/raid1/www/Hosts/bankrupt/TCR_Public/010924.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, September 24, 2001, Vol. 5, No. 186
Headlines
360NETWORKS: Further Defers Q2 Results Report to Mid-October
AMR CORP: Terrorist Attacks Prompt S&P to Drop Ratings to BB
AIR CANADA: S&P Places BB- Debt Rating on CreditWatch Negative
AMERICAN AIRLINES: S&P Cuts Ratings Following Terrorist Attacks
AMERICAN TRANS: Debt Ratings Placed on CreditWatch Negative
AMERICA WEST: S&P Junks Certain Ratings & Initiates Watch
AMES DEPARTMENT: Asks Court to Set-Up Compensation Procedures
AMTRAN INC: S&P Cuts Ratings In Wake Of Reduced Air Traffic
ARMSTRONG HOLDINGS: Seeks Third Extension of Exclusive Periods
BIO-PLEXUS: Emerges From Bankruptcy with Appaloosa Financing
BTI TELECOM: Makes Interest Payment But Liquidity Still Strained
COMDISCO: Deadlines Extended & Chapter 11 Cases Still On Course
CONTINENTAL AIRLINES: S&P Places Ratings on CreditWatch Negative
CONTINENTAL AIR: Begins Furlough Process & Closes Denver Center
DELTA AIR: S&P Places Ratings on CreditWatch Negative
ENLIGHTEN SOFTWARE: Files Chapter 7 Petition in N.D. California
ENLIGHTEN SOFTWARE: Chapter 7 Voluntary Case Summary
FINOVA: Court Denies Appaloosa's Application for Reimbursement
FINOVA GROUP: Expects Losses Resulting From Terrorist Attacks
FLEMING: Noteholders Consent to Proposed Indentures Amendments
FLEMING: S&P Rates New $250MM Senior Subordinated Notes at B+
FORMICA CORP: S&P Drops Ratings On Near-Term Liquidity Concerns
FOSTER & GALLAGHER: Expects to Close Substantial Asset Sale Soon
GENESIS WORLDWIDE: Gets Okay to Borrow $3.5M of DIP Facility
HEALTHCENTRAL: Slashes Jobs to Effect Operating Costs Reduction
HI-RISE RECYCLING: Mulls Bankruptcy Filing to Restructure Debt
INTERNATIONAL TOTAL: Sues Ex-CEO For Over $25M In Damages
INVESTORS RESEARCH: Will Commence Liquidation on Thursday
ISPAT INTL: Gloomy Market Forecast Prompts S&P to Cut Ratings
KOMAG INC: Files Plan of Reorganization
MIDWAY AIRLINES: Creditors Agree to Continue Ticket Refunds
NORTHWEST AIRLINES: S&P Concerned About Aftermath of Attacks
OWENS CORNING: Court Okays Settlement with Continental Claimants
PACIFIC GAS: Independent Producers Find Reorg. Plan "Creative"
PASMINCO: S&P Junk Ratings Further On Voluntary Administration
PIONEER COMPANIES: Files Amended Joint Plan of Reorganization
RAILWORKS CORPORATION: Files Chapter 11 Petition in Maryland
RAILWORKS CORPORATION: Chapter 11 Case Summary
SANLUIS CORPORACION: Fitch Assigns D-Level Currency Ratings
SCHWINN/GT: Closes Cycling & Fitness Units Sale to Direct Focus
SUN HEALTHCARE: Agrees to Extend Bar Date for Gov't Entities
TRI-NATIONAL: Court to Consider Bankruptcy Case on October 26
US AIRWAYS: Attacks Spur S&P to Place Ratings on Watch Negative
U.S. INTERACTIVE: Court Confirms Joint Chapter 11 Plan
UNITED AIRLINES: Ratings Placed on CreditWatch Negative
VLASIC FOODS: Moves to Set-Up Solicitation Procedures
WEBVAN GROUP: Selling Technology Platform to Founder for $2.5MM
BOND PRICING: For the week of September 24 - 28, 2001
*********
360NETWORKS: Further Defers Q2 Results Report to Mid-October
------------------------------------------------------------
360networks says it expects to file its second quarter 2001
financial statements and the related management's discussion and
analysis by mid-October 2001.
This delay, 360 says, "is due to additional requirements related
to the complexity of the company's various creditor protection
and insolvency proceedings."
In compliance with the provisions of the Alternate Information
Guidelines contained in the Ontario Securities Commission Policy
57-603, 360networks is issuing a default status report every two
weeks until the second quarter results are issued.
360networks offers optical network services to
telecommunications and data-centric organizations in North
America. The company's fiber optic network includes terrestrial
segments and undersea cables in North America and South America.
On June 28, 2001, the company and several of its operating
subsidiaries filed for protection under the Companies' Creditors
Arrangement Act (CCAA) in the Supreme Court of British Columbia.
The company's principal U.S. subsidiary, 360networks (USA) inc.
and 22 of its affiliates concurrently filed for protection under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Southern District of New York. The company has
also instituted insolvency proceedings in Europe.
AMR CORP: Terrorist Attacks Prompt S&P to Drop Ratings to BB
------------------------------------------------------------
Standard & Poor's lowered its ratings on AMR Corp. following
terrorist attacks last week. Ratings remain on CreditWatch with
negative implications, where they were placed Sept. 13, 2001.
The downgrades reflect the severe impact of sharply reduced air
traffic since the Sept. 11 terrorist attacks in New York City
and Washington, D.C., with expectations for only a slow recovery
in the coming months. This worsens significantly an already grim
airline industry outlook, with depressed business travel and
higher labor costs. The enormity of the New York and Washington
attacks, and the resulting investigations and possible U.S.
military response, will keep the events in the public eye for a
significant period.
In addition, the attacks and surrounding sense of crisis may
undermine consumer confidence, which is already shaky following
the U.S. slowdown, further weakening the U.S. economy and demand
for air travel. Pending moves to provide federal aid to the
airlines in the form of direct grants, liability relief, and
possible other support will be important in limiting the severe
financial damage, but will not offset it entirely.
The extent of the downgrades was determined principally by:
* The risk of a downward rating action prior to the current
crisis, and thus how much credit "cushion" was available
within those ratings;
* The cash and bank lines available to AMR Corp., as well as
the amount of owned, unsecured aircraft that could be used
in secured debt or sale-leasebacks to raise further funds;
and
* The ability of the airlines to reduce cash operating
expenses and commitments for capital spending.
In addition, certain specific debt issues were affected to a
lesser extent, compared with the lowering of the AMR Corp.'s
corporate credit rating, or not affected at all, because those
issues are insured or were already lowered for other reasons.
In determining the need for any further downgrades of debt
issues, Standard & Poor's will consider not only the corporate
credit ratings of AMR Corp., but also the adequacy of asset
protection for aircraft-backed debt, in light of current and
expected global industry conditions, and the effect of
mounting levels of secured debt and leases on recovery prospects
for unsecured creditors.
Ratings Lowered, Remain on CreditWatch
with Negative Implications
To From
AMR Corp.
Corporate credit rating BB BBB-
Senior secured debt BB BBB-
Senior unsecured debt BB BBB-
Senior unsecured (shelf) BB BBB-
AIR CANADA: S&P Places BB- Debt Rating on CreditWatch Negative
--------------------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's placed Air Canada's BB- senior unsecured debt
rating on CreditWatch with negative implications.
This action follows the placement earlier of the long-term
corporate credit ratings on Air Canada on CreditWatch with
negative implications.
Ratings on Air Canada was placed on CreditWatch with negative
implications because of the company's substantial dependence on
traffic between its respective domestic locations and the U.S.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks. In contrast to previous terrorist
incidents affecting aircraft on international routes, these
attacks involved multiple domestic flights.
As a result, the effect on passenger demand is likely to be more
widespread. The enormity of the New York and Washington
incidents, and the resulting investigations and possible U.S.
military response, will keep the events in the public eye for a
significant period. U.S. aviation authorities have, in addition,
blocked the shipment of cargo and mail on passenger aircraft as
a security measure, business that normally provides 5% or more
of airline revenues.
The attacks and surrounding sense of crisis may undermine
consumer confidence, which is already shaky following the U.S.
slowdown, further weakening the U.S. economy and demand for air
travel.
The price of oil, and therefore aviation fuel, could spike
upward as a result of concerns about a widening Middle East
crisis.
In the short term, the additional costs arising from cancelled
flights, including those from accommodating passengers and
related expenses, although these costs are not expected to be as
serious in the long term as the other effects noted.
Although it is difficult to forecast liability risk,
particularly at this early stage, airlines have historically not
suffered material financial damage from lawsuits or legal costs
(both largely covered by insurance) following accidents or
terrorist attacks. Airline insurance costs will may well rise as
policies are renewed, but this is not a large expense item.
The CreditWatch status on securities issues for individual
airlines will be resolved when the financial and business risks
arising from the U.S. terrorist attacks and any related events
can be better estimated.
AMERICAN AIRLINES: S&P Cuts Ratings Following Terrorist Attacks
---------------------------------------------------------------
Standard & Poor's lowered its ratings on American Airlines Inc.
Ratings remain on CreditWatch with negative implications, where
they were placed Sept. 13, 2001.
Ratings Lowered, Remain on CreditWatch
with Negative Implications
To From
American Airlines Inc.
Corporate credit rating BB BBB-
Short-term corporate credit rating B A-3
Senior unsecured debt BB BBB-
All equipment trust certificates rated AA+ AAA
A+ AA-
BBB+ A-
BBB- BBB
The downgrades reflect the severe impact of sharply reduced air
traffic since the Sept. 11 terrorist attacks in New York City
and Washington, D.C., with expectations for only a slow recovery
in the coming months. This worsens significantly an already grim
airline industry outlook, with depressed business travel and
higher labor costs.
In addition, the attacks and surrounding sense of crisis may
undermine consumer confidence, which is already shaky following
the U.S. slowdown, further weakening the U.S. economy and demand
for air travel. Pending moves to provide federal aid to the
airlines in the form of direct grants, liability relief, and
possible other support will be important in limiting the severe
financial damage, but will not offset it entirely.
The extent of the downgrades was determined principally by:
* The risk of a downward rating action prior to the current
crisis, and thus how much credit "cushion" was available
within those ratings;
* The cash and bank lines available to American Airlines, as
well as the amount of owned, unsecured aircraft that could
be used in secured debt or sale-leasebacks to raise
further funds; and
* The ability of American Airlines Inc. to reduce cash
operating expenses and commitments for capital spending.
In addition, certain specific debt issues were affected to a
lesser extent, compared with the lowering of American Airlines's
corporate credit rating, or not affected at all, because those
issues are insured or were already lowered for other reasons.
In addition, ratings of equipment trust certificates, pass-
through certificates, and enhanced equipment trust certificates
of American Airlines Inc. benefited from the fact that the
equipment trust certificate rating of an investment-grade major
airline is typically one notch higher than the corporate credit
rating (in those cases triple-'B', compared with triple-'B'-
minus corporate credit rating, prior to these rating actions).
Thus the downgrades for all equipment trust certificates,
enhanced equipment trust certificates, and pass-through
certificates for American Airlines Inc. was less than the extent
of the downward rating action on the corporate credit.
In determining the need for any further downgrades of debt
issues, Standard & Poor's will consider not only the corporate
credit ratings of the airline, but also the adequacy of asset
protection for aircraft-backed debt, in light of current and
expected global industry conditions, and the effect of mounting
levels of secured debt and leases on recovery prospects for
unsecured creditors.
* * *
On September 11, 2001, two American Airlines aircraft were
hijacked and destroyed in terrorist attacks on The World Trade
Center in New York City and the Pentagon in northern Virginia.
On the same day, two United Air Lines aircraft were also
hijacked and used in terrorist attacks. In addition to the
loss of all passengers and crew on board the aircraft, these
attacks resulted in untold deaths and injuries to persons on
the ground and massive property damage. In the immediate
aftermath of the attacks, the Federal Aviation Administration
closed the U.S. airspace (except for military operations) for
several days.
Subsequently, Standard & Poor's announced that it had placed
the long-term corporate credit ratings of all U.S. airlines
on CreditWatch with negative implications. Likewise, Moody's
Investors Service announced that it had placed the credit
ratings of American and a number of other U.S. airlines on
review for possible downgrade.
The impact of the events of September 11, 2001 on American
will depend on a number of factors, including the following:
(i) the number of and the size of the claims that will be
made against American arising from the events of September
11, 2001, and the adequacy of American's insurance to cover any
liability associated with these claims; (ii) the adverse impact
of the terrorist attacks on the economy in general; (iii)
the likelihood of a further decline in air travel because of
these attacks and as a result of a reduction in American's
operations; (iv) the costs associated with new airline security
directives and any other increased regulation of air carriers;
(v) a possible increase in the price of jet fuel; (vi) the
number of crew members who may be called for duty in the
reserve forces of the armed services and the resulting impact
on American's ability to operate as planned; and (vii) the
economic losses to American from the FAA's shutdown of the
U.S. air traffic system.
American, United and other U.S. air carriers have
approached the federal government to seek legislative relief,
including governmental financial assistance. In the case of
American and United, the relief sought includes protection
from liabilities for claims relating to the attacks that may
be brought by persons other than those on the affected
aircraft. There is no assurance when or if any such relief
will be forthcoming or that it will be adequate.
At this point, American is unable to estimate the impact
on it of the events of September 11, 2001 and their
consequences. However, given the magnitude of these
unprecedented events and the possible subsequent effects,
American expects that the adverse impact to its financial
condition, its operations and its prospects will be material
and could be highly material. Furthermore, to the extent the
federal government fails to provide American adequate protection
from liabilities as discussed above, those liabilities may
exceed American's financial resources.
AMERICAN TRANS: Debt Ratings Placed on CreditWatch Negative
-----------------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's today placed American Trans Air Inc. and
Amtran Inc.'s ratings on CreditWatch with negative implications.
Ratings Placed On CreditWatch With Negative Implications
Issuer Ratings
Amtran Inc.
Senior unsecured debt B
American Trans Air, Inc.
Senior secured debt B+
All rated equipment trust certificates AA-;
A-;
BBB
This action follows the placement earlier of the long-term
corporate credit ratings on all U.S. airlines on CreditWatch
with negative implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks.
In contrast to previous terrorist incidents affecting aircraft
on international routes, these attacks involved multiple
domestic flights. As a result, the effect on passenger demand is
likely to be more widespread. The enormity of the New York and
Washington incidents, and the resulting investigations and
possible U.S. military response, will keep the events in the
public eye for a significant period.
U.S. aviation authorities have, in addition, blocked the
shipment of cargo and mail on passenger aircraft as a
security measure, business that normally provides 5% or more of
airline revenues.
The attacks and surrounding sense of crisis may undermine
consumer confidence, which is already shaky following the U.S.
slowdown, further weakening the U.S. economy and demand for air
travel.
The price of oil, and therefore aviation fuel, could spike
upward as a result of concerns about a widening Middle East
crisis.
In the short term, the additional costs arising from cancelled
flights, including those from accommodating passengers and
related expenses, although these costs are not expected to be as
serious in the long term as the other effects noted.
Although it is difficult to forecast liability risk,
particularly at this early stage, airlines have historically not
suffered material financial damage from lawsuits or legal costs
(both largely covered by insurance) following accidents or
terrorist attacks.
Airline insurance costs will may well rise as policies are
renewed, but this is not a large expense item. The CreditWatch
status on securities issues for individual airlines will be
resolved when the financial and business risks arising from the
U.S. terrorist attacks and any related events can be better
estimated.
AMERICA WEST: S&P Junks Certain Ratings & Initiates Watch
---------------------------------------------------------
Standard & Poor's lowered its ratings on America West Holdings
Corp. and subsidiary America West Airlines Inc. (see list
below), except for ratings on enhanced equipment trust
certificates that are insured by triple-'A' rated Ambac
Assurance Corp. The CreditWatch status on the ratings is
developing.
The rating action is based on the company's weak liquidity
position, which was already constrained before the nationwide
U.S. airline shutdown during the week of Sept. 10, 2001, and has
deteriorated even further. The company has very little cash on
hand (less than $100 million), is fully drawn on its revolving
credit facility, and leases most of its aircraft.
At the same time, the company is operating at a reduced capacity
level, with revenues generated significantly below operating
costs, resulting in increased pressure on the company's
remaining cash. If the government provides aid to the industry
and/or the company is able to raise liquidity from other sources
within the near future, ratings could be raised.
Alternatively, if the company is unable to raise additional
liquidity, the company could be forced to file for bankruptcy.
Ratings Lowered & Placed on CreditWatch Developing
TO FROM
America West Holdings Corp.
Corporate credit rating CCC- B+
America West Airlines Inc.
Corporate credit rating CCC- B+
Senior unsecured debt CC B
Equipment trust certificates (pass-thru)
$99.5 mil 6.85% class A ser 1996-1 due 2011 BBB- AA-
$37.1 mil 6.93% class B ser 1996-1 due 2009 BB- A-
$37.7 mil 6.86% class C ser 1996-1 due 2006 B- BB-
$29.6 mil 8.16% class D ser 1996-1 due 2002 CCC BB
$14.5 mil 10.5% class E ser 1996-1 due 2004 CC B+
$45.8 mil 7.33% class A ser 1997-1 due 2008 BBB- AA-
$17 mil 7.4% class B ser 1997-1 due 2005 BB- A-
$17.1 mil 7.53% class C ser 1997-1 due 2004 B- BBB-
$131.67 mil 6.87% ser 1998-1A due 2017 BBB- AA-
$41.154 mil 7.12% ser 1998-1B due 2017 BB- A-
$17.705 mil 7.84% ser 1998-1C due 2010 B BBB
$20.158 mil 8.54% ser 1999-1G due 2006 B BBB
$20.429 mil 9.244% ser 2000-1C due 2008 B+ BBB+
$57.021 mil 8.37% ser 2001-C due 2007 B+ BBB+
$45 mil flt rate ser 2001-D due 2005 CCC BB
AMES DEPARTMENT: Asks Court to Set-Up Compensation Procedures
-------------------------------------------------------------
Ames Department Stores, Inc. asks the Court to put uniform
procedures in place to establish an orderly, regular process for
allowance and payment of compensation and reimbursement for
attorneys and other professionals employed and retained in these
cases and to reimburse Committee Members' expenses:
(A) On or before the 20th day of each month following the month
for which fees are sought, each Professional seeking fees
will serve a monthly statement to:
a) Ames Department Stores, Inc., 2418 Main Street, Rocky
Hill, Connecticut 06067 (Attn: David H. Lissy, Esq.);
b) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York,
New York 10153 (Attn: Martin J. Bienenstock, Esq.);
c) attorneys for any statutory committee;
d) attorneys for the Office of the United States Trustee, 33
Whitehall Street, 21st Floor, New York, New York 10004;
e) Winston & Strawn, 200 Park Avenue, New York, New York
10166 (Attn: William Brewer, Esq.);
(B) The monthly statement need not be filed with the Court and a
courtesy copy need not be delivered to chambers since this
Motion is not intended to alter the fee application
requirements outlined in sections 330 and 331 of the
Bankruptcy Code and since Professionals are still required
to serve and file interim and final applications for
approval of fees and expenses in accordance with the
relevant provisions of the Bankruptcy Code, the Federal
Rules of Bankruptcy Procedure, and the Local Rules for the
United States Bankruptcy Court, Southern District of New
York;
(C) Each monthly fee statement must contain a list of the
individuals and their respective titles who provided
services during the statement period, their respective
billing rates, the aggregate hours spent by each individual,
a reasonably detailed breakdown of the disbursements
incurred, and contemporaneously maintained time entries for
each individual in increments of 1/10 of an hour;
(D) Each person receiving a statement will have at least 15 days
after its receipt to review it and, in the event that he or
she has an objection to the compensation or reimbursement
sought in a particular statement, he or she shall, by no
later than the 35th day following the month for which
compensation is sought, serve upon the Professional whose
statement is objected to, and the other persons designated
to receive statements in paragraph (A), a written "Notice Of
Objection To Fee Statement," setting forth the nature of the
objection and the amount of fees or expenses at issue;
(E) At the expiration of the 35 day period, the Debtors shall
promptly pay 80% of the fees and 100% of the expenses
identified in each monthly statement to which no objection
has been served in accordance with paragraph (D);
(F) If the Debtors make or receive an objection to a particular
fee statement, they shall withhold payment of that portion
of the fee statement to which the objection is directed and
promptly pay the remainder of the fees and disbursements in
the percentages set forth in paragraph (E);
(G) Similarly, if the parties to an objection are able to
resolve their dispute following the service of a Notice Of
Objection To Fee Statement and if the party whose statement
was objected to serves on all of the parties listed in
paragraph (A) a statement indicating that the objection is
withdrawn and describing in detail the terms of the
resolution, then the Debtors shall promptly pay, in
accordance with paragraph (E), that portion of the fee
statement which is no longer subject to an objection;
(H) All objections not resolved by the parties shall be
preserved and presented to the Court at the next interim or
final fee application hearing to be heard by the Court.
(I) The service of an objection in accordance with paragraph (D)
shall not prejudice the objecting party's right to object to
any fee application made to the Court in accordance with the
Bankruptcy Code on any ground whether raised in the
objection or not. Furthermore, the decision by any party
not to object to a fee statement shall not be a waiver of
any kind or prejudice that party's right to object to any
fee application subsequently made to the Court in accordance
with the Bankruptcy Code;
(J) Once every 150 days, each of the Professionals shall serve
and file with the Court an application for interim or final
Court approval and allowance, pursuant to sections 330 and
331 of the Bankruptcy Code of the compensation and
reimbursement of expenses requested;
(K) Any Professional who fails to file an application seeking
approval of compensation and expenses previously paid under
this Motion when due shall:
(1) be ineligible to receive further monthly payments of fees
or expenses as provided herein until further order of the
Court and
(2) may be required to disgorge any fees paid since retention
or the last fee application, whichever is later;
(L) The pendency of an application or a Court order that payment
of compensation or reimbursement of expenses was improper as
to a particular statement shall not disqualify a
Professional from the future payment of compensation or
reimbursement of expenses as set forth above, unless
otherwise ordered by the Court;
(M) Neither the payment of, nor the failure to pay, in whole or
in part, monthly compensation and reimbursement as provided
herein shall have any effect on this Court's interim or
final allowance of compensation and reimbursement of
expenses of any Professionals;
(N) Attorneys for a statutory committee may, in accordance with
the foregoing procedure for monthly compensation and
reimbursement of Professionals, collect and submit
statements of expenses, with supporting vouchers, from
members of the committee he or she represents; provided,
however, that such committee attorneys ensure that these
reimbursement requests comply with the Court's
Administrative Orders dated June 24, 1991 and April 21,
1995.
The Debtors propose that each Professional may seek, in its
first request for compensation and reimbursement of expenses
pursuant to this Motion, compensation for work performed and
reimbursement for expenses incurred during the period beginning
on the effective date of the Professional's retention and ending
on September 30, 2001.
David S. Lissy, Esq., Ames' Senior Vice President and General
Counsel, contends that the proposed procedures will enable the
Debtors to closely monitor the costs of administration, maintain
a level cash flow, and implement efficient cash management
procedures. Moreover, Mr. Lissy adds that these procedures will
allow the Court and the key parties in interest to insure the
reasonableness and necessity of the compensation and
reimbursement sought pursuant to such procedures. (AMES
Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
AMTRAN INC: S&P Cuts Ratings In Wake Of Reduced Air Traffic
-----------------------------------------------------------
Standard & Poor's lowered its ratings on nine U.S. airlines.
Ratings remain on CreditWatch with negative implications, where
they were placed Sept. 13, 2001.
The downgrades reflect the severe impact of sharply reduced air
traffic since the Sept. 11 terrorist attacks in New York City
and Washington, D.C., with expectations for only a slow recovery
in the coming months. This worsens significantly an already grim
airline industry outlook, with depressed business travel and
higher labor costs.
In addition, the attacks and surrounding sense of crisis may
undermine consumer confidence, which is already shaky following
the U.S. slowdown, further weakening the U.S. economy and demand
for air travel. Pending moves to provide federal aid to the
airlines in the form of direct grants, liability relief, and
possible other support will be important in limiting the severe
financial damage, but will not offset it entirely.
The extent of the downgrades was determined principally by:
* The risk of a downward rating action prior to the current
crisis, and thus how much credit "cushion" was available
within those ratings;
* The cash and bank lines available to Amtran Inc. as well
as the amount of owned, unsecured aircraft that could be
used in secured debt or sale-leasebacks to raise further
funds; and
* The ability of Amtran Inc. to reduce cash operating
expenses and commitments for capital spending.
In addition, certain specific debt issues were affected to a
lesser extent, compared with the lowering of the Amtran Inc.'s
corporate credit rating, or not affected at all, because those
issues are insured or were already lowered for other reasons.
In determining the need for any further downgrades of debt
issues, Standard & Poor's will consider not only the corporate
credit ratings of the Company, but also the adequacy of asset
protection for aircraft-backed debt, in light of current and
expected global industry conditions, and the effect of mounting
levels of secured debt and leases on recovery prospects for
unsecured creditors.
Ratings Lowered, Remain on CreditWatch
with Negative Implications
To From
Amtran Inc.
Corporate credit rating B- B+
Senior unsecured debt CCC+ B
American Trans Air Inc.
Corporate credit rating B- B+
Senior secured debt B- B+
(Guaranteed by Amtran Inc.)
All equipment trust certificates rated A AA-
BBB A-
BB+ BBB
ARMSTRONG HOLDINGS: Seeks Third Extension of Exclusive Periods
--------------------------------------------------------------
Armstrong Holdings, Inc., and its debtor-affiliates bring their
third Motion asking Judge Farnan for further extensions of the
time periods during which only the Debtors can present a plan of
reorganization and solicit acceptances for that plan.
The Debtors argue that these are extremely large and complex
chapter 11 proceedings involving literally tens of thousands of
claims and a multinational business enterprise that employs in
excess of 16,000 people throughout the world. The initial
period of these cases has involved stabilizing the businesses
and addressing the multitude of concerns raised by customers,
vendors, employees and other business partners to assure that
the value of the enterprise is maximized and the dislocations
necessarily attendant to any chapter 11 filing are minimized.
As a result of the Debtors' efforts, the Debtors pat themselves
on the back and say they've been "extremely successful".
These chapter 11 cases, in view of their size and complexity,
remain in their early stages. The Debtors rehearse their
various motions and requests for relief to date, which have been
granted, including the setting of a bar date for filing claims,
although some extensions have been agreed to. The Debtors cite
the litigation over dissolution of the PD Committee as a bar to
their further progress toward a chapter 11 plan.
The Debtors remind Judge Farnan that no legal representative for
the holders of future asbestos-related personal injury claims
has been appointed. Because the plan ultimately proposed in
these cases will likely involve an injunction and channeling
order under 11 U.S.C. Sec. 524(g), the appointment of a futures
representative is a critical element of these cases and the plan
process.
Although the Debtors, the Unsecured Creditors' Committee, and
the Asbestos PI Committee have been involved in many discussions
with respect to this issue and have considered many individuals,
based on the many other matters they have been attending to
during the early stages of these cases, a consensus on a
candidate to propose has not yet been achieved.
If the PD Committee remains in place, it also will be involved
in this process, further postponing the appointment of a future
claimants' representative.
In view of these facts, the Debtors assert that more than ample
cause exists for an extension of each of the exclusivity
periods. The present periods are October 5, 2001, for the
filing of a plan, and November 4, 2001, for solicitation of
acceptances of that plan. The Debtors ask for an additional
six-month extension to and including April 5, 2002, and June 4,
2002, respectively. (Armstrong Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
BIO-PLEXUS: Emerges From Bankruptcy with Appaloosa Financing
------------------------------------------------------------
Bio-Plexus, Inc. (OTCBB: BPXS), a leader in the design,
manufacture and marketing of safety medical needles and related
products, reiterated that it has successfully emerged from
protection under Chapter 11 of the United States Bankruptcy
Code.
The Company has also implemented a recapitalization and
refinancing plan with Appaloosa Management LP and certain
related entities (Appaloosa), which has resulted in, among other
things:
a) the elimination of the convertible debt held by Appaloosa;
b) the elimination of $2.5 million in annual interest
expense;
c) the elimination of current restrictive covenants;
d) the increase in shareholders' equity from negative $3
million to positive $19 million, a $22 million turnaround;
and
e) a $3 million capital infusion to Bio-Plexus. In connection
with the restructuring, Bio-Plexus has also implemented a
new equity incentive plan aimed at retaining key
employees.
John S. Metz, President and Chief Executive Officer of Bio-
Plexus, stated, "In sum, these developments have positioned Bio-
Plexus for future growth in the medical safety needle industry
and provided financial stability for the Company."
The plan includes the following key components:
* Conversion of Appaloosa Debt to Equity
Appaloosa has converted its existing debt of
approximately $19 million into approximately 8.5
million shares of Bio-Plexus common stock.
* New Equity Investment of $3 million
The Company also completed a $3 million private
placement with Appaloosa through the issuance of 1.3
million shares of common stock. As a result of its
debt conversion and equity infusion, Appaloosa now
owns approximately 87% of the issued and outstanding
shares of Bio-Plexus common stock. In addition, Bio-
Plexus has granted callable Warrants to Appaloosa to
purchase an additional 1,314,060 shares of common
stock, exercisable at $2.283 per share. Upon
achieving certain performance targets, Bio-Plexus
will be able to call for the redemption of these
warrants at $0.01. Proceeds from the private
placement and, if exercised, the Warrants, will be
used for general corporate purposes.
With the balance sheet restructured and the infusion of new
equity capital, the Company is seeking to raise up to $4 million
in additional funds through a private equity placement or
traditional debt financing to provide new working capital as
needed.
Reincorporation and Reverse Split
The Company, formerly a Connecticut Corporation, has been
reincorporated as a Delaware corporation, effective July 19,
2001. As part of the reincorporation, holders of Bio-Plexus
Common Stock shall receive 1 (one) share of Common Stock in the
Delaware Bio-Plexus in exchange for 10 (ten) shares of Common
Stock in the Connecticut Bio-Plexus. The total number of common
shares (diluted) outstanding (post reverse split) stands at 11.3
million.
Mr. Metz continued, "Clearly, this has been a difficult time for
Bio-Plexus. While I am pleased to announce these developments, I
am most proud of the fact that throughout the bankruptcy period
we have successfully met the needs of our customers and our
vendors. This is due in large part to the hard work and
dedication of our employees, who, in my opinion, are among the
best and brightest in our industry. Bio-Plexus has established
itself as a world-class provider of a comprehensive range of
medical safety needles and related products. We believe that
this new financing plan will allow us to focus our efforts on
accelerating the growth of the Company and expanding our
industry presence."
The Company also announced that on July 17, 2001, it filed its
Form 10-K (for the year ending December 31, 2000) and Form 10-Q
(for the period ending March 31, 2001) with the Securities and
Exchange Commission. The Company's delinquency in filing these
reports, due to the bankruptcy proceedings and recapitalization,
caused the Company's common stock to be delisted from the
OTC Bulletin Board. Bio-Plexus common stock is now trading on
the OTC Bulletin Board.
The Company believes this re-listing has created a more orderly
market and will allow investors easier access to Company news
and information. Bio-Plexus also plans to apply for a listing on
a national stock exchange once it meets all necessary
eligibility requirements.
The Company also announced that it has begun fulfilling customer
orders for its PUNCTUR-GUARD(R) Safety Winged Set for Blood
Collection. This commercialization follows the Company's receipt
of 510(k) approval from the Food and Drug Administration in
January 2001 and the successful clinical evaluations of the
product undertaken by Bio-Plexus since May 2001.
Mr. Metz concluded, "We are proud that our products have a
direct impact on the safety and well-being of healthcare workers
around the world. As evidenced by the recent launch of our new
Winged Set, we are continuing to leverage our PUNCTUR-
GUARD(R)technology to develop new, innovative products.
"These advances complement existing agreements in place with
companies such as Johnson & Johnson (NYSE: JNJ), Fresenius
Medical Care, North America (NYSE: FMS) and Teleflex Medical,
which supplies C.R. Bard (NYSE: BCR)."
Bio-Plexus, Inc. (OTCBB: BPXS), designs, develops, manufactures
and holds U.S. and international patents on safety medical
needles and other products under the PUNCTUR-GUARD(R), DROP-
IT(R), and PUNCTUR-GUARD REVOLUTION(TM) brand names. For
independent evaluations of the PUNCTUR-GUARD(R) blood
collection needle, refer to the Centers for Disease Control
(MMWR, January 1997) and ECRI (Health Devices, June 1998 and
October 1999) studies.
Accidental needlesticks are estimated to number about one
million per year in the United States and can result in the
transmission of deadly diseases including HIV and Hepatitis B
and C.
BTI TELECOM: Makes Interest Payment But Liquidity Still Strained
----------------------------------------------------------------
Standard & Poor's ratings on BTI Telecom Corp. remain on
CreditWatch with negative implications, where they were placed
Aug. 14, 2001.
Ratings Remaining on CreditWatch Negative
BTI Telecom Corp. RATING
Corporate credit rating CCC-
Senior unsecured debt CC
Senior secured bank loan CCC-
Although BTI met its Sept. 15, 2001, interest payment, the
company has a weak liquidity position and could potentially
restructure its debt, as was indicated in its second quarter
earnings release.
In addition, there is uncertainty regarding the impact of the
weakened economy since the second quarter on BTI's financial
position. As of June 30, 2001, the company had a cash balance of
$48 million and had no availability under its $89 million
secured bank credit facility.
COMDISCO: Deadlines Extended & Chapter 11 Cases Still On Course
---------------------------------------------------------------
Comdisco, Inc. (NYSE: CDO) announced that the U.S. Bankruptcy
Court for the Northern District of Illinois approved the
company's request for an extension of the exclusive periods
during which only Comdisco may file a plan of reorganization and
solicit acceptances of that plan.
These periods, which had been scheduled to expire on November
13, 2001 and January 15, 2002, have now been extended through
January 15, 2002 and March 15, 2002, respectively.
Comdisco also announced that the Bankruptcy Court has set
November 30, 2001 as the "bar date," or deadline for filing a
proof of claim against Comdisco or any of its 50 subsidiaries
that are also chapter 11 debtors. To preserve claims against
Comdisco and its related subsidiaries and affiliates, all
persons and entities with such claims must file, and such
claims must be received, no later than 4:00 p.m. Eastern Time on
November 30, 2001.
The Bankruptcy Court also fixed January 14, 2002 as the bar date
for governmental entities, established separate bar dates for
certain categories of claims, and excluded certain categories of
claims or interests from the bar date order. Among other
matters, the Bankruptcy Court directed that common shareholders
are not required to file proofs of interest solely on account of
their common stock holdings pending further order of the Court.
The company said that complete bar date notice packets are being
prepared for mailing to persons or entities that may have
potential claims against Comdisco and this press release is
qualified entirely by the formal notice packages to be
distributed. Notice packets include, among other things, a
copy of the Court-approved proof of claim form and instructions
for completing and returning that form. Notices of the deadline
to file claims will appear in publications throughout the United
States.
The company said that none of the Comdisco affiliates located
outside of the United States have commenced chapter 11 cases or
similar proceedings in any other jurisdictions, are not affected
by the chapter 11 cases, and continue to operate their
businesses in the ordinary course of business outside of
bankruptcy.
Norm Blake, Chairman and Chief Executive Officer, said: "We are
pleased that the court has granted Comdisco's request for an
extension of its exclusivity periods -- which is customary at
this early stage in a chapter 11 case as large and complex as
ours. We remain committed to a `fast-track' reorganization and
expect to make considerable progress in the next few months in
finalizing our asset sales and developing a plan of
reorganization that is in the best interest of our employees,
customers, creditors and other important constituent groups."
The company also said that due to the tragic events of September
11, 2001 and the resulting travel delays, and in light of the
large number of potential bidders, Comdisco has extended the due
diligence periods for the sale of both its Availability Services
and Leasing businesses.
The bid deadline for the Availability Services business will be
extended through 12 o'clock noon on Monday, October 8, 2001. The
auction date of Thursday, October 11, 2001 and sale hearing date
of Tuesday, October 23, 2001 remain unchanged. For the Leasing
businesses, the bid deadline will be extended to Monday, October
29, the auction date will be Thursday, November 8, 2001, and
the sale hearing date will be Thursday, November 15, 2001.
Comdisco, Inc. and 50 domestic U.S. subsidiaries filed voluntary
petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the Northern District of
Illinois on July 16, 2001. The filing allows the company to
provide for an orderly sale of some of its businesses, while
resolving short-term liquidity issues and enabling the company
to reorganize on a sound financial basis to support its
continuing businesses.
Simultaneous with the filing, Comdisco also announced the
proposed sale of substantially all of its Availability Solutions
business to Hewlett-Packard Company for $610 million. Closing of
that transaction is subject to a court-supervised auction
process.
Comdisco's operations located outside of the United States were
not included in the chapter 11 reorganization cases. All of
Comdisco's businesses, including those that filed for chapter
11, are conducting normal operations.
Comdisco is continuing to pursue other strategic alternatives to
create value for its stakeholders, including the potential sale
of its leasing businesses, as well as the restructuring of its
Ventures group. The company has targeted emergence from chapter
11 during early 2002.
Comdisco -- http://www.comdisco.com-- provides technology
services worldwide to help its customers maximize technology
functionality, predictability and availability, while freeing
them from the complexity of managing their technology. The
Rosemont, (IL) company offers a complete suite of information
technology services including business continuity, managed web
hosting, storage and IT Control and Predictability
Solutions(SM).
Comdisco offers leasing to key vertical industries, including
semiconductor manufacturing and electronic assembly, healthcare,
telecommunications, pharmaceutical, biotechnology and
manufacturing. Through its Ventures division, Comdisco provides
equipment leasing and other financing and services to venture
capital backed companies.
CONTINENTAL AIRLINES: S&P Places Ratings on CreditWatch Negative
----------------------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's placed Continental Airlines Inc.'s ratings on
CreditWatch with negative implications.
Ratings Placed on CreditWatch with Negative Implications
Issuer Ratings
Continental Airlines Inc.
Senior secured debt BB
Senior unsecured debt BB-
All equipment trust certificates rated AAA;
AA+;
A+;
A-;
BBB+
BBB;
BBB-
Subordinated debt B+
Preferred stock convertible bond B
This action follows the placement of the long-term corporate
credit ratings on all U.S. airlines on CreditWatch with negative
implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks.
In contrast to previous terrorist incidents affecting aircraft
on international routes, these attacks involved multiple
domestic flights. As a result, the effect on passenger demand is
likely to be more widespread.
The enormity of the New York and Washington incidents, and the
resulting investigations and possible U.S. military response,
will keep the events in the public eye for a significant period.
U.S. aviation authorities have, in addition, blocked the
shipment of cargo and mail on passenger aircraft as a security
measure, business that normally provides 5% or more of airline
revenues.
The attacks and surrounding sense of crisis may undermine
consumer confidence, which is already shaky following the U.S.
slowdown, further weakening the U.S. economy and demand for air
travel.
The price of oil, and therefore aviation fuel, could spike
upward as a result of concerns about a widening Middle East
crisis.
In the short term, the additional costs arising from cancelled
flights, including those from accommodating passengers and
related expenses, although these costs are not expected to be as
serious in the long term as the other effects noted.
Although it is difficult to forecast liability risk,
particularly at this early stage, airlines have historically not
suffered material financial damage from lawsuits or legal costs
(both largely covered by insurance) following accidents or
terrorist attacks. Airline insurance costs will may well rise as
policies are renewed, but this is not a large expense item.
The CreditWatch status on securities issues for individual
airlines will be resolved when the financial and business risks
arising from the U.S. terrorist attacks and any related events
can be better estimated.
* * *
As of June 30, 2001, the Company had $1.0 billion in cash and
cash equivalents. Net cash provided by operating activities
decreased $196 million during the six months ended June 30, 2001
compared to the same period in the prior year primarily due to a
decrease in net income and changes in working capital.
Net cash used by investing activities increased $412 million for
the six months ended June 30, 2001 compared to the same period
in the prior year, primarily as a result of the proceeds from
the sale of short-term investments in the first half of 2000 and
an increase in capital expenditures. Net cash used by financing
activities for the six months ended June 30, 2001 compared to
the same period in the prior year decreased $124 million
primarily due to a decrease in payments on long-term debt and
capital lease obligations and an increase in proceeds from the
issuance of long-term debt, partially offset by an increase in
the purchase of the Company's Class B common stock.
In January 2001, the Company obtained a 3-year $200 million pre-
delivery credit facility to be used to finance manufacturer
progress payments on new Boeing aircraft.
During the second quarter, the Company completed two offerings
of pass-through certificates totaling $901 million at an
effective average interest rate of 6.87%. The proceeds will be
used to finance (through either leveraged leases or secured debt
financings) the debt portion of the acquisition cost of 21 new
aircraft. These aircraft are scheduled for delivery from October
2001 to June 2002.
Continental has a commitment of $283 million to finance six new
Boeing aircraft to be delivered from July 2001 to February 2002.
On July 13, 2001, the Company priced an offering of $200 million
of pass-through certificates at an interest rate of 7.57%. The
proceeds will be used for general corporate purposes.
Continental expects its cash outlays for 2001 capital
expenditures, exclusive of fleet plan requirements, to aggregate
approximately $300 million (net of financings), primarily
relating to software application and automation infrastructure
projects, aircraft modifications and mandatory maintenance
projects, passenger terminal facility improvements and office,
maintenance, telecommunications and ground equipment.
Continental's capital expenditures during the six months ended
June 30, 2001 aggregated $116 million (net of financings),
exclusive of fleet plan expenditures.
The Company expects to fund its future capital commitments
through internally generated funds together with general Company
financings and aircraft financing transactions. However, there
can be no assurance that sufficient financing will be available
for all aircraft and other capital expenditures not covered by
firm financing commitments.
CONTINENTAL AIR: Begins Furlough Process & Closes Denver Center
---------------------------------------------------------------
Continental Airlines (NYSE: CAL) began its employee furlough
process, which includes the closure of its Denver Reservations
Center and Los Angeles flight attendant base.
Last week Continental announced that, as a result of the tragic
terrorist attacks on the United States, it would reduce its
schedule for the long term by 20 percent, resulting in the
furlough of about 12,000 employees.
Subsequent to Continental's announcement, other major airlines
and suppliers have announced furloughs and schedule reductions.
Tens of thousands of additional furloughs are expected. Those
that have announced furloughs and/or pay cuts include:
* American Airlines - 20,000
* United Airlines - 20,000
* The Boeing Company - 30,000
* Honeywell - 12,000
* US Airways - 11,000 and anticipated pay cuts
* British Airways - 7,000
* America West Airlines - 2,000
* Virgin Atlantic - 1,200
* American Trans Air - 1,500
* Midwest Express - 450
* Frontier Airlines - 440
* Mesaba - undetermined furloughs and significant pay cuts
* KLM - 10 percent of workforce
Those that have already announced schedule reductions, which
will almost certainly result in significant layoffs, include:
* Northwest Airlines - Reduced its schedule by 20 percent
* Delta Air Lines - Reduced its schedule by 20 percent
* Aer Lingus - Reduced its operations by 25 percent
* AirTran - Reduced its schedule by 20 percent and
significant pay cuts
Continental's furlough affects employees in every area of the
company, including management, pilots, airport agents, flight
attendants, technicians, reservations agents, material services
and others. The breakdown of furloughed employees includes:
* Approximately 1,100 management and approximately 400
clerical employees
* Approximately 1,000 pilots
* Approximately 3,000 airport agents
* Approximately 475 technicians, which includes the closure
of line maintenance bases in Kansas City, Miami,
Washington, D.C., Greensboro and Albuquerque
* Approximately 1,200 reservations agents
* Approximately 1,800 flight attendants
* Approximately 700 Chelsea Catering employees
* Approximately 600 Continental Express employees
* Approximately 250 Continental Micronesia employees
Early retirements and Company Offered Leaves of Absence (COLA)
are expected to significantly offset the total number of 12,000
job cuts. In addition, because of Continental employee seniority
rights and the option for more senior employees to consider
relocation, the exact number of employees furloughed in each
location cannot be determined at this time.
"Numerous airlines - and many other industries - have been
forced to reduce their staffs by tens of thousands due to the
drops in air travel," said Continental Chairman and CEO Gordon
Bethune. "We are truly sad that this airline has been forced to
furlough our hard-working co-workers, but we are fighting to
save this industry so that they may return to us one day."
To reduce the number of furloughs, Continental has offered
eligible non-management employees COLAs. The number of employees
that accepts COLAs will further offset the number of furloughs.
At the time of furlough, Continental is giving affected
employees information about state unemployment benefits.
Furloughed employees also will be receiving severance payments
in accordance with their work rules.
Continental also is closing its Denver Reservations Center,
which will eliminate approximately 950 jobs. However, due to
their seniority, many Denver Reservations agents will have the
option of transferring to other reservations centers in Houston,
Salt Lake City and Tampa. The closure of the Denver Reservations
facility offers significant cost savings that help to reduce the
number of job furloughs.
The carrier will be holding Outplacement Job Fairs in its hub
cities so that furloughed employees can meet with employment
assistance professionals, representatives from governmental
agencies and staffing managers of other companies who are hiring
new personnel.
DELTA AIR: S&P Places Ratings on CreditWatch Negative
-----------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's placed Delta Air Lines Inc.'s ratings on
CreditWatch with negative implications.
Ratings Placed on CreditWatch with Negative Implications
Issuer Ratings
Delta Air Lines Inc.
Senior secured debt BBB-
Senior unsecured debt BBB-
All equipment trust certificates rated AAA;
AA-;
A+;
A;
BBB
This action follows the placement of the long-term corporate
credit ratings on all U.S. airlines on CreditWatch with negative
implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks.
ENLIGHTEN SOFTWARE: Files Chapter 7 Petition in N.D. California
---------------------------------------------------------------
Enlighten Software Solutions, Inc. (OTC Bulletin Board: SFTW), a
leading provider of system management software for Linux, Unix,
Windows and Freia filed Chapter 7 of the US Bankruptcy Code on
September 13, 2001.
A hearing scheduled by the Court pursuant to Section 341 of the
United States Bankruptcy Code (sometimes referred to as a "First
Meeting of Creditors") has been set for October 10, 2001, in San
Francisco, CA. Creditors and interest holders are permitted to
attend the hearing but are not required to do so.
Enlighten Software Solutions, Inc. is a provider of single point
workgroup administration and event monitoring solutions for
Unix, Linux, Windows and FreeBSD within distributed and Internet
computing environments. The Company's award-winning EnlightenDSM
product suite provides cost-effective systems administration
solutions for Unix, Linux, Windows and FreeBSD.
The EnlightenDSM product suite provides comprehensive
functionality with unprecedented ease of installation and use.
The EnlightenDSM product suite conforms to industry standard
frameworks yet allows seamless integration with other vendors'
point solutions. For more information, please visit the
company's web site at http://www.EnlightenDSM.com
ENLIGHTEN SOFTWARE: Chapter 7 Voluntary Case Summary
----------------------------------------------------
Debtor: Enlighten Software Solutions, Inc.
dba Software Professionals, Inc.
1900 S Norfolk St. #220
San Mateo, CA 94403
Chapter 7 Petition Date: September 13, 2001
Court: Northern District of California (San Francisco)
Bankruptcy Case No.: 01-32337
Judge: Thomas E. Carlson
Debtor's Counsel: Michael St. James, Esq.
St. James Law
155 Montgomery St. #1004
San Francisco, CA 94104
415-391-7566
FINOVA: Court Denies Appaloosa's Application for Reimbursement
--------------------------------------------------------------
Appaloosa Management is a member of the Official Committee of
Unsecured Creditors of The FINOVA Group, Inc., holding a claim
arising from its ownership of FINOVA's Trust Offered Preferred
Certificates.
Neal J. Levitsky, Esq., at Agostini, Levitsky, Isaacs & Kulesza,
in Wilmington, Delaware, relates that Finova Finance Trust
issued the Trust Offered Preferred Securities to the public in
the face amount of $115,000,000 in return for gross cash
proceeds of $118,600,000.
Then, Mr. Levitsky notes, Finova Trust loaned the proceeds to
Finova Group. As evidence of the Loan, Mr. Levitsky says,
Finova Trust took back a $118,600,000 5.5% subordinated
debenture. According to Mr. Levitsky, the terms of the Finova
Group Debenture were similar to the terms of the Trust Offered
Preferred Securities.
When payments on Finova Group Debenture are made, Mr. Levitsky
says, they flow through the Trust Offered Preferred Securities.
For those holders of a principal amount of Trust Offered
Preferred Securities, Mr. Levitsky explains they are entitled to
vote the same principal amount of Finova Group Debenture. Each
holder will also receive the same principal amount of Finova
Group Debenture after an event default, Mr. Levitsky adds. In
other words, Mr. Levitsky notes, the holders of Trust Offered
Preferred Securities are the beneficial holders of the Finova
Group Debenture. Thus, Mr. Levitsky says, these holders are
creditors of Finova Group.
According to Mr. Levitsky, Appaloosa and its professionals
fought on behalf of the constituency of the $115,000,000 5.5%
Trust Offered Preferred Securities.
Because of its vigilance, Mr. Levitsky claims, Appaloosa and its
professionals boosted the recovery of the Trust Offered
Preferred Securities from less than 20 cents on the dollar at
the beginning of the case to more than 70 cents -- a $65,000,000
improvement -- at a cost of less than $150,000 in legal fees and
disbursements.
By this motion, Appaloosa seeks a reimbursement of attorneys'
fees, expenses and disbursements in the amount of $139,237.
Firm Legal Fees Expenses Total
---- ---------- -------- -------
Kramer Levin Naftalis & Frankel $127,015 $8,624 $135,639
Agostini Levitsky Isaacs & Kuleza 3,478 120 3,598
---------- -------- -------
Total = $130,493 $8,744 $139,237
According to Mr. Levitsky, these legal fees and expenses were
incurred solely in connection with the attorneys' representation
of the Trust Offered Preferred Securities on the Committee.
Among the activities undertaken by Appaloosa's counsels were:
(a) attendance of meetings only when the Committee debated the
plans proposed by Berkadia and General Electric
Corporation;
(b) investigation of the separate assets and liabilities of
Finova Group (the Trust Offered Preferred Securities'
debtor) and;
(c) objection to the Contested Disclosure Statement tailored
to the deficiencies in treatment of the Trust Offered
Preferred Securities and disclosure to the Trust Offered
Preferred Securities.
Mr. Levitsky emphasizes that no other party investigated the
separate assets and liabilities of Finova Group, and no other
lawyer litigated on behalf of the Trust Offered Preferred
Securities.
For such a substantial contribution, Mr. Levitsky contends that
Appaloosa is entitled to reimbursement of its fees and expenses
that were incurred in the performance of the duties of the
Committee in maximizing the recovery of the Trust Offered
Preferred Securities at the expense of shareholders and
Berkadia.
Appaloosa asserts that fees and disbursements of its counsel
represents reasonable compensation, which is more than justified
by the value provided to the Trust Offered Preferred Securities
and the Debtors' estates. Thus, Appaloosa requests the Court to
grant them the relief requested.
United States Trustee Objects
On behalf of the United States Trustee, George M. Conway, Esq.,
argues that the counsels for the individual members of the
Committee are not retained professionals under the Bankruptcy
Code. Thus, Mr. Conway asserts, the award of attorneys' fees to
counsel for individual committee members is neither automatic
nor routine.
Besides, Mr. Conway adds, the application does not establish and
satisfy the burden of showing such "unusual circumstances" and
that the services rendered were necessary to the performance of
the duties of particular member of the official creditors'
committee.
Appaloosa Responds
Contrary to the United States Trustees' observations, Mr.
Levitsky contends that Appaloosa has sufficiently justified its
request for reimbursement.
Mr. Levitsky relates that Appaloosa had tried to seek assistance
from the Committee's accountant, PricewaterhouseCoopers, to
obtain information about the assets of Finova Group. However,
Mr. Levitsky claims, PriceWaterhouseCoopers ignored the request.
Thus, Mr. Levitsky explains, Appaloosa had to conduct its own
inquiries, and only after doing so was Appaloosa able to obtain
information critical to its litigation and negotiation strategy.
Mr. Levitsky says Appaloosa's successful two-track strategy for
increasing the recovery of the Trust Offered Preferred
Securities were: (1) obtain information and (2) oppose the
confirmation of the Debtors' Plan while at the same time
negotiating an improvement in distributions to the Trust Offered
Preferred Securities.
For the most critical period prior to the negotiation of the
final Plan, Mr. Levitsky reminds the Court that it was only
Appaloosa who took action to increase the recovery of the Trust
Offered Preferred Securities.
Surely the reimbursement of expenses less than $150,000 is a
small price to pay for increasing the value of distributions to
the Trust Offered Preferred Securities by more than $26,000,000,
Mr. Levitsky observes.
Judge Walsh Rules
But Appaloosa's arguments were not able to convince Judge Walsh.
The Court denied Appaloosa's application for reimbursement.
(Finova Bankruptcy News, Issue No. 15; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FINOVA GROUP: Expects Losses Resulting From Terrorist Attacks
-------------------------------------------------------------
The FINOVA Group Inc. (NYSE: FNV) announced that it expects to
incur losses in its asset portfolios as a result of the
terrorist attacks against the United States, although the
Company is not currently able to estimate the amount of those
losses.
The Company has large lease and loan portfolios in the
transportation, resort and hotel industries. Those industries
have experienced, and are expected to continue experiencing,
losses of revenues as a direct result of the terrorist attacks.
As previously disclosed, the transportation industry in
particular had already been in a down cycle, and the Company's
inventory of off-lease and repossessed assets had been rising.
As of June 30, 2001, the Company's investment in financing
transactions and off lease assets totaled $2.1 billion in its
transportation finance line of business (substantially all
aircraft), $1.6 billion in its resort finance line of business
and $0.5 billion in its specialty real estate finance line
of business (excluding real estate leveraged leases).
Each of these businesses is expected to suffer losses in the
coming months. The substantial majority of the Company's
remaining portfolio, which totaled $5.1 billion at June 30,
2001, could be adversely affected by any general downturn in the
economy that may result from the terrorist attacks.
The Company emerged from bankruptcy on August 21, 2001 when it
received a $5.6 billion loan from Berkadia LLC, an entity
jointly controlled by Berkshire Hathaway Inc. and Leucadia
National Corporation. The Company will apply the provisions of
fresh start accounting principles, which generally require that
the Company record its assets and liabilities based on their
fair values as of the date of emergence.
Financial statements for periods after the application of fresh
start accounting principles will reflect losses incurred as a
result of these terrorist attacks. The Company does not expect
to be able to estimate these losses prior to filing its Form 10-
Q for the quarter ended September 30, 2001.
"These losses are merely monetary and cannot compare with the
losses suffered by the victims, their families and friends in
this monstrous attack. Our thoughts and prayers are with them,"
Finova in its press statement said.
FLEMING: Noteholders Consent to Proposed Indentures Amendments
--------------------------------------------------------------
Fleming (NYSE:FLM) announced that it has received consents from
holders representing a majority of the principal amount of each
of its 10-1/2 percent senior subordinated notes due 2004 and 10-
5/8 percent senior subordinated notes due 2007 in connection
with certain proposed amendments to the indentures governing
these securities.
Accordingly, Fleming has executed supplemental indentures
enacting amendments with respect to each of its 10-1/2 percent
senior subordinated notes due 2004 and 10-5/8 percent senior
subordinated notes due 2007.
As of 3:20 p.m. (New York City time) on September 20, 2001,
Fleming had received the following consents:
Aggregate Principal
Amount Outstanding Security Consents Received
------------------- ------------------ -----------------
$250,000,000 10-1/2% Senior $181,601,000
Subordinated Notes (72.6%)
due 2004
$250,000,000 10-5/8% Senior $137,963,000
Subordinated Notes (55.2%)
due 2007
In addition, Fleming has extended the consent period for holders
of the notes who have not submitted consents. Holder will now
have until 5:00 p.m. (New York City time) on Friday, September
21, 2001 to submit consents.
Any questions or requests for assistance or copies of the
consent solicitation materials may be directed to Deutsche Banc
Alex. Brown and J.P. Morgan, the Solicitation Agents, at
(212/469-7772), D.F. King & Co. (800/714-3305), the Information
Agent, or Manufacturers and Traders Trust Company (715/842-
5602), the Tabulation Agent.
FLEMING: S&P Rates New $250MM Senior Subordinated Notes at B+
-------------------------------------------------------------
Standard & Poor's raised its ratings on Fleming Cos. Inc. and
assigned its single-'B'-plus rating to Fleming's proposed $250
million senior subordinated notes due 2011. These notes will be
issued pursuant to Rule 144A with registration rights. Proceeds
from the offering will be used to pay down bank debt.
Rating Assigned
Rating
$250 million senior subordinated notes B+
Ratings Raised
To From
Corporate credit rating BB BB-
Senior secured bank loan BB+ BB
Senior unsecured debt BB- B+
Subordinated debt B+ B
The outlook is stable.
The upgrade is based on continued operating improvement in the
first half of 2001 and fiscal 2000, the result of increased
sales and cost reduction in Fleming's distribution business, the
company substantially completing capital investments and
integration relating to its $4.5 billion supply agreement with
Kmart Corp., and its focus on price impact formats in its
retail segment.
The ratings on Fleming reflect its position as one of the two
largest food wholesalers in the U.S., mitigated by modest but
improving cash flow protection measures.
Fleming, with about $14 billion in sales, has made good progress
increasing the efficiency of its distribution operations while
paring down its unprofitable retail businesses. EBITDA in 2000
grew 13% in the food distribution segment and 31% in the retail
segment, while return on capital was 12%, up from about 10% from
1997 through 1999.
Although Fleming's wholesale customer base eroded over the past
few years, the company's shift to non-traditional channels bodes
well for this segment. The traditional wholesale customer has
been affected by accelerated consolidation in the supermarket
industry, which is creating chains with the critical mass to
self-distribute and placing independent operators at risk.
Yet Fleming is gaining new customers from independent
supermarket operators and non-traditional retail channels,
including general merchandise retailers, supercenters, and
convenience stores.
In addition, Fleming's recent $4.5 billion 10-year supply chain
agreement with Kmart Corp. to distribute substantially all of
Kmart's food and consumables products adds an incremental $3.2
billion in volume, expanding its market share and extending its
geographic presence.
Fleming is now focused on growing its food and general
merchandise distribution in these channels as well as its Food 4
Less value retail format. The "no frills" Food 4 Less format can
be expanded more quickly and with less capital than conventional
supermarkets. The company is exiting most of its conventional
supermarket chains, which have shown very poor profitability in
recent years.
EBITDA covered interest expense 2.5 times in 2000, up from 2.2x
in 1999. The company's $600 million revolving credit facility
provides good flexibility for ongoing operations.
Outlook: Stable
Steady progress in distribution efficiency and better
profitability from the retail segment has resulted in stabilized
operations. Thin operating margins and a highly competitive
industry limit the potential for a rating upgrade over the next
two years.
FORMICA CORP: S&P Drops Ratings On Near-Term Liquidity Concerns
---------------------------------------------------------------
Standard & Poor's lowered its ratings on Formica Corp. The
ratings remain on CreditWatch with negative implications where
they were placed on July 2, 2001.
Ratings Lowered & Remaining on CreditWatch
With Negative Implications
Ratings
Formica Corp. To From
Corporate credit rating B- B+
Senior secured bank loan rating B- B+
Subordinated debt rating CCC B-
The downgrade reflects near-term liquidity concerns at Formica
and the expectation that dismal credit measures would likely
persist, or worsen, during a U.S. economic recession.
Poor performance has been driven by the global economic
slowdown, adverse currency impact, and higher energy and
transportation costs. Formica has very limited availability
under its $120 million revolving credit facility, with only
about $25 million in cash, and mandated term loan amortization.
Financial flexibility is further constrained because the
company's waiver for second quarter bank covenant violations
extends only until Nov. 9, 2001. The company is in discussions
with its banks to amend its $345 million credit facility.
However, the ratings could be lowered further if the company is
not successful, or if Standard & Poor's believes conditions of
an amendment are not sufficient to relieve financial stress.
The ratings reflect Formica Corp's very aggressive financial
profile and below average business position, which is the result
of limited product diversity; industry cyclicality; and modest
growth prospects and substitution risk for the company's primary
product--high pressure laminate (HPL)--which is used in
commercial and residential interior surfacing applications such
as countertops, cabinetry, furniture, and doors. These negative
factors are somewhat offset by leading market positions, high
brand-name recognition, established distribution, and good
geographic diversity.
Formica has implemented a cost control program and is realizing
savings from its 2000 acquisition of Perstorp Surface materials
AB. However, market conditions remain highly competitive and the
company will continue to be subject to volatile raw material
costs, industry cyclicality, and currency movements. The company
has a very heavy debt burden and weak cash flow protection, with
total debt to EBITDA of almost 8 times and funds from operations
to total debt well below 10%.
Standard & Poor's will resolve the CreditWatch upon completion
of Formica's bank negotiations.
FOSTER & GALLAGHER: Expects to Close Substantial Asset Sale Soon
----------------------------------------------------------------
Foster & Gallagher, Inc. (F&G) announced that the auction
process for a substantial portion of the Company's assets has
concluded, and it has presented the accepted bids to the United
States Bankruptcy Court for the District of Delaware.
The Company said that it has received Court approval of the
bids, and expects that the sales will close in the coming weeks.
As previously announced, F&G and 21 of its domestic subsidiaries
filed for Chapter 11 protection on July 2, 2001 in order to sell
all or substantially all of their assets.
The Company said that it has successfully auctioned a
substantial portion of its assets through an auction process
that began last week. Following the conclusion of the auction,
F&G, in consultation with its secured lenders and the official
committee of unsecured creditors, examined all bids to determine
which to accept.
Accepted bids were presented to the bankruptcy court at a
hearing yesterday morning. The Company said it was gratified by
the level of interest in the assets, and is pleased with the
court approval received Thursday. The asset sales approved by
the court are as follows:
* The Gift Group, including all inventory, real estate,
intellectual property and equipment, will be sold to Brecon
Capital for $15 million;
* Substantially all of the F&G horticulture business,
including all inventory, equipment, intellectual property
and most real estate, will be sold to Gardens Alive for
$10.75 million.
F&G said that it expects all sales to close in early October.
The Company said that the net sale proceeds will be distributed
in accordance with the requirements of the Bankruptcy Code.
As previously announced, F&G ceased operations on June 29, 2001,
and announced extensive layoffs. The Company said that it has
cooperated fully with the Department of Labor in its
investigation into F&G's compliance with the Worker Adjustment
and Retraining Notification (WARN) Act, and has voluntarily
provided additional information to Rep. Ray LaHood (R-IL) in
this matter.
The Company believes that it has fulfilled its obligations under
the law due to the exigent circumstances surrounding the
cessation of operations. As previously reported, beginning in
1998, the Company began to experience significant financial and
operational challenges, primarily as a result of negative media
coverage concerning sweepstakes marketing approaches, which
resulted in dramatic changes in consumer buying and response
rates.
F&G also faced an increasingly challenging business environment
and a relatively heavy debt burden as a result of a 1995
transaction to purchase shares for the ESOP.
The Company said that had revenues remained at pre-1998 levels,
it would have continued to have been profitable and its debt
burden would have remained manageable. In the past two years,
the Company undertook a number of actions to reverse the decline
in revenues, including consolidating operations and reducing
management and employee headcount while initiating new marketing
strategies. Unfortunately, it was determined that a traditional
restructuring would not have sufficiently addressed the
Company's obligations.
GENESIS WORLDWIDE: Gets Okay to Borrow $3.5M of DIP Facility
------------------------------------------------------------
Federal Bankruptcy Court Judge Thomas Waldron approved first day
motions presented by Genesis Worldwide, Inc. (OTCBB:GWOW),
including immediate approval to borrow up to $3.5 million of the
company's $6.0 million debtor-in-possession credit facility and
the use of cash collateral.
The Court also approved orders allowing the company to continue
to pay salaries, wages, pensions, and other benefits to its
employees thereby ensuring its ability to manufacture and
deliver products and provide services to customers.
"Based on immediate access to the debtor-in-possession financing
facility and our ability to use cash collateral, the Company has
sufficient liquidity to operate and satisfy its ongoing
obligations during the chapter 11 process," said Richard
Clemens, President and Chief Executive Officer, Genesis
Worldwide.
A court hearing to approve the company's use of the balance of
the credit facility is scheduled for October 10, 2001.
The company and 10 of its subsidiaries filed on Wednesday,
September 17 for chapter 11 protection. Genesis Worldwide, Inc.
engineers and manufactures high-quality metal coil processing
and roll coating and electrostatic oiling equipment in the
United States. The Company also provides mill roll
reconditioning, texturing and grinding services in addition to
its rebuild, repair and spare parts business.
HEALTHCENTRAL: Slashes Jobs to Effect Operating Costs Reduction
---------------------------------------------------------------
HealthCentral (Nasdaq:HCEN), a leading provider of healthcare
e-commerce and content, announced a reduction in its workforce
of approximately 60 employees in order to reduce operating
costs. The remaining employees total approximately 80 people.
Also, the Company anticipates net revenue for the third quarter
of 2001 ending September 30, 2001 will be lower than previously
expected.
HealthCentral (Nasdaq:HCEN) is a leading provider of healthcare
e-commerce to consumers through WebRx(SM), a network of sites
representing the consolidation of Vitamins.com,
HealthCentral.com, RxList.com and others.
Its e-commerce site, WebRx -- http://www.webrx.com-- features
more than 20,000 products. WebRx features one of the largest on-
line selections of vitamins, a Vision Center and a Comfort
Living departmentt - http://www.comfortliving.com -- with a
broad range of products including maternity and baby care,
ergonomic chairs, water purifiers and an extensive line of
allergy control products. HealthCentral.com -
http://www.healthcentral.com-- provides health-related
information and commentary by Dr. Dean Edell, MD and other
experts. RxList.com - http://www.rxlist.com-- provides both
patient-focused and professional-focused prescription drug
information monographs.
* * *
Need For Additional Financing and Nasdaq Listing
The Company has sustained net operating losses and negative cash
flows from operations since its inception. In the past, the
Company experienced substantial increases in expenditures
consistent with its growth in operations and personnel, both
internally and through multiple acquisitions. These matters
raise substantial doubt about the Company's ability to continue
as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
The Company has previously financed operations through the
issuance of preferred stock, the issuance of notes payable, an
initial public offering completed in December 1999 for $74.7
million in cash, through capital leases, and the proceeds of the
long-term debt financing entered into in May 2001. The Company's
current cash and cash equivalents are expected to be sufficient
to satisfy its liquidity requirements through approximately
2001, provided that the Company achieves its targeted revenues,
efficiencies and cost reductions, restructures certain
partnerships and other relationships and completes certain asset
sales and collects certain accounts receivables in a timely
manner.
However, there can be no assurance that the Company will not
need additional funds from the issuance of additional equity or
debt securities, funds from credit facilities and/or from the
sale of certain assets, none of which may be achieved.
On April 5, 2001, the Company received a notice from Nasdaq that
its stock would be delisted from the Nasdaq National Market
because the stock failed to maintain a minimum closing bid price
of $1.00 for the requisite 10 day period during the 90 calendar
day grace period.
The Company appealed that determination and a hearing before a
Nasdaq Listing Qualifications Panel was held on May 31, 2001.
Since the hearing, the Company effected a 1-for-50 reverse stock
split on June 28, 2001 and has been successful at maintaining a
minimum closing bid price above $1.00. On July 20, 2001, the
Company received a determination on its continued listing by
Nasdaq.
The Panel determined that while the Company has satisfied the
minimum bid price requirement of at least $1.00 per share, the
Company does not currently satisfy the $5,000,000 market value
of public float threshold. While the Panel agreed to continue
the listing of the Company's securities on the Nasdaq National
Market, the Company's stock did not achieve a market value of
public float of at least $5,000,000 for the 30-consecutive
trading day period ending August 9, 2001.
Thus, the Company expects that the Panel will render a
determination as to whether the continued listing of the
Company's securities on the Nasdaq National Market is warranted
and whether a cure period will be granted. Should the Panel
determine not to allow the continued listing of the Company's
stock on the Nasdaq National Market, the Company believes it
will qualify for listing on the Nasdaq Small Cap Market.
HI-RISE RECYCLING: Mulls Bankruptcy Filing to Restructure Debt
--------------------------------------------------------------
Hi-Rise Recycling Systems, Inc. (OTCBB:HIRI) reported results
for the three months ended June 30, 2001.
Revenues for the quarter ended June 30, 2001 were $14.2 million
with a net loss of $(6.1) million. This compares to revenues of
$18.3 million with net income of $21,000 for the comparable
period of fiscal year 2000. Revenues for the six months ended
June 30, 2001 were $25.8 million with a net loss of $(11.4)
million. This compares to revenues of $(34.2) million with a
net loss of $(591,000) for the comparable period of fiscal year
2000.
The Company attributes its decline in operating margins to
softness in demand for its products, new competitive pricing and
decrease in capital expenditures by its largest customers. This
resulted in substantial losses, the continued use of cash in
operations and defaults under its credit facility with GE
Capital Commercial Equipment Financing (GECC).
"Hi-Rise is moving forward in its implementation of a broad
operational business plan to restructure the company," said Jim
Ashton, acting chief executive officer. "The company is still
investigating alternatives for sources of capital, as well as,
methods of reorganizing the Company's debt obligations, which
could include the selling of some or all of the Company's
assets or the filing of voluntary bankruptcy proceeding."
INTERNATIONAL TOTAL: Sues Ex-CEO For Over $25M In Damages
---------------------------------------------------------
International Total Services, Inc. (OTC:ITSW) filed a complaint
on September 19, 2001 in United States Bankruptcy Court for the
Eastern District of New York against the company's former
chairman and CEO Robert A. Weitzel (Weitzel) and his son Robert
P. Weitzel.
The lawsuit seeks more than $25 million in compensatory damages
in each of seven counts and an injunction enjoining Weitzel from
what the complaint claims is further interference and
competition with ITS.
The suit also seeks the return of all payments made by ITS to
Weitzel under the terms of his retirement agreement. ITS is a
leading provider of airport service personnel and staffing and
training services and commercial security services.
According to the complaint, Weitzel was forced to resign in 1999
by the company's board of directors after independent outside
auditors uncovered evidence of gross mismanagement, manipulation
of the company's financial statements for his personal gain, and
other significant improprieties.
The company was forced to restate its previously reported
financial results for fiscal years 1995 through 1998 and for the
first quarter of fiscal 1999. In total, approximately $13
million worth of adjustments were required. A new management
team was named in February 2000, to undertake a turnaround of
the company.
Under the terms of Weitzel's retirement agreement, ITS agreed to
pay Weitzel a total of $1 million over approximately two years
in exchange for his resignation and agreement to cease all
involvement with the company and its business. The agreement
included, among other terms, non-interference, non-compete and
confidentiality provisions.
Notwithstanding his clear contractual obligations, the complaint
states, immediately after his resignation, Weitzel began his
quest to either regain control of ITS or ensure that valuable
business contracts were acquired by his son's newly formed
company, which in reality Weitzel was managing and controlling.
In addition, the lawsuit charges, Weitzel interfered with
potential contracts and other business of the company, made
false and disparaging remarks regarding ITS to its lending bank
and customers, and harassed employees, officers and directors of
ITS.
"We regret having to resort to the courts to seek redress from
Mr. Weitzel, but felt we had no alternative," said H. Jeffrey
Schwartz, who serves on the board of ITS. "Management must be
able to run the business without interference, particularly at
this critical time in the airline industry. The new president
and CEO, Mark Thompson, and his team have done a superb job. But
due to Mr. Weitzel's earlier mismanagement and his continued
disruptions -- including interfering with alternative
recapitalization solutions -- ITS was forced to file chapter 11
bankruptcy on September 13, 2001.
The company continues to operate as before, but now under
protection of the court. "We are now in the process of
negotiating with banks and third parties to provide the
necessary capital to sustain the company," he continued.
"Management is also working hard to keep the business running
smoothly in a very difficult operating environment. Mr.
Weitzel's continuing improper interference is hampering our
ability to carry out these critical tasks."
Schwartz said the company would fully cooperate with the United
States Trustee, the Securities and Exchange Commission and any
other government agencies in any investigation into Weitzel's
activities.
ITS is a leading provider of airport service personnel and
staffing and training services and commercial security services.
As previously announced, the company filed for protection under
chapter 11 on September 13, 2001. ITS services include, among
other things, airport passenger checkpoint screening for
airlines. The company has more than 12,000 employees at
operations throughout the United States, and in Guam and the
United Kingdom.
INVESTORS RESEARCH: Will Commence Liquidation on Thursday
---------------------------------------------------------
After carefully considering management's recommendations, the
board of trustees decided to liquidate the Investors Research
Fund (Nasdaq:INREX) effective at the close of business on
Thursday, Sept. 27, 2001.
The board and management reached this decision based on many
factors. Perhaps the most important was the fact that the fund's
asset base (approximately $10 million as of Sept. 18, 2001) is
too small to support its expenses.
Given the increasing competitiveness of the mutual fund
marketplace, the prospects for attracting additional assets are
at best highly uncertain. Therefore, the board felt that the
fund's shareholders would be best served by permitting them to
make their own decisions about future investment of their funds.
The board wants to stress, however, that this decision was in
no way related to the recent tragic events.
Investors Research Fund, Inc. is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund is incorporated in the
state of Delaware. The Fund began operations on March 1, 1959.
The investment objective of the Fund is to seek growth of
capital over the long term.
The Fund seeks to achieve its objective by primarily investing
in common stocks of large capitalization domestic companies that
combine growth potential with superior financial strength.
ISPAT INTL: Gloomy Market Forecast Prompts S&P to Cut Ratings
-------------------------------------------------------------
Following poor half-year results from the American steel
markets, Standard & Poor's lowered its long-term ratings on
Netherlands-based steel producer Ispat International N.V.
(Ispat) and related entities, including its long-term corporate
credit rating on Ispat, which it lowered to single-'B'-plus from
double-'B'-minus. At the same time, the outlook was revised to
stable from negative.
Ratings Lowered
Ratings
To From
Ispat International N.V.
Long-term corporate credit rating B+ BB-
Inland Steel Co.
Long-term corporate credit rating B+ BB-
Senior secured debt B+ BB-
Senior unsecured debt B- B
Ispat Europe Group S.A.
Long-term corporate credit rating B+ BB-
Senior secured debt (Guaranteed B+ BB-
by Ispat International N.V.)
Ispat Inland L.P.
Long-term corporate credit rating B+ BB-
Senior secured debt B+ BB-
Senior unsecured debt B- B
Ispat Mexicana S.A. de C.V.
Long-term corporate credit rating B+ BB-
Ispat Sidbec Inc.
Long-term corporate credit rating B+ BB-
Senior secured debt B+ BB-
The ratings reflect a very difficult trading environment,
particularly in the North American steel markets, with volumes
and prices for the six months to June 2001 far below
expectations, as well as a gloomy forecast in the wake of profit
warnings from U.S. auto manufacturers.
Standard & Poor's estimates that the current gloomy industry
situation in the U.S. and European steel sectors is likely to
prevail for longer than was expected a few weeks ago.
The second half of 2001 is likely to see further low operating
results from Ispat, even if a relative improvement on the first
half of 2001 is possible, with little prospect of significant
market upturn in the first half of 2002. For the six months to
June 2001, Ispat's EBITDA before one-off expenditures was down
to $18 million, compared with $343 million for the same period
last year.
As a result, the group is continuing to focus on reducing its
costs, as well as its non-maintenance capital expenditure and
working capital needs, to compensate for the fall in EBITDA
levels and remain cash flow neutral during this low point in the
cycle. Nevertheless, the current poor financial performance will
slow Ispat's debt reduction efforts.
Difficult trading conditions in North America are likely to
continue until at least the first half of 2002, making it
unlikely that Ispat will be able to reduce debt significantly in
the next 12 months. European steel markets are also suffering,
although to a lesser extent, providing some support to
Ispat's cash flows.
Ispat's ratings are based on the group's fair business position
in the difficult, capital-intensive, and cyclical global steel
industry. The group's subsidiaries operate in extremely
competitive markets, characterized by periods of oversupply and
intense pricing pressure. The ratings also reflect management's
continuing aggressive growth and financial strategies.
Outlook: Stable
Ispat is expected to continue operating through the current
industry downturn without increasing its overall debt level,
thanks to its continuing cost reduction efforts and tight
control over capital expenditure and working capital needs.
KOMAG INC: Files Plan of Reorganization
---------------------------------------
Komag, Incorporated (OTC: KMAG), the largest independent
producer of media for disk drives, announced that it is filing a
Plan of Reorganization with the Bankruptcy Court overseeing the
company's chapter 11 reorganization case.
The plan has the support of holders of approximately $265
million, or more than half, of the company's estimated
outstanding debt. This group includes Komag's senior lenders,
Western Digital Corporation ("WDC") and the Citadel Investment
Group.
"We have worked hard with our lenders and other creditors to
craft a plan that we believe is reasonable and fair to all of
the company's stakeholders," said T.H. Tan, Komag, chief
executive officer. "It is our intention to pursue confirmation
of this plan as expeditiously as possible. Each of our
stakeholders will be best served by a rapid completion of the
chapter 11 process. I am particularly pleased by WDC's support.
As our largest customer, we are counting on a continued strong
relationship to build the foundation for our business when we
emerge from chapter 11. As we have stated earlier, Komag has
leading technology, significant capable manufacturing capacity,
low costs and solid customer relationships. With a restructured
balance sheet we will be poised to return the company to health
as our industry rebounds."
The Bankruptcy Court will hold a hearing regarding adequacy of
information in the Disclosure Statement filed with respect to
the plan on October 23, 2001. If the Court approves the
Disclosure Statement, Komag will send copies of the Disclosure
Statement and the plan to all of its creditors and shareholders
shortly after that date.
Founded in 1983, Komag is the world's largest independent
supplier of thin-film disks, the primary high-capacity storage
medium for digital data. Komag leverages the combination of its
U.S. R&D centers with its world-class Malaysian manufacturing
operations to produce disks that meet the high-volume, stringent
quality, low cost and demanding technology needs of its
customers.
By enabling rapidly improving storage density at ever-lower cost
per gigabyte, Komag creates extraordinary value for consumers of
computers, enterprise storage systems and electronic appliances
such as peer-to-peer servers, digital video recorders and game
boxes.
MIDWAY AIRLINES: Creditors Agree to Continue Ticket Refunds
-----------------------------------------------------------
Midway Airlines Corporation announced that it has reached
agreement with its Unsecured Creditors to continue to refund
unflown passenger tickets in the normal course. Roughly $20
million is being held in reserve to pay these refunds.
Instructions for Refunds:
Passengers with tickets issued by travel agencies should contact
that agency for a refund. Passengers with tickets purchased
directly from Midway should do the following:
For electronic tickets (Easy Ticket), submit a request for a
refund to Midway by
1) email at refunds@midwayair.com,
2) fax at 919-468-1193 addressed to Refunds Department, or
3) by US mail to:
Midway Airlines
Refund Department
2801 Slater Road, Suite 200
Morrisville, NC 27560
For paper tickets, return the unused tickets and/or coupons to
Midway Refunds Department at the above address.
Tickets purchased by credit card will be refunded back to that
same card. Tickets purchased by cash or check will be refunded
by check.
* * *
In light of deteriorating economic conditions and operating
results, Midway filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code on August 13, 2001, in the
Eastern District of North Carolina. The Company sought Chapter
11 protection in order to facilitate an orderly restructuring of
the Company. Immediately following the tragic events on
September 11, Midway shut-down. Midway is returning leased
aircraft to its lessors and is soliciting purchasers for the
various assets it own or controls. Gerald A. Jeutter, Jr.,
Esq., at Kilpatrick Stockton LLP, Midway's bankruptcy counsel,
indicates that the Debtor anticipates paying all obligations
incurred following its Chapter 11 filing and proposing a Plan of
Reorganization to deal with all obligations which arose prior to
the Chapter 11 filing.
NORTHWEST AIRLINES: S&P Concerned About Aftermath of Attacks
------------------------------------------------------------
Standard & Poor's placed Northwest Airlines Corp.'s ratings on
CreditWatch with negative implications as a result of the recent
acts of terrorism in the U.S.
This action follows the placement earlier of the long-term
corporate credit ratings on all U.S. airlines on CreditWatch
with negative implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks.
The CreditWatch status on securities issues for the airline
company will be resolved when the financial and business risks
arising from the U.S. terrorist attacks and any related events
can be better estimated.
Ratings Placed On CreditWatch With Negative Implications
Issuer Ratings
Northwest Airlines Corp.
Senior unsecured debt BB
Subordinated debt B+
Equipment trust certificates BBB-
Northwest Airlines Inc.
Senior secured debt BB
Subordinated debt B+
(Guaranteed by Northwest Airlines Corp.)
Equipment trust certificates:
$215.91 million floating rate 2001-2
E-EETC Class A pass-through
certificates rated AAA*;
All equipment trust certificates rated AA+;
AA;
A+;
A;
BBB+;
BBB;
BBB-
(*Guaranteed by Northwest Airlines Corp.)
NWA Trust No. 1
All equipment trust certificates rated AA;
A
NWA Trust No. 2
All equipment trust certificates rated AA;
A;
BBB+
OWENS CORNING: Court Okays Settlement with Continental Claimants
----------------------------------------------------------------
Owens Corning files a motion seeking authorization from the
Court to enter into a settlement with Continental Casualty Co.,
and:
(1) the heirs and estate of Earlven Gauthe, to resolve the
Debtors' appeal of a pre-petition verdict obtained by the
Claimants before the Louisiana State Court. In order to
effectuate the settlement the Debtors request that the
automatic stay be lifted to the extent necessary to permit
the Claimants to collect payment from Continental.
In 1996, the Jefferson Parish Court, Louisiana, entered a
judgment against 14 defendants including the Debtors, which
obligated the Debtors to pay the Claimants $1,976,047 plus
post-judgment interest for asbestos-related personal
injuries allegedly suffered by the Claimant. In order to
stay the execution of the judgment, the Debtors and
Continental Casualty Co. posted the Supersedeas Bond, for
$2,462,458. The Debtors challenged the Court's refusal to
reduce the Debtors' share of judgment to the Louisiana Court
of Appeals and the case was held in abeyance pending
resolution of the Debtors bankruptcy proceedings.
Terms of the agreement are:
a) The Debtors appeal of the judgment shall be settled in
consideration of a payment of $260,000 payable by
Continental within five days after Court approval of the
settlement. Continental's payment of the Settlement
amount shall be conditioned on the Debtors' receipt of a
properly executed release of all claims and a
satisfaction of judgment by the Claimants against the
Debtors and Continental.
b) Upon Continental's payment of the Settlement amount & the
release and discharge of the Supersedeas Bond,
Continental shall be deemed to hold an allowed, general
unsecured claim against the Debtors' estates for the
settlement amount. The settlement expressly provides
that Continental may file a proof of claim for such claim
in the Debtors' chapter 11 case.
(2) the estate of Johnnie Johnson, to resolve the Debtors'
appeal of a pre-petition verdict obtained by the Claimants
before the Louisiana State Court. In order to effectuate
the settlement the Debtors request that the automatic stay
be lifted to the extent necessary to permit the Claimants to
collect payment from Continental.
In 1996, the Jefferson Parish Court, Louisiana, entered a
judgment, which the Debtors were a party to, obligating the
Debtors to pay the Claimants $21,622.22 plus post-judgment
interest for asbestos-related personal injuries allegedly
suffered by the Claimant. In order to stay the execution of
the judgment, the Debtors and Continental Casualty Co.
posted the Supersedeas Bond, for $20,082. The Debtors
challenged the Court's refusal to reduce the Debtors' share
of judgment to the Louisiana Court of Appeals and the case
was held in abeyance pending resolution of the Debtors
bankruptcy proceedings.
Terms of the settlement are:
b) The Debtors appeal of the judgment shall be settled in
consideration of a payment of $1,500 payable by
Continental within five days after Court approval of the
settlement. Continental's payment of the Settlement
amount shall be conditioned on the Debtors' receipt of a
properly executed release of all claims and a
satisfaction of judgment by the Claimants against the
Debtors and Continental.
b) Upon Continental's payment of the Settlement amount & the
release and discharge of the Supersedeas Bond,
Continental shall be deemed to hold an allowed, general
unsecured claim against the Debtors' estates for the
settlement amount. The settlement expressly provides
that Continental may file a proof of claim for such claim
in the Debtors' chapter 11 case.
(3) Willaim Dean and Oletha Pearl Thompson to resolve the
Debtors' appeal of pre-petition verdict obtained by the
Claimants before the Texas State Court. In order to
effectuate the settlement the Debtors request that the
automatic stay be lifted to the extent necessary to permit
the Claimants to collect payment from Continental.
On October 31, 1997, the District Court of Dallas County,
Texas, entered a judgment, which obligated the Debtors to
pay the Claimants $2,805,415.92 plus post-judgment interest
for asbestos-related personal injuries allegedly suffered by
the William Dean and Oletha Pearl Thompson. In order to
stay the execution of the judgment pending appeal, the
Debtors and Continental posted the Supersedeas Bond,
originally for $3,226,228.20 but ultimately increased to
$3,750,000 to reflect the accumulation of post-judgment
interest. On June 2000, judgment was affirmed by the Texas
Court of Appeals and further denied the Debtors' motion for
rehearing of the case.
Terms of the settlement are:
a) The Debtors appeal of the judgment shall be settled in
consideration of a payment of $3,000,000 payable by
Continental within five days after Court approval of the
settlement. Continental's payment of the Settlement
amount shall be conditioned on the Debtors' receipt of a
properly executed release of all claims and a
satisfaction of judgment by the Claimants against the
Debtors and Continental.
b) Upon Continental's payment of the Settlement amount and
the release and discharge of the Supersedeas Bond,
Continental shall be deemed to hold an allowed, general
unsecured claim against the Debtors' estates for the
settlement amount. The settlement expressly provides
that Continental may file a proof of claim for such claim
in the Debtors' chapter 11 case.
(4) Harry & Barbara Tidwell to resolve the Debtors' appeal
of a pre-petition verdict obtained by the Claimants before
the Louisiana State Court. In order to effectuate the
settlement the Debtors request that the automatic stay be
lifted to the extent necessary to permit the Claimants to
collect payment from Continental.
On November 22, 1999, the Kentucky Court entered a judgment,
which obligates the Debtors to pay the Claimants $313,333.33
plus post-judgment interest on account of asbestos-related
personal injuries allegedly suffered by the Claimants. The
Debtors then filed a motion for a new trial, which was
denied but the Court reduced the judgment to $309,143.37.
The Debtors as principal and Continental as surety then post
the Supersedeas Bond amounting to $365,000 to stay the
execution of the judgment and filed an appeal to the Court
of Appeals of Kentucky on February 11, 2000.
Under the terms of the settlement, the Claimants have agreed
to release their claims against the Debtors and Continental
for the sum of $200,000, an amount that represents a
discount from the amount awarded by a Court judgment. Such
an amount shall be payable by Continental, pursuant to the
terms of the supersedeas bond which the Debtors had obtained
from Continental prior to the Petition Date in order to
effectuate the judgment. In order to effectuate the
settlement, the Debtors requested the automatic stay be
lifted to permit the Claimants to collect payment from
Continental pursuant to the supersedeas bond, and further
requests that Continental be allowed a general unsecured
claim in the amount of $200,000 in satisfaction of its right
to indemnification.
(5) the heirs and estate of Russell William Meinert, Sr., to
resolve the Debtors' appeal of a pre-petition verdict
obtained by the Claimants before the Louisiana State Court.
In order to effectuate the settlement the Debtors request
that the automatic stay be lifted to the extent necessary to
permit the Claimants to collect payment from Continental.
On February 9, 1998, the Texas Court entered a judgment,
which obligates the Debtors to pay the Claimants $4,851,099
plus post-judgment interest on account of asbestos-related
personal injuries allegedly suffered by the Claimants. The
Debtors then filed a motion for a new trial, which was
denied but the Court reduced the judgment to $309,143.37.
The Debtors as principal and Continental as surety then
posted a Supersedeas Bond amounting to $6,850,044.82,
reflecting the accumulation of post-judgment interest in
order to stay the execution of the judgment and filed an
appeal to the Court of Appeals.
Under the terms of the agreement, the Claimants have agreed
to release their claims against the Debtors and Continental
for the sum of $5,750,000, an amount that represents a
discount from the amount awarded by a Texas State Court
judgment. Such an amount shall be payable by Continental,
pursuant to the terms of the supersedeas bond which the
Debtors had obtained from Continental prior to the Petition
Date to stay the judgment. In order to stay the execution
of the judgment pending appeal, the Debtors requests the
automatic stay be lifted to permit the Claimants to collect
payment from Continental pursuant to the supersedeas bond,
and further requests that Continental be allowed a general
unsecured claim in the amount of $5,750,000 in satisfaction
of its right to indemnification.
(6) Clarence & Gladys Osborne to resolve the Debtors' appeal of
a pre-petition verdict obtained by the Claimants before the
Louisiana State Court. In order to effectuate the
settlement the Debtors request that the automatic stay be
lifted to the extent necessary to permit the Claimants to
collect payment from Continental.
On February 9, 1998, the Kentucky Court entered a judgment,
which obligates the Debtors to pay the Claimants $762,900
plus post-judgment interest on account of asbestos-related
personal injuries allegedly suffered by the Claimants. The
Debtors tried to file a motion for a new trial but was
denied. The Debtors as principal and Continental as surety
posted a Supersedeas Bond amounting to $855,008 reflecting
the accumulation of post-judgment interest in order to stay
the execution of the judgment pending appeal with the Court
of Appeals of Kentucky.
Under the terms of the agreement, the Claimants have agreed
to release their claims against the Debtors and Continental
for the sum of $330,000, an amount that represents a
discount from the amount awarded by a Kentucky State Court
judgment. Such an amount shall be payable by Continental,
pursuant to the terms of the supersedeas bond which the
Debtors had obtained from Continental prior to the Petition
Date. In order to effectuate the settlement, the Debtors
requests the automatic stay be lifted to permit the
Claimants to collect payment from Continental pursuant to
the supersedeas bond, and further requests that Continental
be allowed a general unsecured claim in the amount of
$330,000 in satisfaction of its right to indemnification.
(7) the estate of Charles & Naomi Greanleaf to resolve the
pre-petition verdict obtained by the Claimants before the
Louisiana State Court. In order to effectuate the
settlement the Debtors request that the automatic stay be
lifted to the extent necessary to permit the Claimants to
collect payment from Continental.
In 1997, the Pennsylvania District Court entered a judgment,
which obligates the Debtors to pay the Claimants $1,850,000
plus post-judgment interest on account of asbestos-related
personal injuries allegedly suffered by the Claimants. The
Debtors as principal and Continental as surety posted a
Supersedeas Bond amounting to $2,382,520 in order to reflect
the accumulation of post-judgment interest to stay the
execution of the judgment. The Debtors then filed an appeal
with the Court of Appeals of Pennsylvania, which ruled on
the Debtors favor and remanded a new trial on the Debtors'
damages, estimated to be $162,191.
Under the terms of the agreement, the Claimants have agreed
to release their claims against the Debtors and Continental
for the sum of $64,876, an amount that represents a discount
from the amount awarded by a Kentucky State Court judgment.
Such an amount shall be payable by Continental, pursuant to
the terms of the supersedeas bond which the Debtors had
obtained from Continental prior to the Petition Date. In
order to effectuate the settlement, the Debtors requests the
automatic stay be lifted to permit the Claimants to collect
payment from Continental pursuant to the supersedeas bond,
and further requests that Continental be allowed a general
unsecured claim in the amount of $64,876 in satisfaction of
its right to indemnification.
The Debtors feel that consummation of a settlement rather than
continued appellate litigation will maximize the value of their
estates. The Settlement Amount represents a discount from the
value of the claim to be enforced if the judgment is not
overturned. The Debtors have determined that the discount is
appropriate given the parties' probabilities of success in the
event that the judgment was to proceed.
The settlement is conditioned on the Debtors' receipt of a
properly executed release of all claims and a satisfaction of
judgment from the Claimants. Upon Continental's payment of the
settlement, Continental shall be deemed to hold a general
unsecured claim for the settlement amount and may file a proof
of claim in the Debtors' chapter 11 case.
Norman Pernick, Esq., at Saul Ewing LLP in Wilmington, Delaware
states that the Debtors feel that consummation of a settlement
plan is in the best interest of their estates and should be
approved. Given the inherent uncertainties of litigation, Mr.
Pernick states that the Debtors have no assurance of success in
the event that an appeal is pursued and will also have the risk
of facing a claim substantially larger than the Settlement
amount in the event that the Debtors does not prevail in its
appeal. Moreover, Mr. Pernick claims that continued litigation
will result in a large administrative expense for the Debtors
estates.
Mr. Pernick submits that granting the relief requested will not
prejudice the rights of other creditors and other parties-in-
interest. Mr. Pernick asserts that settlement amount will
result in no additional administrative expense or claims against
the estate under which the Debtors potential liability will be
reduced to a sum considerably less than if the judgment were not
overturned.
* * *
Finding that the settlements are fair and reasonable, and that
granting the relief is necessary to preserve the Debtors'
ability to reorganize and that it would be in the best interests
of the Debtors' estates, creditors and interest holders, Judge
Fitzgerald approves the settlement agreements that the Debtors
and Continental entered with the Claimants. (Owens Corning
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PACIFIC GAS: Independent Producers Find Reorg. Plan "Creative"
--------------------------------------------------------------
PG&E Corporation and its utility, Pacific Gas & Electric
Company, filed a Plan of Reorganization in U.S. Bankruptcy Court
that would allow it to "pay all valid creditor claims in full."
"While we are still studying the details of the plan, it appears
to be a creative, credible and responsible approach to paying
power generators, large and small, what they are owed -- without
increasing rates for California customers," said Jan Smutny-
Jones, Executive Director of the Independent Energy Producers.
"Once we complete our review, we hope to be able to urge the
Bankruptcy Court to confirm the plan as quickly as possible, in
order to restore PG&E to creditworthiness."
According to Smutny-Jones, independent power generators have not
been paid for more than a billion dollars worth of electricity
delivered to PG&E customers.
PASMINCO: S&P Junk Ratings Further On Voluntary Administration
--------------------------------------------------------------
Standard & Poor's lowered its long-term ratings on Pasminco Ltd.
and its guaranteed bank loan to double-'C' from triple-'C'
following the company being placed in voluntary administration
on Sept. 19, 2001.
The long-term ratings remain on CreditWatch with negative
implications where they were placed on July 2, 2001. The
company's single-'C' short-term rating remains on CreditWatch
with negative implications. At the current rating level,
Pasminco is highly vulnerable to nonpayment of its obligations.
The downgrade follows Pasminco's failure to obtain the support
of its financiers to secure a standstill agreement, which would
have provided the company with short-term committed funding, and
liquidity support to complete the sale of its Australian mining
assets. The appointment of an administrator follows the
uncertainty of Pasminco's future access to credit.
Under Corporations Law, the company must lodge audited annual
accounts with the Australian Securities & Investments Commission
by Sept. 28, 2001, accompanied by a declaration of its
directors. Given Pasminco was unable to obtain a standstill
agreement from its financiers, the directors were unable
to form the view that the company could meet all of its
commitments as and when they fall due.
Hence, for legal reasons, the company directors were unable to
sign the Directors Declaration, resulting in the appointment of
an administrator. The administrator is expected to have a line
of credit, which will enable Pasminco's operations to continue
while under voluntary administration. Pasminco's total financial
indebtedness currently stands at about A$2.8 billion (including
A$230 million off-balance-sheet lease obligations), of which
about A$870 million relates to the company's foreign exchange
hedge position. The company has a near-term debt maturity
profile, with its next scheduled debt repayment for about
US$17.5 million falling due in January 2002.
The CreditWatch will be resolved on determination of Pasminco's
debt-refinancing and long-term capital structure following
receipt of funds from the proposed asset sales. The company's
ratings could be lowered to 'D' if Pasminco fails to meet its
financial obligations.
PIONEER COMPANIES: Files Amended Joint Plan of Reorganization
-------------------------------------------------------------
Pioneer Companies, Inc. (OTC Bulletin Board: PIONA) announced
that it filed an Amended Joint Plan of Reorganization and a
Revised Disclosure Statement with the U.S. Bankruptcy Court for
the Southern District of Texas, and that the Court has entered
an order approving the Disclosure Statement and the forms of
ballots and solicitation and tabulation procedures with respect
to confirmation of the Plan.
The solicitation material will be mailed to the holders of
claims on or before October 1.
Pioneer's Plan of Reorganization was modified in light of lower
cash flow expectations. The amount of new debt to be exchanged
for $552 million of outstanding senior secured indebtedness
(plus accrued interest) will be reduced from $250 million to
$200 million.
The Plan continues to provide that the senior secured creditors
will receive 97% of the common stock of the reorganized company.
The official committee of unsecured creditors has been actively
involved in negotiating the Plan and supports its confirmation.
The revised new debt will consist of a $50 million principal
amount five-year floating rate term loan and $150 million
principal amount of seven-year, 10% bonds. The term loan will
require mandatory prepayments only to the extent of excess cash
flow as defined.
Michael J. Ferris, President and Chief Executive Officer of
Pioneer said, "We deeply appreciate the efforts and cooperation
of Pioneer's senior secured creditors and the creditors'
committee in helping us revise the critical terms of the
restructuring. Although these changes result in the termination
of the agreement that was previously in effect, committing a
majority of the senior secured creditors to vote in favor of the
Plan, we are highly confident that the Amended Plan will be
approved and implemented in a timely manner."
Mr. Ferris concluded, "We are pleased with the progress that has
been made on our goal of emerging from Chapter 11 before the end
of the year and appreciate the support we have received from
senior secured creditors and from our vendors."
Pioneer, based in Houston, Texas, manufactures chlorine, caustic
soda, hydrochloric acid and related products used in a variety
of applications, including water treatment, plastics, pulp and
paper, detergents, agricultural chemicals, pharmaceuticals and
medical disinfectants. The Company owns and operates five chlor-
alkali plants and several downstream manufacturing facilities in
North America. Current financial information and press releases
of Pioneer Companies, Inc. can be obtained from its Internet
web site at http://www.piona.com
RAILWORKS CORPORATION: Files Chapter 11 Petition in Maryland
------------------------------------------------------------
RailWorks Corporation (Nasdaq: RWKS) announced that it and its
operating subsidiaries in the U.S. have voluntarily filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the District of Maryland
(Baltimore Division).
RailWorks operations in Canada are not involved in yesterday's
filings and continue to operate outside of bankruptcy.
Members of the existing creditor group, including Bank of
America, N.A., as administrative agent, CSFB Global
Opportunities Advisers, LLC, Stonehill Capital Management LLC,
and Travelers Casualty and Surety Company of America, have
committed to provide a DIP (Debtor in Possession) credit and
related bonding facility totaling up to $165 million, subject to
Bankruptcy Court approval and the negotiation of definitive
documentation.
The facility includes a revolver and LC facility of up to $35
million, a term loan facility of up to $30 million, and a surety
bonding facility of up to $100 million supported by an LC
facility of up to $40 million.
"With this capital infusion and bonding facility, every division
of our Company will be able to compete for new business,
including bonded business," said Chief Executive Officer of
RailWorks Corporation, John Kennedy.
Mr. Kennedy said, "Through reorganization we believe RailWorks
will emerge from bankruptcy stronger and continue to be a
leading supplier of rail related services and products.
"We recognize that our employees, customers and suppliers are
the lifeblood of our business, and appreciate their commitment
to RailWorks. And we are grateful for the vote of confidence we
are receiving from Bank of America, CSFB, Stonehill and
Travelers."
The Company also announced that Norman Carlson, formerly of
Arthur Andersen where he was the Worldwide Managing Director of
the Transportation Industry Practice, was named the new non-
executive Chairman of the Board. Glass & Associates continues to
serve as the restructuring advisors. The law firms of Willkie
Farr & Gallagher and Whiteford, Taylor & Preston represent
RailWorks Corporation in its chapter 11 filings. Dresdner
Kleinwort Wasserstein, Inc. serves as investment banker and
restructuring advisor.
Founded in March of 1998, RailWorks Corporation (RWKS) a leading
supplier of rail system products, track construction,
rehabilitation, repair and maintenance and installation of
electrification, communication and signaling equipment for rail
applications, and related products and services throughout North
America. RailWorks is headquartered in Baltimore, Maryland.
RAILWORKS CORPORATION: Chapter 11 Case Summary
----------------------------------------------
Lead Debtor: RailWorks Corporation
6225 Smith Avenue, Suite 200
Baltimore, MD 21209
Debtor affiliates filing separate chapter 11 petitions:
RailWorks Track Systems-Texas, LP
Dura-Wood, LLC
RailWorks Transit Systems, Inc.
RailWorks Transit, Inc.
Neosho Construction Company, Inc.
CPI Concrete Products Incorporated
U.S. Railway Supply, Inc.
Neosho Central America, Inc.
M-Track Enterprises, Inc.
L.K. Comstock & Company, Inc.
HSQ Technology Corporation
Gantrex Corporation
Cranequip, Inc.
RailWorks Rail Products & Services, Inc.
RailWorks Track Services, Inc.
RailWorks Construction, Inc.
Wood Waste Energy, Inc.
RailWorks Canada, Inc.
RailWorks Wood Products, Inc.
Breaking Technology & Equipment, Inc.
Midwest Construction Services, Inc.
RailWorks Track Systems, Inc.
Chapter 11 Petition Date: September 21, 2001
Court: District of Maryland (Baltimore)
Bankruptcy Case Nos.: 01-64463 through 01-64485
Judge: E. Stephen Derby
Debtors' Counsel: Martin T. Fletcher, Esq.
Seven Saint Paul St.
Baltimore, MD 21202
410-347-8737
SANLUIS CORPORACION: Fitch Assigns D-Level Currency Ratings
-----------------------------------------------------------
Fitch has lowered the foreign and local currency ratings of
SANLUIS Corporacion, S.A. de C.V. (SANLUIS) from `BB' to `D'.
The rating action is a result of the company's decision to begin
to restructuring its debt obligations. The company will not make
payments on its short-term Euro commercial paper and Euro bonds.
The Euro bonds consist of US$200 million with a coupon of 8.875%
due 2008. An interest payment of US$8.9 million was due Sept.
18, 2001.
Despite the apparent availability of balance sheet cash, the
company has been experiencing difficulties refinancing its short
term indebtedness. The company is taking these actions as a
result of lower liquidity in the international financial markets
and the expectation for a more severe downturn in the U.S.
economy following last week's tragic events.
The combination of a longer term slowdown in U.S. automotive
sales and production, and SANLUIS' recent debt financed capital
expenditure investments that increased brake production capacity
has pressured cash flow available to service debt.
In addition, continued low gold and silver prices for the
company's mining operation and the continued strength of the
Mexican Peso versus the dollar has hurt the profitability of
this Mexican exporter.
SANLUIS's ratings had been constrained by high financial
leverage levels, resulting from a sharp increase in debt levels
during 1997 and 1998 as the company significantly expanded
production capacity. Consolidated debt as of June 30, 2001
totaled US$549.9 million, of which approximately half were
direct obligations of SANLUIS Corp. and the balance obligations
of operating subsidiaries.
SANLUIS is the leading producer of leaf springs for the NAFTA
market, with estimated market shares of 62% for the United
States and Canada combined and 90% in Mexico. Leaf springs are
used in the suspensions of most pick-up and medium-duty trucks,
certain sport-utility vehicles and some minivans.
SANLUIS's auto parts division also manufactures brake
components. SANLUIS's mining division accounts for 10% of
revenues and is a producer of gold and silver.
SCHWINN/GT: Closes Cycling & Fitness Units Sale to Direct Focus
---------------------------------------------------------------
Schwinn/GT Corp. said it has closed the sale of its Fitness and
Cycling Divisions to Direct Focus, Inc. (Nasdaq: DFXI) and
Pacific Cycle LLC. The sale was approved by the Bankruptcy Court
on September 20, 2001 and the financial portion of the sale was
completed on Sept 21, 2001.
"The sale of the Cycling and Fitness Divisions represents a
major step in the reorganization process of Schwinn/GT," said
Jeff Sinclair, Schwinn/GT's Chief Executive Officer. "Through
this sale, we have worked toward maximizing the recovery for all
creditors. Effective today Direct Focus and Pacific Cycle will
be operating the Schwinn Fitness and Schwinn/GT Cycling
divisions respectively."
The proceeds from the sale transaction will be used to discharge
liabilities and satisfy creditors' claims in the Chapter 11
cases of Schwinn/GT Corporation and certain of its affiliated
companies.
Schwinn/GT filed voluntary petitions for reorganization under
Chapter 11 on July 16, 2001, in the United States Bankruptcy
Court for the District of Colorado in Denver.
SUN HEALTHCARE: Agrees to Extend Bar Date for Gov't Entities
------------------------------------------------------------
The Bar Date for the Governmental Entities to file a proof of
claim against any of the Debtors was previously extended to and
including September 1, 2001 pursuant to discussions between Sun
Healthcare Group, Inc., on the one hand, and the Health Care
Financing Administration, the Inspector General of the
Department of Health and Hunan Services, the Department of
Justice and the Equal Employment Opportunity Commission
(collectively, the "Governmental Entities"), on the other hand.
The Debtors and the Governmental Entities are engaged in
continuing negotiations and making progress toward achieving a
global resolution of the various matters between them, and the
parties believe it is advisable to further extend the Bar Date
for the Governmental Entities.
Accordingly, the parties stipulate and agree that the Bar Date
is hereby extended to and including November 1, 2001 with
respect to the Governmental Entities. The extension applies to
any claims for the benefit of the Governmental Entities relating
in any way to the Medicare program, including the claims of
private persons brought on behalf of the Governmental Entities
pursuant to the qui tam provisions of the False Claims Act, 31
U.S.C. section 3730(b).
The extension also applies to any claim brought by the
Governmental Entities arising from charge number 220-99-9026.
(Sun Healthcare Bankruptcy News, Issue No. 23; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
TRI-NATIONAL: Court to Consider Bankruptcy Case on October 26
-------------------------------------------------------------
Senior Care Industries Inc. (OTCBB:SENC), said that it had
neither seen nor had it been served with any lawsuit reportedly
filed by Tri-National Development (OTCBB:TNAV) on Sept. 17,
2001.
It reserved comment on any lawsuit until it receives a copy.
"What we do know as fact is that Judge John Hargrove, who is
presiding over the involuntary bankruptcy case filed against
Tri-National by several of Tri-National's creditors in the
United States Bankruptcy Court in San Diego, has set October 26,
2001, as the date when he will determine whether Tri-National
will be forced into bankruptcy," said Robert Coberly, vice
president in charge of development for Senior Care.
"As we reported yesterday, numerous other creditors have
expressed their desire to join the original list of co-
petitioners against Tri-National. We anticipate that the
collective appeal of this growing list of creditors will
compel the judge to put Tri-National into bankruptcy."
Once in bankruptcy, said Coberly, the creditors would push to
remove Tri-National management and propose a plan to reorganize
the company. Senior Care welcomes this eventuality, he said, and
is moving full speed ahead with its tender to Tri-National
shareholders to gain control of the company.
Senior Care is a company that is moving to become one of the
largest builders of high-quality, affordable senior citizen
housing in the western United States. Senior Care Industries is
a specialty real estate development firm constructing a focused
portfolio of real estate uniquely designed and located to meet
the needs of a growing senior citizen population.
The company develops and constructs age-restricted projects that
are on the cutting edge of design and efficiency. In the future,
Senior Care may acquire assisted living centers for seniors.
Senior Care continues to actively seek land for development or
existing large apartment complexes that can be converted to
senior housing. For additional information, see
http://www.seniorcareind.com
US AIRWAYS: Attacks Spur S&P to Place Ratings on Watch Negative
---------------------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's placed US Airways Inc.'s debt and certificates
ratings on CreditWatch with negative implications.
This action follows the placement of the long-term corporate
credit ratings on all U.S. airlines on CreditWatch with negative
implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The likely adverse impact on passenger demand, spreading to
leisure travel from the already depressed business travel
market. This is mainly because of fears regarding further acts
of terrorism, as well as heightened security procedures in
response to the U.S. attacks.
The CreditWatch status on securities issues for U.S. Airways
resolved when the financial and business risks arising from the
U.S. terrorist attacks and any related events can be better
estimated.
Ratings Placed on CreditWatch with Negative Implications
Issuer Ratings
US Airways Inc.
Senior secured debt B+
Equipment trust certificates rated AAA; (except those rated
AAA' that are insured by a
bond insurer)
All equipment trust certificates rated AA-
A+;
A;
A-;
BBB
BBB-;
BB+
BB-
U.S. INTERACTIVE: Court Confirms Joint Chapter 11 Plan
------------------------------------------------------
U.S. Interactive, Inc. announced that the company's joint
reorganization plan under Chapter 11 of the U.S. Bankruptcy
Code, which was confirmed by the U.S. Bankruptcy Court for the
District of Delaware on September 11, 2001, became effective at
the close of business Friday.
As a result, the company and its wholly-owned subsidiary, U.S.
Interactive Corp. (Delaware), have successfully emerged from
bankruptcy proceedings and will be able to move forward. Under
the terms of the reorganization plan, the company eliminated in
excess of $100 million in debt and is now virtually debt-free.
Mr. Vinay Deshpande, President and CEO of U.S. Interactive,
expressed satisfaction with the conclusion of the proceedings
and noted, "Now that we are out of Chapter 11, we can return our
focus on our core business and better serve the evolving needs
of our customers. During the course of the bankruptcy
proceedings, we have reduced our cost base, which we believe
stabilized our overall financial position. Most of our major
customers continue to use our software products and services and
we will work hard to build upon this base. We particularly
appreciate all the hard work of our employees and the loyalty
and support of our many customers and vendors throughout this
Chapter 11 case."
U.S. Interactive(R) is an award-winning professional services
and software company that focuses on developing and delivering
Internet-centered customer management solutions to the
communications industry. U.S. Interactive's solutions are
designed to enhance the total customer experience, which is
intended to reduce the costs of customer acquisitions, improve
customer retention, and increase revenue yields per customer.
UNITED AIRLINES: Ratings Placed on CreditWatch Negative
-------------------------------------------------------
As a result of the recent acts of terrorism in the U.S.,
Standard & Poor's placed United Air Lines Inc.'s securities
ratings on CreditWatch with negative implications.
This action follows the placement earlier of the long-term
corporate credit ratings on all U.S. airlines on CreditWatch
with negative implications.
The effects of the terrorist attacks in New York and Washington
on Sept. 11, 2001, are likely to create significant risks for
U.S. passenger airlines.
The CreditWatch status on securities issues for United Air Lines
will be resolved when the financial and business risks arising
from the U.S. terrorist attacks and any related events can be
better estimated.
Ratings Placed On CreditWatch with Negative Implications
Issuer Ratings
UAL Corp.
Preferred stock B+
United Air Lines Inc.
Senior unsecured debt BB+
Equipment trust certificates:
$275.599 million 7.783% Class A-1
pass-through Series 2000-1 AAA
$325.328 million 7.73% Class A-2
pass-through Series 2000-1 AAA
$349.873 million 7.032% Class A-1
pass-through Series 2000-2 AAA
$732.77 million 7.186% Class A-2
pass-through Series 2000-2 AAA
$291.037 million 6.071% Class A-1
pass-through Series 2000-1-1 rated AAA
$263.614 million 6.201% Class A-2
pass-through Series 2000-1-1 rated AAA
$372.987 million 6.602% Class A-3
pass-through Series 2000-1-1 rated AAA
All equipment trust certificates rated AA-;
A+;
A-;
BBB+
BBB
VLASIC FOODS: Moves to Set-Up Solicitation Procedures
-----------------------------------------------------
To facilitate transmittal of the Disclosure Statement, creditor
voting, ballot tabulation and confirmation of its Joint Plan of
Distribution, Vlasic Foods International, Inc. asks the Court to
enter an Order:
(a) scheduling a hearing to consider confirmation of the First
Amended Joint Plan of Distribution of VF Brands, Inc. and
Certain Affiliates, preferably starting October 31 at
10:30 a.m. (Eastern Time);
(b) establishing deadlines and procedures for:
(i) filing objections to confirmation of the Plan,
preferably on October 24, 2001 at 4:00 p.m.
(Eastern Time)
(ii) substantial contribution requests, preferably also
on October 24, 2001 at 4:00 p.m. (Eastern Time),
and
(iii) temporary allowance of claims for voting purposes,
preferably no later than October 11, 2001 at 4:00
p.m. (Eastern Time);
(c) determining the treatment of certain unliquidated,
contingent or disputed claims for notice, voting, and
distribution purposes;
(d) setting September 20, 2001 as the record date;
(e) approving:
(i) solicitation packages and procedures for
distribution to certain creditors,
(ii) the form of notice of the Confirmation Hearing and
related matters, and
(iii) the forms of ballots; and
(f) establishing a voting deadline and procedures for
tabulating votes.
The Debtors insist that the Court should only consider those
written objections, motions, and applications that were timely
filed and served. The rest that are not should be overruled,
according to Robert A. Weber, Esq., at Skadden, Arps, Slate,
Meagher & Flom LLP, in Wilmington, Delaware.
Mr. Weber reminds the Court that the hearing to consider the
adequacy of the Disclosure Statements has been set for Sept. 20,
2001 at 2:00 p.m. Thus, the Debtors request authority to
distribute the Disclosure Statement and the Summary Disclosure
Statement to all creditors and holders of equity security
interests. To get free copies, contact:
VF Brands, Inc.
c/o Robert L. Berger & Associates LLC
PMB 1002, 10351 Santa Monica Boulevard, Suite l0lA
Los Angeles, California 90025
TEL: (818) 7003311, or
IKON Office Solutions
901 North Market Street, Suite 310
Wilmington, Delaware 19801
TEL: (302) 777-4500.
Those who want to review the Plan or the Disclosure Statements
may do so during regular business hours at:
(1) The U.S. Bankruptcy Court for the District of Delaware
Marine Midland Plaza, 824 Market Street, 5th Floor
Wilmington, Delaware 19801, in the alternative
(2) The offices of Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square, New York, New York 10036, or
One Rodney Square, Wilmington, Delaware 19801.
Objections to confirmation of the Plan must:
(a) be in writing,
(b) comply with the Bankruptcy Rules and the Local Bankruptcy
Rules,
(c) set forth the name of the objector, and the nature and
amount of any claim or interest asserted by the objector
against or in the Debtors, their estates or their
property,
(d) state with particularity the legal and factual bases for
the objection, and
(e) be filed with the Court, together with proof of service,
and served by personal service, overnight delivery, or
first class mail, so as to be received no later than the
Objection Deadline, by:
(i) counsel for the Debtors;
(ii) the United States Trustee; and
(iii) counsel for the Creditors' Committee.
For parties timely filing and serving a Rule 3018(a) Motion, the
Debtors request that they be provided a ballot and be permitted
to cast a provisional vote to accept or reject the Plan. If the
Debtors and such party are unable to resolve the issues raised
by the Rule 3018(a) Motion prior to the Voting Deadline, then
Mr. Weber says, the Court must decide at the Confirmation
Hearing whether the provisional ballot should be counted or not.
The Debtors request that the Court direct that creditors holding
Non-Voting Claims be denied treatment as creditors with respect
to such claims for purposes of voting on the Plan, receiving
distributions under the Plan, and receiving notices, other than
by publication, regarding the Plan.
Non-Voting Claims shall mean claims which:
(a) are scheduled in the Debtors' schedules of assets and
liabilities as disputed, contingent, or unliquidated and
which are not the subject of a timely filed proof of
claim, or a proof of claim deemed timely filed with the
Court pursuant to either the Bankruptcy Code, or any order
of the Court, or otherwise deemed timely filed under
applicable law, or
(b) are not scheduled and are not the subject of a timely
filed proof of claim, or a proof of claim deemed timely
filed with the Court pursuant to either the Bankruptcy
Code, or any order of the Court, or otherwise deemed
timely filed under applicable law.
Proposed Voting Procedures
Any claim, which a separate objection has been filed before
confirmation of the Plan, shall not to be entitled to vote on
the Plan. Such claims not be counted in determining whether the
requirements of the Bankruptcy Code have been met with respect
to the Plan:
(a) unless the claim has been temporarily allowed for voting
purposes, and
(b) except to the extent that, on or before the Voting
Deadline the objection to such claim has been resolved in
favor of the creditor asserting the claim.
For purposes of voting, the amount of a claim used to calculate
acceptance or rejection of the Plan shall be:
(i) the amount of such claim or interest that has been
scheduled by the Debtors,
(ii) the liquidated amount specified in a proof of claim (that
is not the subject of a pending or stayed judicial or
administrative proceeding) that was or is deemed timely
filed under applicable law and any applicable orders of
the Court and that was:
(a) not objected to by a party-in-interest or
(b) otherwise allowed by a final order of the Court, or
(iii) the amount temporarily allowed by the Court for voting
purposes after notice and a hearing prior to the Voting
Deadline.
Ballots cast by holders of claims who timely file proofs of
claim in unliquidated or unknown amounts that are not the
subject of an objection filed before the Confirmation Hearing
should be counted for purposes of satisfying the numerosity
requirement of the Bankruptcy Code, but should not be counted
toward satisfying the aggregate amount provision, unless
temporarily allowed by the Court in a specific amount for voting
purposes.
Record Date
Mr. Weber informs the Court that the registrars of the Debtors'
securities need advance notice of 3 full business days to enable
those responsible for assembling ownership lists of publicly
traded debt and equity securities to compile a list of holders
as of a date certain. Mr. Weber explains that accurate lists
often cannot be prepared retroactively as to ownership on a
prior date. Accordingly, the Debtors request that this Court set
September 20, 2001 -- the first day of the hearing on the
Disclosure Statement -- as the Record Date for determining:
(a) creditors and equity holders entitled to receive
Solicitation Packages, and
(b) creditors entitled to vote to accept or reject the Plan.
Within five business days after the Disclosure Statement is
approved, the Debtors intend to send an information and solic-
itation package to all of their known creditors, indenture
trustees, equity security holders, and all other entities
required to be served under Bankruptcy Rules 2002 and 3017.
According to Mr. Weber, the Solicitation Package shall contain a
copy or conformed printed version of:
(i) the Disclosure Statement that includes a copy of the
Plan as an exhibit, and
(ii) a copy of the order approving the Disclosure Statements.
The Solicitation Package delivered to holders of equity
securities claims and Interests shall contain the Summary
Disclosure Statement in lieu of the Disclosure Statement. Each
of the Solicitation Packages will also contain, for all holders
of impaired claims who are entitled to vote on the Plan, one or
more ballots appropriate for the specific creditor. Finally,
each of the Solicitation Packages will contain notice of the
Confirmation Hearing.
To avoid duplication and reduce expenses, the Debtors propose
that:
(a) creditors holding unclassified claims or unimpaired claims
and also claims in a class that is designated as impaired
and entitled to vote under the Plan should be required to
receive only the Solicitation Package appropriate for that
impaired class, and
(b) creditors who have filed duplicate claims in any given
class should be required to receive only one Solicitation
Package and one ballot for voting their claims with
respect to that class.
The appropriate Ballot forms will be distributed to holders of
claims entitled to vote to accept or reject the Plan:
Ballot B-1 Ballot for Class 4 Convenience Claims
Ballot B-2 Beneficial Owner Ballot for Class 4
Convenience Claims
Ballot B-3 Ballot for Class 5 General Unsecured Claims
Ballot B-4 Beneficial Owner Ballot for Holders of
Senior Unsubordinated Note Claims
The Debtors also propose to include in the Solicitation Packages
a letter from the Committee recommending that creditors holding
Class 4 and 5 Claims vote to accept the proposed Plan. The
Committee has been very active in formulating and negotiating
the proposed Plan. As a result, the Committee is in a unique
position to recommend acceptance of the Plan. Accordingly, the
Debtors hereby request that the Court authorize the Debtors to
include the Recommendation Letter in the Solicitation Packages.
Because of the complexity and difficulty associated with
reaching the beneficial owners of publicly traded securities,
many of which hold their securities indirectly in brokerage or
other custodian accounts and through several layers of
ownership, the Debtors propose to mail the Solicitation Package
to:
(i) each holder of record of the Debtors' publicly held debt
(the Debt Securities) and equity securities as of the
Record Date, and
(ii) each bank, brokerage, or other custodian firm, transfer
agent, or nominee identified by the Debtors' voting,
information, and tabulation agent as an entity through
which beneficial owners indirectly hold the Debt
Securities and equity securities.
To facilitate the mailing describe in the preceding paragraph,
the Debtors request that the Court order the Bank of New York,
the indenture trustee for the 10% Senior Subordinated Notes due
2009, and the First Chicago Trust Company, a division of
Equiserve, the transfer agent for the Debtors' equity securities
to provide the Voting Agent within 3 business days after the
Record Date a written list, and the names, addresses, account
numbers and holdings of the respective holders of records as of
the Record Date.
Even after the mailings to the holders of Debt Securities and
equity securities of record as of the Record Date as described
above, additional steps are necessary to ensure that beneficial
owners of the Debtors' publicly traded securities that are not
record holders receive the Solicitation Package and have an
opportunity to vote.
Thus, the Debtors propose that the Court order that the Security
Intermediaries through which beneficial owners hold Debt
Securities or equity securities promptly distribute Solicitation
Packages to such holders, and cooperate with the Voting Agent to
accomplish such distribution, in any case no later than 3
business days after receipt of the Solicitation Packages.
The Debtor requests that the Court authorize the appropriate
Security Intermediaries to obtain the votes of beneficial by:
(a) forwarding the Solicitation Package to each beneficial
owner of the Debt Securities for voting and include a
return envelope provided by and addressed to the Security
Intermediary so that the beneficial owner may return the
completed beneficial owner ballot to that entity; and
(b) summarizing the individual votes of its respective
beneficial owners from their beneficial owner ballots on
an appropriate master ballot, and then return the Master
Ballot(s) to the Voting Agent.
The appropriate Master Ballot forms, as applicable, will be
distributed thus:
Master Ballot B-5 Master Ballot for Holders of Senior
Subordinated Notes in Class 4 (to
the extent necessary)
Master Ballot B-6 Master Ballot for Holders of Senior
Subordinated Notes in Class 5
So that they will have notice of this procedure, the Debtors
propose to serve a copy of the Solicitation Procedures Order,
once it is approved, on each Indenture Trustee and Security
Intermediary identified by the Voting Agent as an entity through
which beneficial owners hold Debt Securities and equity securi-
ties. In addition, the Debtors seek authorization to reimburse
such entities for their reasonable, actual, and necessary
out-of-pocket expenses incurred in performing the tasks
described above upon written request by such entities.
Because sending Solicitation Packages and other notices to
outdated or otherwise improper addresses results in needless
expense, the Debtors request authority not to give notice or
service of any kind upon any person to whom the Debtors mailed a
notice of the section 341 meeting or notice of the bar date for
filing proofs of claim and received either of such notices
returned by the United States Postal Service marked
"undeliverable as addressed," "moved -- left no forwarding
address," or "forwarding order expired," or similar marking or
reason, unless the Debtors have been informed in writing of that
person's new address.
The Debtors also request that the Court approve the form of a
supplemental publication notice. Additionally, the Debtors seek
authorization to cause the Publication Notice to be published
once on or before September 28, 2001 in The New York Times
(national edition) or the Wall Street Journal (national
edition).
The Debtors believe that publication of this notice will provide
sufficient notice to persons who do not otherwise receive the
notice provided for in the Solicitation Procedures Order.
The Debtors request that the Court fix October 24, 2001, 7 days
prior to the Confirmation Hearing Date, as the last date by
which ballots (including Master Ballots) for accepting or
rejecting the Plan must be received by the Voting Agent if they
are to be counted.
Procedures for Vote Tabulation
To avoid uncertainty, provide guidance to the Debtors and the
Voting Agent, and avoid the potential for inconsistent results,
the Debtors request that the Court establish the guidelines set
forth below for tabulating ballots.
(A) Votes Counted
Any ballot timely received that contains sufficient information
to permit the identification of the claimant and is cast as
either an acceptance or rejection of the Plan will be counted
and will be deemed to be cast as an acceptance or rejection of
the Plan.
To avoid inconsistent treatment, and to provide guidance to the
Debtors and Voting Agent, the Court should order that each
record holder or beneficial owner of the Debt Securities will be
deemed to have voted the full principal amount of its claims
relating to such debt security, notwithstanding anything to the
contrary on the ballot.
(B) Deemed Acceptances
Any non-voting holder of a claim who is a member of a class in
which no votes are cast should be deemed to have accepted the
Plan.
(C) Votes Not Counted
The Debtors propose that these ballots not be counted or
considered for any purpose in determining whether the Plan has
been accepted or rejected:
(i) Any ballot received after the Voting Deadline;
(ii) Any ballot that is sent by facsimile transmission
(except a master ballot followed by a hard copy), is
illegible, or contains insufficient information to
permit the identification of the claimant;
(iii) Any ballot that indicates neither an acceptance nor
rejection, or indicates both acceptance and rejection,
of the Plan;
(iv) Any ballot cast by a person or entity that
does not hold a claim in a class that is entitled to
vote to accept or reject the Plan;
(v) Any unsigned ballot;
(vi) Any form of ballot other than the official form sent
by the Voting Agent or a copy thereof; or
(vii) Any copy of a ballot without an original signature.
(D) Changing Votes
The Debtors propose that whenever 2 or more ballots are cast
voting the same claim prior to the Voting Deadline, the last
ballot received prior to the Voting Deadline will be deemed to
reflect the voter's intent and thus to supersede any prior
ballots, without prejudice to the Debtors' right to object to
the validity of the second ballot on any basis permitted by law,
and, if the objection is sustained, to count the first ballot
for all purposes.
(E) No Division of Claims or Votes
The Debtors propose that the Court clarify that creditors may
not divide their claims or the votes associated therewith
(except as it may relate to the procedures with respect to
Master Ballots) and order that holders of claims who vote must
vote all of their claims within a particular class either to
accept or reject the Plan.
(F) Procedures for Counting Ballots from Holders of Debt
Securities
The Debtors propose that all Security Intermediaries through
which beneficial owners hold Debt Securities be required to
receive and summarize on a Master Ballot all beneficial owner
ballots cast by the beneficial owners they serve and then return
the Master Ballot to the Voting Agent.
The Debtors further propose that Security Intermediaries be
required to retain for inspection by the Court the ballots cast
by such entities for one year following the Record Date.
To the extent that conflicting, double, or over-votes are
submitted, the Debtors propose that the Voting Agent attempt to
resolve the conflicting, double, or over-vote prior to the
Voting Deadline in order to ensure that the votes of beneficial
owners of Debt Securities are accurately tabulated.
To the extent that conflicting, double, or over-votes on a
Master Ballot are not reconcilable prior to the Voting Deadline,
the Debtors propose that the Voting Agent be directed to count
votes in respect of such Master Ballot in the same proportion as
the votes to accept and reject the Plan submitted on the Master
Ballot that contained the conflicting, double, or over-vote, but
only to the extent of the applicable bank's or brokerage firm's
position on the Record Date in the debt security.
Banks and brokerage firms should be authorized to complete
multiple Master Ballots, and the votes reflected by such
multiple Master Ballots should be counted. The Court should
order that, if two or more Master Ballots submitted are
inconsistent in whole or in part, the latest Master Ballot
received prior to the Voting Deadline will supersede and revoke
any prior Master Ballot. The Debtors will retain their right to
object to the validity of the second Master Ballot on any basis
permitted by law, and, if such objection is sustained, the first
Master Ballot will then be counted.
United States Trustee Objects
United States Trustee for Region 3, Patricia A. Staiano, has
these complaints regarding the Debtors motion:
(a) The Motion does not propose to establish a claims objection
deadline for voting purposes.
(i) Without a claims objection deadline sufficiently in
advance of the October 11, 2001 deadline the Debtors
seek for the filing of motions for temporary allowance
of claims, the Debtors could disenfranchise creditors
by objecting to their claims after the time has passed
for such creditors to seek temporary allowance of their
claims. Without an appropriate claims objection
deadline for voting purposes, the Debtors could prevent
the counting of any ballot to reject their Plan simply
by objecting to any dissenting creditors' claim but
waiting to do so until after it is too late for
dissenting creditors to obtain effective relief.
(ii) To protect the voting rights of parties-in-interest, a
claims objection deadline for voting purposes should be
set sufficiently in advance of the proposed deadline
for filing motions for temporary allowance of claims so
that creditors will have an opportunity to review and
analyze the objections and to prepare, file and serve
motions for temporary allowance of claims. Such a
deadline could be established for voting purposes only,
without prejudice to the Debtors' right to object to
claims at a later date, provided that such later-filed
objections not impair a creditor's right to vote on the
Plan.
(b) The Debtors' proposal in the motion for "deemed acceptance"
by holders of claims in a class, which does not cast any
votes is an inappropriate shifting of the Debtors' burden of
securing acceptance of the Plan. This proposal effectively
creates an affirmative "opt-out" requirement. Failure to
vote - whether by a single creditor or by an entire class of
creditors - is no more indicative of acceptance of the Plan
than it is of rejection, and the Bankruptcy Code explicitly
requires that a class of claims or interests "accept" the
plan, not that a class "not reject" it.
For these reasons, the United States Trustee requests the Court
to deny the Debtors' motion until these objections are cured.
(Vlasic Foods Bankruptcy News, Issue No. 11; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WEBVAN GROUP: Selling Technology Platform to Founder for $2.5MM
---------------------------------------------------------------
Webvan Group, Inc. announced that it has entered into a $2.5
million contract for the sale of its technology platform to
Mercury Acquisitions Corporation, a company controlled by
Webvan's founder, Louis Borders.
In early August, Webvan began soliciting bids for its assets,
including both the Webvan and HomeGrocer technology platforms.
Over 100 parties were contacted and more than 30 entities
expressed interest in the platform. After reviewing all proposed
offers for the technology platforms, Webvan chose Mercury
Acquisition Corporation's offer to purchase the Webvan and
HomeGrocer technology platforms, as well as their respective
trademarks, patents and other intellectual property.
Webvan also announced that the Bankruptcy Court approved the
procedures by which the sale of the technology platforms to
Mercury would be approved. According to the Court's order, the
agreement with Mercury Acquisition Corporation will be subject
to an overbid auction to be held on October 1, 2001. Others
interested in purchasing the technology platforms are continuing
their due diligence inspections and are anticipated to bid for
the platform at the auction.
"We're very excited about our deal with Mercury and are hopeful
that the process we began back in August will result in the
highest value for our creditors, said a Webvan spokesperson.
"These technology platforms represent some of the best work by
some of the best software designers. In particular, the Webvan
platform is modular in design and as such is extremely versatile
-- capable of a range of functions from a completely integrated
e-commerce platform to supporting warehouse management and
delivery operations. The price currently offered is a fraction
of what it would cost to develop a comparable platform and
represents a unique opportunity in today's difficult business
climate."
Scott McNutt, of McNutt & Litteneker, LLP, counsel for the
Official Committee of Unsecured Creditors in the Webvan
bankruptcy case, stated, "The Creditors' Committee is delighted
that so many substantial companies have shown an interest in the
acquisition of the technology platform. Mr. Borders clearly
sees substantial value here. As a nationally known business
figure whose previous accomplishments include the Borders
Bookstore chain, his interest says a lot about the opportunity
here. Naturally, the process doesn't stop with this offer, when
the Borders' deal is presented to the Bankruptcy Court, others
can bid up the price. This would make the Webvan Creditors'
Committee very happy, as it will bring more money to the Webvan
creditors."
Persons interested in finding out more information about the
sale of the technology platforms and the auction process are
encouraged to call Dara Williams at 650/627-3301 or Webvan's
bankruptcy counsel, Debra Grassgreen at 415/263-7000.
BOND PRICING: For the week of September 24 - 28, 2001
-----------------------------------------------------
Following are indicated prices for selected issues:
Algoma Steel 12 3/8 '05 12 - 15 (f)
Amresco 9 7/8 '05 36 - 38 (f)
Asia Pulp & Paper 11 3/4 '05 24 - 27 (f)
AMR 9 '12 82 - 84
Bethlehem Steel 10 3/8 '03 28 - 32
Chiquita 9 5/8 '04 68 - 70
Conseco 9 '06 80 - 82
Globalstar 11 3/8 '04 3 - 4 (f)
Level III 9 1/8 '04 40 - 42
Northwest Air 8.70 '07 60 - 64
Owens Corning 7 1/2 '05 28 - 32
Revlon 8 5/8 '08 43 - 45
Royal Caribbean 7 1/4 '18 60 - 63
Trump AC 11 1/4 '06 62 - 64
USG 9 1/4 '01 72 - 74 (f)
Westpoint 7 3/4 '05 34 - 36
Xerox 5 1/4 '03 85 - 88
*********
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
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