions attached to the
settlement be included in a confirmed plan. A third issue Walsh
had with the proposed settlement is that it lacked the
signatures of two creditors that would be affected by the
settlement. Hechinger, a home improvement store operator, filed
for chapter 11 bankruptcy protection June 11, 1999, with a plan
to close 89 stores and rebuild the rest of the company. After
several months of deliberation, the company decided to shut down
its remaining 117 stores and hold going-out-of-business sales.
The Largo, Md., company listed $1.32 billion in assets and $1.39
billion in debts in its bankruptcy filing. (ABI World, July 11,
2001)
LAIDLAW INC.: Court Allows Continuance of Cash Management System
----------------------------------------------------------------
Ivan R. Cairns, Vice President and Secretary of Laidlaw USA,
Inc., tells Judge Kaplan that the Company uses a sophisticated
cash management system that allows the Company to (a) control
and monitor corporate funds, (b) invest idle cash, (c) ensure
the availability of funds where they're needed when they're
needed; and (d) reduce administrative expenses by facilitating
the movement of funds and aiding accounting processes.
By this motion, the Debtors sought and obtained permission to
maintain their pre-petition cash management system.
Mr. Cairns stepped Judge Kaplan through the major components of
Laidlaw's cross-border cash management system:
(1) The. U.S. Centralized Cash Management System
(a) Cash Collection and Concentration
In the United States, Laidlaw Transportation Management
Inc. and each of the Business Segments maintain one or more
concentration accounts at Bank One, N.A. Each Business Segment
maintains numerous lockboxes or other collection accounts at
Bank One and other banks. At the beginning of each business day,
the previous business day's material available deposits within
the Collection Accounts are swept to the respective Business
Segments concentration accounts. Each Business Segment's
Concentration account typically maintains a balance at the
conclusion of each business day. The Debtors maintain minimum
balances in these accounts to ensure that cash is available to
fund the respective Business Segments operations. As deemed
necessary, funds are wired to and from LTMI's Master
Concentration account at Bank One.
(b) Disbursements
The Business Segments maintain all of their material
disbursement accounts, other than payroll accounts, at Bank One.
Payroll disbursement accounts are maintained at numerous banks.
As checks drawn on the General Disbursement Accounts at Bank One
clear the banking system, these accounts automatically are
funded from the appropriate Business Segment's Concentration
Account. Disbursement Accounts at banks other than Bank One are
funded through a wire transfer from the Business Segment's
applicable Concentration Account. To the extent that there are
insufficient funds in a Business Segment's Concentration Account
to fund a disbursement, funds are wire transferred from the LTMI
Master Concentration Account to cover the deficit.
(c) Business Segment Cash Management
Each of the Debtors' Business Segments in the United
States maintains its own distinct cash management subsystem,
which is integrated into the Debtors' overall centralized cash
management system in the United States.
(2) The Canadian Cash Management System
(a) Cash Collection, Concentration and Funding
In Canada, most of the Canadian Businesses participate
in a cash management system through the Canadian Imperial Bank
of Commerce. These entities maintain a variety of operating bank
accounts at CIBC and participate in a cash concentration
agreement, pursuant to which any shortfall in funds experienced
by one of the Canadian Businesses in its CIBC Operating Accounts
will be funded automatically from the aggregate balance of all
of the other CIBC Operating Accounts (i.e., the funds in all of
the CIBC Operating Accounts are pooled for use by all of the
participating Canadian Businesses). In addition to maintaining
CIBC Operating Accounts, certain of the Canadian Businesses,
most notably Greyhound Canada Transportation Corp. and certain
of its affiliates, maintain certain collection accounts with the
Royal Bank of Canada. These entities maintain collection
accounts at Royal Bank. Pursuant to an arrangement with Royal
Bank, each entity's collection accounts at Royal Bank are
maintained as zero balance accounts and are swept into that
entity's Royal Bank Concentration Account on a daily basis. Cash
may be transferred between the CIBC Operating Accounts and the
Royal Bank Concentration Accounts, as necessary, by wire
transfer.
(b) Disbursements
Greyhound Canada maintains separate disbursement
accounts for each of its affiliates at Royal Bank. Each of the
Royal Bank Disbursement Accounts are funded on an as needed
basis by transfers from Greyhound Canada's Royal Bank
Concentration Account. The rest of the Canadian Businesses'
material disbursement accounts are maintained at CIBC and funded
from the CIBC Operating Accounts in accordance with the terms of
the Cash Concentration Agreement.
(c) Relationship to the Debtors' Centralized U.S. Cash
Management System
Funds occasionally are transferred between the U. S. and
Canadian cash management systems pursuant to a demand loan
agreement between LILAC and LTI. The Demand Loan Agreement
provides a mechanism by which LTMI and LILAC may borrow up to
$75,000,000 from each other as needed and repay those funds,
with interest, as each entity's cash flow permits. Interest
payments on loans under the Demand Loan Agreement are required
to be paid quarterly by the borrowing entity, with the entire
balance of any outstanding loan due upon demand by the lending
entity.
The Debtors maintain current and accurate accounting records of
daily cash transactions (a) between and among the Debtors and
(b) between and among the Debtors and their Nondebtor
Affiliates. Thus, each of the Debtors and their Nondebtor
Affiliates' entitlement to funds is known and recorded. The
Debtors and their non-debtor affiliates have comprehensive
internal controls governing the receipt and disbursement of
funds within their respective cash management systems. The
Debtors' software systems enable them to trace each receipt and
disbursement that enters the system by payor or payee, which
then permits the Debtors to account for the funds either by
operating division or legal entity.
Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue, notes that
bankruptcy courts routinely grant Chapter 11 debtors authority
to continue using their existing cash management systems and
treat such requests as a relatively "simple matter".
Judge Kaplan directs the Debtors to maintain a careful
accounting of all funds transferred from one legal entity to
another and, to the extent that one Laidlaw affiliate becomes a
debtor to another Laidlaw affiliate, the Laidlaw-affiliated
creditor entity is accorded a superpriority administrative
expense claim against the Laidlaw-affiliated debtor entity in
these chapter 11 cases. (Laidlaw Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LENOX HEALTHCARE: Files Second Chapter 11 Case in Wilmington
------------------------------------------------------------
After emerging from chapter 11 reorganization less than seven
months ago, Lenox Healthcare Inc. has once again filed for
chapter 11-this time planning to call it quits, according to Dow
Jones. The health care company and more than 65 affiliates filed
for chapter 11 in the U.S. Bankruptcy Court in Wilmington, Del.
Just seven months ago, on Dec. 20, the company had emerged from
its first chapter 11 case, which was filed in Delaware on Nov.
3, 1999.
Chairman H. Jeffrey Schwartz of Benesch Friedlander Coplan &
Aronoff LLP said the board has concluded that reorganized Lenox
can't succeed as a going-concern. The company intends to move
its skilled nursing facilities out of the estate and will or has
already filed a request for approval of sale procedures it hopes
to use to attract a buyer. Now the company is focused on the
transition, and after that will figure out the best ways to
administer the residual estate. (ABI World, July 11, 2001)
LENOX HEALTHCARE: Chapter 11 Case Summary
-----------------------------------------
Lead Debtor: Lenox Healthcare, Inc
75 South Church Street, Suite 650
Pittsfield, MA 01201
Debtor affiliates filing separate chapter 11 petitions:
Lenox Healthcare Capital Corporation
Lenox Healthcare, LLC
Lenox Healthcare of Yuma, LLC
Lenox Twin Pines Capital Corporation
Lenox Healthcare of Anaheim
Lenox Healthcare of Claremont, LLC
Lenox Healthcare of Hayward, LLC
Lenox Healthcare of Concord, LLC
Lenox Healthcare of Modesto, LLC
Lenox Healthcare of Oakland, LLC
Lenox Healthcare of Roseville, LLC
Lenox Healthcare of San Bernadino, LLC
Lenox Healthcare of San Leandro, LLC
Lenox Healthcare of San Rafael, LLC
Lenox Healthcare of Santa Paula, LLC
Lenox Healthcare of Santa Paula-Twin Pines, LLC
Lenox Healthcare of Kailua-Kona, L.P.
Lenox Healthcare of Logansport, LLC
Lenox Healthcare of Markle, LLC
Lenox Healthcare of Westfield, LLC
Lenox Healthcare of Chanute, LLC
Lenox Healthcare of Council Grove, LLC
Lenox Healthcare of Haysville, LLC
Lenox Healthcare of Larned, LLC
Lenox Healthcare of Sedgwick, LLC
Lenox Healthcare of Brockton, LLC
Lenox Healthcare of Palmer, LLC
Lenox Healthcare of Goldsboro, LLC
Lenox Healthcare of Salem, LLC
Lenox Healthcare of Carthage, LLC
Zurich North American Capital Corp.
Lenox Healthcare of Pinellas, LLC
Greylock Health Corporation
Greylock Health Corp. of Independence Lodge, L.P.
Greylock Health Corporation of Topeka, L.P.
Greylock Health Corporation of Wichita, L.P.
Greylock Health of Ava, L.P.
Greylock Health of Ballwin, L.P.
Greylock Health of Clinton, L.P.
Greylock Health of Columbia, L.P.
Greylock Health of Crane, L.P.
Greylock Health of Des Peres, L.P.
Greylock Health of Jefferson City, L.P.
Greylock Health of Joplin-Manor, L.P.
Greylock Health of Joplin-Healthcare, L.P.
Greylock Health of Kimberly City-Manor, L.P.
Greylock Health of Lamar, L.P.
Greylock Health of Springfield, L.P.
Greylock Health of St. Charles, L.P.
Greylock Health of Thayer, L.P.
Lenox Healthcare Realty of Concord, LLC
Lenox Healthcare Realty of San Leandro, LLC
Lenox Healthcare Realty of Santa Paulina-Twim
Pines, LLC
Lenox Healthcare Realty of Council Grove, LLC
Lenox Healthcare Realty of Haysville, LLC
Lenox Healthcare Realty of Larned, LLC
Lenox Healthcare Realty of Sedgwick, LLC
Lenox Healthcare Realty of Ballwin, LLC
Lenox Healthcare Realty of Columbia, LLC
Lenox Healthcare Realty of Joplin, LLC
Lenox Healthcare Realty of Springfield, LLC
Lenox Healthcare Realty of St. Charles, LLC
Lenox Healthcare Realty of Goldsboro, LLC
Lenox Healthcare Realty of Brockton, LLC
Lenox Healthcare Realty of San Pablo, LLC
Greylock Health of Kimberling City-Terrace, L.P.
Lenox Healthcare Realty of Chanute, LLC
Chapter 11 Petition Date: July 10, 2001
Court: District of Delaware
Bankruptcy Case Nos.: 01-02288 through 01-02355
Debtors' Counsel: Kevin Gross, Esq.
P. O. Box 1070
Wilmington, DE 19899
(302) 656-4433
LERNOUT & HAUSPIE: Asks To Extend Lease Decision Period To Dec.7
----------------------------------------------------------------
Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. make
a second motion asking Judge Wizmur to further extend the time
during which the Debtors may assume, assume and assign, or
reject unexpired leases of non-residential real property in
which the Debtors, or any one of them, are lessees or sublessees
until the earlier of (a) the effective date of a confirmed plan
of reorganization, or (b) December 7, 2001.
The Debtors tell Judge Wizmur they are parties to approximately
190 unexpired leases of commercial real property in which they
are lessees or sublessees. These leases relate to corporate
offices, storage facilities, or consolidated warehouses and
office facilities.
Of these leases, approximately 172 relate to properties within
the United States and Canada, while 18 relate to properties
located outside those countries. The distribution is:
L&H NV 16 leases
Dictaphone 266 leases
Holdings 8 leases
The Debtors argue that their management and retained
professionals have been consumed with exigent circumstances
typically met in a chapter 11 case, but exacerbated and
compounded by the size and complexity of these volatile and
litigious cases. Further, while the Debtors have initiated an
extensive review of the leases, the demands of these chapter 11
cases have precluded the Debtors from completing their analyses
of the leases. The Debtors require additional time to properly
determine which leases will prove valuable to an effective
reorganization and hence appropriate for assumption, which
leases may be valuable, but not for operational purposes, as
"below market" leases which may be assumed and profitably
assigned to third parties, and which leases are burdensome and
hence appropriate for rejection.
The Debtors argue that the exigent circumstances of these cases
continue, but that they expect to shortly present a plan, and
that under all these circumstances an extension of time is
appropriate. (L&H/Dictaphone Bankruptcy News, Issue No. 8;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LIBERTY HOUSE: Sold To Federated Department Stores For $200 Mil
---------------------------------------------------------------
Federated Department Stores, Inc. announced it has completed its
acquisition of Liberty House, Hawaii's largest retailer. The
total purchase price, including the assumption of debt and net
of cash acquired, was approximately $200 million.
Liberty House's 11 department stores and seven specialty stores
in Hawaii, and one department store on Guam, are now part of
Federated's San Francisco-based Macy's West department store
division. With the new stores, Macy's West now operates 136
department and specialty stores. 2000 annual sales for Macy's
West were $4.26 billion.
According ABI World, as many as 400 Liberty House management and
office positions could be eliminated by the sale. Federated
promised to keep aloha shirts and other island apparel that are
a part of Liberty House's 152-year-old tradition. Liberty House
emerged from chapter 11 bankruptcy in March with fewer and more
efficient operations.
Federated, with corporate offices in Cincinnati and New York, is
one of the nation's leading department store retailers, with
annual sales of more than $18.4 billion. Federated currently
operates more than 450 stores in 34 states, Puerto Rico and Guam
under the names of Macy's, Bloomingdale's, The Bon Marche,
Burdines, Goldsmith's, Lazarus and Rich's, as well as macys.com,
bloomingdales.com and Bloomingdale's By Mail. Federated also
operates the Fingerhut catalog and e-commerce subsidiary.
LIBERTY LOBBY: Loses Court Battle And Ceases Operations
-------------------------------------------------------
Liberty Lobby has closed its doors, and its weekly newspaper,
the Spotlight, has published its last edition after a federal
bankruptcy judge last week dismissed the group's latest claim
for chapter 11 protection, according to The Washington Times.
The most recent ruling by U.S. bankruptcy Judge S. Martin Teel
Jr. puts an end to a complicated eight-year battle between
Liberty Lobby founder Willis A. Carto and his former associates
at the California-based Institute for Historical Review (IHR).
IHR sued and won a multimillion-dollar judgment on claims that
Carto illegally diverted funds from the institute's Texas parent
company, the Legion for the Survival of Freedom.
Carto, a resident of Escondido, Calif., founded the Washington-
based Liberty Lobby in 1955. The nonprofit outfit and its
publication, the Spotlight, funded by outside donations and
subscriptions, claimed to be America's key defender of
patriotism and a hub for grassroots conservative activism. But
they also have been criticized as a fertile breeding ground for
the views of anti-government extremists, conspiracists and
racists. Carto has been called "the most influential anti-Semite
in the United States." About 90,000 people are paid subscribers
to the Spotlight, which in 1981 had an estimated readership of
more than 300,000.
A spokesman told the Times that IHR plans to sell one of the
Liberty Lobby's final assets, its subscriber mailing list, to
such watchdog organizations as the Southern Poverty Law Center
and the Anti-Defamation League. Both groups have been critical
of the feuding groups. (ABI World, July 11, 2001)
LOEWEN GROUP: Summary Of Third Amended Plan Of Reorganization
-------------------------------------------------------------
The Loewen Group, Inc. presents the Court with their Third
Amended Plan of Reorganization and a 295-page Disclosure
Statement dated June 29, 2001, pursuant to section 1125 of the
Bankruptcy Code, in support of that Plan.
The primary objectives of the Plan, as stated by the Debtors,
are to:
(a) alter the Debtors' debt and capital structures to
permit them to emerge from their chapter 11 cases with viable
capital structures;
(b) maximize the value of the ultimate recoveries to all
creditor groups on a fair and equitable basis; and
(c) settle, compromise or otherwise dispose of certain
claims and interests on terms that the Debtors believe to be
fair and reasonable and in the best interests of their
respective Estates, creditors and equity holders.
The Plan provides for, among other things:
(1) transactions that will result in the ultimate parent
company in the corporate structure being Reorganized LGII, a
Delaware corporation;
(2) the cancellation of stock in Non-Ownership Regulated
Debtors other than stock owned by a Loewen Company;
(3) the cancellation of the MIPS (the 9.45% Cumulative
Monthly Income Preferred Securities issued by Loewen Group
Capital, L.P.) Junior Subordinated Debentures, the MIPS Junior
Subordinated Debenture Guarantee, the MIPS and the MIPS
Guarantee in exchange for New Warrants (if the holders of the
MIPS accept the Plan);
(4) the cancellation of the CTA Note Claims in exchange for
a combination of cash, New Five-Year Secured Notes, if issued,
New Two-Year Unsecured Notes, if issued, New Seven-Year
Unsecured Notes and New Common Stock;
(5) the cancellation of certain other indebtedness in
exchange for cash, New Common Stock, New Warrants or interests
in the Liquidating Trust;
(6) the satisfaction of certain Administrative Claims
through the issuance of the New Unsecured Subordinated
Convertible Notes and New Common Stock as contemplated by the
Blackstone Settlement Agreement;
(7) the assumption, assumption and assignment or rejection
of Executory Contracts and Unexpired Leases to which any Debtor
is a party;
(8) the selection of boards of directors of the Reorganized
LGII and the Reorganized Loewen Subsidiary Debtors; and
(9) the corporate restructuring of the Loewen Subsidiary
Debtors to simplify the Debtors' corporate structure.
Corporate Restructuring
TLGI was organized under the laws of British Columbia, Canada,
and conducts its business through more than 1,000 subsidiaries,
including, among others, LGII, the Loewen Subsidiary Debtors and
the CCAA Debtors.
In addition to the corporate restructuring of the Loewen
Subsidiary Debtors, a similar restructuring of certain of the
Canadian subsidiaries of TLGI and certain other transactions
resulting in the transfer of substantially all of TLGI's assets
to Reorganized LGII will be effected pursuant to the CCAA Order.
Changes in the corporate structure of TLGI and its subsidiaries
to be effected pursuant to or in connection with the Plan or
CCAA Order, include: (a) the cancellation of each share of LGII
Old Stock, the transfer of substantially all of the assets of
TLGI to LGII and the effectuation of certain transactions
relating to the NAFTA Claims (the "Reinvestment Transactions");
and (b) in each state in which the Debtors conduct business, the
restructuring of the Loewen Subsidiary Debtors organized under
the laws of such state so as to reduce the number of Loewen
Companies organized in such state (the "Subsidiary Restructuring
Transactions," and, collectively with the Reinvestment
Transactions, the "Restructuring Transactions").
Reorganized LGII will be the issuer of the New Five-Year Secured
Notes, if issued, the New Two-Year Unsecured Notes, if issued,
the New Seven-Year Unsecured Notes, the New Unsecured
Subordinated Convertible Notes, the New Common Stock and the New
Warrants to be issued to various creditors and holders of the
MIPS as of the Effective Date as described below.
TLGI's transfer of assets to LGII as part of the Reinvestment
Transactions will occur before the cancellation of the LGII Old
Stock and the issuance of the New Common Stock. The recovery of
each holder of a Claim will be received first in exchange for
the principal amount of such holder's Claim and not the unpaid
pre-Petition Date interest, if any, on that Claim.
Immediately following the consummation of the Restructuring
Transactions, TLGI will have outstanding the same equity
securities as were outstanding immediately prior to the
consummation of the Restructuring Transactions, but will have:
(a) no assets other than bare legal title to its NAFTA Claims
and title to the outstanding membership interests of Delco; (b)
no right to receive, directly or through Delco, proceeds of the
NAFTA Claims; (c) no directors, officers or employees; and (d)
no relationship to Reorganized LGII to any of its subsidiaries
other than as a result of the transactions relating to the NAFTA
Claims.
NAFTA Litigation
Currently, the NAFTA Claims are the subject of a pending
proceeding before the arbitration panel (the Arbitration
Tribunal) appointed pursuant to the rules of the International
Centre for Settlement of Investment Disputes. In January 2001,
the Arbitration Tribunal issued a ruling rejecting certain of
the U.S. government's jurisdictional challenges and scheduled a
hearing on the merits of the NAFTA Claims for October 2001. The
Debtors do not believe that it is possible at this time to
predict the final outcome, timing or damages of this proceeding.
As under the Second Amended Plan and previously reported, prior
to the Effective Date, TLGI will cause LGII to form (a) a wholly
owned Delaware limited liability company ("Delco") and (b) a
wholly owned Nova Scotia unlimited liability company
("Nafcanco"). On the Effective Date, LGII will transfer its
rights to receive any proceeds of the NAFTA Claims arising under
article 1117 of NAFTA to Delco and will transfer the membership
interests in Delco to TLGI. Immediately thereafter, TLGI will
transfer to Nafcanco all right, title and interest to any
proceeds of the NAFTA Claims arising under article 1116 of NAFTA
and TLGI will cause Delco to transfer to LGII all right, title,
and interest to any proceeds of the NAFTA Claims arising under
article 1117 of NAFTA, and in respect thereof, TLGI will
irrevocably delegate to Nafcanco all powers and responsibilities
of TLGI in respect of the pursuit and prosecution of the NAFTA
Claims and the arbitration under the NAFTA Arbitration
Agreement. As of the Effective Date and as part of the
Reinvestment Transactions, TLGI will assign to Reorganized LGII,
and Reorganized LGII will assume, the NAFTA Contingency Fee
Agreement and the NAFTA Arbitration Agreement.
In addition, on the Effective Date immediately following
completion of the Reinvestment Transactions, an undivided 25%
interest in the NAFTA Net Proceeds will be transferred to the
Liquidating Trust. Under the Plan, NAFTA Net Proceeds take into
account any adjustments or payments under the NAFTA Arbitration
Agreement and are net of payments under the NAFTA Contingency
Fee Agreement.
Creation of Liquidating Trust
The Liquidating Trust will be established and the initial
Liquidating Trust Assets will be transferred to the Liquidating
Trust on the Effective Date.
Cramdown
The Plan constitutes a separate plan of reorganization for each
Debtor.
The "cramdown" provisions of section 1129(b) of the Bankruptcy
Code permit confirmation of a chapter 11 plan of reorganization
in certain circumstances even if the plan is not accepted by all
impaired classes of claims and interests of a debtor.
The Debtors will seek "cramdown" of the Plan in respect to (a)
each Class of Claims or Interests that will not receive or
retain anything under the Plan and (b) Class 4 Claims as to
which the applicable Debtor elects Option C treatment. Further,
the Debtors have reserved the right to request Confirmation
pursuant to the cramdown provisions of the Bankruptcy Code and
to amend the Plan if any Class or Division of Claims of any
Debtor fails to accept the Plan. If such request were granted by
the Bankruptcy Court, the dissenting Classes or Divisions could,
in certain cases, receive alternative treatment under the Plan.
For purposes of the Third Amended Disclosure Statement, however,
it has been assumed that, except as described above, the Debtors
will not be required to seek Confirmation under the cramdown
provisions of the Bankruptcy Code. Although the Debtors believe
that, if necessary, the Plan could be confirmed under the
cramdown provisions of the Bankruptcy Code, there is no
assurance that the requirements of such provisions would be
satisfied.
Effective Date
For purposes of computations of Claim amounts, administrative
and other expenses, the Effective Date is assumed to occur on
September 30, 2001.
Provision for Satisfaction of Claims
The Plan provides that holders of Allowed Claims in certain
Classes will, in respect of their Claims, be entitled to
distributions of: (a) cash; (b) New Five-Year Secured Notes, if
issued; (c) New Two-Year Unsecured Notes, if issued; (d) New
Seven-Year Unsecured Notes; (e) New Common Stock; (f) New
Warrants; or (g) interests in the Liquidating Trust.
The Plan also provides that holders of certain Allowed
Administrative Claims will, in satisfaction of such Claims, be
entitled to distributions of New Unsecured Subordinated
Convertible Notes and New Common Stock as contemplated by the
Blackstone Settlement Agreement and that holders of certain
other Allowed Administrative Claims will, in satisfaction of
such Claims, be entitled to distributions of New Common Stock as
contemplated by the Key Employee Retention Program.
The Plan also provides that the holders of Allowed Secured
Claims (other than the CTA Note Claims) will have their Secured
Claims paid in full or Reinstated or will receive the collateral
securing such Claims, at the option of the Debtors.
Under the Plan, holders of MIPS will, in respect of their
Interests and Claims, be entitled to distributions of New
Warrants (if the holders of the MIPS accept the Plan).
Holders of TLGI Old Stock will receive no distribution under the
Plan.
Shares of LGII Old Stock will be canceled and holders of such
Interests will receive no distributions under the Plan. Shares
of Old Stock in Non-Ownership Regulated Debtors (other than
stock owned by a Loewen Company) will be canceled and holders of
such Interests will receive no distributions under the Plan
unless the Bankruptcy Court determines that the applicable
Debtor is solvent, in which event such holder will receive New
Common Stock equal to the value of the canceled shares as
determined by the Bankruptcy Court. The Debtors do not believe
that any Non-Ownership Regulated Debtor having capital stock
that is owned by a person that is not a Loewen Company is
solvent. Non-Ownership Regulated Debtors are identified on
Exhibit I to the Disclosure Statement.
The determination of the relative distributions to be received
under the Plan by the holders of Claims in certain Classes was
based upon, among other factors, estimates of the amounts of
Allowed Claims in such Classes and the relative priorities of
such Allowed Claims.
Allowed Secondary Liability Claims
No distributions in respect of any Secondary Liability Claims
will be made. Notwithstanding any provision of the Plan to the
contrary, a creditor holding multiple Allowed Claims against
more than one Debtor that do not constitute Secondary Liability
Claims and that arise from the contractual joint, joint and
several or several liability of such Debtors, the guaranty by
one Debtor of another Debtor's obligation or other similar
circumstances may not receive in the aggregate from all Debtors
more than 100% of the amount of the underlying Claim giving rise
to such multiple Claims.
Classification and Treatment of Claims and Interests
Based on their review of Claims filed by the Bar Date, the
Debtors set forth in the Plan a table showing the classification
of Claims and Interests, the amount and nature of distributions
to holders of Claims or Interests in each Class/Division, and
the estimated aggregate amount of Claims in each Class/Division.
The information set forth in the table in the Plan is presented
on a combined basis for all of the Debtors in that Class or
Division to which such information is applicable.
Class 11, which consists of general, non-priority Unsecured
Claims against the Debtors, has been subdivided into eight
Divisions, each of which, for purposes of section 1129 of the
Bankruptcy Code, will be treated as a separate class of Claims
for each relevant Debtor. For purposes of determining which
Debtors would be included in any particular Division, the
Debtors, based on the individual reorganization value of each
Debtor and the Claims and relative priorities of Claims, have
estimated the percentage recovery to which holders of general
Unsecured Claims against each Debtor would be entitled and have
grouped Debtors with the same or similar recoveries in the same
Division. With respect to each Division, the estimated
percentage recovery determined separately for each Debtor
included in the Division is less than or equal to the Estimated
Percentage Recovery for the Division. TLGI and LGII are in
Divisions A and B, respectively. The Division in which each
other Debtor has been grouped is set forth on Exhibit I to the
Disclosure Statement.
The Claims Reconciliation Process is an ongoing process.
Further, the amount of any disputed claim that ultimately is
allowed by the Bankruptcy Court may differ significantly from
the estimated amount as set forth in the Plan. As a result, the
actual ultimate aggregate amount of allowed unsecured claims may
differ significantly from the estimates set forth in the table.
The amount of the Pro Rata distributions of New Common Stock,
New Warrants and Interests in the Liquidating Trust that
ultimately will be received by a holder of an allowed unsecured
claim in a particular division of Class 11 may be adversely or
favorably affected by the aggregate amount of claims ultimately
allowed in the respective division.
Distributions of New Common Stock, New Warrants and Interests in
the Liquidating Trust to holders of allowed unsecured claims in
each division of Class 11 will be made on an incremental basis
until all disputed claims in such division have been resolved.
Due to the treatment of Class 2 Convenience Class Claims, the
Debtors believe that at least 550 Loewen Subsidiary Debtors will
not have creditors holding Class 11 Claims.
The distributions to be received by creditors in any Division of
Class 11 could differ from the Estimated Percentage Recovery if
the estimates of Allowed Claims prove to be inaccurate.
In addition, the percentage recoveries shown in the table for
Classes 5, 6, and 7 are based on the assumptions that: (a) the
amounts to be paid or set aside in respect of fees and expenses
of the Indenture Trustees and the CTA Trustee in respect of fees
and expenses of the Principal CTA Creditors will aggregate $15
million and, accordingly, the Minimum Cash Distribution Amount
will be $25 million; (b) the Available Cash Amount will not
exceed $70 million and, accordingly, the Excess Cash
Distribution Amount will also be equal to $25 million; and (c)
as a result of the foregoing, the New Seven-Year Unsecured Notes
Additional Principal Amount will be $5 million.
The actual amount of fees and expenses that will ultimately be
paid or set aside may be more or less than such amount, and,
accordingly the percentage recoveries actually to be realized by
a holder of an Allowed CTA Note Claim in any of Class 5, 6 or 7
may differ from that shown in the table.
In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims, Substantial Contribution Claims and
Priority Tax Claims have not been classified.
Each amount designated in the table as "Estimated Percentage
Recovery" for each Class and, in the case of Class 11, each
Division is the quotient of:
(a) the cash or the assumed value of the New Five-Year
Secured Notes, if issued, New Two-Year Unsecured Notes, if
issued, New Seven-Year Unsecured Notes, New Common Stock or New
Warrants to be distributed to all holders of Allowed Claims or
Allowed Interests in such Class or Division,
divided by
(b) the estimated aggregate amount of Allowed Claims or
Allowed Interests in such Class or Division.
For purposes of this calculation, it is assumed that:
(a) the New Five-Year Secured Notes, if issued, the New
Two-Year Unsecured Notes, if issued, and the New Seven-Year
Unsecured Notes will each have a value equal to the principal
amount thereof;
(b) the New Common Stock to be distributed to holders of
Claims under the Plan will have an estimated aggregate value of
approximately $687.7 million, or $17.19 per share, as of the
Effective Date, based on the midpoint of the range for assumed
reorganization equity value of Reorganized LGII; and
(c) the New Warrants to be distributed to holders of
Allowed Claims or Allowed Interests under the Plan will have an
estimated aggregate value of approximately $5.8 million, or
$1.85 per New Warrant, as of the Effective Date.
For purposes of the table on Claims, because of the nature of
the Liquidating Trust Assets, no value has been assigned to
interests in the Liquidating Trust.
General Releases
As of the Effective Date, the following entities will be deemed
to forever release, waive and discharge all claims, obligations,
suits, judgments, damages, demands, debts, rights, causes of
action and liabilities (other than the right to enforce the
Debtors' or the Reorganized Debtors' obligations under the Plan
and the contracts, instruments, releases, agreements and
documents delivered thereunder), against (i) any Debtor or other
Loewen Company and each of their respective present or former
directors, officers, employees, attorneys, accountants,
financial advisors and agents, acting in such capacity and (ii)
the members of the Creditors' Committee, each Indenture Trustee,
each Principal CTA Creditor, each holder of a CTA Note Claim and
each of their respective present or former directors, officers,
employees, attorneys, accountants, financial advisors and
agents, acting in such capacity (including all claims alleged in
the CTA Proceeding, which will be dismissed with prejudice)
(which release will be in addition to the discharge of Claims
and termination of Interests provided in the Plan and under the
Confirmation Order and the Bankruptcy Code):
(1) each holder of a Claim or Interest that votes in favor
of the Plan,
(2) each entity that has held, holds or may hold a Claim or
Interest or at any time was a creditor or stockholder of any of
the Debtors and that does not vote on the Plan or votes against
the Plan, and
(3) solely as to clause (ii) above, each Debtor,
Reorganized Debtor and other Loewen Company. (Loewen Bankruptcy
News, Issue No. 42; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
LTV CORPORATION: US Trustee Amends Noteholders' Committee
---------------------------------------------------------
Following the resignation of Indosuez Capital from the
Committee, Donald M. Robiner, United States Trustee for
Ohio/Michigan Region 9, has revised the appointments of members
to the Official Committee of Unsecured Noteholders in The LTV
Corporation's chapter 11 cases. The members of the current panel
are:
HSBC Bank USA
c/o Russ Paladino
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-6041
Fax: (212) 808-7897
U.S. Bank Trust National Association
c/o Scott Strodthoff
180 East Fifth Street
St. Paul, Minnesota 55101
Tel: (651) 244-0707
Fax: (651) 244-5847
Putnam Investments, Inc.
c/o Robert Paine (Temporary Chairperson)
One Post Office Square
Boston, Massachusetts 02109
Tel: (617) 760-1734
Fax: (617) 760-8639
PPM-America
c/o Joel Klein
225 West Wacker
Suite 1200
Chicago, Illinois 60606
Tel: (312) 634-2559
Fax: (312) 634-0053
Teachers Insurance & Annuity Assoc. of America
C/o Roi G. Chandy
730 Third Avenue, 4th Floor
New York, New York 10017
Tel: (212) 916-6139
Fax: (212) 916-6140
(LTV Bankruptcy News, Issue No. 11; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
MARINER POST-ACUTE: Settles Dispute With Palmer & Cay
-----------------------------------------------------
To resolve claims and dispute related to discontinued services
of a consulting firm engaged pre-petition in connection with
contemplated centralization of employee benefits management that
somehow was not carried through, Mariner Post-Acute Network,
Inc., LC Management Company and certain of their debtor in
possession affiliates seek the Court's authority for their entry
into and funding of a "Settlement Agreement and Mutual Release"
with Palmer & Cay Employee Benefits Consulting, Inc., including
payment in the amount of $ $148,860 and MPAN's entry with Palmer
& Cay into new Management and Consulting Agreement with new
arrangement and payment terms.
Restructuring of Management Co.
Involving Palmer & Cray
For cost-effectiveness and certain tax benefits, in or around
April 1999, MPAN undertook to centralize the provision and
management of the Debtors' employee benefits by restructuring
the capitalization of Management Co., a non-Debtor, wholly-owned
subsidiary of MPAN. Prior to the restructuring, Management Co.
was an inactive subsidiary of MPAN.
In connection with the proposed restructuring of Management Co.,
the Debtors obtained the services of Palmer & Cay and gave
Palmer & Cay a seat on Management Co.'s Board of Directors.
The restructuring of Management Co. was effectuated through a
series of agreements entered into (in various combinations) by
MPAN, LC Management (one of the MPAN Debtors), Management Co. (a
non-debtor wholly-owned subsidiary of MPAN), and Palmer and Cay:
(A) Management Co. was recapitalized through a capital
contribution from MPAN to Management Co. of $2.25 mi11ion;
(B) LC Management Co. and all of the MPAN and MHG subsidiaries
entered into a pooling agreement pursuant to which
(1) LC Management assumed all of the MPAN and MHG
subsidiaries' liabilities with respect to group health insurance
coverage for all MPAN and MHG employees (the "Employee
Obligations");
(2) each of the MPAN subsidiaries entered into a demand note
payable to LC Management; and
(3) each of the MHG subsidiaries entered into an "Agreement
to Reimburse Benefit Expenses" with LC Management;
(C) Two of MPAN's subsidiaries, GranCare, Inc. and LCA
Operational Holding Company, declared and paid dividends to
MPAN of two promissory notes aggregating $319,598,529 in
principal amount. The Notes bear interest at 13.75% per
annum, are amortized over 129 months and require the monthly
payment of principal and interest.
(D) MPAN then assigned the Notes to LC Management;
(E) LC Management and Management Co. entered into an exchange
and assumption agreement pursuant to which,
(1) LC Management transferred to Management Co. $250,000 in
cash and the Notes.
(2) In exchange for this transfer, Management Co.
-- assumed the Employee Obligations and
-- issued a convertible instrument (the "Convertible
Instrument"), which provided LC Management with 2,500
convertible units that could, at a time specified in the
Convertible Instrument, be converted into common stock of
Management Co. The Convertible Instrument:
* provides for a yield of 8% of $250,000 payable on
December 31 of each year,
* is convertible on a one-for-one basis into common
stock of Management Co. after May 1, 2008,
* is redeemable by Management Co. between May 1, 2004
and October 1, 2004, and
* may be put to Management Co. between May 1, 2004
and October 1, 2004 for cash in an amount equal to
10% of the value of Management Co. over $250,000.
(F) The Convertible Instrument was later transferred by LC
Management to Palmer & Cay for $250,000.
(G) The payments under the Notes were calculated to exceed
slightly the Employee Obligations to be provided by
Management Co. to the Debtors' employees. It was
contemplated that on the date the Convertible Instrument was
exercisable, Management Co. would have accumulated $10-ll
million in excess cash as a result of the payments under the
Notes in excess of the Employee Obligations; and
(H) Management Co. entered into a three-year benefits consulting
services agreement with Palmer & Cay dated April 28, 1999,
which provided for an annual payment of $288,000 for the
first year (through April 28, 2000) and $270,000 for the
next two years in exchange for Palmer & Cay's provision of
specified consulting services to Management Co.
For a variety of reasons, including the disruption caused by the
Debtors' financial difficulties and the preparation for filing
of the Debtors' chapter 11 cases, the structure contemplated by
the Restructuring Agreements for the funding of employee
benefits was never properly implemented and MPAN continued to
provide and fund employee benefits directly to the Debtors'
employees in the ordinary course rather than through Management
Co. No payments were ever made under the Notes. MPAN paid Palmer
& Cay directly for services rendered under the Consulting
Agreement. In addition, in late 1999, and prior to the Petition
Date, MPAN obtained the $2.5 million provided by MPAN and LC
Management from Management Co.'s bank account.
Postpetition, Palmer & Cay provided some consulting services for
a few months but stopped work because of an unpaid pre-petition
amount. As a result, on or about May 1, 2000, MPAN terminated
the Consulting Agreement and found an alternate provider of such
consulting services.
The Palmer & Cay Claims and Dispute
Palmer & Cay claims,
* that as of the Petition Date, it was owed approximately
$110,000 for prepetition services provided pursuant to
the Consulting Agreement.
* that it is owed $23,860 for postpetition services,
* approximately $540,000 for termination damages under the
Consulting Agreements.
* the $250,000 paid for the Convertible Instrument.
Further, Palmer & Cay contends that Management Co. has a claim
against MPAN for the $2.5 million that MPAN obtained from
Management Co. shortly before the Petition Date and has claims
for the difference between the debt to Management Co. under the
Notes and the assumed Employee Oblibations (approximately $10-22
million), and that, as Management Co.'s sole creditor, Palmer &
Cay is entitled to the benefit of those claims until its claims
against Management Co. are paid.
The Settlement Agreement
To resolve the claims, the parties have agreed to execute the
Settlement Agreement, the salient terms of which provide for:
(1) Transfer of convertible Instrument
Palmer & Cay will transfer to Management Co. the Convertible
Instrument.
(2) Broker Services Agreement
MPAN will enter into a broker services agreement with Palmer
& Cay (the "New Consulting Agreement"). This New Consulting
Agreement will not obligate the Debtors to make any monetary
payments to Palmer & Cay. Rather, Palmer & Cay will be
reimbursed for its services through commissions paid by the
relevant insurance carriers, which is consistent with the
industry practice.
(3) Resignation of Palmer & Cay Representative from Management
Co. Board
The Palmer & Cay representative will resign from Management
Co.'s Board of Directors.
(4) Payments to Palmer & Cay
Management Co. will pay Palmer & Cay $148,860, which
Management Co. will obtain from MPAN.
(5) Release and Discharge by Parties
Palmer & Cay agrees to release MPAN, LC Management,
Management Co., and all of their officers, directors, employees,
shareholders, affiliates, successors, and assigns, from any and
all claims relating to the Restructuring, the Restructuring
Agreements, and any transfer of funds by or to MPAN, LC
Management, or Management Co., other than claims based solely on
a breach of the Settlement Agreement or New Consulting
Agreement.
Likewise, MPAN, LC Management, Management Co., and all of
their officers, directors, employees, shareholders, affiliates,
successors, and assigns, agree to release Palmer & Cay from any
and all claims, relating to the Restructuring, the Restructuring
Agreements, and any transfer of funds by or to MPAN, LC
Management, or Management Co., other than claims based solely on
a breach of the Settlement Agreement or New Consulting
Agreement.
(6) Termination of Restructuring Agreements
Each of the Restructuring Agreements will be terminated and
be of no further force and effect.
The Debtors believe that the proposed settlement is in the best
interest of the Debtors' estates, creditors, and other parties
in interest.
Without this, the Debtors would face millions of dollars in
potential claims and. the threat of fact-intensive, time
consuming litigation. In total, Palmer & Cay is likely to assert
claims against Management Co. and the Debtors arising out of the
Consulting Agreement and the Convertible Instrument that will
total over $923,000. Palmer & Cay further asserts that, as
Management Co.'s sole creditor, it is entitled to the benefit of
Management Co.'s claims against the various Debtors, including
(i) a claim for the $2.5 million transferred prepetition from
Management Co. to MPAN; and (ii) net claims under the
Restructuring Agreements, which Palmer & Cay contends could
total more than $10 million. Palmer & Cay has further threatened
to bring suit directly against certain of the Debtors' officers
and directors for the harm that it allegedly suffered as a
result of such parties' prepetition conduct with respect to
Management Co. The Debtors would have an obligation to defend
their officers and directors in any such action.
The Debtors envisage that, the Settlement Agreement would enable
them to essentially settle all of Palmer & Cay's claims, regain
control of the Convertible Instrument, regain control of
Management Co.'s Board of Directors and its claims against the
Debtors, and obtain a comprehensive release of liability from
Palmer & Cay in return for the payment of $148,860 and MPAN's
entry into the New Consulting Agreement. In so doing, they will
avoid the potentially substantial expense and distraction
associated with the litigation of a potential multitude of
actions involving a variety of claims in this Court and
potentially other forums as well.
The Debtors make the point to Judge Walrath that, while they
believe that they have substantial defenses to Palmer & Cay's
claims, they recognize that the mere defense of Palmer & Cay's
many different claims would be costly and time consuming and
would distract certain key members of the Debtors' personnel
from their other duties, and that there is a risk that Palmer &
Cay could be the beneficiary of potentially substantial claims
of Management Co. against MPAN.
In light of these costs and risks, the Debtors believe that
their entry into the Settlement Agreement and the payment of
$148,860 to Palmer & Cay is in the best interests of their
estates and creditors. (Mariner Bankruptcy News, Issue No. 15;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Moves TO Continue Making Capital Expenditures
----------------------------------------------------------
Pacific Gas and Electric Company presented the Official
Committee of Unsecured Creditors with a substantive outline of
this Motion and provided financial documents in support of the
Motion to PricewaterhouseCoopers for analysis, Paul S. Aronzon,
Esq., at Milbank, Tweed, Hadley & McCloy LLP, tells Judge
Montali. Those presentations and financial documents were
reviewed and the Committee concludes that it supports the
Debtor's request to continue making capital expenditures in the
ordinary course of business on two conditions:
(A) the Committee wants a quarterly report from PG&E
describing (i) all new capital projects approved by PG&E
management not included in the Budget provided to PwC that are
expected to cost more than $1,000,000; (ii) all existing capital
projects with a forecasted cost of more than $1,000,000 where
overrun expenditures are projected to be over $1,000,000; and
(iii) the aggregate amount of all capital expenditures through
the closing date of the report and a forecast of CapEx for the
remainder of the calendar year; and
(B) the Committee reserves all of its rights to challenge,
by motion brought before the Bankruptcy Court, any capital
expenditure proposed by PG&E that, in the aggregate, exceed
$1,500,000,000 for calendar year 2001 and any capital
expenditures for calendar year 2002 and subsequent years.
Judge Montali put his stamp of approval on this arrangement.
(Pacific Gas Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PILLOWTEX: Stipulates To Continue Paying Frontline Consulting
-------------------------------------------------------------
Judge Robinson previously entered an order authorizing Pillowtex
Corporation to retain, employ and pay certain professionals in
the ordinary course of their businesses. The order provides
that:
(a) the fees for Frontline Consulting Services (FCS), Aon
Risk Services and Occupational Fitness may not exceed $70,000,
$40,000 and $35,000 respectively per month, on average, over any
consecutive four-month period;
(b) the fees for any other ordinary course professional may
not exceed $25,000 per month, on average, over any consecutive
four-month period; and
(c) no ordinary course professional may have any material
involvement in the administration of the Debtors' estates.
The order also requires the Debtors to file and serve report on
the payments made to ordinary course professionals retained
every 4 months.
Last April 30,2001, the Debtors submitted their first report
covering the period from November 14, 2000 through March 31,
2001. In the report, the Debtors paid FCS a total of $354,272 or
an average of $78,700 per month. Until they made the report, the
Debtors did not realize that they have been violating the court
order by paying FCS more than the $70,000 per month limit.
FCS is an Information Technology consulting firm.
The Debtors fear their mistake might jeopardize the retention of
FCS' services, which they claim are important to their
operations. Hence, the Debtors' counsel met with other lawyers
of the Debtors' pre-petition and post-petition lenders, as well
as the attorney representing the creditor's committee.
Fortunately, the Debtors, their lenders and the creditors'
committee were able to reach an agreement to allow the Debtors
to continue FCS' retention and pay for its services. The United
States Trustee, who has been briefed of the agreement, also
consented.
The parties agree that:
(a) Notwithstanding the aggregate payment limits
established by the order, the Debtors shall be permitted to
continue to pay FCS on a regular basis in the ordinary course of
the Debtors' businesses without seeking approval of the court to
retain FCS.
(b) FCS shall not be subject to the procedures established
in these cases for interim compensation and reimbursement of
expenses of professionals specifically retained pursuant to an
order of the Court.
Judge Robinson entered an order concurring with the parties'
agreement. (Pillowtex Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PLATINUM ENTERTAINMENT: Plan Confirmation Hearing Is On July 26
---------------------------------------------------------------
The U.S. Bankruptcy Court in Chicago has approved Platinum
Entertainment Inc.'s disclosure statement to the company's first
amended joint reorganization plan. U.S. Bankruptcy Judge Eugene
R. Wedoff signed an order June 21 approving the disclosure
statement, which Platinum filed along with its unsecured
creditors' committee. A hearing is scheduled for July 26 to
consider confirmation of the chapter 11 plan. The bankruptcy
court set July 23 as the voting deadline for interested parties
to accept or reject the plan. (ABI World, July 11, 2001)
POLAROID CORPORATION: Get Waiver of Loan Covenants to Oct. 12
-------------------------------------------------------------
Polaroid Corporation (NYSE: PRD) has reached an agreement with
its U.S. bank lenders that it expects to maintain the company's
near-term liquidity and operational stability as it continues to
implement a series of initiatives aimed at strengthening its
financial performance. Polaroid also announced that it has
retained Dresdner Kleinwort Wasserstein and Merrill Lynch & Co.
to assist the company in an exploration of strategic
alternatives, which could include a sale of assets, a merger or
sale of the company, and/or a strategic partnership. In
addition, Polaroid said it will not make certain upcoming
interest payments on its bonds and intends to begin negotiations
shortly with its bondholders regarding a potential restructuring
of the company's debt with the objective of developing a capital
structure that will better support its long-term business
objectives.
Following negotiations with its bank lenders, Polaroid has
obtained a waiver from its U.S. lenders of certain of its bank
loan covenants through October 12, 2001, as well as a waiver of
a $19 million principal repayment that had been scheduled for
September 2001. These waivers will become effective upon receipt
of a similar waiver from Polaroid's U.K. lenders, which the
company expects to receive shortly. In addition, the company
intends to pursue negotiations with its bank group concerning a
rescheduling of its bank credit facilities.
"The receipt of these waivers demonstrates both the company's
continuing support from its bank group and the progress we are
making in implementing our previously announced five-point plan
to strengthen our financial position," said Gary T. DiCamillo,
chairman and chief executive officer. "From an operational
standpoint, this allows us to continue business as usual while
we position the company for a digital future with our new Opal
and Onyx instant digital printing technologies."
Polaroid will not make the interest payments totaling $11
million due July 16, 2001 on its 6-3/4% notes maturing on
January 15, 2002 and its 7-1/4% notes maturing on January 15,
2007. It also will not make a $16 million interest payment due
August 15, 2001 on its 11-1/2% notes maturing February 15, 2006.
The company intends to initiate discussions with its bondholders
promptly to pursue a consensual restructuring of its unsecured
debt. Dresdner Kleinwort Wasserstein and Zolfo Cooper LLC have
been retained to assist the company in these negotiations.
William L. Flaherty, executive vice president and chief
financial officer, noted that in light of these and other cash
conservation measures, the company is comfortable that its
current cash resources and bank facility provide sufficient
funding for the company's business activities and its
obligations to suppliers and vendors. Employee payroll and
benefit payments are continuing as usual.
"Polaroid is making meaningful progress toward reducing costs
through restructuring, improving working capital, consolidating
manufacturing, reducing capital spending and selling non-core
assets," Flaherty said. "We will be detailing that progress on
Wednesday, July 18, when we report second quarter financial
results essentially in line with the expectations we announced
last month."
At the expiration of the 30-day grace period for the July 16
interest payment, the principal of the 6-3/4% notes and 7-1/4 %
notes will be subject to acceleration. Due to cross-default
provisions, the company's 11-1/2% notes similarly become subject
to acceleration.
A copy of the bank waiver will be available in the Form 8-K to
be filed with the Securities and Exchange Commission.
Polaroid Corporation is the worldwide leader in instant imaging.
Polaroid supplies instant photographic cameras and films;
digital imaging hardware, software and media; secure
identification systems; and sunglasses to markets worldwide.
Visit the Polaroid web site at http://www.polaroid.com.
PRECEPT BUSINESS: Converts Bankruptcy Case to Chapter 7
-------------------------------------------------------
A bankruptcy court has granted Precept Business Services Inc.'s
request to convert its chapter 11 bankruptcy case to a chapter 7
liquidation, according to Dow Jones. Judge Steven A. Felsenthal
of the U.S. Bankruptcy Court in Dallas authorized the conversion
June 28. After creditors filed an involuntary chapter 7 petition
against Precept Business Services on Jan. 26, the bankruptcy
court approved the company's voluntary chapter 11 petition on
Feb. 22. In its motion filed June 28 to convert the case to
chapter 7, Precept said it had liquidated most of its assets
and, as a result, had ceased business operations. The company
paid the majority of proceeds from the asset sales to its
primary secured lenders, Bank One Texas N.A. and Wells Fargo
Bank N.A., the motion said. Precept owed the lenders about $37
million under a revolving credit line on Feb. 22. The company
listed total assets of just under $78 million and total debts of
about $66.6 million in its Feb. 22 bankruptcy petition. The
Dallas company provided business products and transportation
services. (ABI World, July 11, 2001)
PSINET INC.: Hires Sidley Austin Brown & Wood As Special Counsel
----------------------------------------------------------------
Prior to their petition for chapter 11 relief, PSINet Inc.
retained Sidley Austin Brown & Wood to represent the company and
four of its current and former officers named as Individual
Defendants in a class action filed under the securities laws in
the United States District Court for the Eastern District of
Virginia.
Sidley does not presently anticipate seeking payment from PSINet
or any of the Debtors for any fees and costs in connection with
the Securities Actions.
PSINet tells the Court that, out of an abundance of caution, in
the event that Sidley unexpectedly must seek some payment from
the Debtors at a later date, PSINet seeks the Court's
authorization to retain Sidley as special counsel, limited to
matters involving securities law and the pending Securities
Actions. In addition, Sidley may also perform limited services
in connection with the Securities Actions as they relate to the
PSINet Chapter 11 proceedings, as Wilmer, Cutler & Pickering
("WCP"), general bankruptcy counsel for Debtors, may request.
To the extent Sidley seeks payment solely from PSINet's insurer,
National Union, Sidley will not seek Court approval for such
payment. Any compensation payable to Sidley by the Debtors and
their estates with respect to the Chapter 11 period will be
subject to Court approval in accordance with Sections 330 and
331 of the Bankruptcy Code, the Federal Rules of Bankruptcy
Procedure, the local Bankruptcy Rules and the orders of the
Court, including the Compensation Procedures Order.
The Securities Class Action
Between November 3 and December 29, 2000, twenty-one putative
class action suits were filed against PSINet and four of its
current and former officers in the United States District Court
for the Eastern District of Virginia seeking relief under the
1933 Securities Act and the 1934 Securities Exchange Act. The
four officers named as individual defendants in the action are:
William L. Schrader, Harold Wills, Larry Hyatt and David N.
Kunkel.
The plaintiffs generally allege that PSINet, through the
Individual Defendants, made a series of false and misleading
statements to the press, in regulatory filings, and in company
releases concerning PSINet's acquisition of Metamor Worldwide,
Inc. and PSINet's ability to implement its business plan.
After hearing the defendants' motion to dismiss, the District
Court retained two counts of a single complaint (the "McGowan
Action") and granted PSINet's motion to dismiss as to all other
counts of all complaints.
Presently, the District Court has appointed lead plaintiffs for
three potential classes and appointed local and lead counsel for
each lead plaintiff.
The District Court consolidated into one case and under one
caption all of the putative class actions, including the McGowan
Action, the actions that are the subject of an Amended Master
Complaint filed by the claimants and all other pending and
subsequently filed related cases.
After hearing the Debtors' Motion to Dismiss the Amended
Complaint and Debtors' Motion for Summary Judgment relating to
the McGowan Complaint, the District Court denied the Motion to
Dismiss and granted plaintiffs' Motion to Abate the Summary
Judgment Motion. Pursuant to an Order of the District Court, the
parties have served interrogatories and document requests,
objections and some responses. In its Order of April 2, 2001,
the District Court ordered document production in the Securities
Actions to commence on April 9, 2001. The District Court also
ordered that: (1) all document production be completed by June
4, 2001; (2) all non-expert discovery be completed by July 31,
2001; and (3) all expert discovery be completed by August 31,
2001. Also on April 2, 2001, the District Court heard a motion
to compel filed by plaintiffs and a motion to compel filed by
defendants. The District Court granted both motions.
Plaintiffs have filed a motion for class certification.
Defendants are in the process of taking discovery related to
that motion and preparing a response to that motion. Plaintiffs
have served several deposition notices, including a notice of
depositions of the Individual Defendants. Plaintiffs also have
served numerous third-party subpoenas, many of which are
pending.
During the time in which Sidley has represented PSINet and the
Individual Defendants in connection with the Securities Actions,
Sidley has become thoroughly familiar with the factual and legal
issues involved in those matters, the Debtors note, and Sidley
also has developed an extensive knowledge of PSINet's business
operations. PSINet believes that Sidley is both well-qualified
and uniquely able to continue to represent PSINet as special
securities law counsel during the pendency of the Securities
Action in an efficient and timely manner.
Insurance Provision and Sidley's Compensation
PSINet is the insured on several insurance policies that provide
coverage to PSINet and its directors and officers, including a
policy with National Union Fire Insurance Company of Pittsburgh,
PA, and other policies with various other insurers that provide
additional layers of coverage beyond the National Union policy.
The insurance policies include direct coverage for the directors
and officers, indirect indemnification coverage for PSINet and
entity coverage for PSINet. PSINet has provided notice to its
insurers of the Securities Actions. National Union has reserved
its rights regarding all of the claims in the Securities Action
and has disclaimed coverage with respect to the claims in the
McGowan Action. Nevertheless, National Union has agreed to
advance defense costs associated with defense of all claims in
the Securities Actions.
To date, Sidley has been paid $ 200,000 by PSINet, satisfying
the retention amount set forth in the National Union policy.
PSINet notes that invoices from Sidley payable by National Union
in the amount of $ 468,156.81 remain outstanding and additional
invoices payable by National Union are being prepared for
services to date.
Christine Liverzani Prame, a partner in Sidley, advises that the
amount on invoices from Sidley payable by National Union has
accrued to $748,564.
Both PSINet and Sidley expect National Union to continue to
advance the fees and costs related to defense of this action.
With respect to compensation and reimbursement arrangements, Ms.
Prame affirms what is set forth in PSINet's application.
Ms. Prame also advises the Court that, as she understands, the
prosecution of the Securities Actions could result in the
assertion of substantial indemnification claims against PSINet
by the Individual Defendants. She notes a substantial risk that,
if the Securities Actions proceed and liability results, PSINet
will not be able to satisfy all of its indemnification
obligations through the application of insurance proceeds.
PSINet has disputed the insurers' position, and will continue to
do so, Ms. Prame relates, but, in light of that position, Ms.
Prame cautions of an increased risk that PSINet ultimately will
be responsible for indemnifying the Individual Defendants
without the benefit of insurance proceeds.
Sidley expects to continue representing the Individual
Defendants in the Securities Action. If any conflict should
arise between PSINet and any or all of the Individual
Defendants, Sidley will inform the Court immediately, Ms. Prame
assures.
Sidley will accrue fees for services in connection with the
Securities Actions at hourly rates currently ranging from $155
per hour for new associates to $550 per hour for senior
partners. Time devoted by legal assistants is charged at billing
rates currently ranging from $80 to $150 per hour. These hourly
rates are Sidley's standard hourly rates for work of this nature
and are subject to periodic adjustments to reflect economic and
other conditions. Sidley will also accrue direct charges for
expenses arising from its representation of PSINet and its
officers.
The principal attorneys and paralegals presently designated to
represent PSINet and their current standard hourly rates are:
Mark D. Hopson $450
Michael D. Warden $400
Christine Liverzani Prame $370
Griffith Green $350
Colleen M. Lauerman $275
Anne Mayer Turk $235
Patrick F. Linehan $185
Licha M. Nyiendo $185
C. Kevin Marshall $160
Anthony Fabic $130
Elizabeth Hord $110
Sidley has informed the Debtors that the partners and associates
of Sidley who will be engaged in the Securities Actions are
members in good standing of the bar of the District of Columbia,
and that certain of those partners and associates are members of
the bar of the Commonwealth of Virginia or such other
jurisdictions as are relevant.
Sidley has also informed the Debtors that, except as described
in the Prame Affidavit, Sidley (i) does not hold or represent
any interest adverse to the Debtors or their estates with
respect to the matters for which Sidley is to be retained, and
(ii) does not have any "connections," as contemplated within
Bankruptcy Rule 2014(a), with the Debtors, creditors and any
other party in interest, their respective attorneys and
accountants, the U.S. Trustee or any person employed in the
Office of the U.S. Trustee, with respect to the matters on which
Sidley is to be retained.
In her affidavit, Ms. Prame reveals that Sidley has represented,
and currently represents: Anderson Consulting LLP, AT&T, Banc
One Leasing, Bell South, Computer Associates International, DIME
Commercial Corp., Donaldson, Lufkin & Jenrette, EMC Corporation,
FINOVA Capital Corp., GE Capital Corp. General Electric CA,
Hewlett-Packard, ICG Telecom Group, Lucent, Morgan Stanley,
Nissho Electronics, Primus Knowledge Solutions, Veritas Software
Corp. However, such representation is in matters unrelated to
the Debtors.
Ms. Prame further reveals that Sidley has represented MSTD with
respect to an investment in MSTD by PSINet Strategic Services,
Inc., one of the Debtors. Mr. Prame assures that, insofar as she
has been able to determine, Sidley has not and will not
represent MSTD in matters related to the PSINet chapter 11 cases
and the matters for which Sidley is to be retained.
Ms. Prame acknowledges that, Sidley and certain of its partners,
counsel and associates may have in the past represented, and may
currently represent and likely in the future will represent,
creditors and other parties in interest of the Debtors in
connection with matters unrelated to the Debtors and their
chapter 11 cases. In addition, certain of Sidley's partners,
counsel, associates or other employees may hold or in the past
have held publicly traded stock of PSINet Inc. or of creditors
of one or more of the Debtors. Accordingly, Sidley is not able
to state with certainty that every client connection has been
disclosed.
Ms. Prame indicates that, based on what is known to her and
related to the Court, she believes that Sidley is eligible for
employment and retention by PSINet pursuant to Sections 327(e)
and 328 fo the Bankruptcy Code and Bankruptcy Rule 2014(a).
Ms. Prame also covenants that, in the event that it determines
that it has any other connections with any significant creditors
of the Debtors once the Debtors' schedules have been filed.
The Debtors submit that the employment of Sidley by PSINet is
necessary and in the best interests of the Debtors and their
estates, their creditors and parties in interest. (PSINet
Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
RENT-WAY INC.: Auditor Issues Negative Going Concern Opinion
------------------------------------------------------------
Rent-Way, Inc. is the second largest operator in the rental-
purchase industry with 1,134 stores in 42 states as of June 1,
2001. The Company offers quality brand name computers, home
entertainment equipment, furniture, appliances, and jewelry to
customers under full-service, rental-purchase agreements that
generally allow the customer to obtain ownership of the
merchandise at the conclusion of an agreed upon rental period.
The Company also provides prepaid local phone service to
consumers on a monthly basis through dPi Teleconnect LLC, its
70%-owned subsidiary.
PricewaterhouseCoopers LLP, on June 27, 2001, issued the
following statement upon the completion of its auditing of Rent-
Way's accounting records: "The Company violated certain debt
covenants and is now operating under a forbearance agreement
with its bank lenders, which expires on July 31, 2001. The
Company's ability to borrow additional funds is limited. The
Company is in active negotiations with its banks to eliminate
the forbearance agreement and to obtain an amended credit
facility that will provide the Company with sufficient
liquidity. There can be no assurance that the Company will be
successful in negotiating an amendment with the banks. These
matters raise substantial doubt about the Company's ability to
continue as a going concern."
For the years ended September 30th: In fiscal 2000 on total
revenues of $592,686 the Company's net loss was $ (28,041); in
fiscal 1999 on total revenues of $494,352 the Company's net loss
was $ (765); and in fiscal 1998 on total revenue of $436,031 the
Company's net loss was $ (5,819). These figures represent
restated financial statements because on October 30, 2000, Rent-
Way announced that it was investigating certain accounting
matters, including potential accounting improprieties, affecting
its financial results for fiscal 2000 and that based on its
preliminary investigation it expected these matters to have a
negative, non-cash impact of between $25.0 and $35.0 million on
its estimated fiscal 2000 pre-tax earnings. These matters were
discovered by management prior to completion of preparation of
the Company's fiscal 2000 audited financial statements. The
Audit Committee of the Board of Directors immediately instituted
an investigation of the these matters with the assistance of the
Company's outside counsel, Hodgson Russ LLP, special counsel to
the Audit Committee, Ross & Hardies, and a special investigative
team from PricewaterhouseCoopers LLP, Rent-Way's independent
auditors. The Audit Committee and Rent-Way's bank lenders also
jointly retained Ernst & Young LLP, to assist in the
investigation and to review the investigation conducted by
PricewaterhouseCoopers LLP. On the discovery of these matters,
Matthew J. Marini, the Company's Controller and Chief Accounting
Officer, was suspended; Jeffrey A. Conway, the Company's
President and Chief Operating Officer, was asked to relinquish
his operating responsibilities.
On December 12, 2000, the Company announced that based on its
investigation to that date it expected the accounting matters to
have a negative, non-cash impact of between $65.0 and $75.0
million on its estimated fiscal 2000 pre-tax earnings and
possibly require revision of its fiscal 1999 audited financial
statements. Also on December 12, 2000, the employment of Mr.
Marini was terminated. At the request of the Board of Directors,
Mr. Conway resigned effective December 31, 2000. Mr. Conway also
resigned from the Board of Directors. As a result of information
developed in the investigation, the scope of the fiscal 2000
audit was expanded, additional auditing procedures were
conducted, and the Company undertook an expanded review of its
financial reporting matters.
On May 24, 2001, the Company announced that it expected the
accounting matters to have an aggregate negative, non-cash
impact of approximately $127.0 million on estimated fiscal 2000
and audited fiscal 1999 pre-tax earnings. The Company also
announced that it was examining its fiscal 1998 audited
financial statements for possible revision.
After evaluating information revealed in the investigation and
in preparation of its fiscal 2000 year-end financial statements,
the Company had determined that improper accounting entries were
made in fiscal 2000, 1999 and 1998 that overstated assets and
income and understated liabilities and expense. These entries
were made by or at the direction of the Company's former
Controller. The entries were numerous, involved several
different accounts, were often in relatively small amounts, and
had the effect of overstating operating income. There were
several techniques used to hide these improprieties including
preparing false monthly management reports for review by senior
management, instructing lower-level employees to manipulate the
Company's management information system in order to support the
improper entries, requesting third-party vendors to issue
documents used to support the improper entries and misleading
the Company's independent auditors regarding the existence and
results of internal inventories of Company assets, among others.
The total amount of adjustments relating to these improper
entries affecting pre-tax operating income in fiscal 2000, 1999
and 1998 is $74.3 million, $21.0 million and $2.3 million,
respectively. Additional adjustments in fiscal 2000 totaling
$24.5 million consist of (1) year-end audit adjustments,
including increases in expense accruals and reserves, $4.0
million, write-offs of unrealizable or non-existent balance
sheet assets, including cash, accounts receivable, idle and
missing rental merchandise and prepaid items, $7.5 million, and
updates and reconciliations of asset and liability account
balances, $9.5 million, (2) adjustments necessary to give effect
to the operations of DPI, $2.7 million and (3) adjustments
relating to changes in accounting method or adoption of new
accounting policies, $0.8 million. With respect to fiscal 1999
and 1998, the Company has also made adjustments to conform the
application of certain accounting principles for all periods
presented. The total amount of adjustments relating to these
changes in accounting principles affecting pre-tax operating
income in fiscal 1999 and 1998 is $2.6 million and $0.6 million,
respectively. In addition, the Company has also decided to
record certain previously unrecorded recurring adjustments that
were initially identified in its preparation of its fiscal 1999
and 1998 financial statements.
The Company had previously decided not to record these
adjustments on the basis of immateriality. The Company has now
decided to give effect to these adjustments in fiscal 1999 and
1998 as appropriate. The total amount of these adjustments
affecting pre-tax operating income in fiscal 1999 and 1998 are
($0.7 million) and $3.4 million, respectively.
As a result, the Company has determined to restate its
previously reported fiscal 1999 and 1998 financial statements
and its fiscal 2000 unaudited quarterly financial statements.
RITE AID: Releases First Quarter 2001 Results
---------------------------------------------
Rite Aid Corporation (NYSE, PCX:RAD) announced results for its
first quarter, ended June 2, 2001.
Revenues for the 13-week quarter were $3.7 billion, up from $3.4
billion in the same period a year ago.
Same store sales increased 10.0 percent during the first quarter
as compared to the year-ago period, reflecting prescription
sales growth of 12.7 percent and a 5.9 percent increase in
front-end same store sales. Prescription revenue accounted for
61.6 percent of total drugstore sales, and third party
prescription sales represented 91.7 percent of total pharmacy
sales.
First quarter earnings before interest, taxes, depreciation and
amortization, LIFO, gains or losses from asset disposals and
non-cash expenses (EBITDA) amounted to $165.0 million or 4.4
percent of sales.
Excluding non-operating income of $15.0 million received in the
first quarter from the partial settlement of litigation with
certain drug manufacturers and a $4.2 million net reduction of
reserves related to a favorable legal settlement, EBITDA was
$145.8 million or 3.9 percent of sales as compared to EBITDA of
$63.1 million or 1.8 percent of sales for the first quarter of
the prior year, an increase of $82.7 million. EBITDA in the
quarter benefited from higher revenues, improvements in labor
productivity and the better leveraging of fixed costs resulting
from increased sales.
"Our associates are continuing to make substantial improvements
in the operation of our stores resulting in better service to
customers and increased operating efficiency," said Mary
Sammons, Rite Aid president and chief operating officer. "We are
pleased with our continued progress," said Bob Miller, Rite Aid
chairman and chief executive officer. "These improvements have
generated substantial sales growth and have dramatically
improved our EBITDA."
Interest expense for the quarter was $128.7 million, consisting
of $115.1 million of interest on indebtedness and capital lease
obligations and $13.6 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 first quarter was
$211.1 million or a loss per share of $0.56 cents compared to a
net loss from continuing operations of $403.4 million or a loss
per share of $1.57 in the year-ago period.
The net loss from continuing operations would have been $88.7
million or a loss per share of $0.23 cents without non-cash
charges of $188.0 million, $3.4 million in legal and accounting
fees related to the restatement, the $15.0 million litigation
settlement received, the $4.2 million net reduction of legal
reserves and a $49.8 million gain from asset disposals which
included the sale of AdvancePCS stock that the company received
as part of the consideration for the sale of its PCS Health
Systems, Inc., subsidiary last October.
Non-cash charges included $4.5 million for store closings and
impairment, $43.1 million for stock-based compensation, $132.7
million related to debt for equity exchanges and $5.9 million
from the company's share of drugstore.com's losses.
During the quarter, the company opened three new stores,
relocated four stores and closed 20 stores. Stores in operation
at the end of the quarter totaled 3,631.
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
http://www.riteaid.com.
SAFETY-KLEEN: Prepares To Market Chemical Services Business
-----------------------------------------------------------
Safety-Kleen Corp. discloses that:
"In connection with the development of plan of
Reorganization alternatives, the Company will evaluate any
and all proposals to maximize the value of the Debtors. In
connection with a recent amendment to the DIP Facility, the
Company will prepare a Chemical Services marketing book and
begin distribution to potential acquirers or strategic
partners by August 31, 2001. The Company's corporate
restructuring advisor, Lazard Freres & Co. LLC, will assist
in this effort."
As previously described, the Company provides industrial waste
services and has two divisions: (a) Chemical Services and (b)
Branch Sales and Service. The Chemical Services side of the
business provides various services to industrial and commercial
customers and governmental entities, mainly in the United States
and Canada. These services include hazardous and non-hazardous
waste collection, treatment, recycling, disposal and destruction
of hazardous and non-hazardous waste at Company owned and
operated facilities. The Branch Sales and Service side of the
business includes parts cleaner services and other specialized
services to automotive repair, commercial and manufacturing
customers. (Safety-Kleen Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SENIOR HOUSING: Issues 245,000 Shares & $2MM of Preferred Notes
---------------------------------------------------------------
Senior Housing Properties Trust (NYSE: SNH) has sold 245,000
common shares of beneficial interest at a price of $13.00 per
share pursuant to a thirty-day option granted to the
underwriters of its recent equity offering. The total
outstanding shares of SNH is now 29,362,600. In addition, SNH
issued $2,393,750 of trust preferred securities, with a
liquidation preference of $25 per share pursuant to a thirty-day
option granted the underwriters of its recent public offering of
trust preferred securities. The total outstanding amount of
trust preferred securities of SNH is now $27,393,750.
During the past thirty days, SNH has issued a total gross amount
of new long term capital of $72,178,750: (i) 3,445,000 common
shares sold at $13/share; and (ii) 1,095,750 trust preferred
securities at $25 per trust preferred security.
The lead manager of common share offering was UBS Warburg, LLC.
Co-managers were First Union Securities, Inc., Legg Mason Wood
Walker Incorporated and Tucker Anthony Sutro Capital Markets.
The joint book-running managers for the offering of trust
preferred securities were UBS Warburg and Salomon Smith Barney.
Co-managers of this offering were A.G. Edwards & Sons, Inc.,
First Union Securities, Inc., Prudential Securities, Credit
Suisse First Boston and Tucker Anthony Sutro Capital Markets.
SERVICE MERCHANDISE: Assumes Lease Of Store #110 In Pompano, FL
---------------------------------------------------------------
After reviewing the landlord's objection to Service Merchandise
Company, Inc.'s Motion seeking a further extension of the
deadline for assmption/rejection of non-residential real
property leases until plan confirmation, and discovery taken
with respect to the lease, the Debtors determined, in their
reasonable business judgment, to assume the unexpired Lease and
Sublease of non-residential real property with respect to Store
Number 110 in Pompano Beach, Florida and other related
documents.
The Lease relating to the Property was entered as of December
17, 1973, by and between Pompano Plaza, Ltd, as Landlord, and
Service Merchandise Company, Inc., as tenant. The Sublease,
dated April 30, 1982, was entered into between the Debtors, as
sublessor, and Marshalls of MA, Inc., as sublessee, with respect
to a portion of the Property.
In their motion for assumption of the leases, the Debtors tell
Judge Paine that in reaching the determination, they have
evaluated a variety of factors, with the assistance of their
real estate advisors. These factors include, but are not limited
to, the amount of capital expenditures made at each particular
location; whether a sublease transaction has been approved by
the Court and if so, whether such subleased premises has been
delivered to the subtenant; the range of estimated valuations
for each location as produced by their real estate advisors; the
marketability of each location; and the financial performance of
the retail operations at these locations.
While no single factor or combination of factors was outcome
determinative, the Debtors have determined, in their business
judgment, to seek to assume the Leases. The Debtors have
determined that the Property is vital to their business
operations and that the Property will remain part of their
business. Overall, the Debtors have determined that the benefits
attendant to assuming the Leases outweigh the costs associated
with such assumption. Accordingly, the Debtors have determined,
in their reasonable business judgement, that assumption of the
Leases is in the best interests of their estates, creditors and
interest holders and is necessary to SMCO's prospects for a
successful reorganization.
According to the Debtors' books and records, the amount of Cure
Claims owing to the Primary Landlord that the Debtors will be
required to satisfy in assuming the Leases is $202,843.35. The
Debtors submit that the Cure Claims due under the Leases will be
paid within 30 days of the later of (a) the Court's order
approving the Debtors' assumption of the Leases or (b) athe
Court's order allowing the Cure Claims.
Discovery of Defaults and Continuance of Matter
Subsequent to the filing of the motion, the Debtors became aware
of certain alleged defaults by the Landlord under the Lease. The
Debtors believe that these alleged defaults entitle them to
offset their damages for such defaults against amounts due under
the Lease, including the Cure Claims. The Landlord disputes the
existence of any defaults, the Debtors' contention as to the
time they became aware of the alleged defaults, and the Debtors'
entitlement to offset any amounts against the Cure Claims. The
matter was continued upon the mutual agreement between the
parties.
The Court's Order
With no more agreed order for continuance, the motion for
assumption of the Leases is brought before Judge Paine and the
Debtors' motion is granted in its entirety.
The Court finds that the Debtors' business judgment to assume
the Leases, including, without limitation, the Marshalls
Sublease, is reasonable. The Court finds that the conditions of
section 365(b)(1) of the Bankruptcy Code with respect to the
assumption of an unexpired lease or executory contract have been
satisfied in connection with the assumption of the Leases.
Accordingly, the Court authorizes the Debtors to assume the
Leases, free and clear of all claims against the Debtors or
defaults by the Debtors under the Lease except the Cure Claims,
which will be paid within 10 days of entry of the Court's order.
The Court also authorizes the Debtors to pay the Cure Claims in
the amount of $203,261.22 before taking into account the
disputes over the alleged defaults by the Landlord. With respect
to the alleged default, the parties reserve their rights to have
a Court of competent jurisdiction adjudicate this dispute.
(Service Merchandise Bankruptcy News, Issue No. 18; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SINGING MACHINE: Shareholders' Annual Meeting Set For Aug. 16
-------------------------------------------------------------
The Annual Meeting of Stockholders of Singing Machine Company,
Inc. will be held on Thursday, August 16, 2001 at 10:00 a.m. at
the Marriott Hotel which is located at Boca Center, 5150 Town
Center Circle, Boca Raton, Florida, for the following purposes:
(1) To elect directors to serve until the next Annual
Meeting of Shareholders and until their successors shall be
elected and qualified;
(2) To vote on a proposal to approve the Company's Year
2001 Stock Option Plan;
(3) To vote on a proposal to approve the Company's Cash
Bonus Performance Plan;
(4) To ratify the appointment of Salberg & Company, P.A. as
independent public accountants for the Company for the current
fiscal year.
(5) To transact such other and further business as may
properly come before the meeting.
Only shareholders of record at the close of business on July 6,
2001 are entitled to notice of and to vote at the Annual Meeting
or any postponements or adjournments thereof.
STAR TELECOM: Cuts Off Wholesale Carrier Services In U.S.
---------------------------------------------------------
STAR Telecommunications Inc. said that effective at the close of
business on July 13, 2001, STAR will cease providing wholesale
carrier services to its U.S. customers.
STAR will continue to provide wholesale services to customers of
its STAR Europe subsidiary, and will continue to provide retail
services via its Allstar, CEO and PT-1 subsidiaries. STAR also
announced that it is requesting from the U.S. Bankruptcy Court
for the District of Delaware an extension through Nov. 12, 2001,
of the date for its exclusive right to file a plan of
reorganization.
STAR filed a voluntary petition for U.S. Bankruptcy Code Chapter
11 bankruptcy protection on March 13, 2001. Trading in STAR's
stock was halted by Nasdaq on March 13, 2001, in accordance with
Marketplace Rule 4450(f), pending receipt and review of
additional information requested by the staff. On March 27,
2001, STAR requested that Nasdaq terminate the designation of
its securities as Nasdaq National Market securities and
requested that the staff delist its securities at the earliest
practicable date, in accordance with Marketplace Rule 4480(b).
STAR's securities were subsequently delisted by Nasdaq on
April 4, 2001. Trading in STAR's stock is extremely limited.
About STAR Telecommunications
STAR Telecommunications provides global telecommunications
services to consumers and long distance carriers. STAR provides
international and national long distance services, international
private line, dial around services and international toll-free
services.
TELENETICS CORP.: Requests Hearing to Remain on Nasdaq Market
-------------------------------------------------------------
Telenetics Corp., (Nasdaq:TLNT), a wired and wireless data
transmission and network access products provider, has filed a
request for an oral hearing before the Nasdaq Listing
Qualifications Panel to appeal the Nasdaq Listing Qualifications
Department's Staff determination to delist Telenetics'
securities from The Nasdaq SmallCap Market.
Telenetics has been notified by the staff that the company is
not in compliance with the minimum bid price requirement as set
forth in the National Association of Securities Dealers Inc.'s
("NASD") Marketplace Rule 4310(c)(4). Telenetics could face a
possible delisting of its securities as soon as July 11, 2001.
The request for the oral hearing was filed with the Panel
earlier today. Pursuant to NASD Marketplace Rule 4820(a), a
request for a hearing will stay the scheduled delisting of
Telenetics' securities pending the Panel's decision. The time
and place of such hearing will be determined by the Panel.
Commenting on the decision by Telenetics to appeal the staff's
determination and to request the oral hearing, Shala Shashani,
the chairman and chief executive officer of the company stated:
"Our company's business prospects are by far stronger today than
a year ago when we were granted the right to be listed on Nasdaq
SmallCap Market. We have just concluded our second quarter of
fiscal 2001 with record sales of over $6 million.
"We have taken significant steps to reduce our short-term debt
and accounts payable. We are improving our manufacturing
capacity and gross margins. We are committed, and believe we are
on target, to become profitable by the end of the current fiscal
year. We believe that all of these are compelling reasons to
obtain appropriate relief from the Panel regarding Nasdaq's $1
minimum bid price requirement."
If the Panel does not grant the relief that will be requested by
Telenetics at the hearing, Telenetics' securities could be
delisted without further notice. Should the company's securities
cease to be listed on The Nasdaq SmallCap Market, the company's
securities may continue to be traded on the Over-the-Counter
Bulletin Board market.
About Telenetics
Based in Lake Forest, Telenetics is a leader in the design,
production and distribution of wired and wireless data
transmission and network access products and customer-specific
communications products for customers worldwide.
Telenetics offers a wide range of industrial grade modems and
wireless products, systems and services for connecting its
customers to end-point devices such as meters, remote terminal
units, traffic and industrial controllers and remote sensors.
Telenetics also provides high-speed communications products for
complex data networks used by financial institutions, air
traffic control systems and public and private wireless network
operators.
The company is developing an advanced wireless data network
enabling a wide range of customers to reliably and economically
communicate through the Internet with their remote devices.
Additional information may be obtained at
http://www.telenetics.com.
TRANS HAWAIIAN: Tour Bus Company Plunges Into Bankruptcy
--------------------------------------------------------
One of the largest tour bus companies in Hawaii has filed for
bankruptcy, according to TheHawaiiChannel.com. Trans Hawaiian
and four of its related companies filed for bankruptcy
reorganization last Friday, listing more than $7 million in
debts and about $1 million in assets. The company's largest
single creditor is Aloha Airlines, which is owed more than $2
million. The company also owes $321,000 to the Polynesian
Cultural Center, according to KITV4 News. Trans Hawaiian and its
sister companies on all four major islands owe the state of
Hawaii more than $300,000 in back taxes, lease rent and contract
payments. Trans Hawaiian holds multimillion dollar state
contracts to run shuttle buses from airports to tourist centers
on Oahu and Maui. KITV4 News reported that former competitor
Robert's Tours & Transportation is now providing those shuttle
bus runs. (ABI World, July 11, 2001)
USG CORP.: Seeks To Continue Workers' Compensation Programs
-----------------------------------------------------------
Pursuant to 11 U.S.C. Sec. 363(b), USG Corporation seeks
authority to:
(a) continue to make payments with respect to their Workers'
Compensation Programs, including unlimited payment of
all prepetition amounts due and owing in respect to the
Workers' Compensation Programs;
(b) maintain and continue on an uninterrupted basis
prepetition practices with respect to such Workers'
Compensation Programs, including unlimited reimbursement
to the Claims Administrator for the costs associated
with administering valid Workers' Compensation Claims
brought against the Debtors;
(c) pay the annual fees and premiums associated with renewal
of the Workers' Compensation Letters of Credit, the
State Workers' Compensation Bonds and the Financial
Guarantee and Performance Bonds, but not to reimburse
any party for a draw thereunder, and;
(d) pay all prepetition fees and premiums owed to the Bond
Carriers.
The Workers' Compensation Programs
The Debtors are required to maintain workers' compensation
programs and policies under the laws of the many states in which
they operate. The Debtors are also required to provide their
employees with workers compensation coverage for claims related
to or arising from the employment with the Debtors. In
accordance with those laws the Debtors maintain Workers'
Compensation Programs in every state in which they operate
pursuant to the state law requirements.
The Workers' Compensation Programs are made up of (a) self-
insured programs in 16 states; (b) "funded programs" in Ohio,
West Virginia and Washington, as well as to cover seamen
employed on ocean-going vessels belonging to the Debtors
pursuant to the Jones Act; and (c) "high deductible, self
insured retention programs" provided by the American
International Group (Fronted Programs)in all other applicable
states. Under the Self Insured and Fronted Programs, the Debtors
pay the first $1,000,000 of each workers' compensation claim,
and either CNA Insurance Companies or American International
Group provides insurance coverage for any amount over
$1,000,000. All workers' compensation claims paid under the Self
Insured or Fronted Programs are administrated by Gallagher
Bassett Services, Inc.
Mr. Harner explains that pursuant to the Funded Programs the
Debtors participate in workers' compensation insurance programs
that are "monopolistic" in nature. The programs are funded
through, and administered by, the workers' compensation agencies
of Ohio, West Virginia and Washington, respectively. The Debtors
purchase protection and indemnity coverage to cover seamen on
marine vessels, which coverage is jointly administered by the
Debtors and the applicable insurance carrier. The Debtors pay
fixed premiums to the appropriate state agency on a quarterly,
semi-annually or annually based on the Debtors' payroll for
employees in the applicable state. The premiums are
retroactively adjusted based on a final audit of the Debtors'
payroll. All workers' compensation claims paid under such state
funded programs are administered by the applicable state agency.
The Debtors also pay premiums to the applicable carrier to
obtain marine coverage that is subject to various deductibles
per claim under the protection and indemnity coverage portions
of the Funded Programs.
Employees seeking reimbursement for work-related injuries file
their claims directly against the Debtors under all the Workers
Compensation Programs. The Administrator, under the Self-Insured
and the Fronted Programs, then pays the workers' compensation
claims up to the deductible amount. The amounts in excess of the
deductible amount are paid or reimbursed by CNA or AIG. The
Funded Programs applicable state agency pays the workers'
compensation claims in full. Amounts paid by the Claims
Administrator are adjusted daily, weekly, monthly or annually
according to the terms of the individual insurance contracts or
claims handling agreements. The Debtors then reimburse the
Claims Administrator on a daily, weekly, monthly, or an annual
basis with respect to agreements between the Debtors and prior
insurers. Fixed premiums go to CNA annually and AIG on a
quarterly basis for the excess coverage described above based
upon estimated payrolls for the period in question. The fixed
premiums are subject to an annual audit to determine actual
payroll levels.
On the petition date, there were about 407 workers' compensation
claims pending against the Debtors, due to alleged on-the-job
employees injuries. The Debtors estimate the amount payable on
those claims, asserted or potential, is about $8,100,000.
Letters of Credit and Bonds
There are two outstanding letters of credit for the states in
which the Debtors conduct business. These Workers' Compensation
Letters of Credit are issued annually and automatically renewed
unless a cancellation notice is provided by the letter of credit
issuer prior to the renewal date. The Workers' Compensation
Letters of Credit include (a) a letter of credit issued by Chase
Manhattan Bank for the benefit of the State of California Self
Insurance plans in the amount of $3,474,674 and (b) a letter of
credit issued by Chase Manhattan Bank for the benefit of the
Oklahoma Workers' Court in the amount of $650,000.
The Debtors' also provide 14 states with workers' compensation
payment guarantees in the form of bonds. These State Workers'
Compensation Bonds are security for the individual states that
liabilities from the Debtors' self-insured arrangements will be
honored. The states tend to review the amount of this liability
annually and adjust the amount accordingly, subject to the
states' minimum bonding requirements. The bonds are renewed
automatically each year unless the bond issuer give a prior
termination notice.
Financial Guarantee and Performance Bonds
The Debtors also maintain financial guarantee and performance
bonds, including among others, tax appeals bonds, customs entry
bonds, reclamation bonds, and disability bonds. The Financial
Guarantee and Performance Bonds can be tapped if the Debtors
default on their payments to bondholders. The annual premium for
the Financial Guarantee and Performance Bonds is about $50,000.
Marsh USA, Inc. and AON Risk Services are the bond brokers. The
Bond Brokers are paid premiums and other amounts due directly by
the Debtors. The Bond Brokers invoice the Debtors, the Debtors
pay and the Bond Brokers submit payment to the Bond Carriers.
The Bond Brokers receives a commission, derived from each bond's
premium, for placing the Debtors' bonds. Safeco Insurance
Company and Travelers Casualty & Surety Company are the Debtors'
bond carriers that place the bonds.
The Debtors estimate that no amounts are owed to Bond Carriers,
but additional amounts may be owed with respect to these bonds
when such bonds are renewed or certain bondholders request an
increase in the face amount of their existing bonds. Any failure
to pay the Bond Carriers prepetition or postpetition amounts
due/owing with respect to the bonds may affect the Debtors'
ability to renew the bond placed by the Bond Carriers.
Mr. Harner tells Judge Farnan continuation of these Workers'
Compensation Programs, the Bonds and related agreements, and
payment obligations are in the best interest of the Debtors,
their Creditors, and parties of interest and the Debtors seek
the authorization requested above. Any alternative agreements or
arrangements, which would likely cost much more due to the
legally required nature of workers' compensation programs and
the penalties to an employer if such programs are not provided,
Would mean (a)lawsuit brought by employees for unlimited
damages, (b) the Debtors' ongoing business in certain states
could be enjoined and (c) the Debtors' officers could be subject
to criminal prosecution. In support of these statements, Mr.
Harner cites Cal.Lab.Code sections 3706, 3708 which permits
employee lawsuits against noncomplying employers for on-the-job
injuries and providing for presumption of employer negligence
and deemed waiver of certain common law defenses. He also cites
N.Y. Work. Comp. Law sections 213, 220 which permits employee
lawsuits against noncomplying employers for on-the-job injuries
and providing for criminal liability on the part of the officers
of a noncomplying corporation. If the Debtors fail to pay
pre/postpetition amounts due to Bond Carriers it may endanger
The Debtors' ability to renew their bonds. If bonds are not
renewed and are cancelled by the Bond Carriers, the agencies in
various states could force the Debtors to cease operations.
Lastly, the Debtors have sufficient cash reserves to pay the
amounts mentioned as and when they become due, during the course
of ordinary business operations.
The relief requested herein is, according to Mr. Harner, in the
best interests of the Debtors' estates and creditors and
therefore, necessary. In comparable chapter 11 cases in the
District and elsewhere, relief similar to that requested by the
Debtor has been granted.
State Workers' Compensation
Bonds Subject To This Motion
Annual
Carrier Beneficiary Face Amount Expires Premium
------- ----------- ----------- ------- -------
Travelers Florida $945,000 01/01/02 $4,951
Travelers Mississippi 1,000,000 01/01/02 5,250
Travelers Georgia SIT 500,000 02/16/02 2,625
Travelers Oregon 300,000 03/15/02 1,575
Travelers Illinois 200,000 03/18/02 1,313
Travelers Michigan 400,000 03/18/02 2,100
Travelers Iowa 500,000 06/15/02 2,625
Travelers New Jersey 761,000 05/01/02 3,995
Travelers Nevada 238,000 07/01/01 1,250
Travelers Indiana 1,000,000 08/01/01 5,250
Travelers Louisiana 25,000 08/01/01 131
Travelers Pennsylvania 1,000,000 08/01/01 5,250
Travelers Virginia 1,000,000 09/01/01 5,250
Travelers Maryland 1,000,000 09/23/01 5,250
Travelers Oregon 1,000,000 11/01/01 5,250
Examples Of Miscellaneous Surety Bonds
Carrier Beneficiary Type Amount Premium
------- ----------- ---- ------ -------
Safeco Oklahoma Land Reclamation $1,881,860 7,427
Safeco New Jersey Fuel Tax 1,300 100
Safeco Indiana Permit 1,000 100
Safeco Redmond, WA Performance 35,807 134
Safeco NY Thruway Fin'l Guarantee 1,000 100
Safeco CW of PA Oil & Gas Well 25,000 200
Safeco CAN Minister
Of Mines Land Reclamation C$6,099,490 C$32,022
Safeco Missouri
Dept. of
Revenue Sales and Use Tax 2,660 400
Safeco Arizona Motor Carrier Tax 10,000 84
Safeco U.S. Customs Drawback & Refunds 100,000 400
(USG Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
VLASIC FOODS: Hires Peter Menikoff As Chief Financial Officer
-------------------------------------------------------------
Vlasic Foods International, Inc. asks Judge Walrath for
authority to employ Peter Menikoff as their Acting Chief
Financial Officer.
Robert A. Weber, Esq., at Skadden, Arps, Slate, Meagher & Flom
in Wilmington, Delaware, tells Judge Walrath that Menikoff has
30 years of corporate financial experience under his belt and is
more than capable of serving as the Debtors' Chief Financial
Officer.
Menikoff has been overseeing the Debtors' financial operations
since February 2000, a month after the Debtors' Chief Financial
Officer, Mitchell P. Goldstein, resigned.
Initially, a contract was executed for Mr. Menikoff's services.
The term, which expired last January 15, 2001, was extended
under a new services agreement. Under the Letter Agreement, Mr.
Weber notes, the Debtors must pay Mr. Menikoff $3,250 per day
and reimburse him for reasonably incurred work-related out-of-
pocket expenses and for the costs of reasonable long-term
lodging in Cherry Hill, as well as for other reasonable living
expenses. The Debtors will also pay invoices for the fees in the
ordinary course of business, within 30 days of the Debtors'
receipt of such invoices, without further order of the Court,
Mr. Weber adds.
Since the filing of these chapter 11 cases, Mr. Weber states,
the responsibilities of Mr. Menikoff as Acting Chief Financial
Officer has increased. The Debtors seeks the Court's authority
for the employment of Mr. Menikoff because they want to be
assured of his continued services.
Mr. Weber explains that the Debtors' ability to sustain their
ongoing operations pending approval and consummation of a
reorganization plan is dependent upon the continued retention,
active participation and dedication of key personnel like Mr.
Menikoff. (Vlasic Foods Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WARNACO GROUP: Continues To Employ Ordinary Course Professionals
----------------------------------------------------------------
The Warnaco Group, Inc. sought and obtained an order authorizing
them to continue the employment of various accountants,
independent financial and tax consultants, attorneys and/or law
firms, and other professionals, who have been assisting them in
their ordinary course business prior to the filing of these
Chapter 11 cases.
The Debtors are also authorized to employ additional
professionals, from time to time, as the need arises. The Court
only requires them to file the appropriate notices of the
supplemental list of professionals. If no objections are
interposed within 15 days after service of notices, the
employment of the new professionals are considered approved by
the Court.
At the same time, the Debtors are also allowed to make monthly
payments up to $20,000 for compensation and reimbursement of
expenses to each of the ordinary course professionals. If the
fees and expenses exceed $20,000, the firm of the ordinary
course professional is required to apply for court approval.
Within 30 days after its employment, each ordinary course
professional is required to serve an affidavit certifying that
he/she does not hold any adverse interest to the Debtors. They
are also obliged to submit a completed retention questionnaire.
These papers must be submitted to the Court, the Debtors and the
United States Trustee. (Warnaco Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WINSTAR COMM.: Rejecting Distribution Contracts With Anixter
------------------------------------------------------------
By motion, Winstar Communications, Inc. seeks authority to
reject their Equipment Purchase Agreement, Master Distribution
Agreement and Ancillary Material Agreement with Anixter, Inc.
Anixter Inc. is a leading distributor of data communication
products and electrical wire and cable. James Patton, Esq., at
Young Conaway Stargatt & Taylor, in Wilmington, Delaware,
relates that Winstar Wireless entered into the 3 distribution
contracts with Anixter last March 2000.
Under the distribution contracts, Mr. Patton explains, Winstar
and Anixter agreed to jointly market "Wireless Fiber Service",
which includes Internet and telephone service, to potential
customers. Aside from that, Mr. Patton adds, Winstar is required
to provide certain installation services, connectivity, some
maintenance and monitoring services to the buyers of Wireless
Fiber Service. Winstar is further required to reimburse Anixter
for certain marketing expenses. Winstar is also obliged to
purchase from Anixter a minimum level of supplies used for
expanding its wireless work.
But now that the Debtors are experiencing financial
difficulties, Mr. Patton notes, the Debtors decided that
maintaining these distribution contracts is no longer beneficial
to their estates. For one thing, Mr. Patton says, the Debtors
have not earned any significant income from the contracts. And
for another, Mr. Patton adds, the reimbursement obligations are
excess costs. Besides, Mr. Patton states, the Debtors no longer
need to purchase supplies from Anixter at levels required under
the distribution contracts because they significantly slowed
down the development of their network capacity.
In sum, Mr. Patton notes, the immediate rejection of the Anixter
distribution contracts is in the best interests of the Debtors.
(Winstar Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WORLDWIDE XCEED: Court Gives Go Ahead For Asset Sale
----------------------------------------------------
According to documents obtained by BankruptcyData.com, the U.S.
Bankruptcy Court approved Worldwide Xceed Group, Inc.'s motion
for the sale of substantially all Company assets. (New
Generation Research, July 11, 2001)
BOOK REVIEW: THE FAILURE OF THE FRANKLIN NATIONAL BANK:
Challenge to the International Banking System
----------------------------------------------------------
Author: Joan E. Spero
Publisher: Beard Books
Softcover: 235 Pages
List Price: $34.95
Review by: Susan Pannell
Order your own copy today at:
http://amazon.com/exec/obidos/ASIN/1893122344/internetbankrupt
In 1974 the international financial system faced its most
serious crisis since the 1930s. The stresses and shocks of that
year, including the failure of the Franklin National Bank, led
to a crisis of confidence that brought the International banking
system dangerously close to disaster. Franklin's failure forced
United States and foreign regulatory authorities to devise new
ways to avert an international banking crisis, and served as a
catalyst for later efforts to bring international banking under
public management.
The author's case study, first published in 1979 when events
were very fresh, examines the failure of the Franklin--once the
twentieth largest bank in the United States--within the context
of the bank crisis. Franklin's collapse was both cause and
effect; changes in banking regulation and practice contributed
to the bank's problems, while its collapse forced bank
regulators and policymakers to address the new international
nature of banking and to cooperate in addressing dramatic
changes in international financial markets, and, hopefully,
avoiding a repeat of the crisis.
The book begins by reviewing the economic and political factors
that led to the internalization of American banks, as many banks
became multinational corporations. This phenomenon surged during
the 1960s and 1970s, carrying the Franklin (which even acquired
a foreign owner, Italian financier Michele Sindona) with it. The
work then examines the extent to which the Franklin's demise was
caused by its international activities and, in turn, the manner
in which Franklin's insolvency threatened the international
banking system.
After analyzing the crisis's antecedents, the book moves to a
discussion of United States regulatory responses to control it,
and explains how American authorities were forced to take
innovative steps to manage the international dimensions of the
Franklin crisis. Those steps included a massive Federal Reserve
loan and the use of that loan to cover foreign branch outflows,
assistance in managing foreign exchange operations and the
eventual purchase of Franklin's foreign exchange book, and the
FDIC sale.
Not even those bold regulatory approaches sufficed to stem the
crisis, however, United States regulators were obliged to seek
assistance from other nations' financial authorities. The
cooperative approach not only prevented the crisis from
devolving into a crash, but also laid groundwork for increased
cooperation in the future. This achievement, the author
concludes, was the lasting (and beneficial) effect of the
failure of the Franklin National Bank.
The Franklin Episode, thus, revealed both the weaknesses and the
strengths of the United States' regulatory system as it applies
to international banking.
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
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For copies of court documents filed in the District of Delaware,
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bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
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S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
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Copyright 2001. All rights reserved. ISSN: 1520-9474.
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