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/raid1/www/Hosts/bankrupt/TCR_Public/010824.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, August 24, 2001, Vol. 5, No. 166 Headlines ABRAXAS PETROLEUM: Sells $10M Canadian Assets to Up Liquidity ADVANCED GLASSFIBER: S&P Fears Need to Amend Bank Covenants ALLIS CHALMERS: Q2 Net Loss Widens to $271K Due To Market Plight AMERICAN ECO: Asks Court to Compel Accounting from GECC AMES DEPARTMENT: S&P Gives D Ratings Following Chapter 11 Filing AMF BOWLING: Panel Balks at Blackstone Fees & Indemnification AMRESCO CAPITAL: Gets Delisting Notice After Filing Delinquency AT HOME CORP.: Dismisses Ernst & Young as Independent Auditors BENEDEK COMMS: S&P Junks Credit Ratings on Liquidity Concerns BOYSTOYS.COM: Cures All Mechanics' Liens & Retains Lease COMDISCO INC.: Court Okays Hiring of Arthur Andersen as Advisor CYGNION CORP: Seeks Further Extension of Exclusivity Periods EGGHEAD.COM: Withdraws Nasdaq Delisting Appeal ENCHIRA BIOTECHNOLOGY: Subject to Nasdaq Delisting on August 29 FINOVA GROUP: Sets Up Omnibus Claim Objection Protocol FINOVA GROUP: Berkadia to Extend Loan Using $6 Billion Facility FRUIT OF THE LOOM: U.S. Trustee Balks At Sealing E&Y Disclosure GENESIS HEALTH: Gets Okay to Assume PPS-GBMC Deal as Modified GNI GROUP: U.S. Trustee Reconstitutes Creditors' Committee GOLDEN OCEAN: Seeks Entry of Final Decree Effective August 8 HYNIX SEMICON.: S&P Airs Concerns Over Severe Liquidity Crunch INSIGHT HEALTH: S&P Expresses Concerns Over Hefty Debt Burden INTERNET COMMERCE: Revenues Up & Losses Continue in 2nd Quarter KEYSTONE CONSOLIDATED: Noteholders Agree to Defer Right Exercise LAIDLAW INC.: Court Okays Hiring of Logan as Claims Agent LERNOUT & HAUSPIE: Dictaphone Panel Retains Lafili as Counsel LOEWEN: Agrees to Assume Lease of Real Property in Virginia MAXICARE HEALTH: Parent Co. May See Nothing from Dispositions MIDWAY AIRLINES: Lacks Enough Cash to Satisfy Obligations MISSISSIPPI CHEMICAL: Fitch Sees Need to Reduce Hefty Debts MONEY'S FINANCIAL: Court Enters Order Confirming Joint Plan NEXTWAVE: Appeals Court Refuses Delay in Handing over Licenses NMT MEDICAL: Using Proceeds from UK Asset Sale to Repay Debts ORBITAL SCIENCES: Plans To Raise Capital & Refinance Obligations OWENS CORNING: Toyota Wants Decision on Forklift Leases -- Now PACIFIC GAS: Court Extends Time for Plan Filing to December 6 PILLOWTEX CORP.: CIT Seeks Stay Relief or Adequate Protection PLANET HOLLYWOOD: Red Ink Flows Again & SEC Filings are Delayed PSINET INC.: Travis County Objects to Exclusion of Lien Payments SAFETY-KLEEN: Files First Omnibus Objections to Proofs of Claim SIMON WORLDWIDE: Pledges Cooperation with Inquiry into Games TRISM INC.: Padlocks Specialized Big & Heavy Transport Division TRITON ENERGY: Fitch Pulls Out BB- Rating Affecting $500 in Debt VENCOR: UST Says Van Kampen's Supplement Violates Court Rules VIATEL INC.: Level 3 Picks-Up Transatlantic Network Assets WASHINGTON GROUP: Financial Woes Self-Inflicted, Raytheon Says WATTS HEALTH: S&P Assigns 'R' Rating on Financial Strength W.R. GRACE: National Medical Weighs-In on Fresenius Litigation WINSTAR COMMS: Gets Court Approval to Reject Deal with Fibernet BOOK REVIEW: GROUNDED: Frank Lorenzo and the Destruction of Eastern Airlines ********* ABRAXAS PETROLEUM: Sells $10M Canadian Assets to Up Liquidity ------------------------------------------------------------- Abraxas Petroleum Corporation (AMEX:ABP) said that successful drilling, cost effective operations, and improved prices all contributed to Abraxas meeting analysts' guidance results. For the quarter ended June 30, 2001, a 75% improvement, compared to the prior year period, in both cash flow (after interest) and losses resulted in $.28 cash flow per share and $.05 net loss per share. The Company is said to be also working aggressively to both restructure its debt to bring interest costs down and improve its balance sheet as well as continue to reduce operating costs. All of which augurs well for Abraxas' future. Bob Watson, Company CEO, commented, "In south Texas we drilled a successful offset to our previously announced Dimon #1 well confirming our 3D seismic interpretation and setting up additional offset locations. This well, the Pettus #3, is currently producing at 3 MMcfe per day with 3000# of flowing tubing pressure." Watson commented on other U.S. operations, "In west Texas two Montoya wells are now producing from our drilling agreement with EOG Resources, Inc. (NYSE:EOG) and two more wells are expected to be drilling in the second half. On our 100% owned Oates S.W. Montoya play, 3D seismic has been interpreted and one or two old well bores have been identified as re-entry candidates to test the Montoya and Devonian formations in this field at a much lower cost than drilling new wells. Operations will commence on the first of these re-entry candidates shortly. "In Wyoming, the interpretation of our 3D seismic survey is complete and four zones have been identified that are potentially productive in our Brooks Draw area. Permitting has begun on two vertical wells that will allow us to confirm the 3D seismic interpretation and test multiple zones." On Canadian operations, Mr. Watson stated, "Based on our 3D seismic acquired over the winter, over 50 locations have been identified in our core areas of Caroline and Pouce Coupe. Drilling has commenced in both a reas since break-up in June and we have successfully drilled and evaluated 4 wells, with 2 wells currently drilling. "Operations have been slowed by an extremely wet summer in Alberta but the first of these wells is expected to be on production in each of these areas shortly. In Ladyfern, we were successful in a recent lease sale in acquiring additional acreage within our 3D seismic survey that could add up to 2 additional locations to the 4 locations planned for this winter drilling season. Firm capacity has been contracted for on a planned pipeline expansion in anticipation of our drilling program this winter." As previously announced, Abraxas commenced its tender on August 1 for the remaining shares of its 48.3% owned Canadian subsidiary Grey Wolf Exploration Inc. (TSE:GWX). The tender will expire on September 5, 2001, unless extended or withdrawn. The Company also completed approximately $10 million of asset sales in Canada during the quarter and in the third quarter expects to close on another approximate $10 million of non-core asset sales in Canada. These asset sales combined with the tender for Grey Wolf are another step in the restructuring of the Company's balance sheet that will improve liquidity and earnings going forward and allow Abraxas to continue to improve its cost structure while focusing on its portfolio of drilling projects in its core areas. For the balance of 2001, the Company expects to continue its successful exploitation activities in the United States and in Canada and looks forward to its winter drilling program in the Ladyfern area. At the same time the Company will continue to review ways to improve its balance sheet and pare costs in order to maintain liquidity and enhance shareholder value. ADVANCED GLASSFIBER: S&P Fears Need to Amend Bank Covenants ----------------------------------------------------------- Standard & Poor's lowered its ratings on Advanced Glassfiber Yarns LLC. The outlook is stable. The downgrade is the result of significant declines in sales and earnings due to poor market conditions in electronics end markets. A rapid recovery is not expected due to the worldwide economic slowdown and oversupply conditions within the electronics industry. As a result, Advanced Glassfiber's financial performance is likely to remain weak, which may necessitate amendments to financial covenants in its bank loan agreement during the next several months. The ratings reflect Advance Glassfiber's good position in the technically demanding manufacture of glass fibers, offset by a relatively narrow product mix, sales to cyclical end markets, customer concentration, and an aggressive financial profile. Aiken, S.C.-based Advance Glassfiber is a leading global supplier of glass yarns used in a variety of applications including: printed circuit boards, roofing materials, filtration equipment, and reinforced tapes. Advanced Glassfiber's majority (51%) owner is unrated France-based Porcher Industries Group (Porcher), which also owns 100% of BGF Industries Inc. (B+/Stable/--), one of Advanced Glassfiber's major customers. The remainder of Advanced Glassfiber is owned by Owens Corning. Advanced Glassfiber relies on Owens Corning for critical support in the supply of specialized equipment and other areas. No disruption in operations related to Owens Corning's bankruptcy has been experienced or is expected. Although cost reductions have kept operating margins (before depreciation) fairly stable near 30%, lower sales volumes and a negative product mix shift are depressing earnings. Financial performance could come under increased pressure if sales to industrial and construction end markets (which have held up relatively well so far) slow. Also, with about a quarter of sales in currencies other than the U.S. dollar, results continue to be penalized by adverse exchange rates. Debt levels are not expected to increase significantly, as free operating cash flow should be aided by reductions in inventory (which had been built up in advance of production cutbacks) and lower capital spending. As a result, credit protection measures should remain in a range acceptable for the lowered ratings, with debt to EBITDA in the 4 times to 5x range, EBITDA interest coverage averaging about 2x, and funds from operations to debt averaging between 10% and 12%. Outlook: Stable The ratings assume successful renegotiation of bank covenants, assuring continued access to liquidity. Operating performance is expected to produce results in line with the lowered ratings. Ratings Lowered Advanced Glassfiber Yarns LLC To From Corporate credit rating B+ BB- Senior secured bank loan rating B+ BB- Subordinated debt rating B- B ALLIS CHALMERS: Q2 Net Loss Widens to $271K Due To Market Plight ---------------------------------------------------------------- Allis Chalmers Corporation posts results of operations for 2001 and 2000 reflect the business operations of OilQuip. The operations of Houston Dynamic Service, Inc., an Allis Chalmers subsidiary which is involved in the machinery repair and service business, is included from the date of the Merger on May 9, 2001. During the period February 4, 2000 (Inception) to December 31, 2000, OilQuip was in the developmental stage. OilQuip's activities for 2000 consisted of developing its business plan, raising capital and negotiating with potential acquisition targets. Therefore, the results for operations for 2000 had no sales, cost of sales, or marketing and administrative expenses that would be reflective of the ongoing company. Three months ended June 30, 2001: Sales in the second quarter of 2001 totaled $2,001,000 in line with expectations. The reason for the increase from the prior year was the Merger in May 2001. Pro forma sales in the second quarter of 2001 totaled $2,563,000 a significant decrease from $3,069,000 in the second quarter of 2000. Sales at HDS decreased to $1,222,000 compared with $1,598,000 in the prior year. HDS continues to be affected by volatile market conditions that prevail in the oil-related fields of refining, processing, chemicals and petrochemical operating throughout the Gulf Coast. Sales at MCA decreased to $1,341,000 compared with $1,471,000 in the prior year due to difficulties experienced by MCA customers in obtaining drilling permits. The permitting process has now returned to a normal schedule. The Company incurred a net loss of $271,000 in the second quarter of 2001 compared with a loss by OilQuip of $111,000 in the same period of 2000. Six months ended June 30, 2001: Sales in the first six months of 2001 totaled $2,607,000. The reason for the increase from the prior year was the Merger in May 2001. Pro forma sales in the first half of 2001 totaled $4,999,000, a slight decrease from $5,208,000 in the first half of 2000. Sales at HDS increased to $2,559,000 compared with $2,422,000 in the prior year. HDS continues to be affected by volatile market conditions that prevail in the oil related fields of refining, processing, chemical and petrochemical operating throughout the Gulf coasts. Sales at MCA decreased to $2,440,000 compared with $2,786,000 in the prior year due to difficulties experienced by MCA customers in obtaining drilling permits. The permitting process has now returned to a normal schedule. The Company incurred a net loss of $541,000 in the first half of 2001 compared with a loss by OilQuip of $172,000 in the same period of 2000. The Company incurred a pro forma net loss of $704,000 for the six months ended June 30, 2001. AMERICAN ECO: Asks Court to Compel Accounting from GECC ------------------------------------------------------- American Eco Holding Corp., et al. seeks a court order directing General Electric Capital Corporation to provide an accounting pursuant to the terms of an April 4, 2001 Consent Order lifting the automatic stay. In March the debtors filed a motion seeking authorization to use GECC's cash collateral beyond the DIP Expiration Date. AS a consequence of negotiations following the motion, the debtors and GECC entered into a Consent Order lifting the automatic stay. The stay order requires GECC to liquidate its collateral in a commercially reasonable manner. The stay order also provides that GECC will provide the debtors and Committee with a written accounting on the 15th day of each month commencing May 15, 2001. The debtors claim that GECC merely lumps all "collections" and "costs" without providing any detail as to the source of the recoveries or the basis of the costs incurred and/or paid. The debtors are represented by Michael S. Etkin and Bruce Buechler of Lowenstein Sandler PC and Laura Davis Jones, Bruce Grohsgal and Michael R. Seidl of Pachulski, Stang, Ziehl, Young & Jones PC. A hearing on the motion will be held on August 28, 2001 at 8:30 AM before the Honorable Sue L. Robinson, Wilmington, DE. AMES DEPARTMENT: S&P Gives D Ratings Following Chapter 11 Filing ---------------------------------------------------------------- Standard & Poor's lowered its corporate credit rating on Ames Department Stores Inc. to 'D' from triple-'C'-plus and lowered its senior unsecured debt rating to 'D' from triple-'C'-minus. The downgrade follows the company's filing of a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Ames's sales and cash flow have been negatively affected by the company's small position relative to the national discounters, heightened competition in a tough retail environment, difficulties related to its 1999 acquisition of Hills Stores, a heavy debt burden, and very limited financial flexibility. Ames has $4 billion in annual sales and operates 452 discount department stores in the Northeast, Mid-Atlantic, and Midwest. AMF BOWLING: Panel Balks at Blackstone Fees & Indemnification ------------------------------------------------------------- The Official Committee of Unsecured Creditors objects to the application of AMF Bowling Worldwide, Inc. to employ & retain Blackstone Group L.P. as Financial Advisors to the Debtors. The Committee believes that the present indemnification and fee provisions are unreasonable because they: a. insulate Blackstone from its own negligence; b. create a fee structure that does not provide proper incentives to Blackstone; c. guarantee a fee to Blackstone without knowing how much work Blackstone will actually perform for the Debtors and without regard for the quality or results of its efforts on the Debtors behalf; and d. reduce the recovery to unsecured creditors by requiring fee to be paid in lump sum immediately after restructuring is complete. Jonathan L. Hauser, Esq., at Troutman Sanders Mays & Valentine in Richmond, Virginia, tells the Court that the Committee objects to the agreement that the debtors indemnify Blackstone against any "losses, claims, damages, expenses and liabilities" unless judicially determined to result from bad faith, gross negligence or willful misconduct of Blackstone. The agreement further provides that Blackstone's liability shall, in no event, exceed amount of fees received under the Engagement Letter. The collective effort of this provision is to absolve Blackstone from any meaningful responsibility for its own negligence and prevent the Debtor from obtaining money damages to which they may be entitled in the event of such negligence. Mr. Hauser relates that the Committee also objects to Blackstone's proposed compensation. The monthly $200,000 fee is objectionable because it is payable without regard to the amount of work Blackstone performs during any particular month. The $7,000,000 restructuring fee is objectionable because it is payable regardless of how much work Blackstone performs or the recovery the Debtors' creditors receive pursuant to the restructuring. Moreover, the Committee strongly objects to the provision in the Engagement Letter that Blackstone's compensation is not subject to review by the Court. The Committee suggests the Application be approved only if: (a) a new indemnification provision is substituted to make Blackstone liable for its own negligence and require Blackstone to pay full amount of damages due; (b) the monthly advisory fee is credited against the restructuring fee; (c) the restructuring fee is tied to the success of the restructuring -- measured by creditor recovery; (d) the restructuring fee should be payable over 12 to 18 months following consummation of a plan of reorganization rather than payable immediately; and (e) the restructuring fee should be required to be approved by the Court at a Final Fee Hearing to ensure that Blackstone is not inappropriately compensated. Mr. Hauser points-out that Blackstone's relationship with the Debtors has been more than that of an advisor and client. Mr. Hauser observes that investment partnerships managed by Blackstone invested in AMF Bowling, Inc., and currently own 10.1% of AMF Bowling's common stock. Mr. Hauser adds that a Blackstone partner served on the Board of Directors of the Debtors from 1996 through May 30, 2001, just before the filing of the Chapter 11 cases. (AMF Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMRESCO CAPITAL: Gets Delisting Notice After Filing Delinquency --------------------------------------------------------------- AMRESCO Capital Trust (Nasdaq: AMCTE) announced that on August 16, 2001 it received a Nasdaq Staff Determination letter stating that the company had failed to comply with the filing requirements for continued listing set forth in Marketplace Rule 4310(c)(14) and that its securities were, therefore, subject to delisting from The Nasdaq National Market. The company has requested a hearing with a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance that the Panel will grant the company's request for continued listing. As a result of the company's filing delinquency, Nasdaq changed the company's trading symbol from AMCT to AMCTE effective August 20, 2001. As previously communicated, the company is liquidating its assets under a plan of liquidation and dissolution. Shareholders approved the liquidation and dissolution of the company on September 26, 2000. To date, the company has made five liquidating distributions totaling $10.60 per share. AT HOME CORP.: Dismisses E&Y and Taps PwC as New Auditors --------------------------------------------------------- At Home Corporation on August 15, 2001, dismissed Ernst & Young LLP as the Company's independent auditors. The Company said that the report of Ernst & Young LLP on the Company's consolidated financial statements for the fiscal year ended December 31, 2000 dated January 24, 2001 (except for the second and third paragraphs of Note 1, as to which the date is August 14, 2001) contained no adverse opinion or disclaimer of opinion. At Home also said that it was not qualified or modified as to audit scope or accounting principles, but such report contained an explanatory paragraph describing conditions that raise substantial doubt about the Company's ability to continue as a going concern as described in Note 1 to the consolidated financial statements. The decision to change independent auditors was approved by the Company's Audit Committee, Board of Directors and the Company's stockholders. Engagement of New Independent Auditors At Home has engaged PricewaterhouseCoopers LLP as the Company's new independent auditors to audit their financial statements, effective August 16, 2001. Prior to the engagement of PricewaterhouseCoopers LLP, At Home had not consulted with PricewaterhouseCoopers LLP during their two most recent fiscal years and through the date of this report in any matter regarding either: (A) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither was a written report provided to the Company nor was oral advice provided that PricewaterhouseCoopers LLP concluded was an important factor considered by At Home in reaching a decision as to the accounting, auditing or financial reporting issue, or (B) the subject of either a disagreement or a reportable event described in Item 304(a)(1)(v) of Regulation S-K. At Home spokeswoman Alison Bowman tells The Wall Street Journal that the reason for its decision to dismiss Ernst & Young was "benign" and that the Company's plan to switch auditors "has nothing to do with us disagreeing with [E&Y]. It's because AT&T uses PwC and our results wrap up into theirs, so it's easier to use the same auditors." BENEDEK COMMS: S&P Junks Credit Ratings on Liquidity Concerns ------------------------------------------------------------- Standard & Poor's lowered its corporate credit ratings on Benedek Communications Corp. and its subsidiary, Benedek Broadcasting Corp. to double-'C' from triple-'C'-plus. Standard & Poor's ratings on all rated debt and preferred stock are also lowered. All ratings remain on CreditWatch, where they were placed with negative implications on June 7, 2001 based on liquidity and covenant-compliance concerns. The downgrades follow Benedek's disclosure that senior secured bank lenders will likely prohibit the Nov. 15, 2001, interest payment on the 13.25% senior subordinated discount notes, even in the event that the bank group waives the June 30, 2001, covenant noncompliance. Benedek has indicated that refinancing would be unattractive and that it will attempt to negotiate a deferral of cash interest payments on the discount notes. If the company does not make the cash interest payment on the notes and is unable modify its obligation to pay cash interest, noteholders will be entitled to accelerate their debt and exercise their remedies. Benedek expects its proposed bank agreement amendment will require it to sell assets in order to bring the company into compliance with financial covenants under the current facility, as of Dec. 31, 2002. Such transactions would most likely include TV stations in the company's largest markets. While many of Benedek's stations are VHF with first-or second- place ratings, they are in smaller markets, which are generally less attractive than larger markets. The currently weak TV station business environment, which has resulted from the advertising slowdown, also suggests that any station sales will be at depressed cash flow multiples and therefore unattractive to Benedek. Standard & Poor's will continue to monitor the situation as the company proceeds with bank and noteholder negotiations. Ratings Lowered & Remaining on CreditWatch with Negative Implications Benedek Communications Corp. To From Corporate credit rating CC CCC+ Senior subordinated debt C CCC- Preferred stock rating C CC Benedek Broadcasting Corp. Corporate credit rating CC CCC+ Senior secured bank loan rating CC CCC+ BOYSTOYS.COM: Cures All Mechanics' Liens & Retains Lease -------------------------------------------------------- BoysToys.com, Inc. (OTC Bulletin Board: GRLZ), an entertainment holding company, recently moved in bankruptcy court to assume and continue its long-term lease on the Boys Toys' club location in San Francisco. The landlord opposed that motion. In doing so the landlord contended that the lessee under the lease is not BoysToys.com but rather the Company's wholly owned and non-bankrupt subsidiary, RMA of San Francisco, Inc., which operates the club. Shortly afterward, on August 8, 2001, the landlord served RMA with: (i) a three-day notice to pay the same $100,000 lien claim which the landlord had previously demanded from BoysToys.com, Inc., and (ii) a ten-day notice to remove a mechanics' lien filed by R.L. Door & Co. That lien was the last remaining of several expired mechanics' liens that the landlord had earlier demanded that BoysToys.com remove. Management has long considered BoysToys.com, Inc. to be the lessee under the lease. But Management recognized that the landlord's latest maneuverings presented an opportunity: (a) to immediately cure the two remaining breaches under the lease, (b) to thereby block the landlord's multiple attempts to terminate the lease, (c) to resolve the dispute over the lease in the shortest possible time, and (d) to minimize the litigation expense needed to protect the Company's interest in the lease. The Company has therefore agreed to and accepted the landlord's contention that the Company's wholly owned subsidiary RMA of San Francisco is the lessee under the lease. On Friday August 10, 2001, within the time allowed under the three-day notice, RMA of San Francisco, Inc. tendered the $100,000 lien-claim amount to the landlord. On Monday August 13, 2001, within the ten-day-notice period, R.L. Door & Co. agreed to execute and record a release of its mechanics' lien. Hence, it is the Company's position that all breaches asserted by the landlord have been timely cured. The Company can now submit its re-organization plan to the court and is confident it will emerge successful from its Chapter 11 filing. COMDISCO INC.: Court Okays Hiring of Arthur Andersen as Advisor --------------------------------------------------------------- Convinced that it is for the best interests of Comdisco, Inc., Judge Barliant authorizes the Debtors to employ Arthur Andersen LLP as financial advisor. Norman P. Blake, Jr., CEO of Comdisco, reveals that the Debtors chose Arthur Andersen because of its considerable expertise in assisting companies both inside and outside of bankruptcy. Mr. Blake adds that Arthur Andersen has provided them tax advisory services since 1986. Thus, the firm is familiar with the Debtors' accounting systems and business operations as well as the specific financial issues that the Debtors now face. A Retainer Agreement dated June 13, 2001, outlines the professional services Arthur Andersen will perform: (a) reviewing financial and other information as necessary to maintain an understanding of the Debtors' operations and financial position; (b) assisting the Debtors in connection with financial ' reporting matters resulting from the bankruptcy and restructuring, and any reports required by the Court; (c) reviewing cash or other projections and submissions to the Court of reports and statements of receipts, disbursements and indebtedness; (d) assisting the Debtors with the preparation for, and negotiations with, lending institutions and creditors; (e) assisting the Debtors with formulating a plan of reorganization and accompanying disclosure statement; (f) consulting with the Debtors' management and counsel in connection with other business matters relating to the activities of the Debtors; (g) assisting the Debtors with the preparation of a liquidation analysis; (h) providing expert testimony as required; (i) assisting the Debtors in preparing communications to employees, customers and creditors; (j) working with accountants and other financial consultants for the banks, committees and other creditor groups; (k) providing tax advisory services to the Debtors and their affiliates in accordance with ordinary course agreements with the Debtors; (l) assisting the Debtors with the preparation of Schedules of Assets and Liabilities and the Statements of Financial Affairs; and (m) providing such other financial and business consulting services as required by the Debtors and their legal counsel. Arthur Andersen will charge the Debtors its customary hourly rates, which range from: Partners and Principals $425 - $550 Managers and Directors $300 - $425 Associates $200 - $300 Analysts $125 - $200 With respect to State and Local Tax Engagements, Andersen receives fees based upon a percentage in the range of 20% to 25% of the cash savings achieved through reductions in the Debtors' various state and local tax obligations, or similar value-added fee arrangements. The Debtors will reimburse Arthur Andersen for reasonable out- of-pocket expenses billed in conjunction with its monthly professional fee statements. Prior to the Petition Date, the Debtors paid Andersen $1,382,789 for its financial advisory services and reimbursed $59,983 in expenses. Andersen began serving as financial advisor to the Debtors on or about June 13, 2001. Andersen also received a retainer of $250,000 from the Debtors for professional services to be rendered and expenses to be charged in connection with its services. This will be applied against post petition fees and expenses that are allowed by this Court. Jerry L. Turner, a partner in Arthur Andersen LLP, assures the Court that: (a) Neither Arthur Andersen nor any professional at Arthur Andersen holds or represents an interest adverse to the Debtors' estates. (b) Arthur Andersen is not or was not a creditor, an equity security holder or an insider of the Debtors, except that Arthur Andersen has previously rendered tax and financial advisory services to the Debtors for which it has been compensated. (c) Neither Arthur Andersen nor any professional at Arthur Andersen is or was an investment banker for any outstanding security of the Debtors. (d) Neither Arthur Andersen nor any professional at Arthur Andersen is or was, within 3 years before the Petition Date, an investment banker for a security of the Debtors, or an attorney for an investment banker in connection with the offer, sale or issuance of any security of the Debtors. (e) Neither Arthur Andersen nor any professional at Arthur Andersen is or was, within 2 years before the Petition Date, a director or officer of the Debtors or of an investment banker of the Debtors. (f) Arthur Andersen does not have an interest materially adverse to the interest of the estates or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in the Debtors or an investment banker specified in the foregoing paragraphs or for any other reason. (Comdisco Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) CYGNION CORP: Seeks Further Extension of Exclusivity Periods ------------------------------------------------------------ Cygnion Corporation will file a motion requesting an order further extending for sixty days the exclusivity periods by which the debtor has the exclusive right to propose and obtain acceptances of a plan of reorganization. The debtor has been actively marketing all of its assets. The debtor received an offer to purchase certain of its assets for in excess of $300,k000 from Santa Fe computer Products. The court approved the sale in April, 2001. The debtor continues to explore the sale of the remaining inventory of CyberGenie kit components and headsets and/or the potential for assembling and selling additional completed kits, possibly to Santa Fe. WK, the debtor's largest shareholder, holds a $3 million claim based on loans made to the debtor. WK maintains that repayment of its loans to the debtor is secured by a UCC-1 Financing Statement encumbering substantially all of the debtor's assets. Absent a favorable resolution of the sale motion and sale hearing, it is difficult for the debtor to propose a plan treatment for WK. An asset purchase agreement in the case is scheduled for September 6, 2001. Valence Semiconductor, Inc. has offered $600,000 for furniture and fixtures. The debtor believes that it must locate a new buyer and resolve the dispute with WK prior to formulating its plan. Therefore the debtor believes that a brief extension of the exclusivity periods will provide sufficient time to resolve the issues and formulate a successful plan. Philip E. Strok of Albert, Weiland & Golden LLP represents the debtor. EGGHEAD.COM: Withdraws Nasdaq Delisting Appeal ---------------------------------------------- Egghead.com(R), Inc. (Nasdaq: EGGSQ) notified Nasdaq that the Company has withdrawn its request for a hearing to appeal the Nasdaq staff determination to delist the Company's common stock. The Company also would not pursue the reverse split action approved by its Board of Directors in June. Following its delisting as a Nasdaq National Market security, the Company does not expect its common stock to be traded on the OTC bulletin board. "With our sale of assets to Fry's Electronics pending Bankruptcy Court approval, the Egghead.com site remains active; however, at the conclusion of this process, the company will no longer exist as a public entity," said Egghead.com President and CEO Jeff Sheahan. "As a result, there is no reason to appeal the delisting." About Egghead.com Egghead.com, Inc. is an Internet direct marketer of technology and related products. With an emphasis on Small- to Medium-sized Business (SMB) customers, Egghead.com offers a wide range of products from computer hardware and software, consumer electronics and office products, to sporting goods and vacation packages. Its Clearance, After Work and Auction formats offer bargains on excess and closeout goods and services. Egghead.com is located on the Internet at http://www.egghead.com ENCHIRA BIOTECHNOLOGY: Subject to Nasdaq Delisting on August 29 --------------------------------------------------------------- Enchira Biotechnology Corporation (Nasdaq: ENBC) received a Nasdaq Staff Determination on August 21, 2001, indicating that the Company fails to meet the minimum bid price requirement and market value of public float requirement for continued listing set forth in Marketplace Rules 4450 (a)(2) and 4450 (a)(5), and that its common stock is, therefore, subject to delisting from The Nasdaq National Market on August 29, 2001. The Company will request a hearing before the Nasdaq Listing Qualifications Panel to review the Staff's determination. There can be no assurance that the Panel will grant the Company's request for continued listing. The Company's request for a hearing with the Panel will stay the delisting of the Company's Common Stock pending the Panel's decision. The hearing with Nasdaq is expected to occur within 45 days of the Company's request, but could occur later. At the hearing, Enchira will request additional time to resolve the arbitration with Maxygen and will submit a plan detailing how it intends to raise its stock price above the $1.00 minimum and raise its public float over $5 million. If Nasdaq denies the Company's appeal, shares of the Company's common stock may be traded on The Nasdaq SmallCap Market, subject to certain minimum listing requirements, or on the Over- the-Counter Bulletin Board. The next step in the arbitration process with Maxygen is the final hearing before the arbitrator considers an appropriate remedy. This hearing is scheduled to take place by the end of August 2001. In the event that the Company's common stock is delisted from The Nasdaq National Market, the holders of the Company's Series B Preferred Stock may be entitled to have their shares of Series B Preferred Stock redeemed at $50.00 per share. If such right is triggered, and all holders of Series B Preferred Stock elect to exercise their redemption right, the Company would be required to pay the holders of Series B Preferred Stock approximately $15.6 million in the aggregate. Dr. Peter Policastro, President and Chief Executive Officer of Enchira noted, "The Company's stock valuation has been severely affected by the continued arbitration proceedings with Maxygen." Dr. Policastro continued, "We are trading at levels that do not take into account the potential of the Company's technologies or other assets within the Company. The Company's current valuation is also grossly out of proportion with the valuation of its peer companies, and is in fact, trading at less than cash value. We feel the proceeding with Maxygen, which we hope will be resolved within the next several months, has gravely harmed us. Therefore, we are pursuing avenues available to us to protect our shareholders, including a reverse split if it becomes necessary." Enchira Biotechnology is applying proprietary, directed evolution techniques to accelerate development and commercialization of new products for the pharmaceutical, industrial enzyme and ag-bio markets. Additional information is available at the Company's website: http://www.enchira.com FINOVA GROUP: Sets Up Omnibus Claim Objection Protocol ------------------------------------------------------ The volume of claims filed in the chapter 11 cases of the FINOVA Group, Inc. is extremely high, Janet M. Weiss, Esq., at Gibson, Dunn & Crutcher LLP, tells Judge Walsh. Without counting the claims of the indenture trustees for the Debtors' Debt Securities or the agent banks for the Debtors' Bank Claims -- which represent the vast majority of the Debtors' debt obligations in these cases -- more than 5,000 claims were filed against the Debtors' estates. The general Bar Date for filing proofs of claim was not until July 13, 2001, just one month prior to confirmation. Because of the speed with which the Debtors' Plan was confirmed, just over 5 months after the commencement of these cases and one month after the Bar Date, the Debtors have had very little time to process these claims as yet. In order to ensure that the claims resolution process will be as streamlined as possible, thereby allowing distributions upon valid claims as quickly as possible after the Effective Date, the Debtors request that the Court enter an Order that will establish uniform procedures for objections to claims: A. Step One -- Debtors' Objections Under the proposed procedures and the Plan, the Debtors will file and serve objections to claims based on any grounds permitted by the Bankruptcy Code or Rules within 60 days after the Effective Date of the Plan. In addition, supplemental Objections on different grounds may be filed against particular claims notwithstanding that such claims are also the subject of a pending or previously resolved Contemporaneously herewith, the Debtors have filed a Preliminary Omnibus Objection to Claims for Purposes of Allowance, which interposes an objection to any claim, other than a Bank Claim and Debt Securities Claim (as defined in the Plan): (i) that is not listed on the Schedules, (ii) that is listed on the Schedules as contingent, unliquidated or disputed, or (iii) as to which a proof of claim is filed in an amount greater than the amount listed on the Schedules, where such amount is not listed as contingent, unliquidated or disputed, minus any amounts that have been paid or setoff since the Petition Date. In addition, the Preliminary Objection also interposes an objection to the Bank Claims and the Debt Securities Claims only to the extent such claims exceed the Undisputed Claim Amount. B. Step Two -- Responses to Objections In accordance with sections 102(1), 105, 502(b) of the Bankruptcy Code, and Rules 3007, 9019 and 9029 of the Bankruptcy Rules, the holder of a claim that is the subject of an Objection must file a written response to the Objection in order to contest the Objection. The Response must: (i) provide a concise statement setting forth all legal and factual reasons why such claim should not be disallowed, reclassified or otherwise treated in light of the Objection, and (ii) include copies of all documents (not already attached to the proof of claim objected to) supporting the Response. The Claimants will be encouraged to file Responses which are short and specific by procedures, because under the proposed procedures they will retain the right to file additional pleadings if the Objection must be resolved by the Court. The Claimant must file and serve a Response within 20 days after the service of the Objection or such Claimant's claim will be disallowed, reduced, reclassified or otherwise treated, in accordance with the relief requested in the Objections, without further notice or hearing. C. Step Three -- Negotiation Period In an effort to resolve disputed claims on an informal basis, and to avoid burdening the Clerk with inquiries from claimants, the Debtors will include in their Objections the name, address and phone number of the appropriate attorney for the Debtors whom claimants may contact to discuss the Objection. 14. If a Response to the Objection is timely filed, the Debtors will review the Response and enter into negotiations with the respondent toward the potential consensual resolution of the claimant. If, in its Response, the respondent fails to include copies of all documents supporting the claim, the respondent shall have 10 days from a written request by the Debtors to provide such documentation. If the respondent fails to respond to the Document Request within 10 days of the written request, the claim that is the subject of the Document Request will be automatically disallowed, reduced, reclassified or otherwise treated in accordance with the relief requested in the Objection, without further notice or hearing as if a Response had never been filed. 15. After a review of claims as to which Responses are filed, the Debtors will amend or withdraw their Objections to claims to the extent that communications with Claimants and their Responses lead the Debtors to conclude that such claims, as stated by the claimants in their proofs of claim or portions thereof, are valid. The Debtors and Claimants may also file stipulations in the event a consensual resolution of a claim is reached. D. Step Four -- Hearing, If Necessary If a Claimant timely files and serves a Response complying with the above described procedure, and if the Claimant and the Debtors are unable to agree upon a consensual treatment of the subject claim within 30 days after filing of the Response (or, if a Document Request is served, within 30 days after compliance with the Document Request) then either party may schedule a hearing with respect to the Objection and the Response, which hearing may be combined with other hearings on claims objections and other matters heard at omnibus hearing dates or held on such other dates as this Court may order. In order to encourage streamlined and efficient Objections and Responses, the Debtors propose that the filing of such pleadings be without prejudice to the parties' rights to file appropriate supplementary pleadings in the event that a hearing on a particular claim is necessary. These procedures are not intended to affect the burden of proof or the burden of persuasion that would otherwise be applicable in such a hearing. The Debtors submit these procedures are designed to ensure the efficient and cost-effective disposition of the objections to claims by providing a simple and streamlined procedure for their resolution. If approved, the procedure will facilitate the expeditious reconciliation of claims filed against the Debtors, while reducing unnecessary expense and effort by the Debtors, their creditors, other parties in interest and this Court. (Finova Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) FINOVA GROUP: Berkadia to Extend Loan Using $6 Billion Facility --------------------------------------------------------------- FleetBoston Financial's Fleet Securities unit has successfully completed the syndication of the $6 billion securitization facility for Berkadia LLC. Berkadia, a joint venture between Berkshire Hathaway Inc. and Leucadia National Corp., will use the proceeds from the facility to fund a loan to Finova Capital Corp., as part of Finova Group, Inc.'s bankruptcy reorganization plan, which became effective on August 21, 2001. "Fleet's capital market capabilities were essential to completing this transaction," said Warren E. Buffett, Chairman, Berkshire Hathaway Inc. "They've been a great resource in my 30-year association with them, and they delivered outstanding results in this very important deal." Fleet acted as sole arranger for the transaction; 17 other institutions participated in the deal. "We're very pleased to have led this financing for Berkadia. This transaction is one of the largest securitizations ever arranged," said Timothy J. Conway, Managing Director, head of Capital Markets at FleetBoston Financial. "We raised in excess of $6 billion in the global capital markets at attractive pricing levels for the issuer through an innovative structure which provides very competitive returns for investors." By the time of closing, Berkadia's requirements were for $5.6 billion in financing. FleetBoston Financial is the seventh-largest financial holding company in the United States. A diversified financial services company with assets exceeding $200 billion, Fleet offers a comprehensive array of innovative financial solutions to 20 million customers in more than 20 countries and territories. Among the company's key lines of business are: corporate banking, including capital markets/investment banking and commercial finance; retail banking, with nearly 1,700 branches and more than 3,800 ATMs in the Northeast; investment services, including nationwide brokerage; and full-service banking through more than 250 offices in Latin America. FleetBoston Financial is headquartered in Boston and listed on the New York Stock Exchange (NYSE: FBF) and the Boston Stock Exchange (BSE: FBF). FRUIT OF THE LOOM: U.S. Trustee Balks At Sealing E&Y Disclosure --------------------------------------------------------------- Patricia A. Staiano, Esq., the United States Trustee for Region III, objects to Fruit of the Loom, Ltd.'s request to file E&Y's supplemental disclosure under seal. Ms. Staiano points to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure: "An order approving the appointment of attorneys, accountants, appraisers, auctioneers, agents or other professionals shall be made only on application of the trustee of committee. The application shall be filed and, unless the case is a chapter 9 municipality case, a copy of the application shall be transmitted by the applicant to the United States Trustee. The application shall state the specific facts showing the necessity for the employment, the name of the person to be employed, the reasons for the selection and to the best knowledge of the applicant, all of the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee or any person employed in the office of the U.S. trustee. The application shall be accompanied by a verified statement of the person to be employed setting forth the person's connections with the debtor, creditors, 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." In addition, Federal Rule of Bankruptcy Procedure 9018 provides: "On motion or on its own initiative, with or without notice, the court may make any order which justice requires (1) to protect the estate or any entity in respect of a trade secret or other confidential research, development, or commercial information, (2) to protect any entity against scandalous or defamatory matter contained in any paper filed in a case under the Code, or (3) to protect governmental matters that are made confidential by statute or regulation. If an order is entered under this rule without notice, any entity affected thereby may move to vacate or modify the order, and after a hearing on notice the court shall determine the motion. As the party seeking relief, Fruit of the Loom, has the burden of demonstrating (as a threshold matter) that the generic provisions of Rule 9018 can be used to trump E&Y's obligation to disclose connections pursuant to Rule 2014(a). Ms. Staiano argues that Fruit of the Loom does not cite a single published or unpublished opinion which supports the far-fetched notion that Rule 9018 can be used to modify Rule 2014(a), a rule that is grounded in the strong, compelling presumption of open access to judicial records and proceedings in civil matters. Even assuming Fruit of the Loom is successful in making the threshold showing, the firm still has the burden of demonstrating that the information sought to be sealed in the Supplemental Affidavit is the type of information that is entitled to protection. Based on the information known to the UST, the proposed Supplemental Affidavit indicates (at most) that E&Y has a connection with an unidentified party who may be involved in an event related to the Debtors. The details and parameters of the event are also unspecified. The type of event involved is an event that occurs in nearly every Chapter 11 case. To the extent that Fruit of the Loom believes that a reader of the Supplemental Affidavit who is "in the know" may draw inferences regarding the possible nature of the event or the identity of the party, such belief merely serves to indicate that the allegedly confidential information is already in the public domain and therefore not entitled to protection. Furthermore, if Fruit of the Loom is successful in demonstrating that the supplemental affidavit contains material which may be protected under section 107(b) and Rule 9018, the relief granted should be narrowly tailored to protect such material - the entire document should not be filed under seal where a few lines may be redacted. The UST believes that the contents of the Supplemental Affidavit do not justify the extraordinary relief requested. E&Y and Fruit of the Loom apparently believe that Ms. Staiano means business. To pacify her, James J. Doyle, partner at E&Y, submits a redacted affidavit with several lines obscured by black marker. Mr. Doyle states that in connection with his firm's retention by Fruit of the Loom, E&Y requested the names of entities which may have had a connection with Debtors. The retention affidavit set forth the connections which were known to E&Y. E&Y committed to advise the Court if additional relationships became known to E&Y. Mr. Doyle states that E&Y currently serves as auditors for a publicly traded company that is potentially interested in purchasing certain assets from Fruit of the Loom. E&Y cannot reveal the identity of the potential purchaser at this time, as it is a publicly traded company and its interest in the proposed transaction may be material non-public information not to be selectively disclosed. In order for the potential purchaser to pursue the proposed transaction, it is essential that it have access to services that can only be provided by its auditors. If E&Y were not able to provide such services, the potential purchaser would either have to forego the transaction or replace E&Y as it auditors-a difficult and costly transition. As a result, while the retention affidavit states that "E&Y will not accept any engagement which would require E&Y to represent an interest adverse to Debtors in any way relating to the matters in connection with which E&Y is to be engaged in these Chapter 11 cases," E&Y hereby modifies that statement to make clear that it intends to provide the services described in this affidavit to the potential purchaser. The services E&Y proposes to render to the potential purchaser are unclear as the vast majority of the text is obscured with black ink. However, E&Y assures the Court that it will establish appropriate internal procedures to ensure that E&Y employees and professionals providing services for Fruit of the Loom will not compromise the interests of the potential purchaser and vice versa. Mr. Doyle informs the Court that Fruit of the Loom has consented to E&Y's provision of services to the potential purchaser and the potential purchaser has approved the arrangement as well. (Fruit of the Loom Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENESIS HEALTH: Gets Okay to Assume PPS-GBMC Deal as Modified ------------------------------------------------------------- To retain the benefits derived from a Joint Venture known as PPS-GBMC which is in jeopardy due to the Genesis Health Ventures, Inc.'s filing for bankruptcy and holding of Joint Venture funds in the amount of $681,032 (the Cure Amount), the Debtors sought and obtained the Court's approval of a settlement with GBMC which involves assumption of the Operating Agreement with modifications and payment of the Cure Amount. On or about October 15, 1996, Professional Pharmacy Services, Inc., a wholly-owned subsidiary of GHV and a Debtor in these chapter 11 cases, and GBMC Agency, Inc., an entity unrelated to the Debtors, formed a limited liability company known as PPS- GBMC Joint Venture, LLC. by way of an Operating Agreement, as amended by the First Addendum to Operating Agreement for PPS- GBMC Joint Venture, LLC, dated as of October 1, 1998. The Debtors have been advised that Agency is directly affiliated with GBMC which is one of the largest hospitals in the Greater Baltimore, Maryland area. The Joint Venture owns and operates two retail pharmacies on the campus of the Greater Baltimore Medical Center. The Debtors derive several substantial benefits from their involvement in the Joint Venture. First, the Joint Venture is a high volume, high margin pharmacy which produces considerable amounts of profit annually, fifty percent of which inures to the benefit of PPS. It produces an estimated annual positive cash flow of $275,000, and an estimated annual earnings before interest, taxes, depreciation, and amortization (EBITDA) of $520,000. Second, PPS receives a management fee of 3% of the net sales of the Joint Venture which results in approximately $144,000 in annual revenues to PPS. In addition to the direct benefits, the Debtors enjoy an extremely lucrative global relationship with GBMC. In fact, GBMC represents a significant strategic partner for the Debtors as it is one of the largest referring hospitals to the Debtors' inpatient operations in Maryland. Moreover, the Debtors provide discharge planning services to GBMC for which the Debtors receive substantial added revenues. After GHB filed for bankruptcy, Agency and GBMC raised certain issues with the Debtors concerning the impact of the Debtors' filing of their chapter 11 cases on their respective relationships. Specifically, the Operating Agreement contains Bankruptcy Default Provisions pursuant to which the voluntary filing of a chapter 1l case by a member of the Joint Venture may cause the dissolution of the Joint Venture at the non-defaulting party's option. Thus, Agency and GBMC asserted that the Debtors' filing of their chapter 11 cases triggered the Bankruptcy Default Provisions of the Operating Agreement. The Debtors, on the other hand, maintain that the provisions contained in section 365(e)(1) of the Bankruptcy Code render the Bankruptcy Default Provisions unenforceable. In addition, while the Operating Agreement provides that the funds and operations of the Joint Venture must be segregated from the funds and operations of PPS and from those of any other entity related to PPS, until recently, the funds and operations of the Joint Venture were combined with those of GHV. As of the Commencement Date, GHV held $681,032 of the Joint Venture's funds which is due and owing to the Joint Venture (the Cure Amount). These issues threatened the lucrative global relationship the Debtors maintained with GBMC. Negotiations among the Debtors, Agency, and GBMC took place and the parties ultimately reached a settlement of all outstanding issues. First, the Debtors have agreed to assume the Operating Agreement with modifications. Second, within thirty days after the entry of the Court's order approving this Motion, GHV will pay the Cure Amount to the Joint Venture. Agency, on the other hand, will (i) waive its rights under the Bankruptcy Default Provisions, and (ii) concurrent with payment of the Cure Amount, execute an agreement extending the term of the Operating Agreement for an additional five years, until December 31, 2006. The Debtors tell the Court that "assumption of the Operating Agreement, as modified, will afford PPS with (i) a fifty percent share of the Joint Venture's annual profits which is estimated at an annual positive cash flow of $275,000, and an annual EBITDA of $520,000, and (ii) a management fee of three percent of the Joint Venture's gross sales estimated at $144,000 on an annual basis, for an additional five years, until December 31, 2006." After reviewing the alternatives, the Debtors have determined in the exercise of their business judgment that the Settlement is in the best interest of their estates and creditors. (Genesis/Multicare Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) GNI GROUP: U.S. Trustee Reconstitutes Creditors' Committee ---------------------------------------------------------- The United States Trustee reconstitutes the Official Committee of Unsecured Creditors appointed in The GNI Group, Inc., et al., chapter 11 proceeding. The seven-member panel consists of: 1. Loeb Partners Corporation c/o Robert Grubin 61 Broadway, 24th Floor New York, NY 2. State Street Research & Management Co. c/o Michael Rolnick One Financial Center 31st Floor Boston Mass 02111 3. Conseco Capital Management, Inc. c/o Carl Mabry and Eric Johnson 11825 N. Pennsylvania Street Carmel, Indiana 46032 4. CBSL Transportation services, Inc. c/o Edwin P. Bunyea 4750 S. Merrimac Avenue Chicago, IL 60638 5. Rhodia, Inc. c/o Doreen Wilson-Bailey 259 Prospect Plains Road Cranbury, NJ 08512 6. Air Products & Chemicals Inc. 7201 Hamilton Blvd. Allentown, PA 18195 7. The Bank of New York c/o Romano Peluso 101 Barclay Street - 21W New York, NY 10286 GOLDEN OCEAN: Seeks Entry of Final Decree Effective August 8 ------------------------------------------------------------ Golden Ocean Group Limited, et al. filed a motion seeking entry of a final decree in the case effective August 8, 2001. The plan became effective on about October 10, 2000. The plan has been consummated and the Reorganized debtors have processed all claims and have made pro rata payments in accordance with the confirmed plan to holders of allowed claims. The debtors are represented by Latham & Watkins, Los Angeles, CA and Pachulski, Stang, Ziehl, Young & Jones, PC, Wilmington, DE. HYNIX SEMICON.: S&P Airs Concerns Over Severe Liquidity Crunch -------------------------------------------------------------- Standard & Poor's placed its single-'B' long-term corporate credit ratings on Korea-based Hynix Semiconductor Inc. (Hynix) and its subsidiary Hynix Semiconductor Manufacturing America Inc. on CreditWatch with negative implications. The CreditWatch placement reflects Standard & Poor's heightened concerns over the severity of Hynix's liquidity difficulties in the face of a recent plunge in the price of dynamic random- access memory products--the company's mainstay business. Korea Exchange Bank, Hynix's main creditor bank, is reported to be discussing a new financial assistance package with the company's other creditor banks. Standard & Poor's will review its ratings on Hynix and Hynix Semiconductor Manufacturing America as details of the refinancing package become available. Ratings Placed On CreditWatch With Negative Implications: Hynix Semiconductor Inc. Corporate credit rating B Hynix Semiconductor Manufacturing America Inc. Corporate credit rating B Senior secured debt B INSIGHT HEALTH: S&P Expresses Concerns Over Hefty Debt Burden ------------------------------------------------------------- Standard & Poor's affirmed its ratings on Insight Health Services Corp. and removed the ratings from CreditWatch, where they were placed on Feb. 2, 2001 given the company's exploration of strategic alternatives. The company recently signed a definitive agreement to be purchased for $470 million in a leveraged buyout transaction. Ratings on the proposed financing will be forthcoming when the specifics on the financing are determined. Standard & Poor's will withdraw the ratings on the existing bank debt and subordinated debt when they are retired as the deal is expected to close sometime in mid-September. The outlook is stable. The speculative-grade ratings on Insight reflect its leading position in the mobile and fixed site imaging services field, offset by concerns regarding its niche position in a narrow field and heavy debt burden. Newport Beach, Calif.-based Insight Health Services Corp. is one of the nation's leading independent diagnostic-imaging services companies, providing diagnostic-imaging and management services in 30 states, through a network primarily consisting of 84 mobile and 68 fixed-site MRI facilities. It has a meaningful presence in 11 regions, with core markets that include California, Texas, New England, the Midwest, and the Southeast. Over the past several years, MRI has become a definitive diagnostic tool and an acceptable first-line diagnostic procedure that ultimately reduces overall health care spending. This recognition has led to double-digit industry volume growth in the number of scans. Operators, like Insight, benefit from increasing volume, particularly considering their high fixed- cost structure. Operating margins at 40% and high cash flows support a high degree of leverage and interest burden. Still, given this leverage, Standard & Poor's remains concerned with the pressures to contain health care spending as this business is highly dependent on third-party reimbursement from the government and managed care firms. Insight had been highly levered because of prior ownership changes. Presently, The Carlyle Group and GE Medical Systems will sell their approximate two-thirds ownership in the company to a group led by J.W. Childs, The Halifax Group, and management for $468 million. This will be funded primarily with debt, although the equity partners will infuse approximately $100 million in new equity. Still, under this capitalization plan, funds flow to total debt is expected to average about 15% and interest coverage is expected to be about 2.7x, both consistent with the current rating. Outlook: Stable Standard & Poor's does not expect the rating to change over the intermediate term, as the company must continue to successfully operate under a heavy debt burden in a challenging health care environment. Ratings Affirmed & Removed From CreditWatch Insight Health Services Corp. Corporate credit rating B+ Senior secured bank rating B+ Subordinated debt B- INTERNET COMMERCE: Revenues Up & Losses Continue in 2nd Quarter --------------------------------------------------------------- Internet Commerce & Communications (OTC Pink Sheets: ICCX), a national e-commerce/Web solutions and connectivity company, is reporting that revenue for the second quarter 2001 was up 11% compared to the second quarter 2000, to $13.0 million. The company is currently operating under protection of Chapter 11-bankruptcy code. Gross profits for the quarter were $5.9 million, an improvement of 2% over the same time period in 2000. SG&A for the second quarter was $6.8 million, compared to $9.5 million for the second quarter in 2000, reflecting a 28% decrease. Operating Income for the Company in the second quarter was ($940) thousand. In the same period in 2000, Operating Income was ($3.7) million, thus the company showed a 75% improvement in 2001. Year-to-date revenue is $27.0 million, which is a 14% increase over the first six months of 2000. Gross profits for the Company are $11.2 million for the first and second quarters. This is a 13% increase over same period in 2000. SG&A declined 20%, decreasing from $17.6 million for 2000 to $14.0 million in 2001. Year-to-date Operating Income is ($2.9) million, showing a 63% improvement from the same period in 2000. Douglas Hanson, IC&C's Chairman and CEO, said, "Even though the company felt it necessary to file for protection under Chapter 11, we have seen a tremendous improvement in our year over year results. We have experienced a very good quarter and continue to see improvements. Our SG&A decreased 20%, and our revenue increased 11% proving that we are making strides in our operating performance." Hanson further stated, "Our transaction with EarthLink remains on schedule but we will not see the cash from that transaction until the fourth quarter. I am continually gratified with the way our employees perform their duties and work to bring excellent services to the small and mid-size business market." About Internet Commerce & Communications Denver-based Internet Commerce & Communications is a national e- commerce and connectivity company, focusing on fully integrated solutions for small and medium-sized enterprises (SME's). The Company specializes in e-business applications; consulting, hosting, co-location, and web solutions, including design and marketing; and high-speed access, including DSL service. For more information about IC&C, visit http://www.iccx.net KEYSTONE CONSOLIDATED: Noteholders Agree to Defer Right Exercise ---------------------------------------------------------------- Keystone Consolidated Industries, Inc. (NYSE: KES) announced that, pursuant to its previously reported consent solicitation, holders representing more than 75% of the principal amount of its $100 million 9 5/8% Senior Secured Notes have agreed to defer the exercise of such holders' right to accelerate the payment of the Notes pursuant to the acceleration provisions of the governing indenture and to defer directing the Trustee of the Notes to take any action or exercise any remedy available to the Trustee prior to November 1, 2001, as a result of Keystone's failure to make the interest payment on the Notes due August 1, 2001. As previously announced, Keystone has received an agreement from its primary revolving credit lender to forbear remedies available to it solely as a result of Keystone's failure to make the August 1, 2001 interest payment on the Notes. Keystone continues to evaluate possible restructuring alternatives to improve its overall financial condition, including the potential conversion of the Notes to equity securities of Keystone. In this regard, Keystone has entered into discussions with financial advisors to assist the Company in the process of evaluating possible restructuring alternatives. Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The company is a leading manufacturer and distributor of fencing and wire products, carbon steel rod, industrial wire, nails and construction products for the agricultural, industrial, construction, original equipment markets and the retail consumer. Keystone is traded on the New York Stock Exchange under the symbol KES. LAIDLAW INC.: Court Okays Hiring of Logan as Claims Agent --------------------------------------------------------- Judge Kaplan concurs with Laidlaw Inc.'s observation that the Clerk is not be equipped to effectively and efficiently docket and maintain proofs of claim that will be filed by Laidlaw's thousands of creditors, potential creditors and other parties- in-interest. To effectively and efficiently receive, docket, maintain, photocopy and transmit proofs of claim, the Debtors will employ an independent third party as an agent of the Court. By this Application, the Debtors sought and obtained Judge Kaplan's permission to employ and retain Logan & Company, Inc. as its claims and balloting agent. Logan is a data processing firm that specializes in claims processing, noticing and other administrative tasks in Chapter 11 cases. Specifically, Logan will: (a) serve as the Court's notice agent to mail notices to estate's creditors and parties-in-interest, (b) provide computerized claims, objection and balloting database services, (c) provide expertise and consultation and assistance in claim and ballot processing and with other administrative information related to the Debtor's bankruptcy cases, including assisting in preparation of the Debtor's schedules and statement of financial affairs. The Debtors believe that Logan's assistance will expedite service of 2002 notices, streamline claims administration process and permit Debtors to focus on their reorganization efforts. At the Debtor's or the Clerk's Office's request, Logan agrees to: (a) Relieve the Clerk's Office of all noticing under any applicable rule or bankruptcy procedure and processing of claims including: (i) Initial notice of filing; (ii) 341(a) meeting of creditors (iii) Bar date; (iv) Objections to claims; (v) Notice of any hearings on a disclosure statement and confirmation of a plan of reorganization; (vi) Other miscellaneous notices to any entices, not necessarily the creditors, that the Debtors or Court may deem necessary for an orderly administration of the Chapter 11 cases. (b) At any time, upon request, satisfy the Court that Logan has the capability to efficiently and effectively notice, docket and maintain proofs of claim; (c) Mail a notice of bar date approved by the Court for filing of proof of claim and a form for filing proof of claim to each creditor notified of the filing; (d) File with the Clerk's Office a certificate of service, within 10 days after each service, which includes a copy of the notice, a list of persons to whom it was mailed and the date mailed; (e) Maintain all proofs of claim filed; (f) Maintain official claims registers by docketing all proofs of claim on a claims register, including, but not limited to the following information: (i) the name and address of the claimant and agent, if agent filed proof of claim; (ii) the date received; (iii) the claim number assigned; (iv) the amount and classification asserted by such claimant; (g) Receive and maintain original proofs of claim in correct claim number order, in an environmentally secure area and protect the integrity of these original documents from theft and/or alteration; (h) Transmit to the Clerk's Office an official copy of the claims registers and provide Clerk's Office with any information regarding the claims register upon request; (i) Maintain an up-to-date mailing list for all entities that have filed proofs of claim, which shall be available upon request of a party in interest or the Clerk's Office; (j) Be open to the public for examination of the original proofs of claim without charge during regular business hours; (k) Record all transfers of claims pursuant to Fed. R. Bankr. P. 3001(e) and provide notice of the transfer as required by Fed. R. Bankr. P. 3001(e); (l) Act as the Debtors' solicitation agent in respect of any plan of reorganization and to receive and tabulate ballots in connection therewith; (m) Make all original documents available to the Clerk's Office on an expedited basis; (n) Comply with applicable state, municipal, and local laws, orders, regulations, and requirements of Federal Government Department and Bureaus; and (o) Promptly comply with such further conditions and requirements as the Clerk's Office may hereafter describe; In addition, Logan will also assist the Debtors with: (i) the preparation of their schedules, statements of financial affairs and master creditor lists, if necessary, and any amendments thereto; and (ii) if necessary, the reconciliation and resolution of claims. Kathleen M. Logan, president of Logan & Company, assures Judge Kaplan that: (a) Logan is not employed by the Government and shall not seek any compensation from the Government; (b) By accepting employment in the case, it waives any rights to receive compensation from the Government; (c) It is not an agent of the United States and is not acting on behalf of the United States; (d) It will not misrepresent any fact to the public; and (e) It will not employ any past or present employees of the Debtors for work involving the Debtors' chapter 11 cases. Logan will charge the Debtors' standard prices for its services, expenses and supplies at the rates or prices in effect on the day such services and supplies are provided. Logan also agrees not to increase its prices, charges, and rates for a period of one year from the date of this agreement. The Debtors will pay Logan for any necessary and reasonable incurred out-of-pocket expenses for transportation, lodging, meals and related items. The Debtors agree to make an advance payment to Logan to be applied to the final billing in an amount equal to $100,000. At the end of each calendar month, Logan will submit an invoice to the Debtors. The amount invoiced is due and payable upon receipt. If any amount is unpaid as of 30 days from receipt of the invoice, the Debtors will pay a late charge, which is 1 and 1/2% interest of the amount unpaid. But in case the invoiced amount is disputed, the Debtors shall send Logan a notice within 10 days from receipt. (Laidlaw Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) LERNOUT & HAUSPIE: Dictaphone Panel Retains Lafili as Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors of Dictaphone Corporation asks Judge Wizmur to approve its retention of Lafili, Van Crombrugghe & partners as special Belgian counsel for the Dictaphone Committee to assist and represent it in the Concordat. The Dictaphone Committee also asks that Judge Wizmur enter an order authorizing the Dictaphone Committee to retain Lafili effective as of February 28, 2001, as the Dictaphone Committee's special Belgian counsel for the purpose of providing advice to the Dictaphone Committee on Belgian law in connection with various litigation, corporate mergers and acquisitions, intellectual property, labor law, tax law, finance law, and securities matters pertinent to the Concordat. Lafili is described by the Committee as a highly esteemed Belgian law firm with considerable experience in representing entities involved in concordat proceedings. Due to Lafili's substantial expertise and knowledge in the field of insolvency and restructuring and the Dictaphone Committee's need for on-going legal advice concerning the Concordat, the Dictaphone Committee believes that retention of Lafili as special counsel is in the best interests of the Dictaphone Committee and Dictaphone's creditors. Francis Vanhoonacker is the Lafili attorney who will be primarily responsible for the representation of the Dictaphone committee. Although the Dictaphone Committee has employed Cadwalader Wickersham & Taft as its primary attorneys in these chapter 11 cases, Lafili is intimately familiar with Belgian laws, rules and practices concerning the Concordat and is therefore able to assist Cadwalader in representing the Committee. The professional services to be rendered by Lafili will include: (a) Litigation of any and all issues in connection with the Concordat, including trial (other than those that may be pending before this Court, which Cadwalader will handle); and (b) Such other matters and advice as the Dictaphone Committee may request from time to time in connection with Belgian issues. Subject to Court approval, Lafili will charge for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates in effect on the date services are rendered. The hourly rate charged by Lafili professionals differ based upon, among other things, such professional's level of experience. The current hourly rates charged by Lafili are approximately $200 to $350 per hour for partners, and $100 to $200 per hour for associates. Mr. Francis Vanhoonacker avers that Lafili is a disinterested person with respect to this case, and neither holds nor represents any interests adverse to the Committee on the matters for which employment is sought. (L&H/Dictaphone Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOEWEN: Agrees to Assume Lease of Real Property in Virginia ----------------------------------------------------------- As previously reported, the Mullins Family filed a motion in 2000 seeking the Court's authority to compel The Loewen Group, Inc. to assume or reject a Memorandum of Understanding or in the alternative, that the Movants be released from the noncompetion convenants contained in certain agreements referenced in the Memorandum of Understanding. The Mullins Family told the Court that the Debtors had defaulted on payment but with neither assumption nor rejection of the Agreement, the Mullins Family was obliged not to compete. The parties later resolved the matter by way of a Stipulation and Order approved by the Court. Pursuant to the Stipulation and Order, the Debtors would not make any further payments under, and will not attempt to enforce any noncompetition covenants set forth in the Memorandum of Understanding or the Noncompetition Agreements between LGII and various members of the Mullins Family. The Stipulation and Order also states that the Lease Agreement, dated May 10, 1994, by and between the Mullins and LGII is a separate, freestanding unexpired lease of nonresidential real property that is not integrated with the Memorandum of Understanding, and the Debtors will neither make any further payments nor attempt to enforce any noncompetition covenants set forth in the Memorandum of Understanding and the Noncompetition Agreements entered in 1994 with the members of the Mullins Family. Recently, John T. Mullins and Barbara A. Mullins (the Landlord) filed a motion to compel the Debtors to assume or reject the Lease. The Debtors objected on the grounds that they were unable to fully assess the costs and benefits of assuming the Lease, including in particular the purchase option provisions of the Lease. After negotiations between the parties, the Court entered an order providing that, if the Debtors do not file a motion to assume or reject the Lease on or before August 1, 2001, the lease will be deemed rejected. Given this, the Debtors filed a motion dated August 1, 2001 for assumption of the Non-residential real property lease with John T. Mullins and Barbara A. Mullins, pursuant to section 365 of the Bankruptcy Code. The Lease pertains to real property located in Fredericksburg, Virginia. The Debtors currently operate a funeral home business on the Property. The term of the lease runs from May 10, 1994 through May 31, 2004. The annual rent under the Lease is the greater of (a) eight percent of the annual gross revenues less cash advances and discounts generated at the Property or (b) $240,000. The Lease also provides that LGII has the option to purchase the Property at the end of the term of the Lease in May 2004 for $3.5 million. In the event that LGII does not exercise the Purchase Option, the Mullins have the option to compel LGII to purchase the Property for $3.5 million within 90 days following the initial term of the Lease. The Debtors have determined, in their business judgment, that the Property is integral to their ongoing business operations. The funeral home business operated by the Debtors on the Property provides them with significant cash flow. Furthermore, the Debtors do not believe that any monetary defaults exist under the Lease, and accordingly, no cure amounts will need to be paid in connection with the assumption of the Lease. The Debtors have determined that the cash flow generated by the Property and the value of the Property justify their potential expenditure of $3.5 million to purchase the Property in the year 2004 pursuant to the Purchase Option. Therefore, the Debtors have concluded, in the exercise of their business judgment, that it is in the best interests of their estates and creditors to assume the Lease. (Loewen Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) MAXICARE HEALTH: Parent Co. May See Nothing from Dispositions ------------------------------------------------------------- Maxicare Health Plans Inc. (OTCBB:MAXIQ) announced its operating results for the second quarter of fiscal year 2001, ended June 30, 2001. For the second quarter of 2001, the company reported a net loss of $4.9 million, compared with a net loss of $4.7 million for the second quarter of 2000. The operating losses were attributable to sharply increased healthcare expenses that exceeded the company's ability to increase its premiums. The net loss for the quarter was reduced by the extent to which the consolidated losses of the Indiana HMO and Maxicare Life and Health Insurance Company through May 3, 2001, exceeded the company's investment in those subsidiaries. Total premium revenues for the second quarter of 2001 decreased 34.9% to $120.9 million, compared with $185.7 million in the second quarter of 2000. Commercial premiums for the 2001 second quarter decreased 33.0% to $73.1 million, compared with $109.0 million last year, reflecting the placement of the Indiana HMO and MLH into rehabilitation, the sale of the Louisiana HMO and an increase of $6.4 million in California commercial revenue. Medicaid premiums decreased 42.5% to $26.2 million, due to the placement of the Indiana HMO into rehabilitation. Medicare premiums for the quarter decreased 30.6% to $21.6 million, reflecting the termination of the Louisiana business and the Indiana Medicare business, which contributed Medicare revenue of approximately $1.0 million and $8.7 million, respectively, to the June 2000 quarter. For the six months ended June 30, 2001, the company reported a net loss of $23.3 million, or ($2.39) per share (basic and diluted), compared with net loss of $4.6 million, or ($1.29) per share (basic and diluted), for the same period in 2000. Total premium revenues for the six months ended June 30, 2001, decreased 25.0% to $276.8 million, compared with $369.2 million for the same period in 2001. Commercial premiums for the six months ended June 30, 2001, decreased 17.4% to $179.5 million, compared with $217.2 million last year, reflecting the placement of the Indiana HMO and MLH into rehabilitation, the sale of the Louisiana HMO and an increase of $13.2 million in California commercial revenue. Medicaid premiums decreased 41.2% to $53.9 million, due to the placement of the Indiana HMO into rehabilitation. Medicare premiums decreased 28.1% to $43.4 million, reflecting the termination of the Louisiana business and the Indiana Medicare business, which contributed Medicare revenue of approximately $2.2 million and $17.0 million, respectively, to the six months ended June 30, 2000. On May 4, 2001, the company's Indiana subsidiary, Maxicare Indiana, was placed into rehabilitation by the Indiana Department of Insurance, effectively removing control of its operations and assets from the company. The Indiana subsidiary also owns Maxicare Life and Health Insurance Company (MLH), which offered preferred provider organization (PPO), point of service (POS) and life insurance products in both Indiana and California. MLH has also been removed from the company's control. On May 25, 2001, Maxicare (California), the company's California operating subsidiary, filed for bankruptcy. Maxicare (California) offered commercial coverage, and Medicare and Medicaid coverage in California. The company has previously announced that it had signed an agreement to assign its Los Angeles County Medi-Cal (Medicaid) contract to Care 1st Health Plan for $15 million and to assign its Sacramento-area Medi-Cal contract to Molina Healthcare of California for $900,000. Maxicare earlier announced that it would cease offering Medicare coverage in California as of Aug. 31, 2001. The company is actively pursuing alternatives in regards to the disposition of Maxicare's commercial operations in California, which represent the last of its remaining operating businesses. However, the company cannot give assurance that the assignment agreements already announced will receive the necessary approvals, including that required by the Federal Bankruptcy Court and the California Department of Managed Health Care, or that any potential disposition of its commercial membership would obtain such necessary approvals. In addition, there can be no assurance that any of the transactions already announced or any potential disposition of commercial membership will generate sufficient liquidity to enable the transfer of funds to the parent company, Maxicare Health Plans Inc. The company stated that it was working with the California Department of Managed Health Care to assure continuity of care and smooth transition of its membership to alternate service providers. About Maxicare Maxicare Health Plans Inc., headquartered in Los Angeles, is a managed healthcare company, with operations in California. MIDWAY AIRLINES: Cash Need is Critical & New Financing Rumored -------------------------------------------------------------- Midway Airlines' financial statements as of June 30, 2001 and for the three and six-month periods then ended were prepared assuming the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in its results statement, the Company incurred a net loss for the six months ended June 30, 2001 of $15.3 million. The Company's cash and cash equivalents at June 30, 2001, and its projected 2001 operating cash flows will not be sufficient to allow the Company to satisfy its aircraft purchase indebtedness obligations and other obligations. During the second quarter of 2001, business traffic declined significantly due to general economic conditions. Travel by employees of selected Midway customers declined by as much as 75% by quarter-end, resulting in a unit revenue decline of 17%. This decline in business traffic has continued into July and August, and is expected to continue into the future. This resulted in a material deterioration in the Company's earnings and cash flow, which severely strained the Company's liquidity. As of June 30, 2001, the Company was in violation of the financial covenants of its bank credit facility. The Company sought, but did not receive a waiver under those covenants, and lenders declined to make further advances to the Company which were needed by the Company to make required pre-delivery deposits on certain aircraft on order. The Company's aircraft financiers declined to make the advances necessary to permit the Company to take delivery of a Boeing 737-700 aircraft that was scheduled for delivery on August 16, 2001 because of the Company's deteriorating financial condition. As a result of this aforementioned deterioration in economic conditions and operating results, the Company filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code on August 13, 2001. The Company sought Chapter 11 protection in order to facilitate an orderly restructuring of the Company. In connection with the Chapter 11 filing, the Company has ceased operating all four of its F100 aircraft and thirteen of its twenty-four CRJ aircraft. The Company will continue operating all twelve of its Boeing 737-700 aircraft and eleven CRJ aircraft during the immediate future, although that may change. In connection with the Chapter 11 filing, the Company terminated approximately 700 of its approximately 2700 employees and plans further reductions in the workforce to approximately 50% of the pre-Chapter 11 filing levels. Service on seven routes has been discontinued, with frequency reductions in 18 other routes. Additional cancellation of two routes will occur by the end of August 2001. The events which caused the Company to seek protection under Chapter 11 of the United States Bankruptcy Code also caused the Company to reclassify all long- term debt obligations in the aggregate amount of $130.3 million into current maturities of long-term debt and capital lease obligations on the Balance Sheet as of June 30, 2001. As a result of the Company's recurring losses, working capital deficiency, the Chapter 11 filing and circumstances relating to this event, including the Company's debt structure and current economic conditions, realization of assets and liquidation of liabilities are subject to significant uncertainty. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management recognizes that the Company must obtain additional funds to enable it to meet its obligations. The Company and its advisors are currently evaluating strategic alternatives to improve the Company's liquidity and capital resources. There can be no assurance that the Company will be able to improve its liquidity and capital resources. The Company continues to operate business and manage its operations as debtor-in-possession. Rumor has it that Midway secured some form of debtor-in-possession financing earlier this week. MISSISSIPPI CHEMICAL: Fitch Sees Need to Reduce Hefty Debts ----------------------------------------------------------- Fitch lowered Mississippi Chemical's senior secured debt rating to 'B+' from 'BB-' and lowered the company's senior unsecured debt rating to 'B-' from 'B+'. The senior secured debt rating of 'B+' applies to the company's $200 million senior secured bank facility due 2002 and the senior unsecured debt rating of 'B-' applies to the company's $200 million of outstanding senior unsecured notes due 2017. The Rating Watch Negative has been removed and a Negative Rating Outlook has been assigned. The current ratings reflect recent financial performance as well as the long-term value of the company's current assets, domestic fixed assets and Trinidad-based assets. The Rating Watch Negative status has been removed; however, there is still the potential for noteholders to be negatively impacted by restrictions associated with the senior secured credit facility that would be triggered by continued unfavorable commodity market volatility. The shift from a one-notch to a two-notch differential between the senior secured credit facility and the unsecured notes reflects increased balances under the company's secured credit facility, the recent fourth amendment to the credit facility and the manner in which proceeds from significant asset sales must be directed towards debt reduction. Mississippi Chemical experienced unusually poor operating margins in the most recent quarter ended June 30, 2001, due to volatile natural gas costs and weak product prices. A wet spring planting season, low crop prices and high fertilizer prices have combined to reduce demand as farmers planted less corn and bought more imported fertilizer this year. For the quarter ending June 30, 2001, Mississippi Chemical generated EBITDA of negative $11.6 million. The company's total debt as of June 30, 2001, was approximately $386 million, up from $330 million at June 30, 2000. The company had $12 million in cash and $21 million available under the secured credit facility ($33 million in liquidity), down from $74 million in liquidity at June 30, 2000. Inventory builds and weak sales volumes have contributed to higher debt levels than would have been expected if working capital had been reduced seasonally. Weak earnings have also contributed to negative cash flow and debt addition. Credit-protection measures in the quarter ended March 31, 2001, particularly EBITDA coverage, had improved recently; however, much of this improvement was the result of the realization of gains from selling natural gas hedges. As of June 30, 2001 natural gas hedges were in a loss position. Going forward, the Negative Rating Outlook reflects the continued uncertainty faced by both secured and unsecured creditors. Mississippi Chemical is a leading producer of nitrogen, phosphate, and potash fertilizers. The company sells its products to industrial and agricultural users primarily in the southern US, although it also exports to Asia, Africa, and Latin America. Mississippi Chemical's nitrogen fertilizers (60% of sales) include anhydrous ammonia, ammonium nitrate (Amtrate), and urea for application on crops. Its phosphate segment produces diammonium phosphate fertilizer (DAP). Mississippi Chemical operates production plants in Louisiana, Mississippi and New Mexico, as well as in Trinidad and Tobago (just north of Venezuela) through its Farmland MissChem joint venture. MONEY'S FINANCIAL: Court Enters Order Confirming Joint Plan ----------------------------------------------------------- On July 25, 2001, the Honorable John C. Akard, US Bankruptcy Court, District of Delaware, entered an order confirming the Joint Plan of Reorganization Under Chapter 11 for Money's Foods US Inc. and its affiliated debtors, dated May 31, 2001. Co-counsel to the debtors are Edwin J. Harron and Brendan Linehan Shannon of Young Conaway Stargatt & Taylor LLP, Wilmington, DE and Michael A. Rosenthal PC of Gibson Dunn & Crutcher LLP, Dallas, Texas. NEXTWAVE: Appeals Court Refuses Delay in Handing over Licenses -------------------------------------------------------------- The U.S. Court of Appeals for the District of Columbia refused to delay forcing the FCC to hand-over certain wireless licenses to NextWave Telecom Inc. Michael Wack, NextWave Telecom Deputy General Counsel, issued this statement following that ruling: "Today's ruling puts strong additional wind behind NextWave's efforts to continue its network buildout and move further down the road to completing its successful reorganization. The Court's ruling that the FCC's legal arguments do not present an issue worthy of Supreme Court review underscore the fact that additional litigation serves no purpose other than to hamper NextWave's efforts to provide consumers with advanced wireless services and the benefits of competition." NMT MEDICAL: Using Proceeds from UK Asset Sale to Repay Debts ------------------------------------------------------------- NMT Medical Inc.'s revenues for the three months ended June 30, 2001 increased 7.0% to $9.8 million from $9.2 million for the three months ended June 30, 2000. Product sales increased 7.1% to $9.6 million compared to $9.0 million. An approximately $1.1 million increase in CardioSEAL(R) Septal Occluder product sales was partially offset by an approximately $500,000 decrease in product sales from the neurosciences business unit. License fees and royalties for the three months ended June 30, 2001 increased 2.1% to $197,000 from $193,000 for the three months ended June 30, 2000. Interest income for the three months ended June 30, 2001 decreased by 20.0% to $46,000 from $57,000 for the three months ended June 30, 2000. This decrease is primarily attributable to the use of $1,000,000 in cash for repayments of the subordinated note in January and April 2001 and reduced money market interest. Revenues for the six months ended June 30, 2001 increased 5.1% to $20.2 million from $19.2 million for the six months ended June 30, 2000. Product sales increased 5.5% to $19.8 million compared to $18.8 million. An approximately $2.0 million increase in CardioSEAL(R) Septal Occluder product sales was partially offset by an approximately $100,000 decrease in vena cava filter sales and a $900,000 decrease in product sales from the neurosciences business unit. License fees and royalties for the six months ended June 30, 2001 decreased 9.3% to $401,000 from $442,000 for the six months ended June 30, 2000 due to reduced sales by Boston Scientific Corporation of the Company's stent products.rates. Interest income for the six months ended June 30, 2001 increased to $128,000 from $67,000 for the six months ended June 30, 2000. This increase is primarily attributable to increased cash balances derived principally from the net proceeds, after debt repayments, from the sale of the U.K. operations of the Company's neurosciences business unit in April, 2000. Net income for the three and six months ended June 30, 2001 was $366,901 and $613,005, respectively. In the same periods of 2000 net losses were $(8,701,201) and $(8,633,095), respectively. ORBITAL SCIENCES: Plans To Raise Capital & Refinance Obligations ---------------------------------------------------------------- Revenues for Orbital Sciences Corporation for the quarter ended June 30, 2001, were $118,648, with net income of $66,571. In the same quarter of 2000 revenues were $144,750, with net losses of $42,129. For the six months ended June 30, 2001, revenues were $220,673, with net income of $45,006. In the six months ended June 30, 2000, revenues were $282,519, with net losses of $68,653. The Company incurred net losses from continuing operations for the quarter and six months ended June 30, 2001, of $24,178 and $46,701, respectively. The Company expects to incur a net loss for the year ending December 31, 2001 before considering gains or losses from asset sales. As of June 30, 2001, the company had $51.1 million of unrestricted cash and cash equivalents and current liabilities exceeded current assets by $7.4 million. The Company's accumulated deficit was $419.5 million as of June 30, 2001. The Company's liquidity has been, and continues to be, constrained. To meet its capital and operating requirements, the Company sold its interests in three businesses in 2001, and has entered into a definitive agreement to sell another of its operating divisions. Management's plans also include restructuring business operations by consolidating operations and related systems and, if appropriate, through reducing the Company's work force and otherwise lowering expenses. The Company also intends to raise additional debt and/or equity capital and refinance existing debt obligations. The Company has commenced initial efforts to replace its current senior credit facility. The Company may also consider the sale of additional non-core assets. Management expects this strategy will generate sufficient liquidity to satisfy the Company's obligations; however, the Company's ability to continue as a going concern is contingent upon the its successful implementation of the foregoing strategy on a timely basis. OWENS CORNING: Toyota Wants Decision on Forklift Leases -- Now -------------------------------------------------------------- Toyota Motor Credit Corporation files a motion for an order fixing the time by which the Debtors must assume or reject unexpired leases or relief from automatic stay. Toyota Motor Credit Corporation, a vehicle manufacturing and leasing company, had previously entered into lease agreements with the Debtors whereby Toyota leases certain forklifts to the Debtors. The lease provides that at maturity date of the lease contract, the forklifts shall be returned to Toyota. The lease also requires the Debtors to perform all maintenance, service & repair of the forklifts at its own expense and for the Debtor to maintain insurance on the forklifts. The said leases require monthly payments to Toyota as rent but as of the current date, rental for thirty-three forklifts is in default amounting to a total of $25,379.89. Robert T. Auglur, Jr., Esq., attorney for Toyota, argues that it is appropriate for the Debtors to determine whether it will assume or reject the Forklift leases because Toyota will duffer economic harm that cannot be safeguarded and the potential injury to Toyota outweighs Debtors' interest in utilizing the forklifts. Mr. Auglur contends that forklifts are maintenance sensitive and if regular maintenance is not performed, forklifts quickly depreciate in value and subject tot ruin. Mr. Auglur discloses that Toyota has been unable to inspect the forklifts and has not received reports on regular maintenance from the Debtors. Mr. Auglur argues that Toyota's interest in the forklifts is not adequately protected and any interest that the Debtors have in utilizing the forklifts cannot outweigh the potential injury to Toyota. Furthermore, Mr. Auglur adds that the Debtors are entitled to relief because the Debtors have no equity interest in the forklifts and they are not necessary for an effective reorganization. (Owens Corning Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Court Extends Time for Plan Filing to December 6 ------------------------------------------------------------- Paul S. Aronson, Esq., at Milbank, Tweed, Hadley & McCloy, relates that five members of the Official Committee of Unsecured Creditors of Pacific Gas & Electric Company and all of the Committee's Professionals organized a Plan Working Group to pursue with vigor everything that's required to obtain confirmation of a plan of reorganization that delivers full and immediate repayment to PG&E's creditors. The Plan Working Group has had numerous face-to-face meetings with PG&E, and the Group realizes that there are many variables and complexities that must be resolved before the parties can put a confirmable plan of reorganization on the table. While the Committee would have like to see only a short 60-day extension of PG&E's exclusive period, the Committee recognizes that is unrealistic. Accordingly, the Committee tells Judge Montali, the Committee supports the Debtors' request. The Official Committee of Participant Committee tells Judge Montali that while PG&E may be talking with the Creditors' Committee, it hasn't heard one word from the Debtor. If PG&E really wants to propose a plan that has broad creditor support, the Participants' Committee suggests it should be invited to meetings with the Creditors' Committee and the Debtors. Marc S. Cohen, Esq., at Kaye Scholer LLP, notes that he had a telephone conversation with lawyers at Milbank about two months ago, and that's the extent of the Participants' Committee's involvement in the process to date. With no formal objection to the Debtor's request before the Court and because "the Court does not independently object" to the Debtor's request, Judge Montali rules that the Debtor's exclusive period during which to propose and file a plan of reorganization is extended until December 6, 2001. In the event that the Debtor does file that plan, PG&E's exclusive period during which to solicit acceptances of that plan is extended until February 4, 2002. (Pacific Gas Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX CORP.: CIT Seeks Stay Relief or Adequate Protection ------------------------------------------------------------- Under a Loan and Security Agreement dated June 1996, Opelika Industries, Inc. granted CIT Group/Equipment Financing (CIT) a first priority security interest in and lien on certain Equipment. According to Jennifer A.L. Kelleher, Esq., at Reed Smith LLP, CIT was able to perfect its security interests and liens in and on the Equipment by filing Uniform Commercial Code Financing Statements in appropriate jurisdictions. In connection with the Agreement, Ms. Kelleher relates, Opelika gave CIT a Promissory Note dated July 1996 in the original principal amount of $6,854,999. On that same day, Leshner Corporation also executed and delivered a certain Guaranty Agreement to CIT. Leshner unconditionally guaranteed all of Opelika's present and future payment and performance obligations to CIT. Under the terms of the Agreement and the Note, Ms. Kelleher notes, Opelika agreed to pay CIT monthly payments in the principal amount of $125,132.38 plus interest. If Opelika failed to pay its monthly obligations, it constitutes an event of default. And this was what exactly happened, Ms. Kelleher says. Since Petition Date, Ms. Kelleher informs the Court, Opelika failed to make any payments to CIT. As of July 25, 2001, Opelika owes CIT a substantial amount of $1,012,790. But because of the automatic stay, Ms. Kelleher says, CIT is prevented from pursuing its rights and remedies against Opelika. When CIT conducted an inspection of Opelika's facilities in Opelika, Alabama; Phoenix City, Alabama; and Hawkinsville, Georgia (where the Equipment is supposed to be located), CIT discovered that a substantial portion of the Equipment was no longer there. Ms. Kelleher relates that the Equipment has either been converted or disposed of without CIT's permission, which is in violation of the Agreement, the Note, the Bankruptcy Code, and applicable law. According to Ms. Kelleher, the orderly liquidated value of the Converted Equipment is $1,117,042 while the orderly liquidated value of the Remaining Equipment is $538,905. Ms. Kelleher argues that CIT is entitled to relief from the automatic stay because the value of the Remaining Equipment is less than the amounts owed to CIT. Ms. Kelleher adds the value of the Remaining Equipment also continues to decline without any corresponding reduction in the indebtedness owed to CIT. On top of that, CIT does not know if Opelika maintained insurance policies on the Remaining Equipment or kept the collateral in good condition as required by the Agreement. CIT also contends that the Court should lift the automatic stay since the Opelika has no equity in the Remaining Equipment and neither is the Remaining Equipment necessary to an effective reorganization. But should the Court rule otherwise, CIT maintains that Opelika should be compelled to cure all arrearages and pay CIT monthly adequate protection payments equal to the amounts provided in the Agreement and the Note. And as a result of the conversion or wrongful disposition of the Converted Equipment, CIT contends that they are entitled to a super-priority administrative expense claim in the amount of the value of the Converted Equipment. In sum, CIT requests Judge Robinson to enter an Order: (a) (i) terminating the automatic stay to permit CIT to take possession of the Remaining Equipment and to exercise and enforce all of its rights and remedies against the Remaining Equipment in accordance with the provisions of the Agreement, the Note, and applicable law; (ii) directing Opelika to make the Remaining Equipment available to CIT within 3 days after the entry of the Order at a time and place designated by CIT; (iii) directing Opelika to maintain the Remaining Equipment in good condition and to maintain proper insurance coverage on the Remaining Equipment in accordance with the terms of the Agreement until it is returned to CIT; and (iv) granting CIT an allowed super-priority administrative expense claim in the amount of $1,117,042 and directing Opelika to pay such claim to CIT within 3 days after the entry of the Order; or, in the alternative, (b) (i) directing Opelika to cure all arrearages and to pay to CIT monthly adequate protection payments equal to the amounts provided for in the Agreement and the Note and to maintain the Remaining equipment in good condition and to maintain proper insurance coverage on the Remaining Equipment in accordance with the terms of the Agreement and the Note; and (ii) granting CIT an allowed super-priority administrative expense claim in the amount of $1,117,042 and directing Opelika to pay such claim to CIT within 3 days of the entry of the Order; and (Pillowtex Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) PLANET HOLLYWOOD: Red Ink Flows Again & SEC Filings are Delayed --------------------------------------------------------------- Planet Hollywood International Inc. initiated several transactions during the thirteen weeks ended July 1, 2001, including the May 7, 2001 licensing of four of the Company's domestic restaurants to an affiliated company and the recording of a non-cash impairment charge of approximately $3.7 million related to the write-down of long-lived assets of one of the Company's domestic restaurants. The Company, its officers and management have been spending substantial amounts of time in connection with finalizing the accounting treatment and disclosures associated with these transactions. The Company has been unable to incorporate all of this information into the Company's form 10-Q for the period ended July 1, 2001 prior to the filing deadline. Therefore, there will be a delay in such filing. The Company's reorganization and restructuring of indebtedness completed in May of fiscal 2000 created significant changes in results of operations for the period ended June 25, 2000 compared to the period ended July 1, 2001. The transactions associated with the Company's Plan of reorganization resulted in the Company recording an extraordinary gain on debt forgiveness for the period ended June 25, 2000 of approximately $173 million. For the thirteen weeks ended July 1, 2001 the Company anticipates a loss from operations and a net loss of $11.2 million and $12.7 million, respectively. For the twenty-six weeks ended July 1, 2001 the Company anticipates a loss from operations and a net loss of $22.5 million and $23.3 million, respectively. PSINET INC.: Travis County Objects to Exclusion of Lien Payments ---------------------------------------------------------------- Travis County raises objection because the PSINET, Inc.'s motion to sell real property in Austin, Texas for $7 million makes no mention of the payment of the secured ad valorem tax liens for 2001 retained by Travis County in the estimated amount of $67,695.97, which will be assessed on the real property of the Debtor. Travis County explains that under Section 32.01 of the Texas Property Tax Code a lien attached to the subject real property to secure payment of all taxes, penalty and interest ultimately imposed. Therefore, Travis County objects to the Debtors' motion to sell the real property free and clear of all iens, claims, interests and transfer taxes to the extent that PSINet intends to sell the real property that is encumbered by ad valorem tax liens. Travis County tells Judge Gerber that the Debtor should be ordered to pay all property taxes in the approximate amount of $67,695.97 at the time of the closing of the sale or immediately thereafter. SAFETY-KLEEN: Files First Omnibus Objections to Proofs of Claim --------------------------------------------------------------- Safety-Kleen Corporation and its related and subsidiary Debtors present Judge Walsh with their first omnibus objections to proofs of claim filed against these estates. In making these objections, the Debtors ask Judge Walsh to enter orders disallowing and expunging each of the disputed claims as duplicates of already existing claims, as amended or superseded claims, as late-filed, or as "equity" claims, and by treating certain "blank" claims as filed in the amounts set out in the Schedules. The Debtors remind Judge Walsh that, by his earlier Order, he had set October 31, 2000, at 4:00 p.m. as the last date and time for the filing of proofs of claim against these estates. Notice of this bar date was mailed to all known creditors and published in the national editions of The Wall Street Journal and The New York Times. In addition, the bar date for governmental units was established as December 6, 2000, at 4:00 p.m. The Debtors advise Judge Walsh that, to date, approximately 16,903 proofs of claim have been filed against these estates in the bankruptcy proceedings. In the ordinary course of their businesses, the Debtors maintain books and records that reflect, among other things, the Debtors' liabilities and respective amounts owed to their creditors. The Debtors and their advisors have begun a review of the proofs of claim and the books and records, and for the reasons stated, have determined that certain claims are subject to objection on one or more grounds. Duplicate Claims Certain claims are said by the Debtors to be subject to objection as duplicative because the claimants that filed these claims filed two or more proofs of claim against the same Debtors asserting the same liability in the same amount. The Debtors object to these claims and ask Judge Walsh to order them disallowed and expunged in their entirety. If the Debtors' objections are sustained, proofs of claim by these claimants will survive and remain on the claims registry, subject to the Debtors' right to object to the surviving claims in the future on any grounds allowed under bankruptcy or non- bankruptcy law. The Debtors tell Judge Walsh that the claimants will not suffer any prejudice by having these duplicate claims disallowed and expunged because their surviving claims - asserting the same liability in the same amount against the same Debtor - will remain on the claims registry after the duplicate claim is expunged. The Debtors report that if the requested relief is granted, the duplicate claims which remain will total 179 in number and $11,601,925.46 in amount, with the same number and amount of claims disallowed. Amended and Superseded Claims The Debtors object to other proofs of claim where they believe the claims have been amended or superseded by a clam filed subsequently by the same claimant against the same Debtor for the same liability, but for a different amount. According, the Debtors object to these claims and ask Judge Walsh to order them disallowed and expunged from the claims registry in their entirety. If the Debtors' objections are sustained, proofs of claim by these claimants will survive and remain on the claims registry, subject to the Debtors' right to object to the surviving claims in the future on any grounds allowed under bankruptcy or non- bankruptcy law. The Debtors tell Judge Walsh that the claimants will not suffer any prejudice by having these amended or superseded claims disallowed and expunged because their surviving claims - asserting the same liability in the same amount against the same Debtor - will remain on the claims registry after the amended or superseded claim is expunged. The Debtors report that this group includes objections to 76 proofs of claim totaling $10,273,425.31, and that if the relief is granted, a total of 76 proofs of claim in number and $7,125,906.28 will remain in the claims registry. Late-Filed Claims The Debtors say that proofs of claim in this group are claims that were filed after the bar date established by Judge Walsh's Order, or after the governmental claims bar date, as the case may be. The Debtors object to these claims and ask Judge Walsh to order that they be disallowed and expunged in their entirety. The Debtors report to Judge Walsh that the proofs of claim to which objection is made on the ground of late filing total 462 in number and $34,038,313.85 in amount. Equity Claims The Debtors describe these claims as based solely on a claimant's ownership interest in or possession of any of the Debtors' common stock or other equity securities. As such, these claims do not constitute "claims" within the meaning of the Bankruptcy Code. The Debtors therefore object to these proofs of claim and ask that Judge Walsh order them disallowed and expunged in their entirety. The Debtors report that objections are made to proofs of claim on this basis totaling 142 claims for a dollar amount of $656,498.09. Blank-Filed Claims The Debtors' claims and noticing agent, Trumbull Services Company, mailed out proofs of claim forms to all of the Debtors' known creditors, including those creditors listed in the Debtors' Schedules of Assets and Liabilities. The proof of claim form sent to the scheduled creditors was preprinted with the amount of the scheduled claim in the upper right-hand corner. However, the form still required that the creditor complete the remainder of the information requested on the proof of claim form, including the amount such creditor claimed against the Debtor. Some creditors who received this proof of claim form merely signed the form and returned it without providing the requested information. Specifically, the Debtors cite the absence of the amount of the claim. The Debtors tell Judge Walsh that their believe that these creditors did so to express their agreement with the pre-printed and scheduled amount. The Debtors have therefore objected to these proofs of claim which did not assert an amount and did not assert that the claim was unliquidated or that the amount was unknown. The Debtors ask Judge Walsh to order that each such claim be treated as if it had been filed in an amount equal to the amount scheduled for such claim by the Debtors in their Schedules of Assets and Liabilities. The Debtor reports that the total number of proofs of claim in this group is 105, and there is no change in the dollar amounts. SIMON WORLDWIDE: Loses McDonald's Contract & 65% of Revenues ------------------------------------------------------------ Simon Worldwide, Inc. (Nasdaq: SWWI) discloses that McDonald's had terminated its 25-year relationship with Simon Marketing, Inc., effective immediately, following a sweepstakes security breach. Simon, founded in 1976, generated 65% of its total net sales of $768.4 million in 2001 and 77% of its total net sales of $217.6 million in this year's first half from conducting the McDonald's Happy Meal promotions. Simon says it will work closely with investigators and McDonald's Corporation to address the situation made public Tuesday concerning promotional games administered by the company's main operating subsidiary, Simon Marketing, Inc., on behalf of McDonald's. Executives of Simon Worldwide were notified for the first time Tuesday morning of this matter, and Simon Worldwide made an immediate commitment to cooperate fully with both McDonald's and all investigating agencies. Simon Worldwide also announced that it is in the process of retaining a nationally respected law firm to conduct an independent review and facilitate Simon Worldwide's work with McDonald's and with investigators. Allan Brown, Simon Worldwide's Chief Executive Officer, said, "We have long valued our 25-year relationship with McDonald's. We have just learned of this situation and we do not yet know all of the facts, but we are determined to work with McDonald's and investigators to get the truth to the public as quickly as possible." Simon Worldwide's CEO Allan Brown said: "We share McDonald's shock at today's allegations. The more than 400 employees of Simon Worldwide have also been victimized by the alleged actions of one employee, and everyone at our company is determined to do whatever we can to repair our relationship with McDonald's and to maintain our relationships with Simon Worldwide's other clients." CEO Allan Brown concluded: "We commend the work done by law enforcement investigators in this matter. Simon Worldwide is absolutely committed to the integrity of the games that we administer, and we will work closely with law enforcement to ensure that all of the facts are made known." Simon Worldwide is a diversified marketing and promotion agency with offices throughout North America, Europe and Asia. The company works with some of the largest and best-known brands in the world and has been involved with some of the most successful consumer promotional campaigns in history. Through its wholly owned subsidiary, Simon Marketing, Inc., the company provides promotional agency services and integrated marketing solutions including loyalty marketing, strategic and calendar planning, game design and execution, premium development and production management. Simon is one of the world's largest creators, developers and procurers of promotional games and toys. TRISM INC.: Padlocks Specialized Big & Heavy Transport Division --------------------------------------------------------------- TRISM, Inc. (OTC Bulletin Board: TSMX) is closing its Specialized Division immediately. This Division, which is engaged in the transportation of heavy weight and over- dimensional materials, as well as general freight, will cease picking up shipments as of the close of business today and will effect an orderly delivery of all shipments in transit to their destination points. The Company is currently in discussions with its equipment lenders to reschedule certain equipment payments and to return excess tractors. In order to further reduce costs and generate cash to pay down debt obligations which are currently in default, the Company will also close terminal facilities, sell trailers and terminate substantially all driver and non-driver personnel associated with the Heavy Haul Division. TRISM will continue to operate its Secured Division which specializes in the transportation of munitions, explosives and hazardous waste. TRISM, Inc., headquartered in Kennesaw, Ga., is one of the nation's largest transporters of secured materials. TRITON ENERGY: Fitch Pulls Out BB- Rating Affecting $500 in Debt ---------------------------------------------------------------- Fitch has withdrawn Triton Energy Ltd.'s (Triton) senior unsecured debt rating following Triton's acquisition by Amerada Hess Corporation. Fitch had rated Triton's senior unsecured notes 'BB-'. The withdrawal affects approximately $500 million in debt. VENCOR: UST Says Van Kampen's Supplement Violates Court Rules ------------------------------------------------------------- The Supplement and Modification to Application for Reimbursement of Expenses Pursuant to Sections 503(b)(3) and 503(b)(4) of the Bankruptcy Code filed by Van Kampen fails to conform to the Rules of the Bankruptcy Court and the UST Guidelines, the U.S. Trustee tells the Court. The UST requests the Court hold Van Kampen to the highest standard of compliance with the Rules of the Bankruptcy Court and the UST Guidelines. "The applicant has already reduced its request for reimbursement of expenses from $689,592.84 to $474,288.33 allegedly due to an arithmetic error. This error may not have been identified save for the UST's initial review and objection to the Application," the UST reminds Judge Walrath. The Application, the Supplement and the representation made by Benjamin Mintz, Esquire on behalf of Van Kampen at a hearing held before the Court, all fail to identify any substantial contribution made by professionals at Hopkins and Sutter other than Mr. Solow, the UST notes. At the hearing, Mr. Mintz represented that the substantial contribution made by Van Kampen was the participation by Michael Solow of Hopkins and Sutter and later of Kaye Scholer LLP, in the negotiation of certain agreements between the Debtor and Ventas, and between the Debtor and the United States Department of Justice. The UST draws Judge Walrath's attention to the request for fees in the amount of $56,912.75 for professional services provided by professionals and para-professionals from Hopkins and Sutter other than Mr. Solow, and in the amount of $6,544.00 for professional services provided by professionals from Kaye Scholer LLP, other than Mr. Solow. If substantial contributions were made by professionals other than Mr. Solow, it is incumbent upon the applicant to identify with specificity any activities that contributed to the substantial contribution and the benefit to the estate of that activity, the UST avers. Accordingly, the UST takes the position that the Application and Supplement fail to carry the burden required by section 503(b) in this regard. The UST notes that a daily log of the activities of the applicant's professionals is absent in the original application and the one included in the Supplement fails to comply with the Rules of the Court or the UST Guidelines. Specifically, the UST draws the Court's attention to the following in the Supplement: (A) Approximately 248 line item entries regarding Michael Solow's activities while he was employed by Hopkins & Sutter containg descriptions that are vague and/or lumped. These entries are so vague as to preclude a determination if they contributed a benefit to the estate. Telephone conversations and conferences fail to identify the subject matter discussed. No description identifies the benefit to the estate derived from the activity. The UST calculates the requested reimbursement for the vaguely described and lumped activities as $293,659.36. (B) Approximately 13 line items for Michael Solow while he was employed by Kaye Scholer LLP contain descriptions of activities that are vague and/or lumped. These entries are so vague as to preclude a determination if they contributed a benefit to the estate. Telephone conversations and conferences fail to identify the subject matter discussed. No description identifies the benefit to the estate derived from the activity. The UST calculates the requested reimbursement for the vaguely described and lumped activities as $13,426.25. These items fail to comply with the Rules of the Bankruptcy Court or the UST Guidelines. (C) The Supplement contains numerous entries for tasks that are duplicative of tasks performed by members of the Creditor's Committee or professionals retained by the Creditor's Committee with the approval of the Court. (D) The Supplement contains entries for numerous discussions between Van Kampen personnel and Mr. Solow with no identification of the benefit to the estate of the discussions. The applicant fails to carry its burden for reimbursement under section 503(b) for these requests. Accordingly, the United States Trustee requests that this Court deny or reduce the requested Application commensurate with her objection. (Vencor Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) VIATEL INC.: Level 3 Picks-Up Transatlantic Network Assets ---------------------------------------------------------- Level 3 Communications, Inc. (Nasdaq: LVLT) acquired the transatlantic network of Viatel, Inc. A federal judge overseeing Viatel's Chapter 11 bankruptcy proceedings approved Level 3's purchase on August 21, 2001, and the transaction was closed on Specifically, Level 3 has purchased from Viatel two fibers on the "Yellow" submarine cable connecting London and New York. This is the same fiber pair that Level 3 sold to Viatel in April 2000. Level 3 now owns and controls 50% of the fibers on the Under the terms of the transaction, Level 3 retains all cash payments already made by Viatel under the April 2000 contract, including $94 million paid to Level 3 at the end of last year. In return for the Yellow fiber pair, Level 3 has released Viatel from debts registered with the bankruptcy court totaling approximately $9 million. Viatel has also transferred 20 gigabits of capacity on the separate transatlantic cable known as "AC-1" to Level 3. "We believe this transaction will create value for us, and we continue to look for opportunities as they develop in the current market environment," said Kevin O'Hara, Level 3's president and chief operating officer. O'Hara said that Level 3 continues to take a strategic approach in managing its inventory of undersea network assets. "With this transaction, we have effectively cut in half our cost basis for transatlantic capacity," O'Hara said. "Our objective is to ensure we have the appropriate amount of low-cost bandwidth available to connect our terrestrial networks as we continue to expand our international customer base." Transaction Summary The key provisions of the Level 3-Viatel transaction approved by the judge overseeing Viatel's bankruptcy include: - Level 3 retains the cash payments already received from Viatel under Level 3's original sale of transatlantic fiber announced in April 2000, including $94 million received by Level 3 at the end of last year. - Viatel has transferred ownership of its fiber pair on the Yellow cable back to Level 3. Level 3 now owns 50 percent of the fiber on that cable. - Viatel has transferred backhaul fiber and 20 gigabits of capacity on the AC-1 transatlantic cable to Level 3. Those assets were originally sold to Viatel under the April 2000 contract. - Level 3 has released Viatel from debts it registered with the bankruptcy court totaling approximately $9 million. Level 3 has also paid Viatel $100,000 in cash. - Level 3 will provide Viatel with two unprotected 2.5- gigabit wavelengths on the Yellow cable. Viatel will pay $500,000 in cash to Level 3 to cover one year's operation and maintenance charges on the wavelengths and other costs. About Level 3 Communications Level 3 (Nasdaq: LVLT) is a global communications and information services company offering a wide selection of services including IP services, broadband transport, colocation services and the industry's first Softswitch based services. Its Web address is http://www.level3.com WASHINGTON GROUP: Financial Woes Self-Inflicted, Raytheon Says -------------------------------------------------------------- A series of failures and errors in judgment by Washington Group International (WGI) management put WGI into bankruptcy according to papers filed today in U.S. Bankruptcy Court for the District of Nevada by the Raytheon Company (NYSE: RTN). According to the filing, Raytheon has evidence that will demonstrate that WGI's financial setbacks were not brought on by the transactions with Raytheon, but instead resulted from WGI management's inability to manage a large and complex acquisition that more than doubled its size, combined with its failure to generate new business, control costs and effectively manage its financial affairs. This evidence includes WGI's own documents and statements. Raytheon's filing is in response to the lawsuit filed by WGI on August 3, 2001 alleging that the sale of Raytheon's engineering and construction business to Washington Group in 2000 constituted a fraudulent transfer. "We think that Washington Group's lawsuit is nothing more than a public relations ploy to divert attention from the real reasons that they are again in bankruptcy and to avoid their obligations to Raytheon," said Neal Minahan, senior vice president and general counsel of Raytheon. Mr. Minahan continued, "The subsidiaries Raytheon sold to Washington Group were solvent, and Washington Group was not rendered insolvent by this transaction. Contrary to the defamatory public statements made by WGI and its officers, Raytheon's actions were legal and appropriate at every juncture of this transaction." WGI, its officers, directors and advisers, which included Credit Suisse First Boston, Arthur Anderson, Bain & Company, and Batchelder & Company, engaged in an extensive due diligence process that extended from September 1999 to July 2000. Raytheon will demonstrate that, as a result of this process, WGI, its officers, directors and advisers completely understood the financial statements and financial condition of the engineering and construction business it was purchasing, and indeed renegotiated more favorable terms in the acquisition agreement as a result of that awareness. "We don't think there was a problem with this transaction," Minahan said. "If there was a problem, we think Washington Group should be pursuing claims against its directors and officers, financial and accounting advisers, and lenders who oversaw Washington Group's due diligence and structured and arranged the financing for Washington Group in connection with the sale." On a related point, Raytheon also announced that on August 21st in a court hearing in the bankruptcy proceedings, WGI has stipulated that Raytheon would be entitled to vote in the bankruptcy proceeding as an unsecured creditor, and its vote would be in the amount requested by Raytheon. "We are also pleased, notwithstanding Washington Group's prior statements that Raytheon was not a net creditor and would never vote in the bankruptcy proceeding, that Raytheon will be entitled to a significant vote," said Minahan. With headquarters in Lexington, Mass., Raytheon Company is a global technology leader in defense, government and commercial electronics, and business and special mission aircraft. WATTS HEALTH: S&P Assigns 'R' Rating on Financial Strength ---------------------------------------------------------- Standard & Poor's assigned its 'R' financial strength rating to Watts Health Foundation (WHF). This rating action reflects the California Department of Insurance's recent seizure of WHF, a 34-year-old Inglewood, Calif.-based nonprofit doing business as UHP Healthcare. The company has $59 million in debt and is $10.5 million below its net equity, one of the department's primary financial solvency indicators. WHF was an HMO that provided coverage to 96,000 people in San Bernardino, Orange, and Los Angeles counties. The company provided these services under the UHP Healthcare name. An insurer rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have to power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions, such as market conduct violations. W.R. GRACE: National Medical Weighs-In on Fresenius Litigation -------------------------------------------------------------- National Medical Care, Inc., represented by William H. Suddell, Jr., and Eric D. Swartz of the Wilmington firm of Morris Nichols Arsht & Tunnell, responds to the Joint Motion to prosecute fraudulent conveyance claims, saying that in their joint motion the Asbestos Committees of W.R. Grace Co. seek authorization to challenge as fraudulent conveyances certain transfers made in connection with two complex corporate transactions: a 1996 transaction involving the combination with NMC of the worldwide dialysis business of Fresenius AG, and a 1998 transaction involving the combination of the Debtors' packaging business with Sealed Air Corporation. Although Fresenius takes no position on whether this Court should empower the Asbestos Committees to evaluate or pursue the alleged fraudulent transfer claims, we do believe that the joint motion mischaracterizes the factual background of the Fresenius transaction, obscures the legal and factual impediments to the successful assertion of a fraudulent conveyance claim based on the Fresenius transaction, and avoids altogether discussing the enormous burden that this litigation will impose on the Debtors and their estates. Accordingly, NMC urges the Court to acknowledge the role the Debtors will need to play in the resolution of the novel theories that the Asbestos Committees seek to present, and to insist that such litigation go forward, if at all, in this Court, so that the Court can closely monitor the litigation and ensure that all of the interests of the estates are properly protected. First, Mr. Suddell says bluntly that the Asbestos Committees have mischaracterized the 1996 transaction between Grace and Fresenius. While NMC intends to defend itself vigorously in any adversary proceeding in this Court alleging fraudulent transfer claims, it would, of course, be premature for NMC to present its defense on the merits before a complaint has even been filed. Nonetheless, the mischaracterizations contained in the joint motion of the Asbestos Committees require a short response that accurately sets forth the circumstances of the Fresenius transaction. In particular, Mr. Suddell suggests that Judge Farnan should view "with great skepticism" the suggestion of the Asbestos Committees that the 1996 Fresenius transaction was designed to shield NMC from asbestos liability. To the contrary, at the time of the 1996 transaction NMC and certain of its affiliated subsidiaries were the targets of criminal and civil investigations being conducted by various agencies of the federal government, which investigations related to allegations regarding certain billing and reimbursement practices. Among the potential penalties NMC and its subsidiaries faced as a result of the investigation were substantial fines, civil penalties, forfeitures, and exclusion from participation in all federal health care programs. In the 4 years that followed the Fresenius transaction, Grace remained a profitable, solvent and well-capitalized company. During that same time, NMC bore the burdens, disruptions, and expense of the various federal and state criminal and civil investigations. To date, these investigations have cost NMC and its affiliates well in excess of $500 million in penalties and expenses, and related private civil litigation still continues. No doubt that is why during the 4 years following the Fresenius transaction not a single creditor sought to attack the transaction as "fraudulent" or to impose liability on NMC or its affiliates for the conduct of Grace. To put it quite bluntly, for those four years it appeared to most that Grace may well have gotten the better of the deal between these large and sophisticated companies. It is only after significant changes in circumstances - now that Fresenius has resolved substantial portions of its reimbursement litigation and Grace has faced an unforeseeable explosion in "meritless asbestos claims" - that the Asbestos Committees seek to revise history and claim that the 1996 transaction was fraudulent in purpose and effect. To mount this attack, the Asbestos Committees seek not only to ignore the realities that were known and reasonably foreseeable as of 1996, but they try to avoid any mention of the significant financial strength demonstrated by Grace in the years immediately following the Fresenius transaction. Second, Mr. Suddell says that Grace obtained the highest and best value for NMC. As of the end of 1995, Grace-Conn. owned all the outstanding common stock of NMC, which was a large provider of dialysis services and products throughout the United States. Grace-Conn. in turn was wholly owned by W. R. Grace & Co., a New York corporation. Beginning in the fall of 1995, Grace-N.Y. and its affiliated companies engaged in arms-length negotiations with several entities relating to the possible sale or merger of NMC. Ultimately, Grace decided that the best value could be obtained by negotiating a reorganization that would result in the tax- free combination of NMC with the worldwide dialysis businesses of Fresenius AG, a German corporation with its principal place of business in Bad Homburg, Germany. The 1996 transaction was structured in such a way as to provide maximum ax benefits to Grace. As a result of this structure, consideration was paid both directly to Grace-Conn. and to Grace shareholders. Ultimately, however, the Fresenius entities paid over $4 billion in cash and stock for NMC. Of that, Grace-Conn. received a tax-free cash distribution of approximately $2.1 billion. Moreover, and perhaps equally important, Grace-Conn. received from the Fresenius entities an indemnity agreement which assured that Grace would not bear any of the potential liability arising out of the ongoing investigations of NMC. In addition to receiving over $2 billion in tax-free cash at the time of the transaction, Grace-Conn. remained a solvent, well- capitalized entity long after the Fresenius transaction. For over four years after the transaction, Grace continued to pay its debts as they came due, obtained hundreds of millions of dollars in unsecured lines of credit from some of the world's most sophisticated financial institutions, paid millions of dollars in dividends, paid hundreds of millions of dollars in asbestos settlements, and maintained a significant market capitalization (over 41.4 billion 18 months after the transaction, and approximately $1.2 billion a full 3 years after the transaction. To say that the Asbestos Committees will be pursuing novel theories to argue that such a company was rendered insolvent or undercapitalized as of 1996 is an understatement. Although the structure of the Fresenius transaction may have been complicated, this transaction did not constitute a fraudulent transfer under applicable law. That said, this Court should be mindful of the degree to which any fraudulent conveyance claim relating to the Fresenius transaction necessarily will require significant involvement and attention by the Debtors. In his final point, Mr. Suddell says that litigation of the fraudulent transfer claims will require significant involvement of Grace. The joint motion makes clear that whatever entities the committees might ultimately elect to sue, it is the conduct of Grace that they really wish to challenge. The joint motion suggests that the Asbestos Committees will claim that Grace had a fraudulent purpose in entering into these transactions, and that the effect of one or both of the transactions was to render Grace insolvent or undercapitalized. Accordingly, the fraudulent conveyance litigation necessarily will focus on the intentions and conduct of Grace management, the financial condition of Grace, and the reasonably foreseeable asbestos liabilities of Grace at the time of the transactions. All of this information is unavailable to either NMC or Sealed Air, and thus it is to Grace personnel and documents that all of the parties will turn for the primary factual information in this case. Thus, the issue of who should prosecute the fraudulent transfer claims is not the only matter that must be resolved before litigation can be commenced. There remains the outstanding issue of where the fraudulent transfer claims would be litigated. NMC joined in Grace's motions in both the Abner and Woodward cases seeking to transfer the litigation to Delaware. Litigation of the fraudulent transfer claims in a forum other than the forum in which the underlying reorganization is going forward will unnecessarily complicate and delay Grace's reorganization. Because the fraudulent transfer claims are based on Grace's alleged intent and financial condition at the time of the transactions, much of the burden of defending the fraudulent transfer claims will require the involvement of Grace and will impose a significant burden on the company. As Grace has stated in another litigation, many of the witnesses who would provide key testimony in any fraudulent transfer litigation are the same individuals who will be integral to Grace's successful reorganization. Litigating the fraudulent transfer claims in the same court as the bankruptcy proceeding will ensure that the litigation of those claims will be resolved expeditiously and without unnecessarily delaying Grace's reorganization. Moreover, Mr. Suddell says, Judge Farnan has a direct interest in preventing any unnecessary waste or expense in the conduct of any fraudulent conveyance litigation. Because NMC and Sealed Air both have indemnification rights against Grace, which the Debtors have acknowledged in court and in their filings, the unnecessary continuation or expansion of any fraudulent conveyance litigation could result in additional administrative expenses for the estates. Once the Court makes the initial determination as to who should prosecute the fraudulent transfer claims, some modifications of the automatic stay and/or a preliminary injunction may be required in order to allow the parties effectively and fairly to litigate the relevant issues. Having politely pointed out all these water hazards and reminded Judge Farnan of his duty, NMC suggests with equal courtesy that if the Court decides to authorize the Asbestos Committees to pursue these actions, he require that the actions be brought in this bankruptcy court "where such litigation can be resolved fairly, efficiently, and with due regard to the interests of all constituencies to this bankruptcy proceeding". (W.R. Grace Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: Gets Court Approval to Reject Deal with Fibernet --------------------------------------------------------------- As part of their attempts to reduce operational costs and increase profitability, the Debtors sought and obtained the Court's approval to reject its Business Services Agreement with Fibernet Equal Access, Inc. Pauline K. Morgan, Esq, at Young Conway Stargatt & Taylor, of Wilmington, Delaware, relates that the Business Agreement allows Winstar to use Fibernet's existing infrastructure in four buildings in New York City. However, the said buildings are not being utilized by the Debtors' ongoing business operations. She further adds that the Agreement obligates the Debtors to pay Fibernet an initial $100,000, plus monthly charges totaling thousands of dollars per month, causing an unnecessary drain on their limited cash resources. Judge Farnan ruled that the Agreement be rejected and is clearly appropriate to assist the Debtors in their reorganization and ultimate emergence from chapter 11. (Winstar Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) BOOK REVIEW: GROUNDED: Frank Lorenzo and the Destruction of Eastern Airlines ----------------------------------------------------------- Author: Aaron Bernstein Publisher: Beard Books Softcover: 272 Pages List Price: $34.95 Review by Susan Pannell Order your copy today at http://amazon.com/exec/obidos/ASIN/1893122131/internetbankrupt Barbara Walters once referred to Frank Lorenzo as "the most hated man in America." Since 1990, when this work was first published and Eastern Airlines' troubles were front-page news, there had been many worthy contenders for the title. Nonetheless, readers sensitive to labor-management concerns, particularly in the context of corporate restructuring, will find in this book much to support Barbara Walters' characterization. To recap: For a few brief and discordant years, Frank Lorenzo was boss of the biggest airline conglomerate in the free world (Aeroloft was larger), combining Eastern Continental, Frontier, and People Express into Texas Air Corporation, financing his empire with junk bonds. TAC ultimately comprised a fleet of 452 planes and 50,000 employees, with revenues of $7 billion. But Lorenzo was lousy on people issues, famously saying, "I'm not paid to be a candy ass." The mid-180's were a bad time to take that approach. Those were the years when the so-called Japanese model of management, which emphasized cooperation between management and labor, was creating a stir. The Lorenzo model was old school: If the unions give you any trouble, break 'em. That strategy had worked for him at Continental, where he'd filed Chapter 11 despite the airline's $60 million in cash reserves, in order to exploit a provision in the Bankruptcy Code allowing him to abrogate his contracts with the unions. But Congress plugged that Loophole by the time Lorenzo went to the mat with Charles Bryan, IAM chapter president. Lorenzo might have succeeded in breaking the machinists alone, but when flight attendants and pilots honored the picket line, he should have known it was time to deal. He didn't. Instead he tried again for a strategic advantage through the bankruptcy courts, by filing Chapter 11 in the Southern District of New York where bankruptcy judges were believed to be more favorably disposed toward management than in Miami where Eastern is headquartered, Eastern had to hide behind the skirts of its subsidiary, Ionosphere clubs, Inc., a New York Corporation, in order to get into SDNY. Six minutes later, Eastern itself filed in the same court as a related proceeding. The case was assigned to Judge Burton Lifland, whom Eastern's bankruptcy lawyer, Harvey Miller, knew well, but Lorenzo was mistaken if he believed that serendipitous lottery assignment would be his salvation. Judge Lifland a year later declared Lorenzo unfit to run the airline and appointed Martin Shugrue as trustee. Most hated man or not, one wonders whether the debacle was all Lorenzo's fault. Eastern unions, in particular the notoriously militant machinist, were perpetual malcontents, and Charlie Bryan was an anti-management zealot, to the point of exasperating even other IAM officers. The book provides a detailed account of the three-and-a-half period between Lorenzo's acquisition of Eastern in the autumn of 1986 and judge Lifland's appointment of the trustee in April 1990. It includes the history of Eastern's pre-Lorenzo management, from World War I flying ace Eddie Rickenbacker to astronaut Frank Borman. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Bernadette de Roda, Ronald Villavelez and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***