/raid1/www/Hosts/bankrupt/TCR_Public/011008.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, October 8, 2001, Vol. 5, No. 196
Headlines
AMERICAN SKIING: Oak Hill Discloses Majority Equity Stake
AMERICA WEST: Revenue Passenger Miles Down by 21% in September
ANCHOR GLASS: Must Obtain Unqualified Opinion to Avert Default
AUTOLEND: Fresh Capital & Debt Relief Needed to Secure Viability
BOEING COMPANY: Q3 Deliveries Fall Short of Expectations
BRIDGE INFO: BTT Selling Common Units to BRUT for $1.3 Million
BRIDGE INFORMATION: MoneyLine to Assume 75 Telerate Contracts
CWMBS (INDYMAC): High Delinquencies Prompt Fitch Downgrades
CALPINE CORP: S&P Assigns BB+ Rating to $2 Billion Debt Issue
CELEXX CORP: Defaults on $914K Promissory Note to David Burke
COMDISCO INC: Unsecured Committee Taps Wachtell as Lead Counsel
CONSECO INC: $475MM Special Charges Prompt S&P to Lower Ratings
CYBER EDGE: Files For Protection Under Chapter 11
EBT INT'L: Shareholders to Vote on Liquidation Plan on Nov. 8
EDISON INTERNATIONAL: Mission Energy Commences Exchange Offer
EXODUS COMMS: Gets Okay to Use Existing Cash Management System
FEDERAL-MOGUL: Taps Sidley Austin As Lead Bankruptcy Counsel
FRUIT OF THE LOOM: Moves to Assume Harlingen Wastewater Pact
FRUIT OF THE LOOM: Seeks Time Extension to Solicit Plan Votes
HOMELIFE: Creditors Seek Trustee to Oversee Bankruptcy
IMC GLOBAL: Fitch Rates New Polk County IDRBs at BB
INTIRA CORP: Wants Lease Decision Period Extended to December 31
KRAUSE'S FURNITURE: Buxbaum Begins All-Store Liquidation
LTV CORP: Equity Panel Signs-Up Water Tower for Financial Advice
LAIDLAW INC: Moves to Recoup Defense Costs From American Home
LENOX HEALTHCARE: Trustee Needs 30 More Days to File Schedules
MARINER HEALTH: Wants Plan Exclusivity Extended to November 20
MEDIANEWS GROUP: S&P's Low-B Ratings Reflect Hefty Debt Levels
OWENS CORNING: Plant Insulation Wants Probe Into Fibreboard
PACIFIC AEROSPACE: Senior Lenders Extend Waiver of Defaults
PIONEER COMPANIES: Lease Decision Period Extended to November 30
RELIANCE GROUP: A.M. Best Computes $1.1BB Insolvency for RIC
RHYTHMS NETCONNECTIONS: Asks Court to Fix November 26 Bar Date
SABENA: Brussels Trade Court Grants Protection Until November 30
STERLING CHEMICALS: Court Okays Hiring of Various Professionals
US AIRWAYS: Revenue Passenger Miles Down by 33.4% in September
UNITED AIRLINES: Phases Out United Shuttle Brand
VIALINK COMPANY: Fails to Comply With Nasdaq Requirements
WEBLINK WIRELESS: Closing TX Call Center to Downsize Operations
WEBVAN GROUP: Kaiser Takes Over Technology Platform for $2.65MM
WHEELING-PITTSBURGH: Denies Report on South African Dealing
WORLD COMMERCE: Shuts Down & Abandons Self-Rescue Efforts
BOND PRICING: For the week of October 8 - 12, 2001
*********
AMERICAN SKIING: Oak Hill Discloses Majority Equity Stake
---------------------------------------------------------
As of August 31, 2001,
(i) Oak Hill Capital Partners beneficially owned 29,011,133
shares of the common stock (or 64.38% of the issued and
outstanding shares of common stock) of American Skiing Company,
and had sole voting and dispositive power over 879,133 of those
shares;
(ii) Oak Hill Capital Management Partners beneficially owned
732,600 shares of the common stock (or 4.15% of the issued and
outstanding shares of common stock) and had sole voting and
dispositive power over 22,200 of those shares;
(iii) Oak Hill Capital Partners GenPar beneficially owned
29,743,733 shares of common stock (or 64.98% of the issued and
outstanding shares of common stock) and had sole voting power
and sole dispositive power over 901,333 of those shares;
(iv) Oak Hill Capital Partners MGP beneficially owned
29,743,733 shares of common stock (or 64.98% of the issued and
outstanding shares of common stock) and had sole voting power
and sole dispositive power over 901,333 of those shares;
(v) Oak Hill Securities Fund beneficially owned 1,628,534
shares of common stock (or 8.80% of the issued and outstanding
shares of common stock) and had sole voting power and
dispositive power over 49,334 of those shares;
(vi) Oak Hill Securities Fund GenPar beneficially owned
1,628,534 shares of common stock (or 8.80% of the issued and
outstanding shares of common stock) and had sole voting power
and dispositive power over 49,334 of those shares;
(vii) Oak Hill Securities Fund MGP beneficially owned
1,628,534 shares of common stock (or 8.80% of the issued and
outstanding shares of common stock) and had sole voting power
and dispositive power over 49,334 of those shares;
(viii) Oak Hill Securities Fund II beneficially owned 1,627,733
shares of the common stock (or 8.79% of the issued and
outstanding shares of common stock) and had sole voting and
dispositive power over 49,333 of those shares;
(ix) Oak Hill Securities Fund GenPar II beneficially owned
1,627,733 shares of common stock (or 8.79% of the issued and
outstanding shares of common stock) and had sole voting and
dispositive power over 49,333 of those shares;
(x) Oak Hill Securities Fund MGP II, Inc. beneficially owned
1,627,733 shares of common stock (or 8.79% of the issued and
outstanding shares of common stock) and had sole voting and
dispositive power over 49,333 of those shares;
(xi) OHCP SKI beneficially owned 439,733 shares of common
stock (or 2.53% of the issued and outstanding shares of common
stock) and had sole voting and dispositive power over 13,333 of
those shares;
(xii) Mr. Glenn R. August beneficially owned 3,256,267 shares
of common stock (or 16.21% of the issued and outstanding shares
of common stock) and had voting and dispositive power over
98,667 of those shares; and
(xiii) Oak Hill Capital Management beneficially owned 65,000
shares of common stock (or 3.26% of the issued and outstanding
shares of common stock).
Oak Hill Capital Partners GenPar, Oak Hill Capital Partners MGP,
Oak Hill Securities Fund GenPar, Oak Hill Securities Fund MGP,
Oak Hill Securities Fund GenPar II, Oak Hill Securities Fund MGP
II, Mr. August and Oak Hill Capital Partners, with respect to
the shares of common stock directly owned by Oak Hill Capital
Partners SKI and deemed to be directly owned by it, disclaim
beneficial ownership of such shares of common stock.
American Skiing has eight resorts from California to Maine,
which also offer homes and condominiums, as well as time-shares
in seven Grand Summit Hotels near its resorts. Due to poor
economic conditions the company has cancelled an agreement to
buy MeriStar Hotels and Resorts and combine operations into a
new company called Doral International. However American Skiing
later turned over to MeriStar managment control of all but one
of its properties. Oak Hill Capital Partners owns 49% of the
company; founder and former chairman and CEO Leslie Otten owns
25%.
As of April 2001, the Company had a current ratio of 0.2 to 1,
indicating the illiquid state of the company in the next 12
months. Cash and net receivables totaled $22.1 million, while
its short-term debt amounted to $139.4 million.
AMERICA WEST: Revenue Passenger Miles Down by 21% in September
--------------------------------------------------------------
America West Airlines (NYSE: AWA) reported traffic statistics
for the month of September, third quarter and year-to-date 2001.
Revenue passenger miles (RPM) for September were 1.1 billion,
down 21.0 percent from September 2000. Capacity decreased 15.3
percent in September to 1.9 billion available seat miles (ASM),
largely due to a 20-percent reduction in the airline's flight
schedule as announced September 17. The passenger load factor
for the month was 59.8 percent compared to 64.0 percent reported
in September 2000.
The decline in traffic statistics for the month of September is
a direct result of the terrorist attacks of Sept. 11 and ensuing
decline in demand for air travel. For Sept. 17-23, the week
following the terrorist attacks, America West's load factor was
45 percent. For Sept. 24-30, the load factor rose to 58 percent
and compared favorably to an estimated domestic industry load
factor over the same period of 52 percent.
"While demand for air travel remains significantly below
traditional levels due to the devastating terrorist attacks on
September 11, our bookings have improved over the last couple of
weeks and we've seen our load factors continue to rise," said
Doug Parker, chairman, president and chief executive officer.
"While our traffic was down 21 percent in September, this
decline compares favorably to the 30 percent to 40 percent
declines being reported by our major domestic competitors."
America West also reported record traffic for third quarter and
year-to-date 2001. RPMs for the third quarter were 5.0 billion,
down 1.5 percent from 2000. Capacity decreased to 6.7 billion
ASMs, down 2.7 percent from last year's third quarter. The
third quarter load factor was a record 74.0 percent compared
with 73.0 percent in third quarter 2000. The year-to-date
passenger load factor was a record 72.8 percent compared with
71.2 percent for the first nine months of 2000. RPMs were up
4.6 percent for the year to a record 15.0 billion, while ASMs
rose 2.2 percent to a record 20.6 billion.
America West Airlines, the nation's eighth-largest carrier,
serves 90 destinations in the U.S., Canada and Mexico. Along
with its codeshare partners, America West serves more than 180
destinations worldwide. America West Airlines is a wholly owned
subsidiary of America West Holdings Corporation, an aviation and
travel services company with 2000 sales of $2.3 billion.
ANCHOR GLASS: Must Obtain Unqualified Opinion to Avert Default
--------------------------------------------------------------
Anchor Container Corporation's net sales for the second quarter
of 2001 were $180.0 million compared to $175.1 million for the
second quarter of 2000, an increase of $4.9 million, or 2.8%.
Net sales for the first half of 2001 were $349.4 million and
$329.0 million for the comparable period of 2000. This $20.4
million or 6.2% increase in net sales was principally a result
of the increase in shipment volume (8.3%), particularly in the
beer product line, primarily associated with the Southeast
Agreement, the natural gas related price recovery program and
general price increases.
These increases were offset by a reduction in sales in the first
six months of 2001 as compared to 2000, due to a change in the
way certain packaging materials are sold to a certain customer.
This change results in a comparable reduction in cost of
products sold in 2001. Net sales, adjusted for the packaging
change, would have increased by $44.2 million or 13.4%.
The Company recorded a net loss in the second quarter of 2001 of
approximately $17.0 million as compared to a net income of $0.6
million in the second quarter of 2000. Excluding the provision
for related party accounts of $19.5 million, the Company would
have recorded net income of approximately $2.5 million.
This improvement in earnings results from increased sales
volume, general price increases and reduced selling, general and
administrative costs. The Company had a year to date loss of
$27.6 million compared to net income of $2.4 million in the
prior year.
The results of the first half of 2000 included a gain on the
sale of the previously closed Houston, Texas glass container
manufacturing facility of approximately $4.1 million and a gain
of approximately $2.0 million on the sale of certain operating
rights related to the Houston, Texas facility. Excluding these
sales transactions, the Company would have reported a loss of
approximately $3.7 million in the six months ended June 30,
2000.
On August 3, 2001, Consumers and Owens-Illinois announced an
agreement whereby O-I would acquire substantially all of
Consumers' Canadian glass producing assets as well as the stock
of Consumers U.S. Anchor had been informed by its Chairman and
Chief Executive Officer, John J. Ghaznavi, that he had entered
into a letter of intent with O-I to purchase, individually or
through an entity controlled by him, the shares of Consumers
U.S. that O-I has agreed to purchase from Consumers.
Management of Anchor believes, upon the advice of its counsel,
these transactions will trigger a "change in control" as defined
in the indentures governing Anchor's 11.25% First Mortgage Notes
due 2005, aggregate principal amount of $150.0 million and its
9.875% Senior Notes due 2008, aggregate principal amount of
$50.0 million.
Upon a "change in control" as defined in the Indentures, Anchor
would be required to make an offer to repurchase all of the
First Mortgage Notes and the Senior Notes at 101% of the
outstanding principal amount plus accrued and unpaid interest.
Anchor does not have the cash available to make this repurchase
offer. The failure to make the offer would result in an event of
default under the Indentures that would give the noteholders the
right to accelerate the debt and is also a default under
Anchor's credit facility provided by Bank of America and would
create an event of default under various equipment leases.
On August 13, 2001, the Board of Directors of Anchor formed an
independent committee to review, among other things, the
proposed sale of Consumers' assets, including the Consumers U.S.
stock, to O-I, the subsequent proposed sale of the Consumers
U.S. stock to Mr. John J. Ghaznavi and the settlement documents
with Owens and what action, if any, to take in connection
therewith.
If the special committee determines that the sale of the stock
of Consumers U.S. and /or the sale of Consumers' Canadian assets
to O-I or the subsequent sale of Consumers U.S. stock to Mr.
Ghaznavi, constitutes a change in control, the special committee
may be required to recommend to the Board that the Company take
action to protect the rights of the Company, its shareholders
and other constituents, including seeking to modify the proposed
transaction, litigation, negotiation with the holders of the
First Mortgage Notes and the Senior Notes or such other
appropriate action to protect the Company.
However, there can be no assurance as to the outcome of these or
other alternatives. On August 13, 2001, certain members of the
Board requested certain information from Mr. Ghaznavi related to
his agreement to acquire the stock of Consumers U.S. from O-I.
As of August 20, 2001, Mr. Ghaznavi had not provided this
information.
In addition, G&G and one of its affiliates have pledged common
shares of Consumers that they own as collateral for certain
indebtedness guaranteed by G&G. This indebtedness, together with
the common shares of Consumers pledged as collateral, has been
assigned to Fevisa Industrial, S.A. de C.V., a Mexican company
in which G&G has a 25% ownership interest. Certain defaults on
the indebtedness have occurred which gives Fevisa the right to
foreclose on those common shares.
Such a foreclosure would also trigger a "change in control" as
defined in the Indentures. Fevisa has agreed to forbear on a day
to day basis from the exercise of its foreclosure rights. If
Fevisa exercises its foreclosure rights, such event would
constitute a "change in control" and require Anchor to make a
repurchase offer for the First Mortgage Notes and the Senior
Notes, which as described in the foregoing paragraph, the
Company would be unable to do.
The foregoing represent significant uncertainties as to the
future financial position of Anchor. As a result of the
uncertainties surrounding the Consumers restructuring and its
impact on Anchor, the Company's outside auditors have rendered a
qualified opinion on the Company's financial statements for the
year ended December 31, 2000.
The failure by the Company to obtain an unqualified opinion on
its financial statements was an event of default under the Loan
and Security Agreement, for which the Company received a waiver.
AUTOLEND: Fresh Capital & Debt Relief Needed to Secure Viability
----------------------------------------------------------------
AutoLend Group Inc. recorded a net income of $29,000 for the
three-month period ended June 30, 2001. The net income was
primarily due to the sale of the sub-prime consumer used-car
loan portfolio, resulting in income from discontinued operations
of approximately $95,000, offset by general and administrative
expenses consisting primarily of professional fees, rent, and
salaries.
The impact of non-operating items for the three months ended
June 30, 2001 was a net $8,000 in income, compared to a net non-
operating loss of $4,000 for the three months ended June 30,
2000.
The $8,000 in non-operating income for the present period was
primarily due to $3,000 in investment income, and $10,000 in
rental income, partially offset by $5,000 in amortization of the
imputed discount on the five-year notes payable obligations
outstanding. The $4,000 non-operating loss for the same period
last year was primarily due to interest income of $4,000, offset
by the amortization of the imputed discount on the five-year
notes payable obligations outstanding of $8,000.
The net effect of the foregoing was a net income of $29,000 for
the three months ended June 30, 2001. The net loss for the same
period last year was $373,000. The $29,000 net income in the
current period was primarily due to the sale of the sub-prime
consumer used-car loan portfolio, resulting in income from
discontinued operations of approximately $95,000, rental income
of $10,000, investment income of $3,000, offset by the
amortization of the discount on the notes payable obligations of
$5,000 and general and administrative expenses of $74,000,
consisting primarily of professional fees, rent and salaries.
The $373,000 net loss for the prior period was primarily due to
general and administrative expenses of $374,000.
Cash flow from operations was a negative $62,000 for the three
months ended June 30, 2001, which was primarily due to payment
of general and administrative expenses. This compares to cash
flow from operations of a negative $209,000 for the three months
ended June 30, 2000.
The Company's immediate viability depends upon the near-term
infusion of capital, and/or the infusion of a positive-cash-
flow business. At June 30, 2001, the Company had net cash and
investments of $46,000, and a negative net equity (i.e., a
deficit) of $547,000. This deficit excludes the impact of
remaining amounts due pursuant to the Albuquerque office lease
obligation, which totaled approximately $359,000 at June 30,
2001.
Without the infusion of capital, negotiation of debt relief,
and/or the infusion of a positive-cash-flow business, and/or the
sale or realization of assets for cash at greater than net book
value, the Company will not be able to meet all its presently
outstanding obligations.
The Company believes that it presently has insufficient cash
necessary to meet its daily operating requirements without
regard to its notes payable obligations, through the fiscal year
ending March 31, 2002. It now appears that due to reductions in
fixed overhead and personnel, the Company may survive into the
second or third quarter of this fiscal year. The Company is not
likely to be able to secure and install a new, profitable line
of business before it runs out of cash.
BOEING COMPANY: Q3 Deliveries Fall Short of Expectations
--------------------------------------------------------
The Boeing Company announced third quarter deliveries across its
major commercial, military and space operations.
The company delivered 120 commercial jet transports in the third
quarter of 2001, 19 less than anticipated before the September
11 terrorist attacks. Twenty-nine jet transport deliveries were
made after September 11 through the end of the quarter to
domestic and international customers. Year-to-date deliveries
now total 383 commercial jet aircraft.
The company currently expects to deliver approximately 500
commercial airplanes in 2001 depending upon customer ability to
take delivery in the near term.
Deliveries for military and space operations were not affected
by the Sept. 11 events.
Boeing's third quarter major program deliveries, including
deliveries under operating lease (which are identified by
parenthesis):
Major Programs 3rd Quarter Nine Months
2001 2001
Commercial Airplane
Programs
717 13 (1) 37 (10)
737 Next Generation 69 (1) 214* (3)
747 8 24
757 12 32
767 6 29
777 12 45
MD-11 0 2
Total 120 383
Military Programs
C-17 3 (2) 9 (4)
F/A-18E/F 11 27
AH-64D 3 6
CH-47 2 8
T-45TS 3 11
C-40 2 4
Space Programs
Delta II 1 4
Satellites 1 6
* Includes one inter-company C-40 aircraft
* * *
Boeing is taking a series of actions to address the changed
business environment in light of terrorist attacks against the
United States on September 11.
Given the impacts of the horrific attacks of September 11, and
the resulting capacity reductions now anticipated by its airline
customers, Boeing's Commercial Airplanes unit is setting in
place plans to reduce its employment by approximately 20,000 to
30,000 people by the end of 2002. This includes a reduction in
force in related support personnel at Boeing's Shared Services
Group.
"We profoundly regret that these actions will impact the lives
of so many of our highly-valued employees," said Alan Mulally,
president and CEO of Boeing Commercial Airplanes. "However, it
is critical that we take these necessary steps now to size the
Commercial Airplanes business to support the difficult and
uncertain environment faced by our airline customers."
Revised delivery projections for Boeing Commercial Airplanes,
which are assessments based on an uncertain future and depend
upon customer business decisions, are as follows: Deliveries for
2001, which had been expected to be 538 aircraft, could be as
low as 500 depending on customer ability to take delivery in the
near term. For 2002, deliveries are estimated to be in the low
400s, compared to the 510 to 520 previously forecast.
Current estimates for 2003 indicate a downward delivery trend
will continue. Boeing will add further clarity about 2003 as it
gains insight into the market's direction. These estimates are
in line with the initial 20 percent capacity reduction
projections provided by U.S. carriers and its assessment of
world airline traffic trends.
BRIDGE INFO: BTT Selling Common Units to BRUT for $1.3 Million
--------------------------------------------------------------
A U.S. Bankruptcy Court in Missouri authorized BTT Investments,
Inc., one of the Debtors in these cases, to sell its 5.255
Common Units in The BRUT ECN LLC to BRUT for $1,300,000. All
objections are overruled, Judge
McDonald declared.
In his order, Judge McDonald made it clear that consummation of
the sale does not effect a de facto merger or consolidation of
the Debtors (or any of them) and BRUT or result in the
continuation of the Debtors' businesses under BRUT's control.
BRUT is not the alter ego of, a successor in interest to, or a
continuation of the Debtor, Judge McDonald emphasized. Nor is
BRUT otherwise liable for the Debtors' debts or obligations,
Judge McDonald added.
Judge McDonald directed BRUT to wire transfer $1,300,000 to the
Debtors and BTT to transfer the Common Units to BRUT within 15
days after entry of the Order. (Bridge Bankruptcy News, Issue
No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900)
BRIDGE INFORMATION: MoneyLine to Assume 75 Telerate Contracts
-------------------------------------------------------------
Bridge Information Systems Inc. said that it would give
bankruptcy Judge David P. McDonald a list of about 75 Telerate
contracts to be assumed by and assigned to MoneyLine Network
Inc., Dow Jones reported. No objections were made during the
hearing, and Judge McDonald indicated that he would approve
the assumption and assignment request. McDonald has approved
past similar requests between Bridge and MoneyLine and Bridge
and other buyers of its assets.
MoneyLine, a New York provider of financial content, is buying
Telerate, Bridge information businesses in Europe and Asia and
the Bridge Trading Room System product line for $10 million.
That deal is still expected to close by the end of the month.
MoneyLine is also providing an additional $5 million to Bridge
to help cover Telerate's operating expenses through the deal's
close.
Bridge Information filed for chapter 11 bankruptcy protection on
February 15. (ABI World, October 3, 2001)
CWMBS (INDYMAC): High Delinquencies Prompt Fitch Downgrades
-----------------------------------------------------------
Fitch downgrades the following CWMBS (IndyMac) Inc.'s mortgage
pass-through certificates:
CWMBS 1995-B:
* Class B-4 rated `BB' is placed on Rating Watch Negative;
* Class B-5 rated `B' and currently on Rating Watch Negative, is
downgraded to `CCC'.
CWMBS 1995-D:
* Class B-4 rated `BB' is placed on Rating Watch Negative;
* Class B-5 rated `B' is downgraded to `CCC'.
CWMBS 1995-K:
Pool 3:
* Class B-3C rated `BB' is placed on Rating Watch Negative;
* Class B-3D rated `CCC' is downgraded to `D';
Pool 4:
* Class B-4C rated `BB' is placed on Rating Watch Negative;
* Class B-4D rated `B' and currently on Rating Watch Negative,
is downgraded to `CCC'.
CWMBS 1995-U:
* Class B-3 rated `BBB' is downgraded to `BB' and remains on
Rating Watch Negative;
* Class B-4 rated `CCC' is downgraded to `D'.
CWMBS 1995-W:
* Class B-4 rated `BB' is placed on Rating Watch Negative;
* Class B-5 rated `B' and currently on Rating Watch Negative, is
downgraded to `CCC'.
These actions are taken due to the level of losses incurred and
the high delinquencies in relation to the applicable credit
support levels as of the August 25, 2001 distribution date.
CALPINE CORP: S&P Assigns BB+ Rating to $2 Billion Debt Issue
-------------------------------------------------------------
Standard & Poor's assigned its double-'B'-plus rating to the
roughly $2 billion debt issuance by Calpine Corp. and various
Calpine affiliates, all of whose debt is unconditionally
guaranteed by Calpine Corp. The outlook is stable.
Standard & Poor's has also affirmed its double-'B'-plus
corporate credit rating on Calpine Corp. and its double-'B'-plus
rating on Calpine's existing $5.95 billion in senior unsecured
debt. In addition, Standard & Poor's has affirmed its single-
'B'-plus rating on Calpine's $1.12 billion of convertible
preferred securities. The outlooks remain stable.
The double-'B'-plus corporate credit rating reflects the
following risks:
Current market conditions may hurt Calpine's business and place
stress on liquidity. Lower power prices, a potential economic
recession that could reduce demand growth, and the difficulty in
issuing equity in the current market may collectively challenge
Calpine's capitalization targets, which in turn could increase
Calpine's debt service load.
To finance the current projects in construction, Calpine must
add an additional $2.8 billion in debt in 2002 and may have to
refinance $850 million in convertible, zero coupon debt.
Calpine's merchant portfolio--one-third of its capacity--exposes
cash flow to potential volatility, as evidenced by this year's
dramatic swings in U.S. western power markets. Even contracted
revenues may see the consequences of market cyclicality because
the contracts will expire and be replaced with new contracts,
priced at rates higher or lower than the initial contracts.
Calpine also has substantial exposure to the California market
through contracts with the Department of Water Resources and
Pacific Gas & Electric, which represent about 25% of cash
available for debt service in 2005.
On October 1, 2001, the California Public Utility Commission
(PUC) publicly challenged the validity of these contracts, which
adds uncertainty to the contract's stability. Calpine's minimum
and average consolidated funds from operations (FFO) interest
coverage ratios of 2.3 times and 2.8x, respectively, fall below
investment-grade targets for the next five years for developers
with a speculative component to their revenue streams. That
about 25% of the debt will be at floating interest rates will
exacerbate the risk. Standard & Poor's adjusts the coverage
ratios to account for guarantees on lease payments and partial
debt treatment of the convertible preferred stock.
Calpine's target of 65% leverage to total capitalization makes
the company vulnerable to electricity price volatility, or even
a period of sustained price depression. Adding lease obligations
and partial debt treatment of the convertible preferred stock to
the total debt increases leverage to about 70%. Because of
Calpine's preferred method of construction, Calpine is fully
responsible for construction delays and cost overruns and does
not benefit from the liquidated damages offered in many
engineering, procurement, and construction contracts.
Calpine is also vulnerable to having stranded assets in
construction if the long-term price for electricity were to
crater. Nonetheless, the following strengths adequately mitigate
the above risks at the double-'B'-plus rating level:
Calpine's growth strategy has focused on adding assets in the
U.S. and other developed markets, such as the U.K and Canada,
thereby mitigating sovereign and regulatory risk, when compared
to a peer group that has invested heavily in Latin America and
Asia.
Over the past year Calpine has proven its ability to manage and
construct multiple plants in a timely and efficient manner.
Calpine has successfully built its projects on time and within
budget. Calpine can standardize the design of its plants and
achieve economies of scale in design and maintenance because
most of the new plants are combined-cycle facilities, using "F"
turbine technology.
Calpine has built up a strong trading and marketing organization
in slightly more than a year by acquiring top talent from
leading energy trading companies and investing heavily in
supporting technology. Calpine's trading organization focuses on
stabilizing earnings and cash flow by managing commodity risk
exposures arising from Calpine's generating assets and gas
reserves.
Highly efficient gas turbines increasingly make up a larger
percentage of Calpine's fleet, which should ensure a higher
level of dispatch compared to the older plants that Calpine's
competitors have purchased over the past few years.
Calpine mitigates merchant risk through its strategy, covering
two-thirds of its capacity under long-term contracts. Revenues
from existing contracts over the next five years, assuming
steady state conditions, cover 100% of debt service, but not at
levels commensurate with an investment-grade rating.
Calpine has been successful in recruiting and retaining a strong
and capable management team that has been able to direct the
many new aspects of Calpine's business--development, gas
exploration and production, construction, marketing and trading,
and operations.
Calpine's revenue stream benefits from a portfolio effect
because its generating assets and gas reserves are in various
U.S. markets, a diversity that will soon extend to locations in
34 states and six major markets. Nonetheless, a strict
concentration in gas-fired generation, F-technology, and the
U.S. market will offset some of this diversity when compared to
other developers that own generation, transmission, and
distribution assets in various parts of the world.
Calpine, a San Jose, Calif.-based corporation founded in 1984,
is engaged in the development, acquisition, ownership, and
operation of power generation facilities, principally in the
U.S. Calpine's current portfolio consists of 58 operating
projects with a net ownership interest in about 9,625 MW.
Calpine's development and growth strategy seeks to capitalize on
opportunities in the power market through an ongoing program to
acquire, develop, own, and operate electric power generation
facilities or interests in such facilities, and market power and
energy services to utilities and other end users.
Outlook: Stable
The stable outlook reflects the expectations that Calpine will
continue to construct its plants on time and within budget and
that the high level of expertise of its newly formed power-
marketing group will continue to stabilize revenues.
The outlook may change to positive when the political and
regulatory environment in California becomes more predictable
and stable. This would greatly reduce the counterparty risk
exposure that characterizes the highly politicized California
power market. An upgrade to investment grade would require a
change in the capital structure of the company to a higher level
of equity or an increase in contractual revenues approaching
90%.
Under the current contractual strategy of keeping two-thirds of
the capacity under long-term contract, minimum FFO interest
coverage would have to approach 3.0x to achieve an investment-
grade rating.
If Calpine continues its growth plan without issuing equity,
however, Standard & Poor's may lower its rating.
CELEXX CORP: Defaults on $914K Promissory Note to David Burke
-------------------------------------------------------------
CeleXx Corporation (OTCBB:CLXX) announced that David Burke, Sr.,
its CEO and President resigned as CEO and President effective
September 3, 2001. Mr. Burke Sr. will continue as a member of
the company's board of directors. Douglas H. Forde, CeleXx's
chairman, will assume the role of CEO and President until a
replacement for Mr. Burke Sr. is selected by the Board of
Directors.
Mr. Forde said that vacancies on the company's board of
directors will be filled as soon as possible. Citing continued
losses in the company for the fiscal year ended June 30, 2001,
Mr. Forde warned that the company's auditors may issue a "going
concern".
Mr. Forde also warned that continued softness in the U.S.
economy along with significant declines within the IT sector
would likely have an impact upon the company in the coming
months. He also pointed out that the company is in default on it
promissory note to David Burke, Sr., the former owner of CMI, in
the amount of $914,000.
Approximately $414,000 of the note became due on October 1,
2001, with the balance due in April of 2002. The Company is
aggressively pursuing a remedy.
David Langle, the company's Chief Financial Officer also
announced his resignation from the board of directors of the
Company effective September 1, 2001. Mr. Langle's position as
CFO is unchanged and his resignation from the Board will allow
Mr. Langle to focus all his attention on restructuring efforts
and financial matters.
Moty Hermon, who had served on the board of directors of the
company since the inception in 1998 also resigned from the board
of directors effective August 10, 2001, citing his inability to
attend board meetings and undertake other duties for the
company. Mr. Hermon, who is currently living outside the United
States, will continue as a consultant to the company.
In view of the management changes above and a continuing decline
in the US economy Mr. Forde announced that on September 20, 2001
the company retained Key West Technologies, Inc. to assist
management in restructuring efforts and market focus. Key West
Technologies --http://www.keywesttechnologies.com-- is an
international business and technology consulting firm
specializing in cross border technology transfer and market
development. Key West Technologies, with offices in the U.S.
and Europe and corporate offices in Boca Raton, Florida includes
Fortune 500 companies and leaders in the IT industry in its
clientele.
CeleXx Corporation is a leading provider of Information
Technology (IT) and e-Business Integration services to companies
on the Fortune 500 list. CeleXx provides networking solutions,
computer telephony integration, e-Learning systems, Learning
Management Systems (LMS) implementation, and interactive web-
centric training to major industrial companies listed in the
Fortune 1000, commercial businesses, and financial institutions
in the United States. In general, these services are designed
to enhance the performance of client IT systems, to protect
vital data, to improve employee on-the-job performance, and
to more dynamically link employees, customers, suppliers and
partners.
The Company believes that it will require additional cash
infusions to meet the Company's projected working capital,
strategic acquisitions and other cash requirements in its
current fiscal year ending June 30, 2001 and is working
closely with lenders, investment bankers and others to meet
these projected needs.
COMDISCO INC: Unsecured Committee Taps Wachtell as Lead Counsel
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of Comdisco, Inc.
seek authority to retain and employ Wachtell, Lipton, Rosen &
Katz as its Counsel, nunc pro tunc to the Petition Date.
Susan Dollinger of Citibank, N.A., Co-Chair of the Committee,
tells the Court they chose Wachtell, Lipton they believe the
firm is particularly well suited to represent them in this case.
Wachtell, Lipton plans to staff its representation of the
Committee with partners experienced in creditors' rights,
corporate takeovers and litigation, as necessary. Among the
professional services, which Wachtell, Lipton may be called upon
to render to the Committee are:
(a) negotiating the proposed sale transactions in conjunction
with other advisors;
(b) advising the Committee with respect to a plan of
reorganization that may be proposed;
(c) advocating the Committee's position in pleadings and in
court appearances;
(d) representing the Committee with respect to other
transactions that may be proposed;
(e) assisting in the examination of the Debtors' affairs and
review of the Debtors' operations; and
(f) attending hearings, drafting pleadings and generally
advocating positions and performing other professional
services which further the interests of the creditors
represented by the Committee, including, without
limitation, those services set forth in the Bankruptcy
Code.
Ms. Dollinger says that the Committee believes that tying
professional compensation directly to the ultimate return to
creditors presents the most efficient mechanism to obtain the
services needed to maximize that return to creditors.
Accordingly, the Committee has determined that Wachtell,
Lipton's compensation should depend directly upon the recoveries
achieved by unsecured creditors in these cases.
At the threshold, Ms. Dollinger notes, Wachtell, Lipton will
bill for its services at only $100,000 per month (plus
reimbursement for its actual and necessary expenses). That
monthly sum is likely to be well below the actual time charges
in this case, Ms. Dollinger observes. However, Ms. Dollinger
adds, Wachtell, Lipton will also be compensated with a
contingent fee based on the value of the distributions paid to
unsecured creditors in these cases.
Ms. Dollinger tells the Court that no contingent fee would be
payable if creditor recoveries do not equal or exceed 85% of
total unsecured debt on a blended basis (average recovery to all
unsecured creditors). For comparison, upon information and
belief, Ms. Dollinger relates that the Debtor's publicly traded
bonds are trading in the range of 83 on the dollar as of a very
recent date. The maximum fee achievable would be capped at
$5,000,000. The calculation of the contingent fee would be:
Recovery as Percentage Incremental Cumulative
of Total Claim of Wachtell, Lipton Wachtell, Lipton
Unsecured Creditors Contingent Fee Contingent Fee
--------------------- ---------------- ----------------
85% - 91% $0 - $725k $725k
91% - 94% 870k 1,595k
94% - 96% 1,160k 2,755k
96% - 98% 1,450k 4,205k
98% - 100% 1,740k 5,000k
According to Ms. Dollinger, the $100,000 monthly fees would be
credited against the contingent fee once the contingent fee
exceeds $725,000; at that point the fee would be the greater of:
(a) the monthly fees plus $725,000, or
(b) the contingent fee calculated in the chart above less the
monthly fees.
The contingent fee will be capped so that after such application
it does not exceed $5,000,000, Ms. Dollinger says.
Ms. Dollinger speculates that the principal source of recovery
for the more than $4 billion in unsecured claims in these cases
likely will come from the sale of most of the Debtor's
businesses in the very near future. Ms. Dollinger explains the
proposed fee structure is designed so that Wachtell, Lipton is
rewarded if the sale process (with Wachtell, Lipton's
significant and active involvement on behalf of the Committee)
and other aspects of the reorganization are successful and
creditor recoveries are enhanced. If Wachtell, Lipton is
unsuccessful, then, Ms. Dollinger notes, its fees will be
$100,000 per month (which will likely be less than its monthly
time charges).
In addition, Ms. Dollinger relates, the Committee has been
advised that Wachtell, Lipton was retained as special
reorganization counsel by an informal committee of the holders
of the Debtors' pre-petition bonds. But that representation was
terminated before the Committee retained the firm, Ms. Dollinger
says. The Committee believes that the services performed by
Wachtell, Lipton since Petition Date have redounded to the
benefit of all the Debtors' creditors, inasmuch as:
(a) the Committee is composed of at least 1 member of the
prior informal bond committee, plus the trustees for the
Debtors' bond issues, and
(b) substantially all of the Debtors' creditors are pari passu
unsecured.
Chaim J. Fortgang, Esq., a partner of Wachtell, Lipton, assures
Judge Barliant that the firm does not represent any interest
adverse to the Debtors or to their estates in the matters upon
which they are to be engaged. Mr. Fortgang swears that he is
not aware of any claims that Wachtell, Lipton holds against the
Debtors. Wachtell, Lipton will not represent any party-in-
interest in these Chapter 11 cases except for the Committee, Mr.
Fortgang promises Judge Barliant. To the extent Wachtell,
Lipton does hold claims against the Debtors, Mr. Fortgang adds,
such claims are waived.
Wachtell, Lipton is a "disinterested person" as defined in the
Bankruptcy Code, Mr. Fortgang tells the Court. (Comdisco
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
CONSECO INC: $475MM Special Charges Prompt S&P to Lower Ratings
---------------------------------------------------------------
Standard & Poor's lowered its counterparty credit and senior
debt ratings on Conseco Inc. to single-'B'-plus from double-'B'-
minus. At the same time, Standard & Poor's lowered its
counterparty credit and financial strength ratings on Conseco
Inc.'s insurance subsidiaries to triple-'B'-minus from triple-
'B', and affirmed its single-'B' commercial paper rating on
Conseco Inc.
The outlook is stable.
The ratings on Conseco Finance Corp. are unaffected because the
special impairment charges related to interest-only securities
were already factored into the existing single-'B'-minus senior
debt rating.
The rating actions follow Conseco's announcement on October 2,
2001, of $475 million (post-tax) in special charges stemming
from write-downs in its interest-only security, realized losses
in the bond portfolio, special charges from the discontinuation
of the major medical lines, the marking to market of its
Telecorp investments, and a charge related to the company's
potential liability for guaranteeing bank loans to certain
directors and officers.
More than $246 million of these special charges are relative to
Conseco's insurance operations.
Although Conseco has made significant progress in a debt-
restructuring plan providing for the retirement of more than $2
billion of debt, the most recent round of special charges
suggests that the quality of capital is inconsistent with
original expectations. Standard & Poor's now believes Conseco's
recovery will take longer than originally expected and that
additional special charges could arise in upcoming quarters,
depressing earnings.
Despite this, financial leverage of 36.9% as of quarter end,
interest coverage of 1.33 times, and operating earnings and
operating cash flow remain in line with Standard & Poor's prior
expectations. Yet the continuing trend of special charges
indicates Conseco has not yet achieved a position from which the
rebuilding of its capital position is assured.
The lowering of the financial strength ratings on Conseco Inc.'s
life insurance subsidiaries is directly linked to the rating
action on Conseco Inc.
Standard & Poor's continues to believe these subsidiaries
maintain an appropriate level of capitalization and a good level
of liquidity.
Outlook: Stable
Operating earnings are expected to continue to improve.
Conseco's insurance operations are expected to continue
producing pretax operating earnings of at least $200 million per
quarter, maintaining the pace established in the first quarter
of 2001. However, the capital growth normally expected from such
earnings improvement is expected to be limited by a continuing
trend of special charges. Conseco Finance Corp. is expected to
maintain controlled growth, which will continue to produce
positive cash flow.
Outstanding Ratings Lowered
Conseco Inc. To From
Counterparty credit rating B+/Stable BB-/Stable
Senior debt rating B+ BB-
Preferred stock rating CCC+ B-
Conseco Inc.'s Insurance Subsidiaries
Bankers Life & Casualty Co.
Conseco Annuity Assurance Co.
Conseco Direct Life Insurance Co.
Conseco Health Insurance Co.
Conseco Life Insurance Co.
Conseco Life Insurance Co. of NY
Conseco Medical Insurance Co.
Conseco Senior Health Insurance Co.
Conseco Variable Insurance Co.
Manhattan National Life Insurance Co.
Pioneer Life Insurance Co.
Counterparty credit rating BBB-/Stable BBB/Stable
Financial strength rating BBB- BBB
Outstanding Ratings Affirmed
Conseco Inc.
Commercial paper rating B
CYBER EDGE: Files For Protection Under Chapter 11
-------------------------------------------------
Cyber Edge Enterprises Inc. (OTC BB:CYEI) announces that on
October 1, 2001 the Company filed documents in Bankruptcy court
for protection under the Chapter 11 Reorganization rules.
The Company states that they have reached an agreement with the
Major Judgment Holder. This agreement shall effectively progress
the reorganization process.
Cyber Edge states that they are aggressively seeking out Merger
Candidates to bring back shareholder value to the company.
The company has reestablished its office at 68 Lamar Street West
Babylon, New York 11704.
Effective October 15, Contact the Company at (631) 491-7100
EBT INT'L: Shareholders to Vote on Liquidation Plan on Nov. 8
-------------------------------------------------------------
eBT International, Inc. (Nasdaq: EBTI) announced that it has
mailed to shareholders its proxy statement in connection with a
special meeting of shareholders to be held on November 8, 2001
to vote upon a proposed Plan of Complete Liquidation and
Dissolution.
The proxy statement indicates that, subject to the conditions
set forth therein, the estimated minimum net proceeds available
for distribution to shareholders will be approximately $3.20 per
share, of which $2.75 per share is expected to be paid in cash
on or before December 31, 2001.
On September 21, 2001, the Bankruptcy Court for the Western
District of New York approved the previously announced
settlement by the Company of the complaint filed by Microlytics
on June 9, 1999. The terms of the settlement included the
payment of $2 million to Microlytics.
On September 25, 2001 the United States District Court for the
District of Massachusetts approved the plaintiffs' motion to
dismiss the putative class action complaint filed against the
Company in February 2000 following the Company's preliminary
disclosure of revenues for the fourth quarter of fiscal 2000.
The Bankruptcy Court's approval of the settlement and the
District Court's approval of the dismissal of the putative class
action did not impact the amount of minimum net proceeds
previously estimated as available for distribution to
shareholders.
Shareholders of the Company are encouraged to read the proxy
statement because it will contain important information about
the proposed liquidation and dissolution. The proxy statement
will be available for free both on the Commission's website --
http://www.sec.gov/-- and from the Company at:
Proxy Statement
eBT International
299 Promenade Street
Providence, RI 02908-5720
(401) 752-4400
The proxy statement will be furnished in connection with the
solicitation of proxies by the Board of Directors of the
Company. Information concerning the beneficial ownership of the
Company's securities by each of the Company's directors and
executive officers may also be obtained from the Company without
charge.
Prior to May 23, 2001, eBT (Nasdaq: EBTI) developed and marketed
enterprise-wide Web content management solutions and services.
eBT's products were designed to satisfy certain key business
objectives -- time-to-market, integration and ease of use -- to
help organizations automate the creation, management and
publication of Web content.
eBT's products are suited to work in concert with other software
solutions to enable the integration customers require to build a
cohesive, complete e-business solution that maximizes the
viability of an organization's Web infrastructure. For more
information, visit http://www.ebt.com
EDISON INTERNATIONAL: Mission Energy Commences Exchange Offer
-------------------------------------------------------------
Edison Mission Energy announced that it has commenced an offer
to exchange up to $400,000,000 aggregate principal amount of new
10% Senior Notes, which have been registered under the
Securities Act of 1933, as amended, for an equal principal
amount of its outstanding 10% Senior Notes.
The exchange offer will expire at 5:00 p.m., New York City time,
on November 2, 2001, unless extended. The Bank of New York has
been appointed as exchange agent for the exchange offer.
Requests for assistance or documents should be directed to
Carolle Montreuil of The Bank of New York at (914) 773-5735.
Edison Mission Energy is a leading global power producer as
measured by megawatts. Through its subsidiaries, Edison Mission
Energy engages in the business of developing, acquiring, owning
and leasing and operating electric power generation facilities
worldwide.
Edison Mission Energy is a subsidiary of Rosemead, California-
based Edison International. Other Edison International
companies include Edison Capital, Edison Enterprises, Edison O&M
Services and Southern California Edison.
EXODUS COMMS: Gets Okay to Use Existing Cash Management System
--------------------------------------------------------------
Exodus Communications, Inc., sought and obtained an order from
the Court authorizing continued use of their existing cash
management systems, pending a hearing on the Debtors' "first-
day" motions in these cases.
Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP in
Wilmington, Delaware, relates that prior to the commencement of
these cases, the Debtors used a highly-automated and integrated
centralized cash management system used to collect, transfer and
disburse funds generated by their operations and to accurately
record all such transactions as they are made.
The Debtors' Cash Management System has been constructed to
provide a substantially integrated system for the Debtors'
operating group, Mr. Chehi says, which allows for an integrated
method for revenues and expenses to be collected, paid and
accounted for.
Mr. Chehi relates that cash used to fund operating expenditures
of the Debtors comes largely from the daily collection of
accounts receivable. Receivables from third parties are
collected primarily in a lockbox depository account, that funds
a concentration account, that, in turn, funds a master
concentration account.
In addition, some receivables are collected via wire transfer
directly into the Master Concentration Account. The Master
Concentration Account is utilized to fund the Parent Company
payroll and other disbursements through designated payroll and
controlled disbursements accounts, Mr. Chehi explains, as well
as investment and money market accounts where excess cash is
held to provide a return to the Debtors on such cash. Mr. Chehi
informs the Court that the Master Concentration Account also is
used to fund Parent Company travel reimbursement and employee
benefits accounts.
In addition, both of the concentration accounts fund overnight
investment sweep accounts if levels of cash above certain
amounts are deposited into the concentration accounts.
Mr. Chehi states that the Cash Management System is highly
automated and computerized and includes the necessary accounting
controls to enable the Debtors, as well as creditors and the
Court, if necessary, to trace funds through the system and
ensure that all transactions are adequately documented and
readily ascertainable. Mr. Chehi asserts that the Debtors' cash
management procedures are ordinary, usual and essential business
practices, and are similar to those used by other major
corporate enterprises. The Cash Management System provides
significant benefits to the Debtors, including the ability to:
(a) control corporate funds centrally,
(b) segregate the respective cash flows of the Debtors,
(c) invest idle cash,
(d) ensure availability of funds when necessary, and
(e) reduce administrative expenses by facilitating the
movement of funds and the development of more timely
and accurate balance and presentment information.
Mr. Chehi tells the Court that the operation of the Debtors'
businesses requires that the Cash Management System continue
during the pendency of these chapter 11 cases. Requiring the
Debtors to adopt new cash management systems at this critical
stage of these cases would be expensive, create unnecessary
administrative burdens, and be much more disruptive than
productive, adversely impacting the Debtors' ability to
reorganize.
Consequently, Mr. Chehi contends that maintenance of the
existing Cash Management System is in the best interests of all
creditors and other parties in interest. (Exodus Bankruptcy
News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FEDERAL-MOGUL: Taps Sidley Austin As Lead Bankruptcy Counsel
------------------------------------------------------------
Federal-Mogul Corporation presents the Court with its
application to employ and retain the New York-based law firm of
Sidley Austin Brown & Wood as its general and lead bankruptcy
counsel.
Federal-Mogul's Senior Vice President and General Counsel, James
J. Zamoyski, Esq., tells the Court that Sidley is a full-service
law firm with national and international presence throughout
North America, Europe and Asia.
Mr. Zamoyski adds that Sidley has experience and expertise in
every major substantive area of legal practice and its regular
clients include leading public companies in a variety of
industries, privately-held businesses and major non-profits.
Sidley will bill the Debtors at its customary hourly rates:
Partners $340-$650
Associates $160-$375
Para-professionals $80-$160
Federal-Mogul will look to Sidley:
(A) to provide legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operations of their business and management of their
properties;
(B) to provide legal advice with respect to the Administrators'
powers and duties in the administration of the Cross Border
Debtors' businesses and management of their properties;
(C) to take all necessary action to protect and preserve the
Debtors' estates, including prosecuting actions on behalf of
the Debtors, defending any actions commenced against the
Debtors, negotiating all litigation in which the Debtors are
involved, and objecting to claims files against the Debtors'
estates;
(D) to prepare on behalf of the Debtors and Administrators all
necessary motions, answers, orders, reports, and other legal
papers in connection with the administration of the Debtors'
estates;
(E) to perform all other legal services to the Debtors and
Administrators in connection with both these chapter 11
cases and the UK administration, and with the formulation
and implementation of the Debtors' plan of reorganization;
(F) to advise and assist the Debtors regarding all aspects of
the plan confirmation process, including securing the
approval of a disclosure statement by the Bankruptcy Court
and the confirmation of a plan at the earliest possible
date;
(G) to give legal advice and perform legal services with respect
to general corporate matters and advice and representation
with respect to obligations of the Debtors, their Board of
Directors and officers and the Administrators;
(H) to give legal advice and perform legal services with respect
to matters involving the negotiation of the terms of and the
issuance of corporate securities, matters related to
corporate governance and the interpretation, application,
amendment of the Debtors' corporate documents, including
their Certificates of Incorporation, by-laws and materials
contracts, and matters involving stockholders and the
Debtors' and Administrators' legal duties towards them;
(I) to give legal advice and perform legal services with respect
to real estate and tax issues related to all of the
foregoing;
(J) to advise the Administrators with respect to their duties as
administrators in this unique circumstance; and
(K) to render such services as may be in the best interest of
the Debtors in connection with any of the foregoing, as
agreed upon by Sidley and the Debtors.
Mr. Zamoyski informs the Court that Sidley received a $500,000
retainer in contemplation of these chapter 11 cases. Mr.
Zamoyski also relates that Sidley has received approximately
$6,000,000 in legal fees for services in connection with these
chapter 11 cases for the past year preceding the petition date.
David M. Sherbin, Esq., the Debtors' Vice President and Deputy
General Counsel, suggests that these cases are likely to be
extraordinarily complex and will require counsel to the Debtors
with a national reputation and with extensive experience in
insolvency and bankruptcy cases.
He adds that the Debtors chose Sidley Austin Brown & Wood as
their bankruptcy counsel for these cases because of Sidley's
extensive experience with and knowledge of the Debtors'
businesses learned in connection with the Debtors' preparation
for its restructuring efforts, as well as Sidley's extensive
experience and knowledge in the field of debtors' and creditors'
rights and business reorganizations generally under chapter 11
of the Bankruptcy Code.
In the months leading up to the Petition Date, Mr. Sherbin
relates, Sidley has been advising the Debtors as to
restructuring and insolvency issues, including factors
pertaining to the commencement of these cases, as well as to
general corporate, real estate, tax and litigation matters.
In so doing, Mr. Sherbin contends, Sidley has become intimately
familiar with the Debtors and their affairs. The partners and
associates of Sidley who will advise the Debtors in these cases
have wide-ranging experience in insolvency and bankruptcy law,
as well as in litigation and corporate, real estate and tax law.
The Debtors believe that Sidley is uniquely well-qualified to
represent them as debtors in possession in these Chapter 11
Cases.
Mr. Sherbin asserts that the Sidley's professional services are
necessary to enable the Debtors to execute faithfully and
competently their duties as debtors in possession. Subject to
the control and further order of this Court, the Debtors propose
to retain Sidley to render to perform the services detailed in
the Application For an Order Authorizing the Retention of Sidley
Austin Brown & Wood as Attorneys for the Debtors, Debtors In
Possession and Administrators.
Larry J. Nyhan, Esq., a partner of Sidley Austin Brown & Wood,
tells the Court that the Firm conducted a series of searches of
its databases to identify relationships with creditors and other
parties-in-interest in respect of the Debtors and they came
across these findings:
(1) Representations of clients in matters involving the Debtors,
including AMF, Inc., Borden Chemical, Inc., Borden, Inc.,
Dai-Ichi Kangyo Bank Ltd., Lucent Technologies, Merill
Lynch, NTN USA Corp., OCI Alleged Tollers Joint Defense
Group, OMC Senior Debt Group, and Union Carbide Corp.
(2) Asbestos-related representations to General Electric
Company, and J.P. Morgan Chase.
(3) Institutional Lenders to the Debtors who are or were
represented by Sidley in unrelated matters, such as ABN Amro
Bank, N.V., Banco Espirito Santo S.A., Bank of America, Bank
of Montreal, Bank of New York, Bank of Nova Scotia, Bank of
Tokyo-Mitsubishi Ltd., Bank One, Bayerische Hypo und
Vereinsbank AG, Banque Paribas, Bear Stearns & Co., Inc.,
Chase Manhattan, Citicorp, Commerzbank AG, Credit Agricole
Indosuez, Credit Lyonnais, Credit Suisse First Boston, Dai-
Ichi Kangyo Bank, Dresdner Bank AG, Arste Bank, First Union
National Bank, Fleet Boston, Goldman Sachs, HSBC, Industrial
Bank of Japan, Jackson Natinal Life Insurance, KBC Bank,
N.V., Mellon Bank, N.A., National City Bank, National
Westminster Bank, Royal Bank of Scotland, Royalton Company,
Societe Generale, Stein Roe & Farnham, Wachovia Bank N.A.
(4) Representations by Sidley to entities listed as one of the
20-largest unsecured creditors in unrelated cases, such as
Bank of New York, State Street Bank & Trust, and General
Electric Company.
(5) Representation by Sidley to the Debtors' major customers,
such as Caterpillar, Inc., Cummins Engine Co., Inc.,
DaimlerChrysler AG, Ford Motor Co., General Motors Corp.,
Volkswagen AG and Volvo Car B.V.
(6) Representations by Sidley of Insurers to the Debtors in
unrelated matters such as American International Group
(AIG), Aon Corporation, Associated Aviation Underwriters,
Chubb Insurance Group.
(7) Representation by Sidley to North River Insurance Company,
significant litigants to the Debtors, in matters unrelated
to these cases.
(8) Sidley represented professional retained by the Debtors such
as PricewaterhouseCoopers LLP, and R.R. Donnelly & Sons
Company in matters unrelated to these cases.
Mr. Nyhan assures the Court that none of these representations
relate to Federal-Mogul. Mr. Nyhan is confident that he, his
partners and Sidley are disinterested as required by 11 U.S.C.
Sec. 327(a). (Federal-Mogul Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FRUIT OF THE LOOM: Moves to Assume Harlingen Wastewater Pact
------------------------------------------------------------
Fruit Of The Loom Texas operates a manufacturing plant within
the extraterritorial jurisdiction of the City of Harlingen,
Texas. The Plant is not within the boundaries of the City. The
Plant is located within an area the City has designated as an
industrial district in which the City provides certain economic
incentives for businesses to locate there due to its proximity
to the City.
Risa M. Rosenberg, Esq., at Milbank, Tweed, Hadley & McCloy,
asks Judge Walsh to allow Fruit of the Loom to assume two
agreements and amendments.
First, the Wastewater Agreement, provides that, during its term,
the City will provide the Plant with water and wastewater
treatment services. In return, FOTL Texas is to pay fees based
on usage and to reimburse the City for the expense of issuing
bonds that were incurred to improve water treatment facilities.
The water and wastewater treatment services provided by the
City, under the agreement, are essential for FOTL Texas'
operation of the Plant.
Second, the Industrial District Agreement provides that, during
its term, the area where the Plant is located will not be
annexed by the City and will continue to have the status of an
Industrial District. At the same time, under the Agreement, the
City provides services, such as police and fire services, to the
Plant as if the Plant were located within the City boundaries,
for a fee in lieu of taxes. Such fee is initially calculated as
an amount equal to the ad valorem taxes, which would be payable
if the Plant were within City boundaries.
As an economic incentive to FOTL Texas, the IDA reduces the
amount due in lieu of taxes from FOTL Texas when employment at
the Plant increases to certain levels. Annexation by the City
would eliminate the possibility of the decreased payment in lieu
of taxes. Presently, employment levels at the Plant are not
sufficient to entitle FOTL Texas to pay the reduced fees.
The IDA Amendment extends the term of the IDA for an additional
7 years, to 2010, and also resolves, at a reduced amount, the
prepetition cure amount required to assume the IDA. The IDA
Amendment also settles certain disputes between Fruit of the
Loom and the City regarding the calculation of the pre-Petition
Date arrearages under the IDA. The Wastewater Amendment also
extends the term of the Wastewater Agreement, extending it to
2021, and readjusts related services, resulting in long term
water charges that Fruit of the Loom believes are favorable.
Pursuant to the Stipulation, all amounts due to the City under
the IDA have been paid in full, except for a portion as to which
the City agreed to accept an allowed unsecured claim. Under the
terms of the IDA Amendment, the amount of the cure payment that
FOTL Texas and City have agreed is necessary to cure all
monetary defaults and pay all actual pecuniary losses under the
Agreement is the amount of the allowed unsecured claim under the
Stipulation -- $105,000.
Under the terms of the Wastewater Amendment, there is no cure
amount necessary, however, there is a catch-up payment of
$364,560.31, required to equalize payments from January 1, 2000
through the date of this Wastewater Amendment, which will be due
within five business days after approval of the Wastewater
Amendment.
Ms. Rosenberg tells the Court that Fruit of the Loom believes it
is in the best interests of their estates and creditors to
assume the IDA and the Wastewater Agreement, as amended by the
IDA Amendment and the Wastewater Amendment. Fruit of the Loom
and the City have negotiated the terms and conditions of the IDA
Amendment and the Wastewater Amendment in good faith and at
arm's length.
The IDA and the Wastewater Agreement each constitutes an
executory contract in that performance obligations remain on
both sides. See Sharon, 872 F.2d at 39(finding eleven year
natural gas utilities severance agreement with eight months
remaining was executory, "characterized by reciprocal
obligations continuing into the future").
Ms. Rosenberg assures those present that performance of the IDA
will benefit FOTL Texas, its estate and creditors. As noted
above, the IDA provides the Plant with essential services and an
opportunity for tax savings. Ensuring FOTL Texas' participation
in the IDA is essential to FOTL Texas' continued operation and
effective reorganization. Further, if FOTL Texas rejected the
IDA, the property on which the Plant is located likely would be
annexed by the City and FOTL Texas would be required to pay
taxes at least at the amount provided for in the IDA and
possibly more. Accordingly, for the reasons set forth above,
assumption of the IDA as amended by the IDA Amendment will
benefit FOTL Texas, Fruit of the Loom, and the estates and
creditors.
Performance of the Wastewater Agreement will benefit FOTL Texas,
its estate and creditors. As noted above, FOTL Texas'
participation in the Wastewater Agreement provides the plant
with necessary water services. Ensuring FOTL Texas'
participation in the Wastewater Agreement is essential to FOTL
Texas' continued operation and effective reorganization.
Further, if FOTL Texas rejected the Wastewater Agreement, the
Plant would only be able to obtain these services at what is
likely to be a higher cost. Accordingly, for the reasons set
forth above, assumption of the Agreement will benefit FOTL
Texas, Fruit of the Loom, and the estates and creditors.
As required by 11 U.S.C. Sec. 365(b)(1)(C), FOTL Texas and Union
Underwear will perform their respective obligations under the
terms of the IDA and the Wastewater Agreement, as each is
amended, going forward from the date the Court approves the
assumption of the IDA and the Wastewater Agreement. (Fruit of
the Loom Bankruptcy News, Issue No. 38; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FRUIT OF THE LOOM: Seeks Time Extension to Solicit Plan Votes
-------------------------------------------------------------
Fruit of the Loom Ltd. is seeking court approval of an extension
of its exclusive period to solicit votes for its disclosure
statement and proposed reorganization plan, according to Dow
Jones. A hearing has been scheduled for Oct. 22 in the U.S.
Bankruptcy Court in Wilmington, Del., and objections are due on
Oct. 15. If the request is granted, Fruit of the Loom would have
until Jan. 31 to obtain acceptances for its reorganization plan.
By a prior court order, the solicitation period was extended to
September 28, 2001. Under Delaware law, because Fruit of the
Loom filed its motion prior to the expiration date, the company
automatically preserves its exclusive right to solicit votes
through the October 22 hearing.
The company filed its reorganization plan and disclosure
statement on March 15. Fruit of the Loom said it expects to
file an amended disclosure statement and reorganization plan
within the next month. The Chicago-based Fruit of the Loom and
28 affiliates filed for chapter 11 bankruptcy protection on Dec.
29, 1999. The company listed assets of $2.35 billion and
liabilities of $2 billion as of Oct. 2, 1999. (ABI World,
October 3, 2001)
HOMELIFE: Creditors Seek Trustee to Oversee Bankruptcy
------------------------------------------------------
HomeLife Corp.'s unsecured creditors' committee has requested a
bankruptcy court to appoint a trustee to administer the chapter
11 case or name another officer to direct the company's
liquidation, according to Dow Jones.
The committee said that the furniture retailer's management
hasn't allowed the committee's financial advisers timely and
meaningful access to HomeLife records. A hearing before the
U.S. Bankruptcy Court in Wilmington, Del., is scheduled for
Wednesday, October 3, 2001. HomeLife has filed an objection to
the request.
Privately-held HomeLife shut down all of its 128 retail
locations before it filed for chapter 11 bankruptcy protection
on July 16. The Roselle, Ill.-based retailer listed both assets
and liabilities of more than $100 million each in its petition.
(ABI World, October 3, 2001)
IMC GLOBAL: Fitch Rates New Polk County IDRBs at BB
---------------------------------------------------
Fitch has assigned a rating of 'BB' to IMC Global's new Polk
County Industrial Development Authority (Florida), industrial
development revenue bonds (refunding series 2001).
Concurrently, Fitch has affirmed IMC Global's senior secured
credit facility rating of 'BB+', senior secured notes rating
of 'BB+', senior unsecured notes (with subsidiary guarantees)
rating of 'BB' and a senior unsecured notes (without subsidiary
guarantees) rating of 'B+'. The Rating Outlook is Stable.
IMC Global expects to use the proceeds of the current bond issue
to redeem and defease $75 million in Polk County bonds. The new
Polk County Industrial Development revenue bonds benefit from
subsidiary guarantees, just as the recent issue of 10.875%
senior notes due 2008 and 11.25% senior notes due 2011 do.
The ratings are supported by IMC Global's leading world cost
position in phosphate and potash production, cash flow generated
during the current weak pricing environment and assets available
for sale to meet required capital expenditure and debt service
requirements over the next two years, at which time demand-
supply fundamentals in the phosphate business are likely to show
a significant improvement.
Near term cost pressures have subsided as natural gas and
ammonia prices have declined, however diammonium phosphate (DAP)
export markets have been slightly weaker-than-expected,
resulting in a decline in DAP prices. Some positive signals have
come out of China relating to import levels for 2002. This is
significant because a resumption of higher levels of Chinese
imports is likely to drive a recovery in DAP prices.
Total debt at June 30, 2001, increased to $2.56 billion as a
$100 million receivables financing program was terminated. At
June 30, 2001, approximately $161 million was available under
the company's senior secured credit facility. The senior secured
credit facility requires that the company maintain certain
interest coverage and leverage levels.
Including discontinued operations the company generated EBITDA-
to-interest coverage of 2.6 times on a June 30, 2001 LTM basis.
Interest coverage could deteriorate slightly in 2001. A 2002
recovery will depend in part on improved world trade patterns in
DAP and to a lesser extent improved U.S. agricultural demand for
phosphate fertilizers.
INTIRA CORP: Wants Lease Decision Period Extended to December 31
----------------------------------------------------------------
Intira Corporation needs 90 more days to decide whether to
assume or reject its remaining unexpired leases of
nonresidential real property. The company explains that it has
been focusing much of its efforts on the consummation of the
sale of substantially all of its assets to divine Acquisition,
Inc. For that reason, it has not had the opportunity to fully
evaluate its remaining leases.
Thus, Intira asks Judge Farnan to extend its deadline for making
lease decisions to December 31, 2001.
Intira Corporation, a pioneer and industry leader in
netsourcing, the outsourcing of information technology and
network infrastructure used to support internet or private
network-based applications, filed for chapter 11 protection on
July 30, 2001 in Delaware.
Laura Davis Jones at Pachulski Stang Ziehl Young & Jones P.C.
represents the Debtors in their restructuring effort. When the
company filed for protection from its creditors, it listed
$112,970,000 in assets and $152,700,000 in debt.
KRAUSE'S FURNITURE: Buxbaum Begins All-Store Liquidation
--------------------------------------------------------
Buxbaum Group announced that it has been retained to liquidate
inventories from the remaining group of 57 Krause's Custom
Crafted Furniture and Castro Convertibles retail locations
operated by Krause's Furniture, Inc. (Amex: KFI) of Brea, Ca.
The firm was also retained to liquidate all machinery and
equipment in Krause's 250,000-square-foot factory in Brea.
Going-out-of-business sales began Friday at 43 of the stores,
which include seven Castro locations in New York and New Jersey,
and 36 Krause's in California, Washington, Arizona and Colorado.
The sales will include inventories from the 14 additional
locations in this group that were recently closed. Those
recently closed stores included 11 Krause's locations in
Arizona, California, Colorado and Nevada, and three Castro
showrooms in New York and Connecticut.
According to Krause's, the inventories being liquidated in this
final sale are valued at $7.5 million at cost, which equates to
approximately $22.5 million at retail.
All merchandise will be sold at a minimum discount of 40%-off
original prices, payable in cash or by credit card. No checks
will be accepted, and Krause's consumer financing programs will
not be available. In addition to sleeper sofas, love seats,
sectionals, chairs and other upholstered furniture manufactured
in the company's plant, the Krause's and Castro stores carry
such related home furnishings as occasional tables, accent
chairs, area rugs and accessories.
This final round of store closings follows a previous sale
launched by Buxbaum Group in mid-August at 22 Krause's and three
Castro locations. Among that group, sales have already been
concluded at 12 locations, with three more scheduled to close
this weekend and the other 10 by October 14.
Krause's, a vertically integrated manufacturer and retailer of
made-to-order upholstered furniture and accessories, filed for
protection under Chapter 11 of the Federal Bankruptcy Code on
July 20 in the U.S. Bankruptcy Court in Santa Ana, Ca. In its
court petition, Krause's cited the current economic environment
as the primary cause of its Chapter 11 filing. Earlier this
year, the company had closed 11 under-performing showrooms in
various markets.
At the time of the bankruptcy filing, the company received
debtor-in-possession financing designed to support operation of
the
55 remaining showrooms through September 30, 2001. In the event
that a sale of the company's assets was not completed by that
date, the company would be compelled to liquidate inventories
and then cease operations.
"The estate, secured lenders and creditors committee were unable
to come to terms with buyout groups that had put forward
proposals for the acquisition of the assets by the September
30th deadline" said David Ellis, Chief Operating Officer of
Buxbaum Group, Encino, Ca. "Accordingly, the company had no
choice but to liquidate.
"For consumers, this sale represents an outstanding opportunity
to purchase Castro and Krause's renowned sleeper sofas and other
furniture at unusually low prices" Ellis continued."Given
today's difficult economic environment, we are beginning the
sale with 40% discounts, well above the 25% opening discount
typically used in furniture store closings sales"
Castro's roots go back to 1931, when Bernard Castro invented a
concept in convertible furniture that revolutionized the
industry. His goal was to be "first with the most advanced
engineering and manufacturing methods, and first in the minds of
the American people for superior value in finely crafted,
convertible designs."
The New York-based company ultimately expanded its line to offer
Queen, full and twin-size convertibles in full-size sofas,
petite sofas, love seats, chairs or sectionals.
Castro was subsequently acquired by Krause's, which had opened
its first retail showroom/manufacturing facility in Southern
California in 1973. Like Castro, over the years Krause's moved
beyond sofas, with its plant manufacturing chairs, love seats,
recliners and other upholstered furniture, including the Castro
line.
Prior to this liquidation, the company employed approximately
800 people at the stores, Brea plant and distribution centers in
Livermore, Ca.; Kent, Wash.; Denver, Colo.; Houston and
Arlington, Tex.; and New Hyde Park, N.Y.
Buxbaum Group provides inventory appraisals, turnaround and
crisis management and other consulting services for banks and
other financial institutions with retail, wholesale/
distribution and consumer-product manufacturing clients. The
firm also provides liquidation services on consumer-product
inventories, machinery and equipment, and buys and sells
consumer-product inventories.
LTV CORP: Equity Panel Signs-Up Water Tower for Financial Advice
----------------------------------------------------------------
The Official Committee of Equity Security Holders of The LTV
Corporation, acting through Jonathon M. Yarger of the Cleveland
firm of Kohrman Jackson & Frantz, as local counsel, and David F.
Heroy and Michael Yetnikoff of the Chicago firm of Bell, Boyd &
Lloyd LLC as lead counsel, asks Judge Bodoh to authorize their
retention nunc pro tunc to August 3, 2001, of the firm of Water
Tower Capital LTV FA, LLC, as the Equity Committee's financial
advisor in these chapter 11 cases.
Water Tower LTV has two members: Water Tower Capital FA LLC, and
Powell Woodward & Associates, each of whom will provide services
to the Equity Committee upon Judge Bodoh's approval of this
Application.
Water Tower has been in existence for less than a year, and has
had three engagements acting as financial advisors to the equity
committee in Finova, Comdisco, and now LTV Steel. Powell
Woodward is a steel industry consultant. Water Tower explains
that it proposes this combination because it permits access to
expertise specific to the case - here steel.
In connection with its retention in these cases, Water Tower
will conduct such financial review and analysis of the Debtors
as Water Tower and the Equity Committee deem appropriate and
feasible in order to advise the Equity Committee in the course
of these Chapter 11 cases, including:
(a) assisting in the evaluation of the Debtors' assets;
(b) assisting the Equity Committee in preparing and
presenting testimony as required by the Court;
(c) attend court proceedings and meetings with the Equity
Committee, Debtors, creditor constituencies, attorneys
and other interested parties;
(d) provide advice with respect to the development and
approval of any plan of reorganization filed by the
Debtors or any other party in interest and any and all
other necessary and appropriate matters;
(e) provide advice with respect to potential business plans
for the Debtors and with respect to the business
operations of the Debtors; and
(f) provide such further and other services as reasonably
may be requested by the Equity Committee.
The Equity Committee proposes that Water Tower be compensated on
an hourly basis:
Principals $550
Managing Directors $400
Vice Presidents $300
In addition, subject to future agreement with the Equity
Committee and future approval of Judge Bodoh, Water Tower will
be entitled to a percentage of the distribution, if any,
received by equity holders under any transaction, payable in
kind, which percentage will be determined at a later date.
Finally, the engagement agreement includes a rather broad
indemnification provision by which the Debtors are to indemnify
Water Tower for virtually any acts or omissions. The indemnity
provision does limit indemnity for Water Tower's gross
negligence or willful acts, but only as to the Equity Committee.
Under the indemnity provisions, which extends to Water Tower,
its members, directors, officers, employees, agents (including
independent contractors), affiliates or controlling persons, the
Debtors are to indemnify, pay and hold harmless Water Tower for
all losses, claims, damages, costs, judgments, assessments,
penalties, fines, and so on which (1) result directly or
indirectly from information provided by the Debtors or the
Equity Committee, (2) result from any act or failure
to act by the Debtors or Equity Committee, or (3) arises out of
or in connection with Water Tower's engagement.
The consulting agreement provides that the Equity Committee will
not be responsible for claims, losses which result from gross
negligence or willful misconduct if there is a final order not
subject to appeal of a court finding that the person to be
indemnified has been grossly negligent or engaged in willful
misconduct.
The consulting agreement further provides that if the
indemnification provision is held unenforceable, then the
Debtors shall still be responsible for a portion of any loss.
Further, no indemnified person will have any liability (whether
direct or indirect, in contract or tort or otherwise) to the
committee or the Company for or in connection with advice or
services rendered or to be rendered by any indemnified person
under the consulting agreement, the transactions contemplated by
the engagement agreement, or any indemnified person's actions or
inactions in connection with such advice.
An exception is created for actions found to be grossly
negligent or to constitute willful misconduct by a final order
of a court that is no longer subject to appeal. The consulting
agreement states that the Debtors shall pay all amounts and will
reimburse each indemnified person promptly after obtaining
approval of the Bankruptcy Court as required.
F. John Stark, III, a member of Water Tower Capital, LLC,
assures Judge Bodoh that Water Tower is a disinterested person
and neither holds nor represents any interest adverse to the
Equity Committee on the matters for which Judge Bodoh's approval
is sought. Likewise, Robert Powell, acting on behalf of Powell
Woodward, reaches the same conclusions.
However, Mr. Stark further states that "While Water Tower may
have provided financial advisory services to creditors, security
holders and professional advisors of the Debtors in connection
with matters unrelated to the Debtors' cases, in the event a
conflict or possible conflict is identified in the future, Water
Tower shall make the same known to the Court and parties." No
details are provided.
In a supplemental affidavit, Mr. Stark re-emphasizes that WTC-
LTV was created specifically for this engagement. Water Tower
says it has utilized the LLC structure in place here in all of
its engagements. Water Tower uses this structure to assemble an
engagement team with the precise expertise needed in each
engagement. WTC-LTV is structured to provide expertise in the
steel industry, which expertise is provided by Powell Woodward.
(LTV Bankruptcy News, Issue No. 15; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
LAIDLAW INC: Moves to Recoup Defense Costs From American Home
-------------------------------------------------------------
Laidlaw Inc. asks the Court to enter an order authorizing the
American Home Assurance Company, a subsidiary of the American
International Companies, to:
(a) reimburse Laidlaw for certain defense costs paid with
respect to various securities lawsuits in which Laidlaw
and certain present/former directors and officers and
certain of Laidlaw's present/former subsidiaries are
defendants; and
(b) continue to pay certain defense costs of Laidlaw and the
Directors and Officers in the Securities Lawsuits.
American Home Assurance Company provides the Debtors' primary
insurance coverage for director and officer liability through an
insurance policy effective April 18, 1998 through April 18,
2002, Garry M. Graber, Esq., at Hodgson Russ, in Buffalo, New
York, explains.
Under the terms of this Policy, Mr. Graber relates, American
Home agreed to indemnify and advance to the Debtors certain
costs of defending suits brought against the Debtors, and the
Directors and Officers, including various securities lawsuits.
Mr. Graber says these Securities Lawsuits, which were filed
against the Debtors and the Directors and Officers prior to
Petition Date, are pending in:
(a) the United States District Court for the District of South
Carolina, or
(b) the California Superior Court.
Because of the filing of the Debtors' chapter 11 cases, Mr.
Graber continues, the Securities Lawsuits were automatically
stayed. However, Mr. Graber notes, the stay may not include
proceedings with respect to the Directors and Officers that's
why the Debtors filed an adversary proceeding seeking to enjoin
the continuation of the Securities Lawsuits against the
Directors and Officers. But even if this relief sought is
granted, Mr. Graber informs Judge Kaplan, the Directors and
Officers will still face legal expenses in monitoring the
proceedings and participating in any negotiations to reach a
consensual resolution.
According to Mr. Graber, the Debtors have incurred significant
costs in its defense of the Securities Lawsuits. In addition,
Mr. Graber notes, each of the Directors and Officers might be
entitled to reimbursement of defense costs and indemnification
from the Debtors under certain circumstances with respect to the
claims asserted in the Securities Lawsuits, pursuant to the
Debtors' existing corporate policies and by-laws. On top of
that, Mr. Graber says, the Debtors have incurred additional
costs in paying certain defense costs of the Directors and
Officers prior to the Petition Date.
The Debtors contend that they are entitled to at least partial
reimbursement for these defense costs incurred on behalf of
itself and the Directors and Officers.
Mr. Graber also explains the Debtors, the Directors and Officers
and the Subcommittees reached a global agreement regarding key
issues in the Debtors' restructuring efforts prior to Petition
Date. As part of this comprehensive settlement, Mr. Graber
tells Judge Kaplan, the Debtors, the Directors and Officers and
the Subcommittees entered into a letter agreement with respect
to certain insurance coverage and reimbursement issues relating
to the Securities Lawsuits. Among other things, Mr. Graber
says, the Claim Treatment Letter provides that:
(a) the Directors and Officers shall have access to the
Debtors' insurance coverage for any indemnified liability
of the Directors and Officers relating to the Securities
Lawsuits;
(b) the Debtors are also required to use their best efforts to
obtain reimbursement from their insurance carriers for any
defense costs incurred by the Directors and Officers; and
(c) the Debtors have agreed to continue to maintain a defense
trust to satisfy claims for reimbursement made against the
Debtors by the Directors and Officers.
Under certain circumstances, Mr. Graber says, proceeds from
insurance coverage may be used to reimburse this trust. Mr.
Graber informs the Court that the Debtors have also filed a
motion seeking approval of certain interim payments under the
Claim Treatment Letter together with the filing of this motion.
Mr. Graber asserts the relief request will benefit the Debtors'
estates because authorizing American Home to pay and continue to
pay the Covered Defense Costs of the Securities Lawsuits
minimizes the likelihood that the Directors and Officers will
assert reimbursement claims against the Debtors' estates.
If American Home stops paying the Covered Defense Costs of the
Directors and Officers in the Securities Lawsuits, Mr. Graber
notes, the likelihood that those Directors and Officers would be
properly represented in the Securities Lawsuits would decrease,
and the risk of greater reimbursement claims being filed against
the Debtors would increase. Any such increase in claims would
unduly burden the Debtors' estates and prejudice their other
creditors, Mr. Graber contends. (Laidlaw Bankruptcy News, Issue
No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LENOX HEALTHCARE: Trustee Needs 30 More Days to File Schedules
--------------------------------------------------------------
Charles M. Golden, the Chapter 11 Trustee for the estate of
Lenox Healthcare, Inc. asks the U.S. Bankruptcy Court for the
District of Delaware for a further extension of time to file
schedules of the Debtor's assets and liabilities and a statement
of financial affairs.
Judge Mary Walrath previously gave Mr. Golden until October 1,
2001 to file the schedules and statements. However, Mr. Golden
says that Lenox's business records are disperse and are not
maintained in a manner and format which enables the rapid
analysis and compilation necessary to complete the schedules and
statements.
Mr. Golden adds that dismissal of this case would not benefit
creditors of the bankruptcy estate, and reveals that there
appears to be some assets available for creditors.
Thus, Mr. Golden requests for an additional 30 days to file
Lenox Healthcare's schedules and statements.
Lenox Healthcare, Inc., one of the leading health care providers
in the United States, filed for chapter 11 protection on July
10, 2001, in the U.S. Bankruptcy Court for the District of
Delaware. The company's operations have ceased, and Charles M.
Golden, the appointed Chapter 11 Trustee, has been continuing
the transition of the Debtor's business to its secured creditors
and lessors.
MARINER HEALTH: Wants Plan Exclusivity Extended to November 20
--------------------------------------------------------------
Bankrupt long-term care provider Mariner Health Group Inc.
requested court approval for a 60-day extension of its exclusive
periods in which only the company can file a reorganization plan
and solicit acceptance from creditors, Dow Jones reported.
The company has requested up to November 20 to file a plan and
until Jan. 22 to lobby for its acceptance. A hearing on the
issue is scheduled for Oct. 15 in the U.S. Bankruptcy Court in
Wilmington, Delaware.
The company's current exclusivity periods were due to run out on
September 20 and November 20. The Atlanta-based Mariner Health
still retains its exclusivity until the court rules on the
extension request.
Mariner Health is a wholly owned unit of bankrupt Mariner Post-
Acute Network of Atlanta, which is also operating under chapter
11 protection. Both Mariner Post-Acute and Mariner Group filed
for chapter 11 bankruptcy protection on Jan. 18, 2000, with the
parent company listing assets of $1.3 billion and liabilities of
$2.7 billion. (ABI World, October 3, 2001)
MEDIANEWS GROUP: S&P's Low-B Ratings Reflect Hefty Debt Levels
--------------------------------------------------------------
Standard & Poor's revised its outlook on MediaNews Group Inc.
(successor issuer to Garden State Newspapers Inc.) to negative
from stable. At the same time, Standard & Poor's affirmed its
double-'B' long-term corporate credit and single-'B'-plus
subordinated debt ratings on the company.
The outlook change is based on MediaNews' highly leveraged
financial profile and the expectation that no meaningful
strengthening will occur in the near term as a result of the
continued soft advertising revenue climate.
The ratings reflect the company's heavy debt levels,
attributable to its growth through acquisition. Debt to
operating cash flow (net of minority interest) is more than 5
times, and operating cash flow (net) to interest is less than 2
times. This is mitigated by MediaNews' well-positioned and
geographically diverse newspaper operations, limited capital
expenditures, and lack of significant debt maturities until
fiscal 2004.
The company controls more than 40 daily newspapers, mainly in
small and midsize markets in 10 states, including suburban
markets near the San Francisco Bay area, Los Angeles, New York,
Baltimore, and Boston. In addition, MediaNews owns metropolitan
newspapers in Denver and Salt Lake City. The company's cost
structure and revenue opportunities benefit from its clustering
strategy.
In early 2001, a joint operating agreement (JOA) was implemented
between the MediaNews' Denver Post and E.W. Scripps Co.'s Denver
Rocky Mountain News, ending a very costly newspaper battle. The
JOA provides the Denver Post with significant near-term cost
savings, as well as favorable long-term revenue prospects.
Recent results have been affected by the impact of the soft
economy on advertising revenues and higher average newsprint
prices. While the advertising revenue climate is expected to
remain weak in coming periods, the company has implemented cost-
control programs and will also benefit from recent decreases in
newsprint prices.
OUTLOOK: NEGATIVE
Ratings may be lowered if MediaNews' overall financial profile
does not strengthen in the intermediate term.
OWENS CORNING: Plant Insulation Wants Probe Into Fibreboard
-----------------------------------------------------------
Plant Insulation Company wants the Court to appoint an Examiner
to investigate four issues concerning Fibreboard Corporation:
A. Whether the assets of the Fibreboard Settlement Trust have
been used to pay or reduce Owens Corning's asbestos
liabilities.
B. Whether a disproportionate percentage of liability has been
assigned to Fibreboard in group settlements of asbestos
actions as to which which Owens Corning and Fibreboard
settled together.
C. Whether disproportionate payments have been made on behalf
of Fibreboard in group settlements of asbestos actions which
Owens Corning and Fibreboard settled together.
D. Whether any funds from the Fibreboard Settlement Trust have
been paid into any accounts under the control of either
Owens Corning, their attorneys, or attorneys representing
asbestos plaintiffs, not to fund previous settlements but
future settlements of asbestos actions.
Mary M. Maloneyhuss, Esq., at Wolf Block Schorr & Solis-Cohen,
in Wilmington, Delaware says that appointment of an Examiner is
mandatory under 11 U.S.C. Sec. 1104 because Fibreboard's fixed,
liquidated, unsecured asbestos settlement debts exceed
$5,000,000. "Shall," as used in the Code, she argues, means
"must."
Ms. Maloneyhuss relates that Plant Insulation was the exclusive
Northern Californian distributor of Fibreboard's "Pabco"
asbestos-containing high temperature pipe and block insulation
from 1948 until Fibreboard removed asbestos from these products
in the 1970s.
Since the 1980s, Plant Insulation has been sued in thousands of
cases for asbestos-related personal injury, wrongful death, and
loss of consortium. Under California law, Plant Insulation is
entitled to indemnification by Fibreboard for the amounts it had
to pay to defend and settle such actions. Ms. Maloneyhuss says
that Plant Insulation's aggregate claim against Fibreboard for
indemnity exceeds $45,000,000.
John M. Gregory, Esq., Plant Insulation's General Counsel since
1985, affirms that Owens Corning and Fibreboard company records
show they have individual sets of creditors and asbestos
liabilities that are not coextensive. In particular, there are
some asbestos claimants, which have extremely valuable claims
against Fibreboard but no claim at all against Owens Corning and
others with substantial claims against Owens Corning but have de
minimis claims against Fibreboard.
In 1995, Mr. Gregory says, Fibreboard announced its "Global
Settlement", which released it from all present and future
asbestos liabilities, implemented through the mechanism of a
mandatory, non-opt-out "settlement only" class action. It
established a $1,500,000,000 settlement fund. However, it was
disapproved in 1999 and, instead, $2,000,000,000 in cash was
established as an Insurance Settlement Trust to defend and
settle present and future asbestos claims.
Owens corning acquired Fibreboard for $657,000,000 at a time
when it appeared likely that the Global Settlement would be
disapproved by the Supreme Court and that the Insurance
Settlement would be insufficient to pay future asbestos claims
against Fibreboard. The price, Ms. Maloneyhuss claims, is almost
3 times higher than the most optimistic estimate of Fibreboard's
value.
She alleges that the most logical explanation for this
acquisition of an enterprise that experts agreed was doomed to
asbestos insolvency is that it concluded the chance to get
control of the $2 billion cash from the Insurance Settlement
outweighed any future risks.
Ms. Maloneyhuss relates that the management personnel running
Fibreboard are the same individuals in charge of trying to
resolve Owens Corning's asbestos liabilities. She observes that
Owens Corning has had both the opportunity to divert funds from
the Fibreboard Settlement Trust by means of confidential, joint
settlements.
Under the Settlement Program, Owens Corning and Fibreboard
settle cases together, in large groups, with claimants
represented by a particular law firm. Due to confidentiality
clauses in the Settlement Program, there is no way to check on
Owens Corning's incentive to use Fibreboard's money to pay its
own asbestos claims.
An Examiner, Ms. Malneyhuss contends, is urgently needed,
because there is a good reason to believe that millions of
dollars have been wrongfully diverted from a trust established
in 1999 for the sole benefit of Fibreboard's asbestos creditors
and instead used to help pay Owens Corning's asbestos creditors.
Ms. Maloneyhuss alleges that although the $2,000,000,000
Settlement Trust was projected to last for 5-9 years, it was
almost entirely dissipated by the time these cases were filed.
(Owens Corning Bankruptcy News, Issue No. 19; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PACIFIC AEROSPACE: Senior Lenders Extend Waiver of Defaults
-----------------------------------------------------------
Pacific Aerospace & Electronics, Inc. (OTC Bulletin Board: PCTH)
announced that it has obtained a waiver of defaults from the
holders of its 18% senior secured debt.
The Company is in default under its Senior Debt because of its
failure to make the August 1, 2001 interest payment on its
111/4% senior subordinated notes.
The Company also did not make the quarterly interest payment
that was due on the Senior Debt on September 30, 2001 and did
not make that payment before expiration of the 5-day grace
period.
As a result, the holders of the Senior Debt would have the right
to demand payment of all amounts outstanding under their loans
and to pursue additional recourse against the Company. However,
the holders of the Senior Debt have agreed to amend their loan
agreement to waive the Company's defaults until December 31,
2001.
The loan agreement was also amended to accelerate the maturity
date of the loan to December 31, 2001 and to increase the
interest rate from 18% to 21%. The Company agreed to pay the
holders a transaction fee equal to 2% of the outstanding
principal of the Senior Debt, or approximately $288,658.
The transaction fee and the September 30 interest payment will
be paid in kind in lieu of cash by increasing the outstanding
principal amount of the Senior Debt.
The Company previously announced that it has entered into a
lock-up agreement with the holders of approximately 98% of the
Notes regarding a planned restructuring of the Company's debt
and equity outside of bankruptcy.
Obtaining this waiver from the holders of the Senior Debt was
part of the restructuring process. To facilitate the waiver,
the Noteholders agreed to increase the amount of senior debt
permitted by the indenture governing the Notes to the extent
necessary to permit the September 30 interest payment on the
Senior Debt and the transaction fee related to the waiver to be
paid in kind.
"We are pleased that our senior secured lenders have agreed to
cooperate with us and with the Noteholders in the restructuring
of our debt" said Don Wright, President and CEO of the Company.
"We appreciate their willingness to be patient as we undertake
the steps necessary to accomplish the restructuring."
The Company also announced that it has decided to discontinue
efforts to sell its U.K. subsidiary, Aeromet International PLC.
The Company had previously announced its intention to sell
Aeromet and had entertained offers from several bidders.
The Company had planned to use a portion of the sale proceeds to
pay off the Senior Debt. The Company is currently working with
the Noteholders to obtain new commercial financing to replace
the Senior Debt and to provide working capital to the Company.
"After discussions with the Noteholders, we have decided that it
is currently in the Company's best interests to continue to
operate Aeromet," said Mr. Wright. "Our heavy debt load was the
primary impetus for selling Aeromet. Assuming the restructuring
is completed as contemplated, our debt load should be
significantly reduced. We look forward to retaining this
capacity to better serve our global customers."
Pacific Aerospace & Electronics, Inc. is an international
engineering and manufacturing company specializing in
technically demanding component designs and assemblies for
global leaders in the aerospace, defense, electronics, medical,
telecommunications, energy and transportation industries.
The Company utilizes specialized manufacturing techniques,
advanced materials science, process engineering and proprietary
technologies and processes to its competitive advantage.
Pacific Aerospace & Electronics has approximately 800 employees
worldwide and is organized into three operational groups
-- U.S. Aerospace, U.S. Electronics and European Aerospace.
More information may be obtained by contacting the Company
directly or by visiting its Web site at http://www.pcth.com
PIONEER COMPANIES: Lease Decision Period Extended to November 30
----------------------------------------------------------------
Pioneer Companies, Inc. and its subsidiary debtors have until
November 30, 2001 to decide whether to assume or reject their
unexpired leases of nonresidential real property.
So ruled the U.S. Bankruptcy Court for the Southern District of
Texas (Houston Division), which also acknowledged the Debtors'
right to seek further extensions of their lease decision period
if necessary.
Pioneer, a Texas-based manufacturer of basic and intermediate
chemicals and petrochemicals, filed for chapter 11 protection on
July 31, 2001, in the U.S. Bankruptcy Court for the Southern
District of Texas.
Alan Shore Gover, Esq., at Weil Gotshal & Manges, represents the
company in its restructuring efforts. Pioneer's June 2001
balance sheets reveal $574,009,000 in assets and $741,632,000 in
debt.
RELIANCE GROUP: A.M. Best Computes $1.1BB Insolvency for RIC
------------------------------------------------------------
Reliance Insurance Co., which is in the red by $1.1 billion, has
been placed in liquidation.
Pennsylvania Insurance Commissioner Diane M. Koken said the
Commonwealth Court approved the order of liquidation Oct. 3.
"It was the right time and the right decision," Koken said.
Reliance had been under state supervision since May 29, when
Koken took control of the company's operations. She had been
hoping to rehabilitate the company, and return it to regular
business. But the company turned out to be in even worse
financial condition than regulators suspected, and Koken said
any attempt to salvage the company would be futile.
In April, the company had reported it had a negative $200
million in surplus. Financial examiners have since discovered
the company had a negative $730 million in surplus at that time.
According to examiners' reports filed Sept. 28, Reliance had
total admitted assets of $8.8 billion and liabilities of $9.9
billion as of March 31. The insurance department estimates that
if the company had not been placed in liquidation, which
triggers the state guaranty associations, the company may not
have been able to pay claims starting as early as the fourth
quarter of 2001.
The $1.1 billion shortfall isn't entirely on the guarantee
associations' shoulders, Koken said, noting the figure includes
other liabilities besides policyholder claims.
"I don't know whether the policyholders will be paid at 95%
or 90% or 80%" Koken said. "It's far too soon to tell"
About 40% of Reliance's 196,000 claims are workers'
compensation, she said.
The state will continue to operate Reliance's claims
operations so the guarantee association can begin paying claims
without any interruption, the commissioner said.
While Reliance was not directly impacted by the Sept. 11
attacks, they have hurt Reliance's liquidity, Koken said.
Reliance worked with several companies in the World Trade
Center, including Hartford Insurance Co., which as a third party
administrator collected information to file and process claims;
Combined Insurance, an Aon Inc. subsidiary, which was also a
third party administrator; Aon Re, a reinsurance intermediary;
Skor Re, a reinsurer; and Aon and Marsh Inc., for premium
collection.
"While it's not the World Trade Center that put this company
into liquidation, it was clearly one factor. Business has been
disrupted, and the impact is it will flow down on our collection
of reinsurance, which is a substantial asset to this company"
Koken said. Reinsurance receivables and recoverables represent
Reliance's largest pool of assets and account for more than 65%
of Reliance's current cash receipts from operations.
Also, Reliance's New York offices were about half a mile
from the World Trade Center, and department's rehabilitation
team were barred from the office from a week after the attacks.
The team had been staying at the Marriott at the World Trade
Center, but were working at Reliance's offices by 7 a.m. on
Sept. 11 and weren't there when the Twin Towers were hit and
destroyed, said Melissa Fox, a spokeswoman for the department.
Another factor hurting Reliance's liquidity is the refusal
of the parent holding company, Reliance Group Holdings Inc., to
turn over $95 million in assets that Koken says belong to the
insurance company. Reliance Group Holdings and Reliance
Financial Services Corp., its wholly owned subsidiary, have
filed voluntary petitions for relief under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
Southern District of New York. Pennsylvania regulators have
filed a motion to transfer the case to Pennsylvania courts.
"We believe now, even more than before, that now that this
company is in liquidation, all of those assets should be the
subject of a unified matter heard in Pennsylvania through the
Common Court" Koken said.
Reliance Insurance Co. is based in Philadelphia, and its
holding company, Reliance Group Holdings Inc., is in New York.
Reliance Group's financial position began to deteriorate after
it posted a fourth-quarter 1999 net loss of $123 million and
took a $117 million after-tax charge to settle a dispute over
workers' comp business it took as a fronting company for the
workers' comp reinsurance pool run by Unicover Managers Inc.,
now known as Cragwood Managers LLC (Reliance Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
RHYTHMS NETCONNECTIONS: Asks Court to Fix November 26 Bar Date
--------------------------------------------------------------
Rhythms NetConnections Inc. and its affiliate debtors want Judge
Burton R. Lifland of the U.S. Bankruptcy Court for the Southern
District of New York (Manhattan) to establish November 26, 2001
at 4:00 p.m. (EDT) as the last date and time by which proofs of
claim must be filed.
By establishing November 26, 2001 as the Bar Date, all potential
claimants will have more than 45 days' notice for filing their
proofs of claim, the company says.
The Debtors' motion also suggests that proofs of claim arising
from an executory contract's or unexpired lease's rejection that
is dated less than 10 days before the Bar Date must be filed
before the date that the Court fixes in the applicable rejection
order.
Rhythms NetConnections provides Internet access and remote
network connections using high-speed digital subscriber line
(DSL) technology. It filed for Chapter 11 protection on August
1, 2001, in the U.S. Bankruptcy Court for the Southern District
of New York.
Paul M. Basta, Esq., at Weil Gotshal & Manges, represents the
company in its restructuring efforts. When Rhythms
NetConnections filed for protection from its creditors, it
listed $698,527,000 in assets and $847,207,000 in debt.
SABENA: Brussels Trade Court Grants Protection Until November 30
----------------------------------------------------------------
The President of the Brussels Trade Court has granted Sabena
nv/SA and Sabena's co-ordination center (Sabena Interservice
Centre) judicial composition until November 30, 2001. This has
to provide Sabena with the necessary time to fundamentally
restructure the company while continuing operations.
Judicial Composition is a precautionary measure temporarily
putting a company in difficulty under shelter of its creditors.
It secures the continuity of the operations and gives time to
the Management, under control of three Commissioners, to put
forward recovery measures. For employees, it means the
continuity of the work relationship.
In the first (temporary) phase of the judicial composition
Sabena will present a restructuring plan that has to be accepted
by the creditors before the court can grant the benefit of a
second (definitive) phase. If accepted, this plan can then be
implemented during this second phase.
Given this new situation, and in particular the fact that
Swissair did not pay its part of the recapitalization, the
Business Plan will have to be revisited and new large-scale
measures will have to be developed. The implementation of the
social measures are therefore postponed until Sabena has a clear
idea of what the new situation will be.
Until the presentation of the restructuring plan and its
acceptance by the creditors, no external communication on this
issue is foreseen.
STERLING CHEMICALS: Court Okays Hiring of Various Professionals
---------------------------------------------------------------
United States Bankruptcy Court Judge William R. Greendyke puts
his stamp of approval on various employment applications filed
by Sterling Chemicals Holdings and its Official Committee of
Unsecured Creditors.
The law firm of Skadden, Arps, Slate, Meagher & Flom will act as
Sterling Chemicals' lead bankruptcy counsel. Assisting the
Skadden attorneys is the law firm Andrews & Kurth LLP, which
will also serve as Sterling Chemicals' corporate counsel.
Because of various issues involved in these cases, the Court has
authorized the employment of Groom Law Group, Chartered, as
special employee benefits counsel for Sterling Chemicals.
Nexant, Inc. will also be providing valuation and related
services in connection with the Debtors' chemical and
petrochemical production facilities and operations.
The Creditors' Committee will be represented by the law firm of
Akin, Gump, Strauss, Hauer & Feld, LLP. At the same time, the
Creditors' Committee will receive advise from Lazard Freres &
Company, LLC on investment matters.
Compensation of these professionals vary per agreement with
Sterling Chemicals, the Creditors' Committee, and upon order of
the Court.
Sterling Chemicals Holdings, a manufacturer of petrochemicals,
acrylic fibers, and pulp chemicals, filed for Chapter 11
protection on July 16, 2001 in the Southern District of Texas
Bankruptcy Court. D. J. Baker, Esq., at Skadden, Arps, Slate,
Meagher & Flom, represents the Debtors in their restructuring
effort.
Subject to further extensions, the Debtors exclusive period
during which to file a plan expires on November 13, 2001. As of
its September 21, 2001 report to the Securities and Exchange
Commission, the Debtors listed $403,681,000 in assets and
$1,207,403,000 in debt.
US AIRWAYS: Revenue Passenger Miles Down by 33.4% in September
--------------------------------------------------------------
US Airways reported that revenue passenger miles for September
2001 were down 33.4 percent compared to September 2000, while
available seat miles for the month decreased 20.6 percent. The
passenger load factor for the month was 56.1 percent, a decrease
of 10.8 percentage points compared to September 2000.
US Airways' September traffic results were affected dramatically
by the events of Sept. 11. Commercial flights throughout the
country were suspended almost completely for three days and
resumed gradually once the Federal Aviation Administration
allowed resumption of operations.
While there has been a significant increase in the number of
passengers booking on US Airways in recent days, the total
remains well below trends that had been established earlier in
the year. In response, US Airways has reduced its operations and
is implementing a schedule that will reflect a reduction of 23
percent in capacity.
From Sept. 1 to Sept. 10, US Airways' load factor was 65.4
percent. From Sept. 14, when flight operations resumed, through
Sept. 22, the load factor was 45.9 percent and that increased
during the period Sept. 23 through Sept. 30 to 52.8 percent.
That upward trend is continuing.
The same trend is reflected in terms of the numbers of
passengers carried. On Sept. 14, the first day that flight
schedules began to return to a more normal pattern, US Airways
carried 51,753 passengers. Beginning Sept. 27, US Airways has
carried in excess of 100,000 passengers on most days and forward
bookings indicate that trend is continuing. The return to
operations at Washington's Ronald Reagan National Airport,
albeit on a limited basis, should support this trend.
In response to these developments, US Airways has taken a number
of steps to reduce and control costs. As a result of the
necessary reduction of capacity by 23 percent, US Airways is
sadly reducing its workforce by over 11,000 and is retiring
three fleet types -- the B-737-200, the F-100 and the
MD-80. Four reservations centers have been closed as have more
than 40 city ticket offices. Maintenance operations are being
further rationalized to result in greater efficiencies.
As of Sept. 30, 2001, US Airways Group had just over $1.0
billion in cash on hand. In addition, US Airways Group
anticipates receiving a further grant in October of
approximately $180 million from the U.S. government under the
Air Transportation Safety and System Stabilization Act to
compensate for losses resulting from the terrorist actions of
Sept. 11.
For the third quarter of 2001, revenue passenger miles were down
5.4 percent compared to the same period in 2000, while available
seat miles were down 2.9 percent year-over-year. The passenger
load factor for the period was 71.1 percent, a decrease of 1.8
percentage points compared to 2000.
Year-to-date revenue passenger miles were up 6.3 percent,
compared to the same period in 2000, while available seat miles
were up 6.8 percent year-over-year. The passenger load factor
for the nine-month period was 70.4 percent, a decrease of 0.3
percentage points compared to 2000.
The four wholly owned subsidiaries of US Airways Group, Inc. --
Allegheny Airlines, Inc.; Piedmont Airlines, Inc.; Potomac Air;
and PSA Airlines, Inc. -- reported that revenue passenger miles
for September were down 35.1 percent compared to September 2000,
while available seat miles for the month were down 16.9 percent.
The passenger load factor for the month was 42.7 percent, a
decrease of 12.0 percentage points compared to September 2000.
For the second quarter of 2001, US Airways Express revenue
passenger miles were down 9.9 percent compared to the same
period in 2000, while available seat miles were down 4.0
percent. The passenger load factor for the period was 54.0
percent, a decrease of 3.5 percentage points from 2000.
Year-to-date, US Airways Express revenue passenger miles were
down 4.3 percent compared to the same period in 2000, while
available seat miles were down 2.1 percent. The passenger load
factor for the nine-month period was 55.2 percent, a decrease of
1.3 percentage points from 2000.
UNITED AIRLINES: Phases Out United Shuttle Brand
------------------------------------------------
United Airlines (NYSE: UAL) will discontinue the United Shuttle
brand and incorporate Shuttle flights into its mainline and
United Express service this fall. The move will be effective
from October 31, 2001.
United Shuttle operates primarily in the Western United States
with a dedicated fleet of 59 Boeing 737 aircraft. The move is
part of United's continued response to customer needs since the
September 11 terrorist attacks on the United States.
Since those events the airline has adjusted its capacity and
continues to fine tune its operation to match capacity with
customer demand. In particular, the airline now sees less
demand for high utilization, quick turnaround flights in its
system.
United or United Express will continue to offer service in
nearly all markets that currently have Shuttle service. Prior
to September 11, United Shuttle offered approximately 468 daily
flights.
"This will be a seamless experience for our customers as we
transition away from the United Shuttle brand," said Christopher
D. Bowers, United Airlines' senior vice president-North America.
"Our goal is to maintain the best possible schedules for
customers and communities that rely on United for service, while
maintaining flexibility to fine tune our capacity to meet
demand. Eliminating Shuttle allows us to achieve this by using
a mix of either larger or smaller jet aircraft depending on
market conditions and frequency needs."
VIALINK COMPANY: Fails to Comply With Nasdaq Requirements
---------------------------------------------------------
The viaLink Company (Nasdaq:VLNK) received a letter from The
Nasdaq Stock Market, Inc., notifying the company that the
composition of its Board of Directors Audit Committee does not
comply with Nasdaq Rules 4350 (c) and 4350 (d) (2) regarding
independent director and audit committee requirements.
At issue is the appointment of a new independent director to
serve as chairman for the company's Audit Committee. Warren D.
Jones, the previous Audit Committee chairman, vacated the
position on September 5 following his appointment as interim
chief executive officer for viaLink.
The company said it intends to name a new Audit Committee
chairman in the near future, and had began its search for a
replacement prior to the Nasdaq letter. As previously announced,
the company has a Nasdaq compliance hearing scheduled for
October 18 to address outstanding issues.
The viaLink Company (Nasdaq: VLNK) is the leading provider of
data synchronization and advanced e-commerce services to the
retail food industry. The viaLink Partner Package is a suite of
services that use synchronized data to give trading partners
visibility into product movement through the supply chain and
enable collaborative business processes. For more information,
visit viaLink's Web site: http://www.vialink.com
* * *
The Company has incurred operating losses and negative cash flow
in the past and expect to incur operating losses and negative
cash flow until late in 2001. The Company expects its spending
to increase for the foreseeable future for further technology
and product development and other technology and database costs.
The Company also expects increases in customer operations
expense to outsource implementation resources which will be
incurred after corresponding increases in contracted
implementation revenues.
The Company believes that if it successfully executes its
business plan within the timeframes the Company has projected it
will reach the point of cash flow break-even from operations
late in the fourth quarter of 2001. If it is unable to
successfully execute its business plan within the timeframes
projected, the Company may need to obtain approximately $5 to
$10 million in additional capital.
However, dependent on market conditions, it may raise additional
capital to further accelerate growth including other vertical or
geographic markets. The use of its cash and cash equivalents
would accelerate and could require the Company to obtain
additional capital if (a) it is unable to maintain or decrease
projected level of spending, (b) it is unable to manage working
capital requirements or (c) it experiences a lack of revenue
growth due to delayed or less than expected market acceptance of
its viaLink services.
If it is required to raise additional capital there can be no
assurance as to whether, when or the terms upon which any such
capital may be obtained. Any failure to obtain an adequate and
timely amount of additional capital on commercially reasonable
terms could have a material adverse effect on its business,
financial condition and results of operations, including its
viability as an enterprise.
WEBLINK WIRELESS: Closing TX Call Center to Downsize Operations
---------------------------------------------------------------
WebLink Wireless, Inc. (OTC Bulletin Board: WLNKA) has announced
it will close its San Antonio, Texas call center within the next
60 days as part of a series of actions the Company is taking to
size its operations to meet current demands and contain costs to
achieve EBITDA targets.
The San Antonio call load will be moved to the Company's
Amarillo and Dallas, Texas call centers. WebLink Wireless also
plans to move its distribution center from its current location
in Garland, Texas to the Company's network operations facility
in Plano, Texas and reduce the size of its distribution center
staff and certain headquarters staff.
The reduction-in-force totals 232 employees (approximately 20%
of the Company's workforce), of which 151 are employed at the
San Antonio call center. The Company is making these reductions
primarily as a result of softness in the Company's retail
consumer market.
"We regret enormously the loss of jobs resulting from this move"
said N. Ross Buckenham, president of WebLink Wireless. "But in
the current challenging environment it is necessary for
management to be proactive in protecting the operating cash flow
produced by the Company's core network operations. We believe
our key customers remain supportive because we are taking steps
aimed at continuing to generate positive cash flow while
maintaining the high quality service we've always had"
The Company expects the cash severance expense associated with
the reduction-in-force to be approximately $1.3 million, which
will be recorded in the third quarter of 2001. It anticipates
that the economic benefit of the reduction-in-force will not be
fully reflected in the Company's results until the first quarter
of 2002.
In a separate matter, a recent court order has extended WebLink
Wireless' exclusive right to propose a reorganization plan in
its Chapter 11 bankruptcy proceeding until at least Dec. 17,
2001. If WebLink Wireless files a plan of reorganization by
that date, other parties would be prohibited from filing
competing plans through Feb. 19, 2002, while the Company
solicits plan votes.
WebLink Wireless, Inc. is a leader in the wireless data
industry, providing wireless email, wireless instant messaging,
information on demand and traditional paging services throughout
the United States. The company's nationwide, 2-way network is
the largest of its kind reaching approximately 90 percent of the
U.S. population and, through a strategic partnership, extends
into Canada.
The Dallas-based company, which serves approximately 1.7 million
customers, recorded total revenues of $290 million for the year
ended December 31, 2000. For more information, visit the
website at http://www.weblinkwireless.com
WEBVAN GROUP: Kaiser Takes Over Technology Platform for $2.65MM
---------------------------------------------------------------
Webvan Group, Inc. announced that it has sold its technology
platform to Kaiser Foundation Hospitals for $2.65 million. The
transaction, which was approved by the Bankruptcy Court on
October 3rd was closed immediately thereafter with Kaiser taking
possession of the technology platform as well as Webvan's
Oakland Distribution Center.
The transaction included the sale of both the HomeGrocer and
Webvan technology platforms, the trademarks, patents, copyrights
as well as the URL's, including both Webvan.com and
Homegrocer.com.
"We're pleased to see that what was built by the many talented
people at Webvan and HomeGrocer will continue to operate as a
premier technology platform and distribution system" said a
Webvan spokesperson. "Kaiser clearly saw the value of our
technology and the potential that can be realized from the
acquisition of our state-of-the-art warehouse"
The value of the transaction to Webvan far exceeds the $2.65
million that Kaiser paid for the technology platform because
Kaiser also purchased the assets of Webvan's Oakland
Distribution Center for approximately $1.4 million and took over
Webvan's lease obligations, eliminating a significant liability.
"In our estimation, we see the value of the combined Kaiser
package exceeding $5 million to the estate" said Scott McNutt,
an attorney with McNutt & Litteneker, counsel to the Official
Committee of Unsecured Creditors in the bankruptcy proceedings
of Webvan. "As such, this deal represents a significant value
for our creditors"
In addition, Webvan also announced that the leases for its
facilities in Carson, Asuza and Fullerton were all assigned to
other users. These transactions included the sale of
refrigeration equipment; however, all of the conveyor equipment,
racking, computer equipment and vehicles remain to be sold in
upcoming auctions to be held at each of these facilities.
"We made great strides in eliminating our lease liabilities"
said Allen Arthur, Director of Real Estate for Webvan."We're
excited about our upcoming auctions at each of these three
facilities and are also looking forward to strong auctions at
our facilities in Seattle, San Diego and Chicago. We believe
that buyers have a fantastic opportunity to pick up top-quality
equipment at each of these auctions"
The auction schedule is as follows: Seattle: October 11; San
Diego: October 13; Fullerton: October 15; Carson: October 16;
Asuza: October 17 and Chicago October 23. Persons interested in
finding out more information about these auctions are encouraged
to contact Mark Weitz of Great American/Shottenstien (Webvan's
auctioneers) at 818/884-3737.
Webvan also announced that DoveBid, Inc. was selected to conduct
the auction of Webvan's headquarter assets which include
servers, disk arrays, storage equipment, networking gear,
telecommunications equipment and furniture. This auction is
planned for October 30th and will take place at Webvan's Foster
City headquarters. Persons interested in finding out more
information about this auction are encouraged to contact Kirk
Dove of DoveBid at 650/571-7400.
WHEELING-PITTSBURGH: Denies Report on South African Dealing
-----------------------------------------------------------
Wheeling-Pittsburgh Steel Corporation denies a report out of
South Africa that the company is interested in acquiring a South
African caster and shutting down its primary operations.
According to this report, Wheeling-Pittsburgh Steel would
receive an equity infusion from a South African partner as part
of its reorganization under Chapter 11 bankruptcy protection.
"We do not have a plan to shut down our primary operations" said
James G. Bradley, president and chief executive officer of
Wheeling-Pittsburgh Steel. "In fact, our business plan, which
has been actively endorsed by the United Steelworkers of
America, includes the revitalization of our steelmaking
operations"
In connection with the company's reorganization efforts,
Wheeling-Pittsburgh Steel received inquiries involving various
concepts of how the company's operations could be structured.
The news report from South Africa involves one of many concepts
that was presented, but was not developed.
"We have a contract with the United Steelworkers of America and
a plan for revitalizing our primary operations that provide the
cornerstones for our reorganization" Bradley said. "[Thurs]day,
our focus is on completing a Byrd Bill loan application that
will provide financing for the company as it emerges from
bankruptcy"
Wheeling-Pittsburgh Steel is the ninth largest domestic
integrated steelmaker. It filed for Chapter 11 bankruptcy
protection on November 16, 2000. Its primary operations are
located in Steubenville and Mingo Junction, Ohio.
WORLD COMMERCE: Shuts Down & Abandons Self-Rescue Efforts
---------------------------------------------------------
World Commerce Online, an Orlando, Florida-based technology
company that recently filed for chapter 11 bankruptcy
protection, closed its doors and dropped its effort to come back
from the brink of insolvency, The Orlando Sentinel reported.
"They simply could not get any additional financing after the
events of September 11," Orlando bankruptcy attorney Scott
Shuker said. Company officers have asked the U.S. Bankruptcy
Court in Orlando to dismiss the voluntary bankruptcy filing so
that secured creditors can proceed with foreclosure. A hearing
on the motion to dismiss is scheduled for October 9 before
bankruptcy Judge Arthur Briskman.
Shuker said the company has about $15 million in assets on the
books, such as software and accounts receivable, but under
liquidation the final value is expected to be considerably less
than that. The company listed $48 million in debt and about 400
creditors. The primary secured creditor is Interprise
Technology Partners LP, a Miami-based venture capital firm that
helped finance World Commerce Online's start-up. (ABI World,
October 3, 2001)
BOND PRICING: For the week of October 8 - 12, 2001
--------------------------------------------------
Following are indicated prices for selected issues:
Algoma Steel 12 3/8 '05 8 - 12(f)
Amresco 9 7/8 '05 25 - 28(f)
Asia Pulp & Paper 11 3/4 '05 22 - 25(f)
AMR 9 '12 85 - 87
Bethelem Steel 10 3/8 '03 30 - 32
Chiquita 9 5/8 '04 68 - 70
Conseco 9 '06 74 - 76
Global Crossing 9 1/8 '06 22 - 24
Globalstar 11 3/8 '06 6 - 7(f)
Level III 9 1/8 '04 38 - 42
McLeod 11 3/8 '09 20 - 22
Northwest Air 8.70 '07 69 - 71
Owens Corning 7 1/2 '05 33 - 35(f)
Revlon 8 5/8 '08 38 - 42
Royal Caribbean 7 1/4 '18 66 - 70
Trump AC 11 1/4 '06 62 - 64
USG 9 1/4 '01 71 - 73(f)
Westpoint 7 3/4 '05 28 - 32
Xerox 5 1/4 '03 84 - 86
*********
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. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
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